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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2023
Commission file number 000-54863

EATON CORPORATION plc
(Exact name of registrant as specified in its charter)

Ireland |  | 98-1059235
(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)
Eaton House, | 30 Pembroke Road, | Dublin 4, | Ireland |  | D04 Y0C2
(Address of principal executive offices) |  | (Zip Code)

|  |  |  |  | +353 | 1637 2900 |  |  |  |
|  | (Registrant's telephone number, including area code) |  |
|  | Not applicable |  |
|  | (Former name, former address and former fiscal year if changed since last report) |  |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |  | Trading Symbol |  | Name of each exchange on which registered
Ordinary shares ($0.01 par value) |  | ETN |  | New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer," “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer | ☑ |  | Accelerated filer | ☐ |  | Non-accelerated filer | ☐
Smaller reporting company | ☐ |  | Emerging growth company | ☐ |  | (Do not check if a smaller reporting company) |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
There were 398.6 million Ordinary Shares outstanding as of March 31, 2023.

Table of Contents

TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION |
ITEM 1. FINANCIAL STATEMENTS | 2
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 30
ITEM 4. CONTROLS AND PROCEDURES | 31
PART II — OTHER INFORMATION |
ITEM 1. LEGAL PROCEEDINGS | 31
ITEM 1A. RISK FACTORS | 31
ITEM 2. UNRESTRICTED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 31
ITEM 6. EXHIBITS | 32
SIGNATURES | 34

Table of Contents
PART I — FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS.
EATON CORPORATION plc
CONSOLIDATED STATEMENTS OF INCOME

|  |  | Three months ended March 31
(In millions except for per share data) |  |  |  |  | 2023 |  | 2022
Net sales |  |  |  |  | $ | 5,483 |  |  | $ | 4,843 |
Cost of products sold |  |  |  |  | 3,599 |  |  | 3,269 |
Selling and administrative expense |  |  |  |  | 904 |  |  | 790 |
Research and development expense |  |  |  |  | 179 |  |  | 165 |
Interest expense - net |  |  |  |  | 50 |  |  | 32 |
Gain on sale of business |  |  |  |  | — |  |  | 24 |
Other income - net |  |  |  |  | (11) |  |  | (8) |
Income before income taxes |  |  |  |  | 762 |  |  | 619 |
Income tax expense |  |  |  |  | 123 |  |  | 86 |
Net income |  |  |  |  | 639 |  |  | 533 |
Less net income for noncontrolling interests |  |  |  |  | (1) |  |  | (1) |
Net income attributable to Eaton ordinary shareholders |  |  |  |  | $ | 638 |  |  | $ | 532 |
Net income per share attributable to Eaton ordinary shareholders |  |  |  |  |  |  |
Diluted |  |  |  |  | $ | 1.59 |  |  | $ | 1.33 |
Basic |  |  |  |  | 1.60 |  |  | 1.33 |
Weighted-average number of ordinary shares outstanding |  |  |  |  |  |  |
Diluted |  |  |  |  | 400.5 |  |  | 401.8 |
Basic |  |  |  |  | 398.5 |  |  | 399.2 |
Cash dividends declared per ordinary share |  |  |  |  | $ | 0.86 |  |  | $ | 0.81 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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EATON CORPORATION plc
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

|  |  | Three months ended March 31
(In millions) |  |  |  |  | 2023 |  | 2022
Net income |  |  |  |  | $ | 639 |  |  | $ | 533 |
Less net income for noncontrolling interests |  |  |  |  | (1) |  |  | (1) |
Net income attributable to Eaton ordinary shareholders |  |  |  |  | 638 |  |  | 532 |
Other comprehensive income (loss), net of tax |  |  |  |  |  |  |
Currency translation and related hedging instruments |  |  |  |  | 119 |  |  | (62) |
Pensions and other postretirement benefits |  |  |  |  | (2) |  |  | 77 |
Cash flow hedges |  |  |  |  | 15 |  |  | 101 |
Other comprehensive income attributable to Eaton ordinary shareholders |  |  |  |  | 132 |  |  | 116 |
Total comprehensive income attributable to Eaton ordinary shareholders |  |  |  |  | $ | 770 |  |  | $ | 648 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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EATON CORPORATION plc
CONSOLIDATED BALANCE SHEETS

(In millions) | March 31, 2023 |  | December 31, 2022
Assets |  |  |
Current assets |  |  |
Cash | $ | 235 |  |  | $ | 294 |
Short-term investments | 289 |  |  | 261 |
Accounts receivable - net | 4,239 |  |  | 4,076 |
Inventory | 3,604 |  |  | 3,430 |
Prepaid expenses and other current assets | 772 |  |  | 685 |
Total current assets | 9,138 |  |  | 8,746 |
Property, plant and equipment |  |  |
Land and buildings | 2,174 |  |  | 2,129 |
Machinery and equipment | 6,021 |  |  | 5,885 |
Gross property, plant and equipment | 8,195 |  |  | 8,013 |
Accumulated depreciation | (4,989) |  |  | (4,867) |
Net property, plant and equipment | 3,206 |  |  | 3,146 |
Other noncurrent assets |  |  |
Goodwill | 14,894 |  |  | 14,796 |
Other intangible assets | 5,386 |  |  | 5,485 |
Operating lease assets | 579 |  |  | 570 |
Deferred income taxes | 340 |  |  | 330 |
Other assets | 1,975 |  |  | 1,940 |
Total assets | $ | 35,517 |  |  | $ | 35,014 |
Liabilities and shareholders’ equity |  |  |
Current liabilities |  |  |
Short-term debt | $ | 87 |  |  | $ | 324 |
Current portion of long-term debt | 8 |  |  | 10 |
Accounts payable | 3,118 |  |  | 3,072 |
Accrued compensation | 350 |  |  | 467 |
Other current liabilities | 2,524 |  |  | 2,488 |
Total current liabilities | 6,087 |  |  | 6,360 |
Noncurrent liabilities |  |  |
Long-term debt | 8,701 |  |  | 8,321 |
Pension liabilities | 651 |  |  | 649 |
Other postretirement benefits liabilities | 174 |  |  | 177 |
Operating lease liabilities | 466 |  |  | 459 |
Deferred income taxes | 537 |  |  | 530 |
Other noncurrent liabilities | 1,417 |  |  | 1,444 |
Total noncurrent liabilities | 11,946 |  |  | 11,580 |
Shareholders’ equity |  |  |
Ordinary shares (398.6 million outstanding in 2023 and 397.8 million in 2022) | 4 |  |  | 4 |
Capital in excess of par value | 12,502 |  |  | 12,512 |
Retained earnings | 8,757 |  |  | 8,468 |
Accumulated other comprehensive loss | (3,814) |  |  | (3,946) |
Shares held in trust | — |  |  | (1) |
Total Eaton shareholders’ equity | 17,449 |  |  | 17,038 |
Noncontrolling interests | 36 |  |  | 38 |
Total equity | 17,485 |  |  | 17,075 |
Total liabilities and equity | $ | 35,517 |  |  | $ | 35,014 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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EATON CORPORATION plc
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

| Three months ended March 31
(In millions) | 2023 |  | 2022
Operating activities |  |  |
Net income | $ | 639 |  |  | $ | 533 |
Adjustments to reconcile to net cash provided by operating activities |  |  |
Depreciation and amortization | 238 |  |  | 244 |
Deferred income taxes | 17 |  |  | 15 |
Pension and other postretirement benefits expense | 4 |  |  | 6 |
Contributions to pension plans | (29) |  |  | (32) |
Contributions to other postretirement benefits plans | (5) |  |  | (6) |
Gain on sale of business | — |  |  | (24) |
Changes in working capital | (498) |  |  | (785) |
Other - net | (31) |  |  | 91 |
Net cash provided by operating activities | 335 |  |  | 42 |
Investing activities |  |  |
Capital expenditures for property, plant and equipment | (126) |  |  | (115) |
Cash paid for acquisition of a business, net of cash acquired | — |  |  | (612) |
Proceeds from sales of property, plant and equipment | 3 |  |  | 4 |
Investments in associate companies | — |  |  | (17) |
Purchases of short-term investments - net | (27) |  |  | (1) |
Proceeds from settlement of currency exchange contracts not designated as hedges - net | 41 |  |  | — |
Other - net | (14) |  |  | (21) |
Net cash used in investing activities | (124) |  |  | (762) |
Financing activities |  |  |
Proceeds from borrowings | 318 |  |  | — |
Payments on borrowings | (3) |  |  | (4) |
Short-term debt, net | (236) |  |  | 1,105 |
Cash dividends paid | (334) |  |  | (320) |
Exercise of employee stock options | 17 |  |  | 8 |
Repurchase of shares | — |  |  | (86) |
Employee taxes paid from shares withheld | (40) |  |  | (50) |
Other - net | (1) |  |  | (1) |
Net cash provided by (used in) financing activities | (281) |  |  | 652 |
Effect of currency on cash | 11 |  |  | 8 |
Total decrease in cash | (59) |  |  | (60) |
Cash at the beginning of the period | 294 |  |  | 297 |
Cash at the end of the period | $ | 235 |  |  | $ | 237 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
5

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EATON CORPORATION plc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Amounts are in millions 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.
Note 1.BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Eaton Corporation plc (Eaton or the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles (US GAAP) for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) have been made that are necessary for a fair presentation of the condensed consolidated financial statements for the interim periods.
This Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in Eaton’s 2022 Form 10-K. The interim period results are not necessarily indicative of the results to be expected for the full year. Management has evaluated subsequent events through the date this Form 10-Q was filed with the Securities and Exchange Commission.
Certain prior year amounts have been reclassified to conform to the current year presentation.
Adoption of New Accounting Standard
Eaton adopted Accounting Standards Update 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, in the first quarter of 2023. The standard requires disclosure of certain information about the Company's supply chain finance program, including key terms and a rollforward of confirmed amounts payable. The adoption of the standard did not have a material impact on the condensed consolidated financial statements.
Note 2.ACQUISITIONS AND DIVESTITURE OF BUSINESSES
Sale of Hydraulics business
On August 2, 2021, Eaton completed the sale of the Hydraulics business to Danfoss A/S and recognized a pre-tax gain of $617 million in 2021. The Company finalized negotiations of post-closing adjustments with Danfoss A/S and recognized an additional pre-tax gain of $24 million in the first quarter of 2022 and received cash of $22 million in the second quarter of 2022 from Danfoss A/S to fully settle all post-closing adjustments.
Acquisition of Royal Power Solutions
On January 5, 2022, Eaton acquired Royal Power Solutions for $610 million, net of cash received. 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 is reported within the eMobility business segment.
Eaton's 2022 Condensed Consolidated Financial Statements include Royal Power Solutions' results of operations, including segment operating profit of $5 million on sales of $38 million, from the date of acquisition through March 31, 2022.
Acquisition of a 50% stake in Jiangsu Huineng Electric Co., Ltd’s circuit breaker business
On July 1, 2022, Eaton acquired a 50 percent stake in Jiangsu Huineng Electric Co., Ltd’s circuit breaker business, which manufactures and markets low-voltage circuit breakers in China. Eaton accounts for this investment on the equity method of accounting and is reported within the Electrical Global business segment.
Acquisition of a 49% stake in Jiangsu Ryan Electrical Co. Ltd.
On April 23, 2023, Eaton acquired a 49 percent stake in Jiangsu Ryan Electrical Co. Ltd., a manufacturer of power distribution and sub-transmission transformers in China. Eaton will account for this investment on the equity method of accounting and will report it within the Electrical Global business segment.
6

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Note 3. REVENUE RECOGNITION
Sales are recognized when obligations under the terms of the contract are satisfied and control of promised goods or services have transferred to our customers. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. Sales are measured at the amount of consideration the Company expects to be paid in exchange for these products or services.
The following table provides disaggregated sales by lines of businesses, geographic destination, market channel or end market, as applicable, for the Company's operating segments:

|  |  | Three months ended March 31
(In millions) |  |  |  |  | 2023 |  | 2022
Electrical Americas |  |  |  |  |  |  |
Products |  |  |  |  | $ | 716 |  |  | $ | 603 |
Systems |  |  |  |  | 1,578 |  |  | 1,288 |
Total |  |  |  |  | $ | 2,294 |  |  | $ | 1,891 |
Electrical Global |  |  |  |  |  |  |
Products |  |  |  |  | $ | 882 |  |  | $ | 876 |
Systems |  |  |  |  | 618 |  |  | 561 |
Total |  |  |  |  | $ | 1,500 |  |  | $ | 1,437 |
Aerospace |  |  |  |  |  |  |
Original Equipment Manufacturers |  |  |  |  | $ | 314 |  |  | $ | 293 |
Aftermarket |  |  |  |  | 264 |  |  | 221 |
Industrial and Other |  |  |  |  | 225 |  |  | 204 |
Total |  |  |  |  | $ | 803 |  |  | $ | 718 |
Vehicle |  |  |  |  |  |  |
Commercial |  |  |  |  | $ | 448 |  |  | $ | 402 |
Passenger and Light Duty |  |  |  |  | 291 |  |  | 269 |
Total |  |  |  |  | $ | 739 |  |  | $ | 671 |
eMobility |  |  |  |  | $ | 147 |  |  | $ | 126 |
Total net sales |  |  |  |  | $ | 5,483 |  |  | $ | 4,843 |

7

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The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (revenue recognized exceeds amount billed to the customer), and deferred revenue (advance payments and billings in excess of revenue recognized). Accounts receivable from customers were $3,726 million and $3,581 million at March 31, 2023 and December 31, 2022, respectively. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. These assets and liabilities are reported on the Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period. Unbilled receivables were $251 million and $233 million at March 31, 2023 and December 31, 2022, respectively, and are recorded in Prepaid expenses and other current assets. The increase in unbilled receivables reflects higher revenue recognized from increased business activity in 2023.
Changes in the deferred revenue liabilities are as follows:

(In millions) | Deferred Revenue
Balance at January 1, 2023 | $ | 508 |
Customer deposits and billings | 514 |
Revenue recognized in the period | (421) |
Translation | 4 |
Balance at March 31, 2023 | $ | 605 |

(In millions) | Deferred Revenue
Balance at January 1, 2022 | $ | 422 |
Customer deposits and billings | 342 |
Revenue recognized in the period | (334) |
Translation | (2) |
Balance at March 31, 2022 | $ | 428 |

Deferred revenue liabilities of $586 million and $489 million as of March 31, 2023 and December 31, 2022, respectively, were included in Other current liabilities with the remaining balance presented in Other noncurrent liabilities.
A significant portion of open orders placed with Eaton are by original equipment manufacturers or distributors. These open orders are not considered firm as they have been historically subject to releases by customers. In measuring backlog of unsatisfied or partially satisfied obligations, only the amount of orders to which customers are firmly committed are included. Using this criterion, total backlog at March 31, 2023 was approximately $12.3 billion. At March 31, 2023, approximately 82% of this backlog is targeted for delivery to customers in the next twelve months and the rest thereafter.
Note 4. CREDIT LOSSES FOR RECEIVABLES
Receivables are exposed to credit risk based on the customers’ ability to pay which is influenced by, among other factors, their financial liquidity position. Eaton’s receivables are generally short-term in nature with a majority outstanding less than 90 days.
Eaton performs ongoing credit evaluation of its customers and maintains sufficient allowances for potential credit losses. The Company evaluates the collectability of its receivables based on the length of time the receivable is past due, and any anticipated future write-off based on historic experience adjusted for market conditions. The Company's segments, supported by our global credit department, perform the credit evaluation and monitoring process to estimate and manage credit risk. The process includes an evaluation of credit losses for both the overall segment receivable and specific customer balances. The process also includes review of customer financial information and credit ratings, approval and monitoring of customer credit limits, and an assessment of market conditions. The Company may also require prepayment from customers to mitigate credit risk. Receivable balances are written off against an allowance for credit losses after a final determination of collectability has been made.
Accounts receivable are net of an allowance for credit losses of $39 million and $31 million at March 31, 2023 and December 31, 2022, respectively. The change in the allowance for credit losses includes expense and net write-offs, none of which are significant.
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Note 5. INVENTORY
Inventory is carried at lower of cost or net realizable value. The components of inventory are as follows:

(In millions) | March 31, 2023 |  | December 31, 2022
Raw materials | $ | 1,407 |  |  | $ | 1,275 |
Work-in-process | 916 |  |  | 781 |
Finished goods | 1,281 |  |  | 1,375 |
Total inventory | $ | 3,604 |  |  | $ | 3,430 |

Note 6. GOODWILL
Changes in the carrying amount of goodwill by segment are as follows:

(In millions) |  | January 1, 2023 |  |  |  |  |  |  |  |  |  | Translation |  | March 31, 2023
Electrical Americas |  | $ | 7,402 |  |  |  |  |  |  |  |  |  |  | $ | 8 |  |  | $ | 7,411 |
Electrical Global |  | 3,929 |  |  |  |  |  |  |  |  |  |  | 58 |  |  | 3,987 |
Aerospace |  | 2,844 |  |  |  |  |  |  |  |  |  |  | 30 |  |  | 2,873 |
Vehicle |  | 287 |  |  |  |  |  |  |  |  |  |  | 1 |  |  | 288 |
eMobility |  | 334 |  |  |  |  |  |  |  |  |  |  | — |  |  | 334 |
Total |  | $ | 14,796 |  |  |  |  |  |  |  |  |  |  | $ | 98 |  |  | $ | 14,894 |

Note 7. SUPPLY CHAIN FINANCE PROGRAM
The Company negotiates payment terms directly with its suppliers for the purchase of goods and services. In addition, 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. If a supplier elects to participate in the SCF program, the supplier decides which invoices are sold to the financial institution and the Company has no economic interest in a supplier’s decision to sell an invoice. 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. The amounts due to the financial institution for suppliers that participate in the SCF program are included in Accounts payable on the Consolidated Balance Sheets, and the associated payments are included in operating activities on the Condensed Consolidated Statements of Cash Flows.
The changes in SCF obligations are as follows:

(In millions) | SCF Obligations |  |
Balance at January 1, 2023 | $ | 208 |  |  |
Invoices confirmed during the period | 297 |  |  |
Invoices paid during the period | (234) |  |  |
Translation | 12 |  |  |
Balance at March 31, 2023 | $ | 283 |  |  |

Note 8. DEBT
On March 3, 2023, a subsidiary of Eaton issued Euro denominated notes (2023 Euro Notes) in a private issuance with a face value of €300 million ($318 million). The floating rate notes are due June 3, 2024 with interest payable quarterly based on the three-month Euro Interbank Offered Rate plus 25 basis points. The 2023 Euro Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton. The 2023 Euro Notes contain a change of control provision which requires the Company to make an offer to purchase all or any part of the 2023 Euro Notes at a purchase price of 100.5% of the principal amount plus accrued and unpaid interest. The 2023 Euro Notes are subject to customary non-financial covenants.
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Note 9. RETIREMENT BENEFITS PLANS
The components of retirement benefits expense (income) are as follows:

| United States pension benefit expense (income) |  | Non-United States pension benefit expense (income) |  | Other postretirement benefits expense (income)
| Three months ended March 31
(In millions) | 2023 |  | 2022 |  | 2023 |  | 2022 |  | 2023 |  | 2022
Service cost | $ | 5 |  |  | $ | 8 |  |  | $ | 11 |  |  | $ | 16 |  |  | $ | — |  |  | $ | — |
Interest cost | 36 |  |  | 20 |  |  | 21 |  |  | 12 |  |  | 2 |  |  | 2 |
Expected return on plan assets | (49) |  |  | (53) |  |  | (30) |  |  | (31) |  |  | — |  |  | — |
Amortization | 1 |  |  | 8 |  |  | 1 |  |  | 12 |  |  | (4) |  |  | (2) |
| (7) |  |  | (17) |  |  | 3 |  |  | 9 |  |  | (2) |  |  | — |
Settlements | 9 |  |  | 14 |  |  | 1 |  |  | — |  |  | — |  |  | — |
Total expense (income) | $ | 2 |  |  | $ | (3) |  |  | $ | 4 |  |  | $ | 9 |  |  | $ | (2) |  |  | $ | — |

The components of retirement benefits expense (income) other than service costs are included in Other income - net.
During 2020, the Company announced it was freezing its United States pension plans for its non-union employees. The freeze was effective January 1, 2021 for non-union U.S. employees whose retirement benefit was determined under a cash balance formula and is effective January 1, 2026 for non-union U.S. employees whose retirement benefit is determined under a final average pay formula.
During the first quarter of 2023 and 2022, the Company recognized settlement losses from lump-sum distributions of $10 million and $14 million, respectively. During the first quarter of 2022, the Company remeasured certain pension plans as a result of lump-sum distributions exceeding or expected to exceed the sum of service and interest costs for the year. These remeasurements resulted in an increase of $47 million in funded status and corresponding decrease in Accumulated other comprehensive loss in the first quarter of 2022.
Note 10. LEGAL CONTINGENCIES
Eaton is subject to a broad range of claims, administrative and legal proceedings such as lawsuits that relate to contractual allegations and indemnity claims, tax audits, patent infringement, personal injuries, antitrust matters, and employment-related matters. Eaton is also subject to legal claims from historic products which may have contained asbestos. Insurance may cover some of the costs associated with these claims and proceedings. Although it is not possible to predict with certainty the outcome or cost of these matters, the Company believes they will not have a material adverse effect on the Condensed Consolidated Financial Statements.
Note 11. INCOME TAXES
The effective income tax rate for the first quarter of 2023 was expense of 16.1% compared to expense of 13.9% for the first quarter of 2022. The increase in the effective tax rate in the first quarter of 2023 was primarily due to greater levels of income in higher tax jurisdictions and a smaller impact from the excess tax benefits recognized for employee share-based payments in the quarter.
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Note 12. EQUITY
The changes in Shareholders’ equity are as follows:

| Ordinary shares |  | Capital in excess of par value |  | Retained earnings |  | Accumulated other comprehensive loss |  | Shares held in trust |  | Total Eaton shareholders' equity |  | Noncontrolling interests |  | Total equity
(In millions) | Shares |  | Dollars |  |  |  |  |  |  |
Balance at January 1, 2023 | 397.8 |  |  | $ | 4 |  |  | $ | 12,512 |  |  | $ | 8,468 |  |  | $ | (3,946) |  |  | $ | (1) |  |  | $ | 17,038 |  |  | $ | 38 |  |  | $ | 17,075 |
Net income | — |  |  | — |  |  | — |  |  | 638 |  |  | — |  |  | — |  |  | 638 |  |  | 1 |  |  | 639 |
Other comprehensive income, net of tax |  |  |  |  |  |  |  |  | 132 |  |  |  |  | 132 |  |  | — |  |  | 132 |
Cash dividends paid and accrued | — |  |  | — |  |  | — |  |  | (348) |  |  | — |  |  | — |  |  | (348) |  |  | (4) |  |  | (352) |
Issuance of shares under equity-based compensation plans | 0.7 |  |  | — |  |  | (11) |  |  | (1) |  |  | — |  |  | 1 |  |  | (11) |  |  | — |  |  | (11) |
Changes in noncontrolling interest of consolidated subsidiaries - net | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1 |  |  | 1 |
Balance at March 31, 2023 | 398.6 |  |  | $ | 4 |  |  | $ | 12,502 |  |  | $ | 8,757 |  |  | $ | (3,814) |  |  | $ | — |  |  | $ | 17,449 |  |  | $ | 36 |  |  | $ | 17,485 |

| Ordinary shares |  | Capital in excess of par value |  | Retained earnings |  | Accumulated other comprehensive loss |  | Shares held in trust |  | Total Eaton shareholders' equity |  | Noncontrolling interests |  | Total equity
(In millions) | Shares |  | Dollars |  |  |  |  |  |  |
Balance at January 1, 2022 | 398.8 |  |  | $ | 4 |  |  | $ | 12,449 |  |  | $ | 7,594 |  |  | $ | (3,633) |  |  | $ | (1) |  |  | $ | 16,413 |  |  | $ | 38 |  |  | $ | 16,451 |
Net income | — |  |  | — |  |  | — |  |  | 532 |  |  | — |  |  | — |  |  | 532 |  |  | 1 |  |  | 533 |
Other comprehensive income, net of tax |  |  |  |  |  |  |  |  | 116 |  |  |  |  | 116 |  |  | — |  |  | 116 |
Cash dividends paid and accrued | — |  |  | — |  |  | — |  |  | (331) |  |  | — |  |  | — |  |  | (331) |  |  | (2) |  |  | (333) |
Issuance of shares under equity-based compensation plans | 0.8 |  |  | — |  |  | (22) |  |  | (2) |  |  | — |  |  | — |  |  | (24) |  |  | — |  |  | (24) |
Changes in noncontrolling interest of consolidated subsidiaries - net | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1) |  |  | (1) |
Repurchase of shares | (0.6) |  |  | — |  |  | — |  |  | (86) |  |  | — |  |  | — |  |  | (86) |  |  | — |  |  | (86) |
Balance at March 31, 2022 | 399.0 |  |  | $ | 4 |  |  | $ | 12,427 |  |  | $ | 7,707 |  |  | $ | (3,517) |  |  | $ | (1) |  |  | $ | 16,620 |  |  | $ | 36 |  |  | $ | 16,656 |

On February 27, 2019, the Board of Directors adopted a share repurchase program for share repurchases up to $5.0 billion of ordinary shares (2019 Program). On February 23, 2022, the Board renewed the 2019 Program by providing authority for up to $5.0 billion in repurchases to be made during the three-year period commencing on that date (2022 Program). Under the 2022 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, 2023, no ordinary shares were repurchased. During the three months ended March 31, 2022, 0.6 million ordinary shares were repurchased under the 2022 program in the open market at a total cost of $86 million.
The changes in Accumulated other comprehensive loss are as follows:

(In millions) | Currency translation and related hedging instruments |  | Pensions and other postretirement benefits |  | Cash flow hedges |  | Total
Balance at January 1, 2023 | $ | (3,264) |  |  | $ | (810) |  |  | $ | 129 |  |  | $ | (3,946) |
Other comprehensive income (loss) before reclassifications | 121 |  |  | (11) |  |  | 26 |  |  | 136 |
Amounts reclassified from Accumulated other comprehensive loss (income) | (1) |  |  | 8 |  |  | (11) |  |  | (4) |
Net current-period Other comprehensive income (loss) | 119 |  |  | (2) |  |  | 15 |  |  | 132 |
Balance at March 31, 2023 | $ | (3,145) |  |  | $ | (813) |  |  | $ | 144 |  |  | $ | (3,814) |

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The reclassifications out of Accumulated other comprehensive loss are as follows:

(In millions) | Three months ended March 31, 2023 |  | Consolidated Statements of Income classification
Gains and (losses) on net investment hedges (amount excluded from effectiveness testing) |  |  |
Currency exchange contracts | $ | 1 |  |  | Interest expense - net
Tax expense | — |  |  |
Total, net of tax | 1 |  |  |
Amortization of defined benefits pensions and other postretirement benefits items |  |  |
Actuarial loss and prior service cost | (8) |  | 1 |
Tax benefit | — |  |  |
Total, net of tax | (8) |  |  |
Gains and (losses) on cash flow hedges |  |  |
Floating-to-fixed interest rate swaps | 3 |  |  | Interest expense - net
Currency exchange contracts | 11 |  |  | Net sales and Cost of products sold
Tax expense | (3) |  |  |
Total, net of tax | 11 |  |  |
Total reclassifications for the period | $ | 4 |  |  |

1 These components of Accumulated other comprehensive loss are included in the computation of net periodic benefit cost. See Note 9 for additional information about pension and other postretirement benefits items.
Net Income Per Share Attributable to Eaton Ordinary Shareholders
A summary of the calculation of net income per share attributable to Eaton ordinary shareholders is as follows:

|  |  | Three months ended March 31
(In millions except for per share data) |  |  |  |  | 2023 |  | 2022
Net income attributable to Eaton ordinary shareholders |  |  |  |  | $ | 638 |  |  | $ | 532 |
Weighted-average number of ordinary shares outstanding - diluted |  |  |  |  | 400.5 |  |  | 401.8 |
Less dilutive effect of equity-based compensation |  |  |  |  | 2.0 |  |  | 2.6 |
Weighted-average number of ordinary shares outstanding - basic |  |  |  |  | 398.5 |  |  | 399.2 |
Net income per share attributable to Eaton ordinary shareholders |  |  |  |  |  |  |
Diluted |  |  |  |  | $ | 1.59 |  |  | $ | 1.33 |
Basic |  |  |  |  | 1.60 |  |  | 1.33 |

For the first quarter of 2023 and 2022, all stock options were excluded from the calculation of diluted net income per share attributable to Eaton ordinary shareholders because the exercise price of the options exceeded the average market price of the ordinary shares during the period and their effect, accordingly, would have been antidilutive.
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Note 13. FAIR VALUE MEASUREMENTS
Fair value is measured based on an exit price, representing the amount that would be received to sell an asset or paid to satisfy a liability in an orderly transaction between market participants. Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a fair value hierarchy is established, which categorizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
A summary of financial instruments and contingent consideration recognized at fair value, and the fair value measurements used, is as follows:

(In millions) | Total |  | Level 1 |  | Level 2 |  | Level 3
March 31, 2023 |  |  |  |  |  |  |
Cash | $ | 235 |  |  | $ | 235 |  |  | $ | — |  |  | $ | — |
Short-term investments | 289 |  |  | 289 |  |  | — |  |  | — |
Net derivative contracts | 44 |  |  | — |  |  | 44 |  |  | — |
Contingent future payments from acquisition of Green Motion | (45) |  |  | — |  |  | — |  |  | (45) |
December 31, 2022 |  |  |  |  |  |  |
Cash | $ | 294 |  |  | $ | 294 |  |  | $ | — |  |  | $ | — |
Short-term investments | 261 |  |  | 261 |  |  | — |  |  | — |
Net derivative contracts | 29 |  |  | — |  |  | 29 |  |  | — |
Contingent future payments from acquisition of Green Motion | (44) |  |  | — |  |  | — |  |  | (44) |

Eaton values its financial instruments using an industry standard market approach, in which prices and other relevant information is generated by market transactions involving identical or comparable assets or liabilities.
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 an initial estimate of $57 million for the 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 $112 million. As of March 31, 2023, the fair value of the contingent future payments has been reduced to $45 million based primarily on anticipated reductions in projected 2023 revenue compared to the initial estimate.
Other Fair Value Measurements
Long-term debt and the current portion of long-term debt had a carrying value of $8,709 million and fair value of $8,181 million at March 31, 2023 compared to $8,331 million and $7,625 million, respectively, at December 31, 2022. The fair value of Eaton's debt instruments was estimated using prevailing market interest rates on debt with similar creditworthiness, terms and maturities and is considered a Level 2 fair value measurement.
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Note 14. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
In the normal course of business, Eaton is exposed to certain risks related to fluctuations in interest rates, currency exchange rates and commodity prices. The Company uses various derivative and non-derivative financial instruments, primarily interest rate swaps, currency forward exchange contracts, currency swaps and commodity contracts to manage risks from these market fluctuations. The instruments used by Eaton are straightforward, non-leveraged instruments. The counterparties to these instruments are financial institutions with strong credit ratings. Eaton maintains control over the size of positions entered into with any one counterparty and regularly monitors the credit rating of these institutions. Such instruments are not purchased and sold for trading purposes.
Derivative financial instruments are accounted for at fair value and recognized as assets or liabilities in the Consolidated Balance Sheets. Accounting for the gain or loss resulting from the change in the fair value of the derivative financial instrument depends on whether it has been designated as part of a hedging relationship, is effective and the nature of the hedging activity. Eaton formally documents all relationships between derivative financial instruments accounted for as designated hedges and the hedged item, as well as its risk-management objective and strategy for undertaking the hedge transaction. This process includes linking derivative financial instruments to a recognized asset or liability, specific firm commitment, forecasted transaction, or net investment in a foreign operation. These financial instruments can be designated as:
•Hedges of the change in the fair value of a recognized fixed-rate asset or liability, or the firm commitment to acquire such an asset or liability (a fair value hedge); for these hedges, the gain or loss from the derivative financial instrument, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in income during the period of change in fair value.
•Hedges of the variable cash flows of a recognized variable-rate asset or liability, or the forecasted acquisition of such an asset or liability (a cash flow hedge); for these hedges, the gain or loss from the derivative financial instrument is recognized in Accumulated other comprehensive income and reclassified to income in the same period when the gain or loss on the hedged item is included in income.
•Hedges of the currency exposure related to a net investment in a foreign operation (a net investment hedge); for these hedges, the gain or loss from the derivative financial instrument is recognized in Accumulated other comprehensive income and reclassified to income in the same period when the gain or loss related to the net investment in the foreign operation is included in income.
The gain or loss from a derivative financial instrument designated as a hedge is classified in the same line of the Consolidated Statements of Income as the offsetting loss or gain on the hedged item. The cash flows resulting from these financial instruments are classified in operating activities on the Condensed Consolidated Statements of Cash Flows.
For derivatives that are not designated as a hedge, any gain or loss is immediately recognized in income. The majority of derivatives used in this manner relate to risks resulting from assets or liabilities denominated in a foreign currency and certain commodity contracts that arise in the normal course of business.
Eaton uses currency exchange contracts and certain of its debt denominated in foreign currency to hedge portions of its net investments in foreign operations against foreign currency exposure (net investment hedges). The Company uses the spot rate method to assess hedge effectiveness when currency exchange contracts are used in net investment hedges. Under this method, changes in the spot exchange rate are recognized in Accumulated other comprehensive loss. Changes related to the forward rate are excluded from the hedging relationship and the forward points are amortized to Interest expense - net on a straight-line basis over the term of the contract. The cash flows resulting from these currency exchange contracts are classified in investing activities on the Condensed Consolidated Statements of Cash Flows.
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Derivative Financial Statement Impacts
The fair value of derivative financial instruments recognized in the Consolidated Balance Sheets is as follows:

(In millions) | Notional amount |  | Other current assets |  | Other noncurrent assets |  | Other current liabilities |  | Other noncurrent liabilities |  | Type of hedge |  | Term
March 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives designated as hedges |  |  |  |  |  |  |  |  |  |  |  |  |
Currency exchange contracts | $ | 1,138 |  |  | $ | 49 |  |  | $ | 3 |  |  | $ | 14 |  |  | $ | 5 |  |  | Cash flow |  | 1 to 34 months
Commodity contracts | 48 |  |  | 4 |  |  | — |  |  | 1 |  |  | — |  |  | Cash flow |  | 1 to 12 months
Currency exchange contracts | 587 |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  | Net investment |  | 3 months
Total |  |  | $ | 53 |  |  | $ | 3 |  |  | $ | 15 |  |  | $ | 5 |  |  |  |  |
Derivatives not designated as hedges |  |  |  |  |  |  |  |  |  |  |  |  |
Currency exchange contracts | $ | 4,977 |  |  | $ | 22 |  |  |  |  | $ | 14 |  |  |  |  |  |  | 1 to 12 months
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives designated as hedges |  |  |  |  |  |  |  |  |  |  |  |  |
Currency exchange contracts | $ | 1,240 |  |  | $ | 35 |  |  | $ | 2 |  |  | $ | 17 |  |  | $ | 9 |  |  | Cash flow |  | 1 to 36 months
Commodity contracts | 64 |  |  | 4 |  |  | — |  |  | 2 |  |  | — |  |  | Cash flow |  | 1 to 12 months
Total |  |  | $ | 39 |  |  | $ | 2 |  |  | $ | 19 |  |  | $ | 9 |  |  |  |  |
Derivatives not designated as hedges |  |  |  |  |  |  |  |  |  |  |  |  |
Currency exchange contracts | $ | 4,683 |  |  | $ | 30 |  |  |  |  | $ | 14 |  |  |  |  |  |  | 1 to 12 months

The currency exchange contracts shown in the table above as derivatives not designated as hedges are primarily contracts entered into to manage currency volatility or exposure on intercompany receivables, payables and loans. While Eaton does not elect hedge accounting treatment for these derivatives, Eaton targets managing 100% of the intercompany balance sheet exposure to minimize the effect of currency volatility related to the movement of goods and services in the normal course of its operations. This activity represents the great majority of these currency exchange contracts. The cash flows resulting from the settlement of these derivatives have been classified in investing activities in the Condensed Consolidated Statements of Cash Flows.
Foreign currency denominated debt designated as non-derivative net investment hedging instruments had a carrying value on an after-tax basis of $3,092 million at March 31, 2023 and $2,711 million at December 31, 2022.
As of March 31, 2023, the volume of outstanding commodity contracts that were entered into to hedge forecasted transactions:

Commodity |  | March 31, 2023 |  |  |  |  |  | Term
Aluminum |  | 4 |  |  |  |  | Millions of pounds |  | 1 to 12 months
Copper |  | 7 |  |  |  |  | Millions of pounds |  | 1 to 12 months
Gold |  | 1,690 |  |  |  |  | Troy ounces |  | 1 to 12 months
Silver |  | 510,167 |  |  |  |  | Troy ounces |  | 1 to 12 months

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The following amounts were recorded on the Consolidated Balance Sheets related to fixed-to-floating interest rate swaps:

(In millions) | Carrying amount of the hedged assets (liabilities) |  | Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged asset (liabilities) (a)
Location on Consolidated Balance Sheets | March 31, 2023 |  |  | December 31, 2022 |  | March 31, 2023 |  | December 31, 2022 |
Long-term debt | $ | (713) |  |  |  | $ | (713) |  |  | $ | (47) |  |  | $ | (48) |  |

(a) At March 31, 2023 and December 31, 2022, these amounts include the cumulative liability amount of fair value hedging adjustments remaining for which the hedge accounting has been discontinued of $47 million and $48 million, respectively.
The impact of cash flow and fair value hedging activities to the Consolidated Statements of Income is as follows:

| Three months ended March 31, 2023
(In millions) | Net sales |  | Cost of products sold |  | Interest expense - net |  |
Amounts from Consolidated Statements of Income | $ | 5,483 |  |  | $ | 3,599 |  |  | $ | 50 |  |  |
Gain (loss) on derivatives designated as cash flow hedges |  |  |  |  |  |  |
Forward starting floating-to-fixed interest rate swaps |  |  |  |  |  |  |
Hedged item | $ | — |  |  | $ | — |  |  | $ | (3) |  |  |
Derivative designated as hedging instrument | — |  |  | — |  |  | 3 |  |  |
Currency exchange contracts |  |  |  |  |  |  |
Hedged item | $ | 2 |  |  | $ | (15) |  |  | $ | — |  |  |
Derivative designated as hedging instrument | (2) |  |  | 15 |  |  | — |  |  |

| Three months ended March 31, 2022
(In millions) | Net sales |  | Cost of products sold |  | Interest expense - net |  |
Amounts from Consolidated Statements of Income | $ | 4,843 |  |  | $ | 3,269 |  |  | $ | 32 |  |  |
Gain (loss) on derivatives designated as cash flow hedges |  |  |  |  |  |  |
Currency exchange contracts |  |  |  |  |  |  |
Hedged item | $ | 2 |  |  | $ | (3) |  |  | $ | — |  |  |
Derivative designated as hedging instrument | (2) |  |  | 3 |  |  | — |  |  |
Commodity contracts |  |  |  |  |  |  |
Hedged item | $ | — |  |  | $ | (1) |  |  | $ | — |  |  |
Derivative designated as hedging instrument | — |  |  | 1 |  |  | — |  |  |
Gain (loss) on derivatives designated as fair value hedges |  |  |  |  |  |  |
Fixed-to-floating interest rate swaps |  |  |  |  |  |  |
Hedged item | $ | — |  |  | $ | — |  |  | $ | 8 |  |  |
Derivative designated as hedging instrument | — |  |  | — |  |  | (8) |  |  |

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The impact of derivatives not designated as hedges to the Consolidated Statements of Income is as follows:

| Gain (loss) recognized in Consolidated Statements of Income |  |  |  | Consolidated Statements of Income classification
| Three months ended March 31 |  |
(In millions) | 2023 |  | 2022 |  |  |  |
Gain (loss) on derivatives not designated as hedges |  |  |  |  |  |  |
Currency exchange contracts | $ | 11 |  |  | $ | (8) |  |  |  |  | Interest expense - net
Commodity contracts | — |  |  | 1 |  |  |  |  | Other expense (income) - net and Cost of products sold (a)
Total | $ | 11 |  |  | $ | (7) |  |  |  |  |

(a) In the second quarter of 2022, Eaton changed the presentation of gains and losses associated with derivative contracts for commodities that are not designated as hedges from Cost of product sold to Other expense (income) - net on the Consolidated Statements of Income. Prior period amounts have not been reclassified as they are not material.
The impact of derivative and non-derivative instruments designated as hedges to the Consolidated Statements of Income and Comprehensive Income is as follows:

| Gain (loss) recognized in other comprehensive income (loss) |  | Location of gain (loss) reclassified from Accumulated other comprehensive loss |  | Gain (loss) reclassified from Accumulated other comprehensive loss
| Three months ended March 31 |  |  |  | Three months ended March 31
(In millions) | 2023 |  | 2022 |  |  |  | 2023 |  | 2022
Derivatives designated as cash flow hedges |  |  |  |  |  |  |  |  |
Forward starting floating-to-fixed interest rate swaps | $ | — |  |  | $ | 124 |  |  | Interest expense - net |  | $ | 3 |  |  | $ | — |
Currency exchange contracts | 31 |  |  | — |  |  | Net sales and Cost of products sold |  | 11 |  |  | — |
Commodity contracts | 2 |  |  | 5 |  |  | Cost of products sold |  | — |  |  | 1 |
Derivatives designated as net investment hedges |  |  |  |  |  |  |  |  |
Currency exchange contracts |  |  |  |  |  |  |  |  |
Effective portion | (14) |  |  | — |  |  | Gain (loss) on sale of business |  | — |  |  | — |
Amount excluded from effectiveness testing | 5 |  |  | — |  |  | Interest expense - net |  | 1 |  |  | — |
Non-derivative designated as net investment hedges |  |  |  |  |  |  |  |  |
Foreign currency denominated debt | (63) |  |  | 62 |  |  | Gain (loss) on sale of business |  | — |  |  | — |
Total | $ | (39) |  |  | $ | 191 |  |  |  |  | $ | 15 |  |  | $ | 1 |

The pre-tax portion of the fair value of currency exchange contracts designated as net investment hedges included in Accumulated other comprehensive loss were net losses of $14 million at March 31, 2023. The pre-tax portion of the fair value of the forward points included in Accumulated other comprehensive loss were net gains of $4 million at March 31, 2023.
At March 31, 2023, a gain of $38 million of estimated unrealized net gains or losses associated with our cash flow hedges were expected to be reclassified to income from Accumulated other comprehensive loss within the next twelve months. These reclassifications relate to our designated foreign currency and commodity hedges that will mature in the next 12 months.
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Note 15. RESTRUCTURING CHARGES
In the second quarter of 2020, Eaton initiated a multi-year restructuring program to reduce its cost structure and gain efficiencies in its business segments and at corporate in order to respond to declining market conditions brought on by the COVID-19 pandemic. Since the inception of the program, the Company has incurred charges of $335 million. These restructuring activities are expected to be completed in 2023 with total estimated charges of $350 million cumulatively for the entire program. The remaining charges in 2023 are expected to relate primarily to plant closing and other costs.
A summary of restructuring program charges is as follows:

|  |  | Three months ended March 31
(In millions except for per share data) |  |  |  |  | 2023 |  | 2022
Workforce reductions |  |  |  |  | $ | 2 |  |  | $ | 5 |
Plant closing and other |  |  |  |  | 7 |  |  | 13 |
Total before income taxes |  |  |  |  | 10 |  |  | 18 |
Income tax benefit |  |  |  |  | 2 |  |  | 4 |
Total after income taxes |  |  |  |  | $ | 8 |  |  | $ | 14 |
Per ordinary share - diluted |  |  |  |  | $ | 0.02 |  |  | $ | 0.03 |

Restructuring program charges related to the following segments:

|  |  | Three months ended March 31 |  |
(In millions) |  |  |  |  | 2023 |  | 2022 |  |  |  |
Electrical Americas |  |  |  |  | $ | 2 |  |  | $ | 5 |  |  |  |  |
Electrical Global |  |  |  |  | 3 |  |  | 5 |  |  |  |  |
Aerospace |  |  |  |  | 1 |  |  | 3 |  |  |  |  |
Vehicle |  |  |  |  | 2 |  |  | 3 |  |  |  |  |
Corporate |  |  |  |  | 1 |  |  | 2 |  |  |  |  |
Total |  |  |  |  | $ | 10 |  |  | $ | 18 |  |  |  |  |

A summary of liabilities related to workforce reductions, plant closing and other associated costs is as follows:

(In millions) | Workforce reductions |  | Plant closing and other |  | Total
Balance at January 1, 2020 | $ | — |  |  | $ | — |  |  | $ | — |
Liability recognized | 172 |  |  | 42 |  |  | 214 |
Payments, utilization and translation | (33) |  |  | (39) |  |  | (72) |
Balance at December 31, 2020 | 139 |  |  | 3 |  |  | 142 |
Liability recognized | 21 |  |  | 57 |  |  | 78 |
Payments, utilization and translation | (64) |  |  | (52) |  |  | (116) |
Balance at December 31, 2021 | 96 |  |  | 8 |  |  | 104 |
Liability recognized, net 1 | (13) |  |  | 47 |  |  | 33 |
Payments, utilization and translation | (45) |  |  | (51) |  |  | (96) |
Balance at December 31, 2022 | 38 |  |  | 4 |  |  | 41 |
Liability recognized | 2 |  |  | 7 |  |  | 10 |
Payments | (5) |  |  | (8) |  |  | (13) |
Balance at March 31, 2023 | $ | 35 |  |  | $ | 3 |  |  | $ | 38 |

1 The restructuring program liability was adjusted by $30 million in 2022 related to true-ups for completed workforce reductions and the decision not to close a facility in the Vehicle segment that was previously included in the program.
These restructuring program charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other income - net, as appropriate. In Business Segment Information, these restructuring program charges are treated as Corporate items. See Note 16 for additional information about business segments.
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Note 16. BUSINESS SEGMENT INFORMATION
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing performance. Eaton's operating segments are Electrical Americas, Electrical Global, Aerospace, Vehicle, and eMobility. Operating profit includes the operating profit from intersegment sales. For additional information regarding Eaton's business segments, see Note 17 to the Consolidated Financial Statements contained in the 2022 Form 10-K.

|  |  | Three months ended March 31
(In millions) |  |  |  |  | 2023 |  | 2022
Net sales |  |  |  |  |  |  |
Electrical Americas |  |  |  |  | $ | 2,294 |  |  | $ | 1,891 |
Electrical Global |  |  |  |  | 1,500 |  |  | 1,437 |
Aerospace |  |  |  |  | 803 |  |  | 718 |
Vehicle |  |  |  |  | 739 |  |  | 671 |
eMobility |  |  |  |  | 147 |  |  | 126 |
Total net sales |  |  |  |  | $ | 5,483 |  |  | $ | 4,843 |
Segment operating profit (loss) |  |  |  |  |  |  |
Electrical Americas |  |  |  |  | $ | 525 |  |  | $ | 361 |
Electrical Global |  |  |  |  | 274 |  |  | 279 |
Aerospace |  |  |  |  | 180 |  |  | 159 |
Vehicle |  |  |  |  | 107 |  |  | 113 |
eMobility |  |  |  |  | (4) |  |  | (3) |
Total segment operating profit |  |  |  |  | 1,082 |  |  | 909 |
Corporate |  |  |  |  |  |  |
Intangible asset amortization expense |  |  |  |  | (124) |  |  | (128) |
Interest expense - net |  |  |  |  | (50) |  |  | (32) |
Pension and other postretirement benefits income |  |  |  |  | 11 |  |  | 19 |
Restructuring program charges |  |  |  |  | (10) |  |  | (18) |
Other expense - net |  |  |  |  | (148) |  |  | (131) |
Income before income taxes |  |  |  |  | 762 |  |  | 619 |
Income tax expense |  |  |  |  | 123 |  |  | 86 |
Net income |  |  |  |  | 639 |  |  | 533 |
Less net income for noncontrolling interests |  |  |  |  | (1) |  |  | (1) |
Net income attributable to Eaton ordinary shareholders |  |  |  |  | $ | 638 |  |  | $ | 532 |

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ITEM 2.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 improving the quality of life and protecting the environment for people everywhere. We are guided by our commitment to do business right, to operate sustainably and to help our customers manage power – today and well into the future. By capitalizing on the global growth trends of electrification and digitalization, we're accelerating the planet's transition to renewable energy, helping to solve the world's most urgent power management challenges, and doing what's best for our stakeholders and all of society.
Eaton’s businesses are well-positioned to take advantage of secular growth trends related to the energy transition from fossil fuels to renewables. We are responding to these trends by innovating solutions that transform the electrical power value chain, investing in electrical vehicle markets, increasing our focus on electrification, and employing digital technologies for power management. The Company’s innovations are expected to enable the integration of renewables and sustainability solutions, with new types of equipment, services, and software. These strategic focus areas are an important part of our response to climate change.
Additionally, over the past several years, Eaton has completed a number of transactions to add higher growth, better margin businesses to its portfolio. These portfolio updates have the Company better aligned with secular growth trends and well positioned for expected further growth. These changes to our portfolio of businesses along with double digit organic sales growth and operational performance has led to 20% growth in our net income per share i n the first quarter of 2023 compared to the first quarter of 2022.
Founded in 1911, 2023 marks Eaton's 100 th anniversary of being listed on the New York Stock Exchange. We reported revenues of $20.8 billion in 2022 and serve customers in more than 170 countries.
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, strong returns, and align with secular trends and its power management strategies. During 2022 and 2023, Eaton continued to selectively add businesses to strengthen its portfolio.

Acquisitions of businesses and investments in associate companies |  | Date of acquisition |  | Business segment
Royal Power Solutions |  | January 5, 2022 |  | eMobility
A manufacturer of high-precision electrical connectivity components used in electric vehicle, energy management, industrial and mobility markets. |  |  |  |
Jiangsu Huineng Electric Co., Ltd’s circuit breaker business |  | July 1, 2022 |  | Electrical Global
A 50 percent stake in Jiangsu Huineng Electric Co., Ltd's circuit breaker business which manufactures and markets low-voltage circuit breakers in China. |  |  |  |
Jiangsu Ryan Electrical Co. Ltd. |  | April 23, 2023 |  | Electrical Global
A 49 percent stake in Jiangsu Ryan Electrical Co. Ltd., a manufacturer of power distribution and sub-transmission transformers in China. |  |  |  |

Additional information related to acquisitions and divestiture of businesses is presented in Note 2.
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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) |  |  |  |  | 2023 |  | 2022
Acquisition integration, divestiture charges and transaction costs |  |  |  |  | $ | 13 |  |  | $ | 29 |
Gain on the sale of the Hydraulics business |  |  |  |  | — |  |  | (24) |
Total before income taxes |  |  |  |  | 13 |  |  | 5 |
Income tax benefit |  |  |  |  | 3 |  |  | 1 |
Total after income taxes |  |  |  |  | $ | 11 |  |  | $ | 4 |
Per ordinary share - diluted |  |  |  |  | $ | 0.03 |  |  | $ | 0.01 |

Acquisition integration, divestiture charges and transaction costs in 2023 and 2022 are primarily related to the acquisition of Royal Power Solutions and other acquisitions completed prior to 2022, and other charges and income to acquire and exit businesses. These charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other income - net. In Business Segment Information in Note 16, the charges were included in Other expense - net.
Restructuring
In the second quarter of 2020, Eaton initiated a multi-year restructuring program to reduce its cost structure and gain efficiencies in its business segments and at corporate in order to respond to declining market conditions brought on by the COVID-19 pandemic. Since the inception of the program, the Company has incurred charges of $335 million. These restructuring activities are expected to be completed in 2023 with total estimated charges of $350 million cumulatively for the entire program and projected mature year savings of $250 million when fully implemented. The remaining charges in 2023 are expected to relate primarily to plant closing and other costs. Additional information related to this restructuring is presented in Note 15.
Intangible Asset Amortization Expense
Intangible asset amortization expense is as follows:

|  |  | Three months ended March 31
(In millions except for per share data) |  |  |  |  | 2023 |  | 2022
Intangible asset amortization expense |  |  |  |  | $ | 124 |  |  | $ | 128 |
Income tax benefit |  |  |  |  | 27 |  |  | 29 |
Total after income taxes |  |  |  |  | $ | 97 |  |  | $ | 99 |
Per ordinary share - diluted |  |  |  |  | $ | 0.24 |  |  | $ | 0.25 |

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Consolidated Financial Results

|  |  |  |  | Three months ended March 31 |  | Increase (decrease)
(In millions except for per share data) |  |  |  |  |  | 2023 |  | 2022 |
Net sales |  |  |  |  |  |  | $ | 5,483 |  |  | $ | 4,843 |  |  | 13 | %
Gross profit |  |  |  |  |  |  | 1,884 |  |  | 1,574 |  |  | 20 | %
Percent of net sales |  |  |  |  |  |  | 34.4 | % |  | 32.5 | % |  |
Income before income taxes |  |  |  |  |  |  | 762 |  |  | 619 |  |  | 23 | %
Net income |  |  |  |  |  |  | 639 |  |  | 533 |  |  | 20 | %
Less net income for noncontrolling interests |  |  |  |  |  |  | (1) |  |  | (1) |  |  |
Net income attributable to Eaton ordinary shareholders |  |  |  |  |  |  | 638 |  |  | 532 |  |  | 20 | %
Excluding acquisition and divestiture charges, after-tax |  |  |  |  |  |  | 11 |  |  | 4 |  |  |
Excluding restructuring program charges, after-tax |  |  |  |  |  |  | 8 |  |  | 14 |  |  |
Excluding intangible asset amortization expense, after-tax |  |  |  |  |  |  | 97 |  |  | 99 |  |  |
Adjusted earnings |  |  |  |  |  |  | $ | 753 |  |  | $ | 649 |  |  | 16 | %
Net income per share attributable to Eaton ordinary shareholders - diluted |  |  |  |  |  |  | $ | 1.59 |  |  | $ | 1.33 |  |  | 20 | %
Excluding per share impact of acquisition and divestiture charges, after-tax |  |  |  |  |  |  | 0.03 |  |  | 0.01 |  |  |
Excluding per share impact of restructuring program charges, after-tax |  |  |  |  |  |  | 0.02 |  |  | 0.03 |  |  |
Excluding per share impact of intangible asset amortization expense, after-tax |  |  |  |  |  |  | 0.24 |  |  | 0.25 |  |  |
Adjusted earnings per ordinary share |  |  |  |  |  |  | $ | 1.88 |  |  | $ | 1.62 |  |  | 16 | %

Net Sales

Changes in Net sales are summarized as follows: |  |  | Three months ended March 31 |  |  |  |  |  |  |  |
|  |  | 2023 |  |  |  |  |  |  |  |
Organic growth |  |  | 15 | % |  |  |  |  |  |  |  |
Foreign currency |  |  | (2) | % |  |  |  |  |  |  |  |
Total increase (decrease) in Net sales |  |  | 13 | % |  |  |  |  |  |  |  |

Organic sales increased 15% in the first quarter of 2023 due to broad-based strength in end-markets of the Electrical Americas and Electrical Global business segments, strength in sales to commercial OEM and aftermarket in the Aerospace business segment, and higher sales volumes including inflationary pricing recovery for both Vehicle and eMobility business segments.
Gross Profit
Gross profit margin increased from 32.5% in the first quarter of 2022 to 34.4% in the first quarter of 2023 primarily due to higher sales volumes including inflationary pricing recovery. Conversely, wage and commodity inflation, and operating inefficiencies had an unfavorable impact on gross margin, despite offsetting price actions.
Income Taxes
The effective income tax rate for the first quarter of 2023 was expense of 16.1% compared to expense of 13.9% for the first quarter of 2022. The increase in the effective tax rate in the first quarter of 2023 was primarily due to greater levels of income in higher tax jurisdictions and a smaller impact from the excess tax benefits recognized for employee share-based payments in the quarter.
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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, 2022 | $ | 532 |  |  | $ | 1.33 |
Business segment results of operations |  |  |
Performance | 160 |  |  | 0.40 |
Foreign currency | (13) |  |  | (0.03) |
Corporate |  |  |
Intangible asset amortization expense | 2 |  |  | 0.01 |
Restructuring program charges | 6 |  |  | 0.01 |
Acquisition and divestiture charges | (7) |  |  | (0.02) |
Other corporate items | (29) |  |  | (0.07) |
Tax rate impact | (13) |  |  | (0.03) |
March 31, 2023 | $ | 638 |  |  | $ | 1.59 |

Business Segment Results of Operations
The following is a discussion of Net sales, operating profit and operating margin by business segment.
Electrical Americas

|  |  |  |  | Three months ended March 31 |  | Increase (decrease)
(In millions) |  |  |  |  |  | 2023 |  | 2022 |
Net sales |  |  |  |  |  |  | $ | 2,294 |  |  | $ | 1,891 |  |  | 21 | %
Operating profit |  |  |  |  |  |  | $ | 525 |  |  | $ | 361 |  |  | 45 | %
Operating margin |  |  |  |  |  |  | 22.9 | % |  | 19.1 | % |  |

Net sales increased 21% in the first quarter of 2023 compared to the first quarter of 2022 due to a 22% increase in organic sales with a small offset from negative currency translation. The increase in organic sales reflects broad-based strength in end-markets, with particular strength in commercial & institutional, utility, and data center end-markets.
The operating margin increased from 19.1% in the first quarter of 2022 to 22.9% in the first quarter of 2023 primarily due to higher sales volumes including inflationary pricing recovery, partially offset by wage and commodity inflation.
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Electrical Global

|  |  |  |  | Three months ended March 31 |  | Increase (decrease)
(In millions) |  |  |  |  |  | 2023 |  | 2022 |
Net sales |  |  |  |  |  |  | $ | 1,500 |  |  | $ | 1,437 |  |  | 4 | %
Operating profit |  |  |  |  |  |  | $ | 274 |  |  | $ | 279 |  |  | (2) | %
Operating margin |  |  |  |  |  |  | 18.3 | % |  | 19.4 | % |  |
Changes in Net sales are summarized as follows: |  |  |  |  |  |  |  |  |  |  | Three months ended March 31
|  |  |  |  |  |  |  |  |  |  | 2023
Organic growth |  |  |  |  |  |  |  |  |  |  | 8 | %
Divestiture |  |  |  |  |  |  |  |  |  |  | (1) | %
Foreign currency |  |  |  |  |  |  |  |  |  |  | (3) | %
Total increase in Net sales |  |  |  |  |  |  |  |  |  |  | 4 | %

The increase in organic sales in the first quarter of 2023 was primarily due to strength in utility, data center and distributed IT end-markets.
The operating margin decreased from 19.4% in the first quarter of 2022 to 18.3% in the first quarter of 2023 primarily due to operating inefficiencies from ongoing, but improving, supply chain constraints and higher costs to support growth initiatives, partially offset by higher sales volumes including inflationary pricing recovery.
Aerospace

|  |  |  |  | Three months ended March 31 |  | Increase (decrease)
(In millions) |  |  |  |  |  | 2023 |  | 2022 |
Net sales |  |  |  |  |  |  | $ | 803 |  |  | $ | 718 |  |  | 12 | %
Operating profit |  |  |  |  |  |  | $ | 180 |  |  | $ | 159 |  |  | 13 | %
Operating margin |  |  |  |  |  |  | 22.5 | % |  | 22.1 | % |  |
Changes in Net sales are summarized as follows: |  |  |  |  |  |  |  |  |  |  | Three months ended March 31
|  |  |  |  |  |  |  |  |  |  | 2023
Organic growth |  |  |  |  |  |  |  |  |  |  | 13 | %
Foreign currency |  |  |  |  |  |  |  |  |  |  | (1) | %
Total increase in Net sales |  |  |  |  |  |  |  |  |  |  | 12 | %

The increase in organic sales in the first quarter of 2023 was primarily due to strength in sales to commercial OEM and aftermarket.
The operating margin increased from 22.1% in the first quarter of 2022 to 22.5% in the first quarter of 2023 primarily due to higher sales volumes including inflationary pricing recovery, partially offset by commodity and wage inflation.
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Vehicle

|  |  |  |  | Three months ended March 31 |  | Increase (decrease)
(In millions) |  |  |  |  |  | 2023 |  | 2022 |
Net sales |  |  |  |  |  |  | $ | 739 |  |  | $ | 671 |  |  | 10 | %
Operating profit |  |  |  |  |  |  | $ | 107 |  |  | $ | 113 |  |  | (5) | %
Operating margin |  |  |  |  |  |  | 14.5 | % |  | 16.8 | % |  |
Changes in Net sales are summarized as follows: |  |  |  |  |  |  |  |  |  |  | Three months ended March 31
|  |  |  |  |  |  |  |  |  |  | 2023
Organic growth |  |  |  |  |  |  |  |  |  |  | 11 | %
Foreign currency |  |  |  |  |  |  |  |  |  |  | (1) | %
Total increase in Net sales |  |  |  |  |  |  |  |  |  |  | 10 | %

The increase in organic sales in the first quarter of 2023 was primarily due to strength in the North America truck and light vehicle markets, South American truck, bus and agriculture markets, and European light vehicle markets.
The operating margin decreased from 16.8% in the first quarter of 2022 to 14.5% in the first quarter of 2023 primarily due to commodity and wage inflation, and operating inefficiencies, partially offset by higher sales volumes including inflationary pricing recovery.
eMobility

|  |  |  |  | Three months ended March 31 |  | Increase (decrease)
(In millions) |  |  |  |  |  | 2023 |  | 2022 |
Net sales |  |  |  |  |  |  | $ | 147 |  |  | $ | 126 |  |  | 17 | %
Operating loss |  |  |  |  |  |  | $ | (4) |  |  | $ | (3) |  |  | (33) | %
Operating margin |  |  |  |  |  |  | (2.7) | % |  | (2.4) | % |  |
Changes in Net sales are summarized as follows: |  |  |  |  |  |  |  |  |  |  | Three months ended March 31
|  |  |  |  |  |  |  |  |  |  | 2023
Organic growth |  |  |  |  |  |  |  |  |  |  | 18 | %
Foreign currency |  |  |  |  |  |  |  |  |  |  | (1) | %
Total increase in Net sales |  |  |  |  |  |  |  |  |  |  | 17 | %

The increase in organic sales in the first quarter of 2023 was due to strength in North American and European markets primarily due to robust demand for electric vehicles.
The operating margin decreased from negative 2.4% in the first quarter of 2022 to negative 2.7% in the first quarter of 2023 primarily due to manufacturing start-up costs associated with new electric vehicle programs, and wage and commodity inflation, partially offset by higher sales volumes including inflationary pricing recovery.
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Corporate Expense

|  |  |  |  | Three months ended March 31 |  | Increase (decrease)
(In millions) |  |  |  |  |  | 2023 |  | 2022 |
Intangible asset amortization expense |  |  |  |  |  |  | $ | 124 |  |  | $ | 128 |  |  | (3) | %
Interest expense - net |  |  |  |  |  |  | 50 |  |  | 32 |  |  | 56 | %
Pension and other postretirement benefits income |  |  |  |  |  |  | (11) |  |  | (19) |  |  | (42) | %
Restructuring program charges |  |  |  |  |  |  | 10 |  |  | 18 |  |  | (44) | %
Other expense - net |  |  |  |  |  |  | 148 |  |  | 131 |  |  | 13 | %
Total corporate expense |  |  |  |  |  |  | $ | 320 |  |  | $ | 290 |  |  | 10 | %

Total corporate expense was $320 million in the first quarter of 2023 compared to $290 million in the first quarter of 2022. The increase in Total corporate expen se for the first quarter of 2023 was primarily due to higher Interest expense - net and Other expense - net. The increase in Other expense - net is primarily due to the 2022 gain on sale of the Hydraulics business discussed in Note 2.
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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 March 3, 2023, a subsidiary of Eaton issued Euro denominated notes (2023 Euro Notes) in a private issuance with a face value of €300 million ($318 million). The floating rate notes are due June 3, 2024 with interest payable quarterly based on the three-month Euro Interbank Offered Rate plus 25 basis points. Proceeds from the Euro Notes were used to pay down outstanding U.S. dollar commercial paper. The 2023 Euro Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton. The 2023 Euro Notes contain a change of control provision which requires the Company to make an offer to purchase all or any part of the 2023 Euro Notes at a purchase price of 100.5% of the principal amount plus accrued and unpaid interest. The 2023 Euro Notes are subject to customary non-financial covenants.
The Company maintains revolving credit facilities consisting of a $500 million 364-day revolving credit facility that will expire on October 2, 2023 and a $2,500 million five-year revolving credit facility that will expire on October 1, 2027. The revolving credit facilities totaling $3,000 million are used to support commercial paper borrowings and are 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 Eaton’s revolving credit facilities at March 31, 2023. The Company maintains access to the commercial paper markets through its $3,000 million commercial paper program, of which $59 million was outstanding on March 31, 2023, used primarily to manage fluctuations in working capital.
In 2022, the Company paid $610 million to acquire Royal Power Solutions and received cash of $22 million from Danfoss A/S to fully settle all post-closing adjustments from the sale of the Hydraulics business.
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, 2023 and December 31, 2022, Eaton had cash of $235 million and $294 million, short-term investments of $289 million and $261 million, and short-term debt of $87 million and $324 million, respectively. Eaton believes it has the operating flexibility, cash flow, cash and short-term investment balances, availability under existing revolving credit facilities, 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.
Eaton was 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 |  |
(In millions) | 2023 |  | 2022 |  | Change from 2022
Net cash provided by operating activities | $ | 335 |  |  | $ | 42 |  |  | $ | 293 |
Net cash used in investing activities | (124) |  |  | (762) |  |  | 638 |
Net cash provided by (used in) financing activities | (281) |  |  | 652 |  |  | (933) |
Effect of currency on cash | 11 |  |  | 8 |  |  | 3 |
Total decrease in cash | $ | (59) |  |  | $ | (60) |  |  |

Operating Cash Flow
Net cash provided by operating activities increased by $293 million in the first three months of 2023 compared to 2022 primarily due to lower working capital balances and higher net income in 2023, partially offset by cash received from the termination of interest rate swaps in 2022.
Investing Cash Flow
Net cash used in investing activities decreased by $638 million in the first three months of 2023 compared to 2022 primarily driven by no cash paid for business acquisitions in 2023 compared to cash paid for business acquisitions of $612 million in 2022.
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Financing Cash Flow
Net cash used in financing activities increased by $933 million in the first three months of 2023 compared to 2022 primarily due to net payments of short-term debt of $236 million in 2023 compared to net proceeds of short-term debt of $1,105 million in 2022, partially offset by higher proceeds from borrowings of $318 million in 2023 compared to no proceeds from borrowings in 2022, and no repurchase of shares in 2023 compared to repurchase of shares of $86 million in 2022.
Uses of Cash
Capital Expenditures
Capital expenditures were $126 million and $115 million in the first three months of 2023 and 2022, respectively. Eaton expects approximately $700 million in capital expenditures in 2023.
Dividends
Cash dividend payments were $334 million and $320 million in the first three months of 2023 and 2022, 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 2023.
Share Repurchases
On February 27, 2019, the Board of Directors adopted a share repurchase program for share repurchases up to $5.0 billion of ordinary shares (2019 Program). On February 23, 2022, the Board renewed the 2019 Program by providing authority for up to $5.0 billion in repurchases to be made during the three-year period commencing on that date (2022 Program). Under the 2022 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, 2023, no ordinary shares were repurchased. During the three months ended March 31, 2022, 0.6 million ordinary shares were repurchased under the 2022 program in the open market at a total cost of $86 million. At March 31, 2023, there is $4,714 million still available for share repurchases under the 2022 Program. The Company will continue to pursue share repurchases in 2023 depending on market conditions and capital levels.
Acquisition of Businesses
The Company paid cash of $612 million to acquire a business in the first three months of 2022. There were no business acquisitions in the first three months of 2023. 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, 2023, the Company had Short-term debt of $87 million, Current portion of long-term debt of $8 million, and Long-term debt of $8,701 million.
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.
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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) and August 23, 2022 (as supplemented by the First and Second Supplemental Indentures of the same date, the 2022 Indenture). The senior notes of Eaton Corporation are registered under the Securities Act of 1933, as amended (the Registered Senior Notes). Eaton Capital Unlimited Company, a subsidiary of Eaton, is the issuer of five outstanding series of debt securities sold in offshore transactions under Regulation S promulgated under the Securities Act (the Eurobonds). 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, for example, see Note 8 of the Financial Statements included herewith), 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, 2023, 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-K filed on February 23, 2023 (10-K 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-K 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 is 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 Indenture, 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 Indenture provides 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.
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Summarized Financial Information of Guarantors and Issuers

(In millions) |  | March 31, 2023 |  | December 31, 2022
Current assets |  | $ | 3,206 |  |  | $ | 3,363 |
Noncurrent assets |  | 12,919 |  |  | 12,938 |
Current liabilities |  | 2,634 |  |  | 2,948 |
Noncurrent liabilities |  | 10,378 |  |  | 10,047 |
Amounts due to subsidiaries that are non-issuers and non-guarantors - net |  | 16,565 |  |  | 16,285 |
(In millions) |  |  |  | Three months ended March 31, 2023
Net sales |  |  |  | $ | 3,144 |
Sales to subsidiaries that are non-issuers and non-guarantors |  |  |  | 256 |
Cost of products sold |  |  |  | 2,505 |
Expense from subsidiaries that are non-issuers and non-guarantors - net |  |  |  | 164 |
Net income |  |  |  | 28 |

The financial information presented is that of Eaton Corporation 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 Eaton Corporation 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 concerning our acquisition strategy, litigation, expected capital expenditures, future dividend payments, anticipated share repurchases, and expected restructuring program charges and benefits. These statements may discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to Eaton, based on current beliefs of management as well as assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or expressions. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside Eaton’s control. The following factors could cause actual results to differ materially from those in the forward-looking statements: the course of the COVID-19 pandemic, including government responses thereto and the rate of global economic recovery therefrom; unanticipated changes in the markets for the Company’s business segments; unanticipated downturns in business relationships with customers or their purchases from us; the availability of credit to customers and suppliers; supply chain disruptions, competitive pressures on sales and pricing; unanticipated changes in the cost of material, labor 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 impact of acquisitions and divestitures; unanticipated difficulties integrating acquisitions; new laws and governmental regulations; interest rate changes; tax rate changes or exposure to additional income tax liability; stock market and currency fluctuations; war, natural disasters, civil or political unrest or terrorism; and unanticipated deterioration of economic and financial conditions in the United States and around the world. Eaton does not assume any obligation to update these forward-looking statements.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There have been no material changes in exposures to market risk since December 31, 2022.
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ITEM 4.CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures - Pursuant to SEC Rule 13a-15, an evaluation was performed under the supervision and with the participation of Eaton’s management, including Craig Arnold - Principal Executive Officer; and Thomas B. Okray - Principal Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, management concluded that Eaton’s disclosure controls and procedures were effective as of March 31, 2023.
Disclosure controls and procedures are designed to ensure that information required to be disclosed in Eaton’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Eaton’s reports filed under the Exchange Act is accumulated and communicated to management, including Eaton’s Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.
During the first quarter of 2023, there was no change in Eaton’s internal control over financial reporting that materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS.
Information regarding the Company's current legal proceedings is presented in Note 10 of the Notes to the condensed consolidated financial statements.
ITEM 1A.RISK FACTORS.
“Item 1A. Risk Factors” in Eaton's 2022 Form 10-K includes a discussion of the Company's risk factors. There have been no material changes from the risk factors described in the 2022 Form 10-K.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
(c) Issuer's Purchases of Equity Securities
During the first quarter of 2023, there were no shares repurchased.
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ITEM 6.EXHIBITS.
Eaton Corporation plc
First Quarter 2023 Report on Form 10-Q

3 (i) |  | Certificate of Incorporation — Incorporated by reference to the Form S-8 filed November 30, 2012
3 (ii) |  | Amended and Restated Memorandum and Articles of Incorporation — Incorporated by reference to the Form 8-K filed on May 1, 2017
4.1 |  | Description of Eaton Corporation plc’s Securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 of the registrant's Form 10-K filed on February 26, 2020)
4.2 |  | Indenture dated as of November 20, 2012, among Turlock Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 of Eaton Corporation plc's Form 8-K Current Report filed on November 26, 2012 (Commission File No. 333-182303))
4.3 |  | Supplemental Indenture No. 1, dated as of November 30, 2012, among Eaton Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 of the registrant's Form S-4 filed on September 6, 2013)
4.4 |  | Supplemental Indenture No. 2, dated as of January 8, 2013, among Eaton Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference Exhibit 4.3 of the registrant's Form S-4 filed on September 6, 2013)
4.5 |  | Supplemental Indenture No. 3, dated as of December 20, 2013, among Eaton Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference Exhibit 4.4 of the registrant's Form 10-K filed on February 28, 2018)
4.6 |  | Supplemental Indenture No. 4, dated as of December 20, 2017 and effective as of January 1, 2018, among Eaton Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference Exhibit 4.5 of the registrant's Form 10-K filed on February 28, 2018)
4.7 |  | Supplemental Indenture No. 5, dated as of February 16, 2018, among Eaton Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference Exhibit 4.6 of the registrant's Form 10-K filed on February 28, 2018)
4.8 |  | Indenture dated as of August 23, 2022, among Eaton Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee
4.9 |  | First Supplemental Indenture dated as of August 23, 2022, among Eaton Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee
4.10 |  | Second Supplemental Indenture dated as of August 23, 2022, among Eaton Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee
4.11 |  | Pursuant to Regulation S-K Item 601(b)(4), Eaton agrees to furnish to the SEC, upon request, a copy of the instruments defining the rights of holders of its long-term debt other than those set forth in Exhibits (4.2 - 4.7) hereto
10.1 |  | 5-Year Revolving Credit Agreement, dated as of October 3, 2022, among Eaton Corporation, the guarantors from time to time party thereto, the several lenders from time to time parties thereto, Citibank, N.A., as Administrative Agent, Citibank, N.A., JPMorgan Chase Bank, N.A. and BofA Securities, Inc. as joint lead arrangers and joint bookrunners, JPMorgan Chase Bank, N.A., as syndication agent and Bank of America, N.A. as documentation agent.
10.2 |  | 364-Day Revolving Credit Agreement, dated as of October 3, 2022, among Eaton Corporation, the guarantors from time to time party thereto, the several lenders from time to time parties thereto, Citibank, N.A., as Administrative Agent, Citibank, N.A., JPMorgan Chase Bank, N.A. and BofA Securities, Inc., as joint lead arrangers and joint bookrunners, JPMorgan Chase Bank, N.A., as syndication agent and Bank of America, N.A. as documentation agent.
31.1 |  | Certification of Principal Executive Officer (Pursuant to Rule 13a-14(a)) — Filed in conjunction with this Form 10-Q Report *
31.2 |  | Certification of Principal Financial Officer (Pursuant to Rule 13a-14(a)) — Filed in conjunction with this Form 10-Q Report *
32.1 |  | Certification of Principal Executive Officer (Pursuant to Rule 13a-14(b) as adopted pursuant to Section 906 of the Sarbanes-Oxley Act) — Filed in conjunction with this Form 10-Q Report *
32.2 |  | Certification of Principal Financial Officer (Pursuant to Rule 13a-14(b) as adopted pursuant to Section 906 of the Sarbanes-Oxley Act) — Filed in conjunction with this Form 10-Q Report *

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101.INS |  | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. *
101.SCH |  | XBRL Taxonomy Extension Schema Document *
101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF |  | XBRL Taxonomy Extension Label Definition Document *
101.LAB |  | XBRL Taxonomy Extension Label Linkbase Document *
101.PRE |  | XBRL Taxonomy Extension Presentation Linkbase Document *
104 |  | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

_______________________________

* |  | Submitted electronically herewith.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|  |  | EATON CORPORATION plc |
|  |  | Registrant |
Date: | May 2, 2023 | By: | /s/ Thomas B. Okray |
|  |  | Thomas B. Okray |
|  |  | Principal Financial Officer
|  |  | (On behalf of the registrant and as Principal Financial Officer)

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