Eaton Corporation, Plc · NYSE:ETN
Eaton — Yield Hog Conference (September 2012)
30 slides from Eaton's conference presentation, Sep 5, 2012
Slide 1: Yield Hog Conference Capital World Investors
Filed by Eaton Corporation pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934 Subject Company: Cooper Industries plc; Eaton Corporation Filer’s SEC File No.: 1-1396 Date: September 5, 2012 Yield Hog Conference Capi
Slide 2: No Offer or Solicitation
NO OFFER OR SOLICITATION This communication is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the
Slide 3: Forward Looking Statements
Forward Looking Statements This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning Eaton, Eaton Global Plc, the acquisition and other transactions contemplated by the Transaction Agreement, our acquisition financi
Slide 4: Eaton Corporation – A Premier Diversified Power Management Company
Eaton Corporation – A Premier Diversified Power Management Company • A balanced power management company • Eaton’s acquisition of Cooper Industries • 2012 outlook © 2012 Eaton Corporation. All rights reserved. 4
Slide 5: Eaton provides energy efficient solutions using electrical, mechanical, and fluid technologies
Eaton provides energy efficient solutions using electrical, mechanical, and fluid technologies Our products & services deliver reliability, efficiency, and safety for: Cities & Industrial & Information Transportation Infrastructure Energy & Buildings Machinery Technology Utilities …helping to bridge
Slide 6: Today we have a global footprint across the five business segments
Today we have a global footprint across the five business segments… 2011 Sales by Region 2011 Sales by Business U.S. Electrical Truck International Developed Hydraulics Automotive International Emerging Aerospace © 2012 Eaton Corporation. All rights reserved. 6
Slide 7: Our businesses are balanced across the economic cycle
…and our businesses are balanced across the economic cycle 2011 Global Sales by Cycle 100% $2.2B in Revenues 14% Electrical Service, Defense, Filtration, Aerospace Aftermarket 80% 23% $3.6B in Revenues Commercial Aerospace, 60% Nonresidential Construction, Large Data Centers 29% $4.7B in Revenues 40
Slide 8: EBS embodies the values and processes that bind the company
EBS embodies the values and processes that bind the company and have enabled our success A powerful combination of proven foundation elements, tools, and processes, EBS is at the heart of our strategy for being a premier diversified industrial • Growth • Capital Efficiency • Robust strategic plannin
Slide 9: Executing our strategy has resulted in an upward shift in profitability
Executing our strategy has resulted in an upward shift in profitability 25% Profitability Drivers 20% + 260 to 310 bps Innovative new products 14.5%-15% 15% 14.2% 12.7% 11.9% Leveraging the Eaton Business System 10% Targeted restructuring 5% Margin accretive acquisitions 0% 2002-2008 2010 2011 2012E
Slide 10: Our shareholder returns have far outpaced the broader market
Our shareholder returns have far outpaced the broader market Return 2000 – Aug 2012 Index Cumulative Shareholder Returns CAGR* 500 450 400 11.8% 350 300 250 6.6% 200 150 2.5% 100 50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Aug- 12 Eaton S&P 500 PDI Group Note – DI Group represents
Slide 11: Powerful megatrends will help drive our markets to grow at a multiple of global GDP
Powerful megatrends will help drive our markets to grow at a multiple of global GDP By the numbers: …Percentage decrease in electricity demand possible Electrical 23 through the application of energy efficient equipment and demand management services …Percentage increase in agricultural output by 20
Slide 12: Eaton Corporation – A Premier Diversified Power Management Company
Eaton Corporation – A Premier Diversified Power Management Company • A balanced power management company • Eaton’s acquisition of Cooper Industries • 2012 outlook © 2012 Eaton Corporation. All rights reserved. 12
Slide 13: Acquisitions have played a large role in growing our electrical business
Acquisitions have played a large role in growing our electrical business Market Participation Regional Strength Electrical Group Acq’d Year Acquisitions Sales Power Control Power Lighting & Asia- Americas EMEA & Distribution Quality Safety Pacific Cutler Hammer 1978 $0.6B Westinghouse DCBU 1994 $1.0
Slide 14: Transaction overview for Eaton's acquisition of Cooper Industries
Transaction overview for Eaton’s acquisition of Cooper Industries Combined • Premier power management company with 2011 sales of $21.5B company • Under the leadership of Eaton management • Named Eaton Corporation Plc and will continue to trade on NYSE as ETN • Incorporated in Ireland Consideration •
Slide 15: Cooper has a wide range of complementary electrical businesses
Cooper has a wide range of complementary electrical businesses Energy and Safety Solutions ($2.9 B sales) Electrical Products ($2.5 B sales) • Lighting • Cooper Power Systems • $1.1 B sales • $1.3 B sales • Strong LED platform • Market leader in driving growth distribution grid protection • Bussmann
Slide 16: Adding Cooper expands Eaton's market participation
Adding Cooper expands Eaton’s market participation ii Historic Eaton Core Facilities CiNaeioumeetame © ower Distribution & lighting control E-TN © 2012 Eaton Corporation. All nghts reserved 16
Slide 17: The strategic rationale for this acquisition is compelling - I
The strategic rationale for this acquisition is compelling - I • Broad portfolio of complementary products • Market segment expansion: • Upstream into power solutions encompassing primary and secondary distribution, grid automation, and smart grid • Downstream into lighting, lighting controls, and w
Slide 18: The strategic rationale for this acquisition is compelling - II
The strategic rationale for this acquisition is compelling - II • Aligns with our customer segment focus in oil & gas, mining, energy efficiency and alternative energy • Adds breadth to our global geographic exposure • Attractive business in EMEA • Strong oil & gas industry positioning globally • Co
Slide 19: Our integrated operating company capabilities will drive significant synergies
Our integrated operating company capabilities (EBS) will drive significant synergies (1) Synergies ($M) 2013 2014 2015 2016 Pre-tax operating synergies Sales synergies 10 35 70 115 Cost-out synergies 65 140 240 260 Total operating synergies 75 175 310 375 Global cash management and resultant tax ben
Slide 20: The acquisition is accretive to earnings
The acquisition is accretive to earnings(1) Accretion ($) 2013 2014 2015 2016 Operating EPS Accretion (1) (0.10) 0.35 0.45 0.55 Cash Operating EPS Accretion (1,2) 0.40 0.65 0.75 0.85 (1) EPS accretion numbers do not represent a profit forecast as defined in the Irish Takeover Code (2) Cash Operating
Slide 21: Eaton Corporation – A Premier Diversified Power Management Company
Eaton Corporation – A Premier Diversified Power Management Company • A balanced power management company • Eaton’s acquisition of Cooper Industries • 2012 outlook © 2012 Eaton Corporation. All rights reserved. 21
Slide 22: We project growth of 3% - 4% in our markets in 2012
We project growth of 3% - 4% in our markets in 2012… 2012E 2012E Total Non U.S. U.S. Electrical Americas Index 8 9 5 Electrical ROW Index (3) n/a (3) Hydraulics Index 3 8 (1) Aerospace Index 4 1 8 Truck Index 2 11 (4) Automotive Index 3 10 1 Eaton Consolidated Index 3.5% 8% (1)% © 2012 Eaton Corpora
Slide 23: Leading to another year of record margins
…leading to another year of record margins 2011 2012E 2015 Target Electrical Americas 14.6% 16.5% 17% Electrical ROW 9.4% 9.0% 14% Hydraulics 15.6% 16.0% 17% Aerospace 14.8% 15.0% 17% Truck 18.4% 19.0% 20% Automotive 12.0% 12.0% 13% Eaton Consolidated 14.2% 14.5% - 15.0% 16% - 17% © 2012 Eaton Corpo
Slide 24: 2012 Guidance
2012 Guidance January February April July Guidance Guidance Guidance Guidance Market Growth of 3.5% $800M $800M $800M $560M Market Outgrowth of 40% $320M $320M $320M $225M Net Acquisition Revenue $90M $315M $365M $365M Sales Decrease from FOREX $(550)M $(550)M $(300)M $(500)M Incremental Margin 28%
Slide 25: Our acquisition of Cooper Industries remains on track
Our acquisition of Cooper Industries remains on track • S-4 under review by SEC • U.S. HSR approval in early July • Revolving finance facilities upsized to $2B, and $600 million of term debt issued © 2012 Eaton Corporation. All rights reserved. 25
Slide 26: Eaton – Powering Business Worldwide
E:TeN Powering Business Worldwide
Slide 27: Reconciliation of Non-GAAP Financial Information 2Q 2012
Eaton Corporation Reconciliation of Non-GAAP Financial Information 2Q 2012 All numbers $M except per share numbers Reconciliation of net income to operating earnings 2012 Guidance 2003 2004 2005 2006 2007 2008 2009 2010 2011 1Q 2012 2Q 2012 Low High Net income from continuing operations $ 356 $ 626
Slide 28: Reconciliation of net income to EBIT and EBITDA
Reconciliation of net income to EBIT and EBITDA 2003 2004 2005 2006 2007 2008 2009 2010 2011 1Q 2012 2Q 2012 Net income from continuing operations $ 356 $ 626 $ 783 $ 897 $ 959 $ 1,055 $ 383 $ 929 $ 1,350 $ 311 $ 382 Net income from discontinued operations 30 22 22 53 35 3 - - - - - Net income 386 6
Slide 29: Reconciliation of segment operating profit excluding restructuring
Reconciliation of Eaton Electrical Americas operating profit to operating profit excluding restructuring 2006 2007 2008 2009 2010 2011 1Q 2012 2Q 2012 Electrical operating profit (including restructuring) $ 448 $ 534 $ 630 $ 518 $ 529 $ 605 $ 162 $ 190 Acquisition integration charges (pre-tax) 2 - 4
Slide 30: Methodology for calculations used in the presentations
Methodology for calculations used in the presentations Return on equity = trailing 4 quarters net income / average trailing 5 quarters shareholder's equity Return on invested capital = (EBIT - taxes) / average (total debt + equity) Return on sales = net income / sales Total return = stock price appr