4Q 2017 Earnings Release - eaton.com

1 eaton Communications eaton Center Cleveland, OH 44122 tel: +1 (440) 523-5150 Date February 1, 2018 For Release Immediately Contact Scott R. Schroeder, Media Relations, +1 (440) 523-5150 Don Bullock, Investor Relations, +1 (440) 523-5127 eaton Reports fourth quarter Net Income and Adjusted Earnings Per Share of $ Excluding Income of $62 Million Related to the New Tax Bill, Net Income and Adjusted Earnings Per Share Were $ , Up 15 Percent Over fourth quarter of 2016 and at High End of Guidance Range Operating Cash Flow in the fourth quarter of $879 Million, Resulting in Record Full Year Operating Cash Flow of $ Billion 2018 Net Income and Adjusted Earnings per Share Expected to be Between $ and $ , Reflecting 10 percent Growth at Midpoint of Range.

2 Excluding the Gain on eaton Cummins Joint Venture and the Income Related to the New Tax Bill in 2017 DUBLIN, Ireland .. Power management company eaton Corporation plc (NYSE:ETN) today announced that net income and adjusted Earnings per share were $ for the fourth quarter of 2017 . Adjusted Earnings per share excludes $1 million of acquisition integration charges recorded in the quarter . Excluding income in the quarter of $62 million related to the new tax bill, net income and adjusted Earnings per share were $ , up 15 percent over the fourth quarter of 2016. Sales in the fourth quarter of 2017 were $ billion, up 7 percent over the same period in 2016.

3 The sales increase consisted of 5 percent growth in organic sales and 2 percent increase from positive currency translation. Craig Arnold, eaton chairman and chief executive officer, said, We had a strong fourth quarter , with revenues above the high end of our guidance range, and net income and 2 adjusted Earnings per share, excluding the impact of the new tax bill, at the high end of our guidance range. Coming into the quarter , we expected organic sales would be up between 3 and 4 percent and currency translation would add 1 percent growth. Our organic sales ended up growing 5 percent, and positive currency translation impacted sales 2 percent.

4 The 5 percent organic growth was our highest quarterly rate of growth during 2017 . The impact of the new tax bill was income of $62 million in the fourth quarter , said Arnold. Marking our deferred tax assets and liabilities to the lower tax rate created $79 million of income, which was offset by a $17 million charge for the mandatory repatriation tax. Our orders in the fourth quarter grew rapidly in every segment, said Arnold. Segment margins in the fourth quarter were a record percent. Excluding restructuring costs in the segments of $36 million in the quarter , segment margins were percent. Operating cash flow in the fourth quarter was $879 million, said Arnold.

5 We continued to return substantial cash to our shareholders, repurchasing $61 million of our shares in the quarter , making our full year repurchases a total of $850 million, percent of our shares outstanding at the beginning of the year. For full year 2017 , sales were $ billion, 3 percent higher than 2016. Net income and adjusted Earnings per share were $ Excluding the gain on the Cummins JV and the income arising from the new tax bill, net income and adjusted Earnings per share were $ per share, up 11 percent and 10 percent, respectively, over 2016. Operating cash flow in 2017 was a record $ billion.

6 Excluding $350 million contributed to our qualified pension plans during the year, operating cash flow was $ billion. Looking at 2018, we expect our organic revenues to grow approximately 4 percent, said Arnold. We anticipate segment margins to be between and percent, a significant step up from percent in 2017 . We expect 2018 net income and adjusted Earnings per share to be between $ and $ , representing at the midpoint a 10 percent increase over 2017 , excluding the gain on the Cummins JV and the income arising from the new tax bill in 2017 , said Arnold. We anticipate net income and adjusted Earnings per share for the first quarter of 2018 to be between $ and $ 3 Business Segment results Sales for the Electrical Products segment were $ billion, up 6 percent over the fourth quarter of 2016.

7 Organic sales were up 3 percent and currency translation was positive 3 percent. Operating profits, excluding acquisition integration charges of $1 million during the quarter , were $331 million, up 4 percent over the fourth quarter of 2016. Operating margins in the fourth quarter were percent, and excluding restructuring costs of $15 million, percent, said Arnold. Orders in the fourth quarter were up 5 percent over the fourth quarter of 2016, driven by growth in the Americas and EMEA. Sales for the Electrical Systems and Services segment were $ billion, up 3 percent over the fourth quarter of 2016.

8 Organic sales were up 2 percent while currency translation was positive 2 percent. During the quarter we divested our stake in a joint venture, which reduced sales by 1 percent. Segment operating profits were $225 million, up 27 percent over the fourth quarter of 2016. Excluding restructuring costs of $9 million in 2017 and $29 million in 2016, operating profits were up 14 percent. Operating margins were percent, and excluding the $9 million restructuring costs, percent, said Arnold. Orders in the fourth quarter were up 12 percent over the fourth quarter of 2016, led by strong growth in the Americas.

9 We saw particular strength in power distribution assemblies, harsh and hazardous systems, and services. Hydraulics segment sales were $614 million, up 18 percent over the fourth quarter of 2016. Organic sales were up 17 percent and currency translation was positive 1 percent. Operating profits in the fourth quarter were $74 million, an increase of 100 percent over the fourth quarter of 2016. Excluding restructuring costs of $6 million in 2017 and $23 million in 2016, operating profits were up 33 percent. Operating margins in the quarter were percent, and excluding the restructuring costs of $6 million, percent, said Arnold.

10 Hydraulics orders in the fourth quarter of 2017 were up 25 percent over the fourth quarter of 2016, with solid growth in all geographic regions. We continued to see order strength from both OEMs and distributors. 4 Aerospace segment sales were $441 million, up 4 percent over the fourth quarter of 2016. Organic sales were up 2 percent and currency translation was positive 2 percent. Operating profits in the fourth quarter were $88 million, up 5 percent over the fourth quarter of 2016. Operating margins in the quarter were percent, said Arnold. Orders in the quarter were up 9 percent compared to the fourth quarter of 2016.