##### 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, 2009
 Commission file number 1-1396
 EATON CORPORATION
  Ohio
    
    34-0196300(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification Number)
 Eaton Center, Cleveland, Ohio
    
    44114-2584(Address of principal executive offices)
    
    (Zip Code)
 (216) 523-5000
 Not applicable
 þ o
 o o
  Large accelerated filer
    
    þ
    
    
    
    Accelerated filer
    
     ̈Non-accelerated filer
    
     ̈
    
    
    
    Smaller reporting company
    
     ̈
  o þ




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TABLE OF CONTENTS  PART 1  FINANCIAL INFORMATIONItem 1. Financial StatementsItem 2. Managements Discussion & Analysis of Financial Condition & Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPART II  OTHER INFORMATIONItem 4. Submission of Matters to a Vote of Security HoldersItem 6. ExhibitsSIGNATURESEX-12EX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  
 PART 1  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 EATON CORPORATION
STATEMENTS OF CONSOLIDATED INCOME
 Three months endedMarch 31(Millions except for per share data)
    
    2009
    
    
    2008Net sales
    
    $
    2,813
    
    
    $
    3,496Cost of products sold
    
    
    2,174
    
    
    
    2,532Selling & administrative expense
    
    
    558
    
    
    
    552Research & development expense
    
    
    98
    
    
    
    89Interest expense-net
    
    
    37
    
    
    
    38Other (income) expense-net
    
    
    9
    
    
    
    (4
    )Income (loss) from continuing operations before income taxes
    
    
    (63
    )
    
    
    289Income taxes (benefits)
    
    
    (11
    )
    
    
    42Income (loss) from continuing operations
    
    
    (52
    )
    
    
    247Income from discontinued operations
    
    
    
    
    
    
    3Net income (loss)
    
    
    (52
    )
    
    
    250Adjustment of net income (loss) for noncontrolling interests
    
    
    2
    
    
    
    (3
    )Net income (loss) attributable to Eaton
    
    $
    (50
    )
    
    $
    247Net income (loss) per Common Share attributable to
Eaton Common ShareholdersAssuming dilutionContinuing operations
    
    $
    (0.30
    )
    
    $
    1.62Discontinued operations
    
    
    
    
    
    
    .02$
    (0.30
    )
    
    $
    1.64Average number of Common Shares outstanding  assuming dilution
    
    
    166.1
    
    
    
    150.5BasicContinuing operations
    
    $
    (0.30
    )
    
    $
    1.65Discontinued operations
    
    
    
    
    
    
    .02$
    (0.30
    )
    
    $
    1.67Average number of Common Shares outstanding  basic
    
    
    166.1
    
    
    
    147.7Cash dividends paid per Common Share
    
    $
    .50
    
    
    $
    .50Amounts attributable to Eaton Common ShareholdersIncome (loss) from continuing operations
    
    $
    (50
    )
    
    $
    244Income from discontinued operations
    
    
    
    
    
    
    3Net income (loss)
    
    $
    (50
    )
    
    $
    247
  2




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EATON CORPORATION  CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,(Millions)
    
    2009
    
    
    2008ASSETSCurrent assetsCash
    
    $
    145
    
    
    $
    188Short-term investments
    
    
    289
    
    
    
    342Accounts receivable
    
    
    2,016
    
    
    
    2,295Inventories
    
    
    1,490
    
    
    
    1,554Deferred income taxes & other current assets
    
    
    487
    
    
    
    4164,427
    
    
    
    4,795Property, plant & equipment-net
    
    
    2,525
    
    
    
    2,639Goodwill
    
    
    5,213
    
    
    
    5,232Other intangible assets
    
    
    2,426
    
    
    
    2,518Deferred income taxes & other assets
    
    
    1,410
    
    
    
    1,471$
    16,001
    
    
    $
    16,655LIABILITIES & EQUITYCurrent liabilitiesShort-term debt
    
    $
    211
    
    
    $
    812Current portion of long-term debt
    
    
    269
    
    
    
    269Accounts payable
    
    
    969
    
    
    
    1,121Accrued compensation
    
    
    245
    
    
    
    297Other current liabilities
    
    
    1,236
    
    
    
    1,2462,930
    
    
    
    3,745Long-term debt
    
    
    3,707
    
    
    
    3,190Pension liabilities
    
    
    1,612
    
    
    
    1,650Other postretirement liabilities
    
    
    702
    
    
    
    703Other long-term liabilities & deferred income taxes
    
    
    943
    
    
    
    1,002Eaton shareholders equity
    
    
    6,065
    
    
    
    6,317Noncontrolling interests
    
    
    42
    
    
    
    48Total equity
    
    
    6,107
    
    
    
    6,365$
    16,001
    
    
    $
    16,655
  3




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EATON CORPORATION  CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
 Three months endedMarch 31(Millions)
    
    2009
    
    
    2008Net cash provided by (used in) operating activitiesNet income (loss) attributable to Eaton
    
    $
    (50
    )
    
    $
    247Adjustments to reconcile to net cash provided by (used in) operating activitiesDepreciation & amortization
    
    
    143
    
    
    
    126Changes in working capital, excluding acquisitions & sales of businesses
    
    
    40
    
    
    
    (283
    )Other-net
    
    
    (26
    )
    
    
    (107
    )107
    
    
    
    (17
    )Net cash provided by (used in) investing activitiesExpenditures for property, plant & equipment
    
    
    (48
    )
    
    
    (83
    )Cash paid for acquisitions of businesses
    
    
    
    
    
    
    (634
    )Sales (purchases) of short-term investments-net
    
    
    53
    
    
    
    137Other-net
    
    
    (17
    )
    
    
    (28
    )(12
    )
    
    
    (608
    )Net cash provided by (used in) financing activitiesBorrowings with original maturities of more than three monthsProceeds
    
    
    555
    
    
    
    353Payments
    
    
    (300
    )
    
    
    (340
    )Borrowings (payments) with original maturities of less than three months-net,
primarily commercial paper
    
    
    (318
    )
    
    
    670Cash dividends paid
    
    
    (83
    )
    
    
    (73
    )Cash received from exercise of employee stock options
    
    
    7
    
    
    
    24Income tax benefit from exercise of employee stock options
    
    
    1
    
    
    
    6(138
    )
    
    
    640Total increase (decrease) in cash
    
    
    (43
    )
    
    
    15Cash at the beginning of the year
    
    
    188
    
    
    
    142Cash at the end of the period
    
    $
    145
    
    
    $
    157
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  PREPARATION OF FINANCIAL STATEMENTS
   BUSINESS SEGMENT REPORTING
  ADOPTION OF NEW ACCOUNTING STANDARDS  NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS
 Noncontrolling Interests in Consolidated Financial Statements  an amendment of ARB No. 51.
 ACQUISITIONS OF BUSINESSES
  Date of
    
    BusinessAcquired business
    
    acquisition
    
    segment
    
    Annual salesInteg Holding LimitedThe parent company of Integrated Hydraulics
Ltd., a U.K.-based manufacturer of screw-in
cartridge valves, custom-engineered hydraulic
valves and manifold systems
    
    October 2,
2008
    
    Hydraulics
    
    $52 for 2007Nittan Global Tech Co. Ltd.A joint venture to manage the global design,
manufacture and supply of engine valves and
valve actuation products to Japanese and
Korean automobile and engine manufacturers.
In addition, during the second half of 2008,
several related manufacturing joint ventures
were established.
    
    Operational
October 1,
2008
    
    Automotive
    
    New joint
venture
 5




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Date of
    
    BusinessAcquired business
    
    acquisition
    
    segment
    
    Annual salesEngine Valves Business of Kirloskar Oil Engines Ltd.An India-based designer, manufacturer and
distributor of intake and exhaust valves for diesel
and gasoline engines
    
    July 31, 2008
    
    Automotive
    
    $5 for 2007PK ElectronicsA Belgium-based distributor and service provider
of single phase and three-phase uninterruptible
power supply (UPS) systems
    
    July 31, 2008
    
    Electrical
Rest of
World
    
    $9 for 2007The Moeller GroupA Germany-based supplier of electrical
components for commercial and residential
building applications and industrial controls for
industrial equipment applications
    
    April 4, 2008
    
    Electrical
Rest of
World
    
    1.02 billion for
2007Balmen Electronic, S.L.A Spain-based distributor and service provider
of uninterruptible power supply (UPS) systems
    
    March 31,
2008
    
    Electrical
Rest of
World
    
    $6 for 2007Phoenixtec Power Company Ltd.A Taiwan-based manufacturer of single and
three-phase uninterruptible power supply (UPS)
systems
    
    February 26,
2008
    
    Electrical
Rest of
World
    
    $515 for 2007
 Restructuring Liabilities
 Recognition of Liabilities in Connection with a Purchase Business Combination,
 PlantWorkforce reductions
    
    
    closingEmployees
    
    
    Dollars
    
    
    & other
    
    
    TotalBalance at January 1, 2009
    
    
    283
    
    
    $
    12
    
    
    $
    1
    
    
    $
    13Liabilities recorded
    
    
    1,047
    
    
    
    26
    
    
    
    2
    
    
    
    28Utilized
    
    
    (280
    )
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Balance at March 31, 2009
    
    
    1,050
    
    
    $
    35
    
    
    $
    3
    
    
    $
    38
 ACQUISITION INTEGRATION, WORKFORCE REDUCTION & PLANT CLOSING CHARGES
 Acquisition Charges
  Three months endedMarch 312009
    
    
    2008Electrical Americas
    
    $
    1Electrical Rest of World
    
    
    16
    
    
    $
    3Hydraulics
    
    
    1
    
    
    
    2Aerospace
    
    
    2
    
    
    
    7Automotive
    
    
    1
    
    
    
    1Pretax charges
    
    $
    21
    
    
    $
    13After-tax charges
    
    $
    14
    
    
    $
    9Per Common Share
    
    $
    .08
    
    
    $
    .06
 6




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Workforce Reduction Charges
  Summary of Acquisition Integration, Workforce Reduction & Plant Closing Charges
  PlantWorkforce reductions
    
    
    closingEmployees
    
    
    Dollars
    
    
    & other
    
    
    TotalBalance at January 1, 2009
    
    
    534
    
    
    $
    21
    
    
    $
    4
    
    
    $
    25Liabilities recorded
    
    
    6,908
    
    
    
    71
    
    
    
    16
    
    
    
    87Utilized
    
    
    (4,536
    )
    
    
    (48
    )
    
    
    (14
    )
    
    
    (62
    )Balance at March 31, 2009
    
    
    2,906
    
    
    $
    44
    
    
    $
    6
    
    
    $
    50
 LONG-TERM DEBT
  RETIREMENT BENEFIT PLANS EXPENSE
  Three months ended March 31OtherpostretirementPension benefits
    
    
    benefits2009
    
    
    2008
    
    
    2009
    
    
    2008Service cost
    
    $
    (32
    )
    
    $
    (35
    )
    
    $
    (4
    )
    
    $
    (4
    )Interest cost
    
    
    (49
    )
    
    
    (44
    )
    
    
    (12
    )
    
    
    (12
    )Expected return on plan assets
    
    
    48
    
    
    
    48Amortization
    
    
    (13
    )
    
    
    (12
    )
    
    
    (1
    )
    
    
    (3
    )(46
    )
    
    
    (43
    )
    
    
    (17
    )
    
    
    (19
    )Curtailment loss
    
    
    (4
    )
    
    
    
    
    
    
    (1
    )Settlement loss
    
    
    (18
    )
    
    
    (13
    )$
    (68
    )
    
    $
    (56
    )
    
    $
    (18
    )
    
    $
    (19
    )
 INCOME TAXES
  7




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COMPREHENSIVE INCOME (LOSS)
  Three months endedMarch 312009
    
    
    2008Net income (loss)
    
    $
    (52
    )
    
    $
    250Foreign currency translation
    
    
    (183
    )
    
    
    93Pensions & other postretirement benefits
    
    
    25
    
    
    
    19Comprehensive income (loss) attributable to
noncontrolling interests
    
    
    2
    
    
    
    (1
    )Deferred gain on cash flow hedges
    
    
    23
    
    
    
    1Comprehensive income (loss)
    
    $
    (185
    )
    
    $
    362
 INVENTORIES
  March 31,
    
    
    December 31,2009
    
    
    2008Raw materials
    
    $
    666
    
    
    $
    683Work-in-process & finished goods
    
    
    942
    
    
    
    987Inventories at FIFO
    
    
    1,608
    
    
    
    1,670Excess of FIFO over LIFO cost
    
    
    (118
    )
    
    
    (116
    )$
    1,490
    
    
    $
    1,554
 NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO EATON COMMON SHAREHOLDERS
  Three months endedMarch 31(Shares in millions)
    
    2009
    
    
    2008Income (loss) from continuing operations
    
    $
    (50
    )
    
    $
    244Income from discontinued operations
    
    
    
    
    
    
    3Net income (loss) attributable to Eaton Common Shareholders
    
    $
    (50
    )
    
    $
    247Average number of Common Shares outstanding  assuming
dilution
    
    
    166.1
    
    
    
    150.5Less dilutive effect of stock options
    
    
    
    
    
    
    2.8Average number of Common Shares outstanding  basic
    
    
    166.1
    
    
    
    147.7Net income (loss) per Common Share attributable to Eaton
Common ShareholdersDilutedContinuing operations
    
    $
    (0.30
    )
    
    $
    1.62Discontinued operations
    
    
    
    
    
    
    .02$
    (0.30
    )
    
    $
    1.64BasicContinuing operations
    
    $
    (0.30
    )
    
    $
    1.65Discontinued operations
    
    
    
    
    
    
    .02$
    (0.30
    )
    
    $
    1.67
 8




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FINANCIAL ASSETS & LIABILITIES MEASURED AT FAIR VALUE
 Fair Value Measurements,
 Fair value measurement usedQuoted prices
    
    
    Quoted pricesin active
    
    
    in activemarkets for
    
    
    markets for
    
    
    Otheridentical
    
    
    similar
    
    
    unobservableRecorded
    
    
    instruments
    
    
    instruments
    
    
    inputsvalue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash
    
    $
    145
    
    
    $
    145Short-term investments
    
    
    289
    
    
    
    289Foreign currency forward exchange
contracts
    
    
    11
    
    
    
    
    
    
    $
    11Commodity contracts
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )Cross currency interest rate swaps
    
    
    1
    
    
    
    
    
    
    
    1Fixed-to-floating interest rate swaps
    
    
    58
    
    
    
    
    
    
    
    58Long-term debt converted to floating
interest rates by interest rate swaps
    
    
    (58
    )
    
    
    
    
    
    
    (58
    )$
    439
    
    
    $
    434
    
    
    $
    5
 DISCLOSURES ABOUT DERIVATIVE FINANCIAL INSTRUMENTS & HEDGING ACTIVITIES
 Disclosure about Derivative Instruments
and Hedging Activities  an amendment of FASB Statement No. 133.
  Accounting for Derivatives and Hedging Activities,
 
    
    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 on
the derivative financial instrument, as well as the offsetting loss or gain on the hedged item
attributable to the hedged risk, are recorded in net income. The gain or loss on the
derivative financial instrument is included in the same line of the Statement of
Consolidated Income as the offsetting loss or gain on the hedged item.
    
    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
on the derivative financial instrument is recorded in Accumulated other comprehensive income (loss)
in Equity and reclassified to net income in the same period when the gain or loss on the
hedged item is included in net income. The gain or loss on the derivative financial
instrument is included in the same line of the Statement of Consolidated Income as the
offsetting loss or gain on the hedged item.
 
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
    
    The foreign currency exposure related to a net investment in a foreign operation (a net investment hedge). For
these hedges, the gain or loss on the derivative financial instrument is recorded in Accumulated
other comprehensive income (loss) in Equity and reclassified to net income in the same
period when the gain or loss related to the net investment in the foreign operation is
included in net income. The gain or loss on the derivative financial instrument is
included in the same line of the Statement of Consolidated Income as the offsetting loss
or gain on the hedged item.
    Fair valueIncluded in
    
    
    Included in
    
    
    Included inOther current
    
    
    Other long-term
    
    
    Other currentassets
    
    
    assets
    
    
    liabilitiesDerivatives designated as hedgesFixed-to-floating interest rate swaps
(fair value hedges)
    
    
    
    
    
    $
    58Foreign currency exchange contracts
(cash flow hedges)
    
    
    
    
    
    
    
    
    
    $
    7Commodity contracts (cash flow hedges)
    
    $
    1
    
    
    
    
    
    
    
    6Cross currency interest rate contracts
(net investment hedges)
    
    
    
    
    
    
    1$
    1
    
    
    $
    59
    
    
    $
    13Derivatives not designated as hedges (gain or loss
recognized immediately in net income)Foreign currency exchange contracts
    
    $
    51
    
    
    
    
    
    
    $
    33Commodity contracts
    
    
    
    
    
    
    
    
    
    
    2$
    51
    
    
    
    
    
    
    $
    35
   Amount of gain
    
    
    Location of gain(loss) recorded in
    
    
    (loss) recorded innet income
    
    
    net incomeDerivatives designated as fair value hedgesFixed-to-floating interest rate swaps
    
    $
    (19
    )
    
    Interest expenseRelated long-term debt converted to floating
interest rates by interest rate swaps
    
    
    19
    
    
    Interest expense
 Amount of gainAmount of gain
    
    
    (loss) reclassified
    
    
    Location of gain(loss) recorded
    
    
    from Accumulated
    
    
    (loss) reclassifiedin Accumulated
    
    
    other
    
    
    from Accumulatedother
    
    
    comprehensive
    
    
    other comprehensivecomprehensive
    
    
    income (loss) into
    
    
    income (loss) intoincome (loss)
    
    
    net income
    
    
    net incomeDerivatives designated as
cash flow hedgesForeign currency exchange
contracts
    
    $
    (6
    )
    
    $
    (4
    )
    
    Cost of products soldCommodity contracts
    
    
    12
    
    
    
    (10
    )
    
    Cost of products sold$
    6
    
    
    $
    (14
    )
 10




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BUSINESS SEGMENT INFORMATION
  Three months endedMarch 312009
    
    
    2008Net salesElectrical Americas
    
    $
    859
    
    
    $
    911Electrical Rest of World
    
    
    544
    
    
    
    393Hydraulics
    
    
    430
    
    
    
    657Aerospace
    
    
    418
    
    
    
    430Truck
    
    
    292
    
    
    
    567Automotive
    
    
    270
    
    
    
    538$
    2,813
    
    
    $
    3,496Operating profit (loss)Electrical Americas
    
    $
    106
    
    
    $
    142Electrical Rest of World
    
    
    (6
    )
    
    
    18Hydraulics
    
    
    6
    
    
    
    78Aerospace
    
    
    71
    
    
    
    63Truck
    
    
    (34
    )
    
    
    85Automotive
    
    
    (46
    )
    
    
    46CorporateAmortization of intangible assets
    
    
    (42
    )
    
    
    (25
    )Interest expense-net
    
    
    (37
    )
    
    
    (38
    )Pension & other postretirement benefit expense
    
    
    (47
    )
    
    
    (38
    )Stock option expense
    
    
    (7
    )
    
    
    (7
    )Other corporate expensenet
    
    
    (27
    )
    
    
    (35
    )Income (loss) from continuing operations before income taxes
    
    
    (63
    )
    
    
    289Income taxes (benefits)
    
    
    (11
    )
    
    
    42Income (loss) from continuing operations
    
    
    (52
    )
    
    
    247Income from discontinued operations
    
    
    
    
    
    
    3Net income (loss)
    
    
    (52
    )
    
    
    250Adjustment of net income (loss) for noncontrolling interests
    
    
    2
    
    
    
    (3
    )Net income (loss) attributable to Eaton
    
    $
    (50
    )
    
    $
    247
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ITEM 2. MANAGEMENTS DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
  OVERVIEW OF EATON
       HIGHLIGHTS OF RESULTS FOR 2009
 Three months ended March 312009
    
    
    2008
    
    
    DecreaseContinuing operationsNet sales
    
    $
    2,813
    
    
    $
    3,496
    
    
    
    (20
    )%Gross profit
    
    
    639
    
    
    
    964
    
    
    
    (34
    )%Percent of net sales
    
    
    22.7
    %
    
    
    27.6
    %Income (loss) before income taxes
    
    
    (63
    )
    
    
    289Income (loss) after income taxes
    
    $
    (52
    )
    
    $
    247Income from discontinued operations
    
    
    
    
    
    
    3Net income (loss)
    
    
    (52
    )
    
    
    250Adjustment of net income (loss) for
noncontrolling
interests
    
    
    2
    
    
    
    (3
    )Net income (loss) attributable to Eaton
    
    $
    (50
    )
    
    $
    247Net income (loss) per Common Share
attributable to Eaton Common
Shareholders-assuming dilutionContinuing operations
    
    $
    (0.30
    )
    
    $
    1.62Discontinued operations
    
    
    
    
    
    
    .02$
    (0.30
    )
    
    $
    1.64
 12




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13




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RESULTS OF OPERATIONS  2009 COMPARED TO 2008
 Three months ended March 312009
    
    
    2008
    
    
    DecreaseContinuing operationsNet sales
    
    $
    2,813
    
    
    $
    3,496
    
    
    
    (20
    )%Gross profit
    
    
    639
    
    
    
    964
    
    
    
    (34
    )%Percent of net sales
    
    
    22.7
    %
    
    
    27.6
    %Income (loss) before income taxes
    
    
    (63
    )
    
    
    289Income (loss) after income taxes
    
    $
    (52
    )
    
    $
    247Income from discontinued operations
    
    
    
    
    
    
    3Net income (loss)
    
    
    (52
    )
    
    
    250Adjustment of net income (loss) for noncontrolling
Interests
    
    
    2
    
    
    
    (3
    )Net income (loss) attributable to Eaton
    
    $
    (50
    )
    
    $
    247Net income (loss) per Common Share attributable
to Eaton Common Shareholders-assuming dilutionContinuing operations
    
    $
    (0.30
    )
    
    $
    1.62Discontinued operations
    
    
    
    
    
    
    .02$
    (0.30
    )
    
    $
    1.64
   OTHER RESULTS OF OPERATIONS
   Three months endedMarch 312009
    
    
    2008Electrical Americas
    
    $
    1Electrical Rest of World
    
    
    16
    
    
    $
    3Hydraulics
    
    
    1
    
    
    
    2Aerospace
    
    
    2
    
    
    
    7Automotive
    
    
    1
    
    
    
    1Pretax charges
    
    $
    21
    
    
    $
    13After-tax charges
    
    $
    14
    
    
    $
    9Per Common Share
    
    $
    .08
    
    
    $
    .06
 14




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##### Table of Contents



Noncontrolling Interests in Consolidated Financial Statements  an amendment of ARB No. 51.
 RESULTS BY BUSINESS SEGMENT
 Electrical Americas
 Three months ended March 312009
    
    
    2008
    
    
    DecreaseNet sales
    
    $
    859
    
    
    $
    911
    
    
    
    (6
    )%Operating profit
    
    
    106
    
    
    
    142
    
    
    
    (25
    )%Operating margin
    
    
    12.3
    %
    
    
    15.6
    %
   Electrical Rest of World
 Three months ended March 31Increase2009
    
    
    2008
    
    
    (Decrease)Net sales
    
    $
    544
    
    
    $
    393
    
    
    
    38
    %Operating profit (loss)
    
    
    (6
    )
    
    
    18
    
    
    NMOperating margin
    
    
    (1.1
    )%
    
    
    4.6
    %
  15




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##### Table of Contents



Hydraulics
 Three months ended March 312009
    
    
    2008
    
    
    DecreaseNet sales
    
    $
    430
    
    
    $
    657
    
    
    
    (35
    )%Operating profit
    
    
    6
    
    
    
    78
    
    
    
    (92
    )%Operating margin
    
    
    1.4
    %
    
    
    11.9
    %
   Aerospace
 Three months ended March 31Increase2009
    
    
    2008
    
    
    (Decrease)Net sales
    
    $
    418
    
    
    $
    430
    
    
    
    (3
    )%Operating profit
    
    
    71
    
    
    
    63
    
    
    
    13
    %Operating margin
    
    
    17.0
    %
    
    
    14.7
    %
   16




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##### Table of Contents



Truck
 Three months ended March 312009
    
    
    2008
    
    
    DecreaseNet sales
    
    $
    292
    
    
    $
    567
    
    
    
    (49
    )%Operating profit (loss)
    
    
    (34
    )
    
    
    85
    
    
    NMOperating margin
    
    
    (11.6
    )%
    
    
    15.0
    %
   Automotive
 Three months ended March 312009
    
    
    2008
    
    
    DecreaseNet sales
    
    $
    270
    
    
    $
    538
    
    
    
    (50
    )%Operating profit (loss)
    
    
    (46
    )
    
    
    46
    
    
    NMOperating margin
    
    
    (17.0
    )%
    
    
    8.6
    %
   Corporate
   17




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##### Table of Contents



CHANGES IN FINANCIAL CONDITION DURING 2009
 Cash flow and working capital
     Debt
     Credit Ratings
  18




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##### Table of Contents



CONTRACTUAL OBLIGATIONS
  FORWARD-LOOKING STATEMENTS
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
    19




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Approved the election of four directors
 For
    
    
    Against
    
    
    WithheldAlexander M. Cutler
    
    
    143,702,392
    
    
    
    5,463,061
    
    
    
    370,188Arthur E. Johnson
    
    
    143,297,217
    
    
    
    5,732,137
    
    
    
    506,287Deborah L. McCoy
    
    
    141,494,151
    
    
    
    7,538,467
    
    
    
    503,023Gary L. Tooker
    
    
    144,559,458
    
    
    
    4,363,708
    
    
    
    612,475Approved the 2009 Stock PlanFor
    
    
    119,296,972Against
    
    
    14,181,726Abstain
    
    
    927,451Approved the appointment of Ernst & Young LLP as independent auditor for 2009For
    
    
    146,913,660Against
    
    
    2,173,467Abstain
    
    
    448,514
 
 ITEM 6. EXHIBITS
  20




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##### Table of Contents



SIGNATURES
  EATON CORPORATIONRegistrantDate: April 29, 2009/s/ Richard H. FearonRichard H. Fearon
Vice Chairman and Chief Financial
and Planning Officer 21




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##### Table of Contents



EATON CORPORATION
FIRST QUARTER 2009 REPORT ON FORM 10-Q
EXHIBIT INDEX
 3 (a)
    
    Amended Articles of Incorporation (amended and restated as of April 24, 2008)  Incorporated by
reference to the Form 10-Q Report for the three months ended March 31, 20083 (b)
    
    Amended Regulations (amended and restated as of April 23, 2008)  Incorporated by reference to
the Form 10-Q Report for the three months ended March 31, 20084
    
    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 other long-term debt12
    
    Ratio of Earnings to Fixed Charges  Filed in conjunction with this Form 10-Q Report31.1
    
    Certification of Chief Executive Officer (Pursuant to Rule 13a-14(a))  Filed in conjunction with
this Form 10-Q Report31.2
    
    Certification of Chief Financial Officer (Pursuant to Rule 13a-14(a))  Filed in conjunction with
this Form 10-Q Report32.1
    
    Certification of Chief 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 Report32.2
    
    Certification of Chief 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
 22