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Investor Presentaiton

Acquisition of Green Motion SA On March 22, 2021, Eaton acquired Green Motion SA, a leading designer and manufacturer of electric vehicle charging hardware and related software based in Switzerland. Green Motion SA was acquired for $106 million, including $49 million of cash paid at closing and 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 $111 million. As of December 31, 2022, the fair value of the contingent future payments has been reduced to $44 million based primarily on anticipated reductions in projected 2023 revenue compared to the initial estimates at closing. This reduction is presented in Other expense (income) - net on the Consolidated Statements of Income. Acquisition of a 50% stake in Huan Yu High Tech On March 29, 2021, Eaton acquired a 50 percent stake in HuanYu High Tech, a subsidiary of HuanYu Group that manufactures and markets low-voltage circuit breakers and contactors in China, and throughout the Asia-Pacific region. Huan Yu High Tech has production operations in Wenzhou, China. Eaton accounts for this investment on the equity method of accounting and is reported within the Electrical Global business segment. Acquisition of Mission Systems On June 1, 2021, Eaton acquired Mission Systems for $2.8 billion, net of cash received. Mission Systems is a leading manufacturer of air-to-air refueling systems, environmental systems, and actuation primarily for defense markets. Mission Systems is reported within the Aerospace business segment. The acquisition of Mission Systems has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. During the measurement period which ended in June 2022, opening balance sheet adjustments were made to finalize Eaton's fair value estimates based on the final valuations received, which are summarized in the table below. The measurement period adjustments did not have a material impact to the Consolidated Statements of Income. (In millions) Accounts receivable Inventory Prepaid expenses and other current assets Property, plant and equipment Other intangible assets Other assets Accounts payable Other current liabilities Other noncurrent liabilities Total identifiable net assets Goodwill Total consideration, net of cash received $ Preliminary Allocation Measurement Period Adjustments Final Allocation 84 $ 84 179 (1) 178 45 5 50 86 11 97 1,575 (113) 1,462 19 (4) 15 (40) (40) (159) (43) (202) (77) (31) (108) 1,712 (176) 1,536 1,088 176 1,264 2,800 $ $ 2,800 Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Mission Systems. As a result of the acquisition, goodwill of $572 million recognized in the United States is expected to be deductible for tax purposes. The estimated fair values of the customer relationships, technology, and backlog intangible assets of $764 million, $612 million, and $86 million, respectively, were determined using either the relief-from-royalty model or the multi-period excess earnings model, which are discounted cash flow models that rely on the Company's estimates. These estimates require judgment of future revenue growth rates, future margins, and the applicable weighted-average cost of capital used to discount those estimated cash flows. The estimated fair value of technology intangibles is also based on the selection of royalty rates used in the valuation model. The weighted-average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt market holders of a business enterprise. The estimated useful lives for customer relationships, technology, and backlog intangible assets were 22 years, 21 years, and 2 years, respectively. See Note 6 for additional information about goodwill and other intangible assets. Eaton's 2021 Consolidated Financial Statements include Mission Systems' results of operations, including segment operating profit of $128 million on sales of $450 million, from the date of acquisition through December 31, 2021. 33
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