Eaton to acquire MGE Small Systems Business

Diversified industrial manufacturer Eaton Corporation ETN announced today it has committed to acquire the small systems business of Schneider Electric's MGE UPS Systems for EUR 425 million ($570 million). Subject to the satisfaction of certain customary closing conditions, the transaction is expected to close in the third quarter.

"The addition of MGE's products will bring us valuable technology to fill product gaps in our UPS single-phase portfolio," said Randy W. Carson, Eaton senior vice president and president - Electrical Group. "In addition, MGE's presence in more than 40 countries will provide us with access to new markets and important distribution channels and will further establish our manufacturing presence in regions like China. This transaction clearly underlines Eaton's stated strategic focus to expand our Power Quality business globally."


Eaton Buys Small Systems BusinessStocks Rise After Strong Economic Data
For the 12-month period ending May 31, 2007, the small systems business of MGE had sales of approximately EUR 163 million ($218 million) and EBITDA of approximately EUR 39 million ($52 million).

MGE's small systems business employs approximately 600 people worldwide and is a global provider of power quality solutions designed to increase the availability and uptime of mission-critical applications and processes. Its products include uninterruptible power systems (UPS), power distribution units, static transfer switches and surge suppressors. The business is headquartered in Saint-Ismier, France.

Eaton CEO Got $12.1 Million in Compensation

Eaton Corp.'s Alexander M. Cutler, chairman, president and chief executive officer, in 2006 received compensation the company valued at $12.1 million, the industrial parts and systems maker said in a regulatory filing Friday.The Associated Press calculation of total pay includes executives' salary, bonus, incentives, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year.According to a proxy filing with the Securities and Exchange Commission, Cutler received a salary of just over $1 million, incentive plan pay of nearly $8.2 million and other compensation totaling $139,961.Included in that last figure are perks, such as: a car allowance of $18,000, an executive benefit allowance of $14,400; personal use of company aircraft valued at $55,800; and a $17,289 reimbursement of taxes associated with the use of company-owned aircraft.Directors have authorized Cutler to use company aircraft for professional and personal reasons to enhance his productivity and personal security.Cutler also received an annual premium for company-purchased life insurance of $11,472, $8,800 in matching payments to his employee savings plan, and financial planning and tax preparation worth $14,200.Eaton reported above-market earnings on non-qualified deferred compensation to Cutler of $3,902.The total amount listed in the filing for fair value of restricted stock and options awards that were valued at $2.77 million when they were granted.Cutler, 55, became president and chief operating officer in 1995 and was named chairman, CEO and president in 2000. He previously had led Eaton's industrial and controls units.The Eaton board's compensation committee noted that Cutler surpassed performance expectations. The committee also bases compensation on what executives are paid within a peer group of companies including General Electric , Illinois Tool Works , ITT Industries , United Technologies , Honeywell and Parker Hannifin .In January, Eaton said fourth-quarter earnings were up nearly 15 percent from a year ago, driven by continuing growth of its electrical and fluid power business segments. For the year, Eaton's profit grew 18 percent to $950 million, or $6.22 per share, on sales of $12.37 billion.Eaton has 60,000 employees and plants in 29 countries. Its products include transmissions, couplings, hoses, motors, circuit breakers, filters, pumps and cockpit controls.Eaton shares rose 37 cents to close at $82.52 on the New York Stock Exchange. The stock has traded within a one-year range of $62.81 and $84.89.

Department of Justice and SEC probe Siemens

FRANKFURT (Reuters) - A corruption affair that has shaken German industrial conglomerate Siemens AG has spread to the United States with investigations by the U.S. Department of Justice and Securities and Exchange Commission."The U.S. Department of Justice is conducting an investigation of possible criminal violations of U.S. law by Siemens in connection with these matters," Siemens said in its first-quarter financial report posted on its Website (www.siemens.com)."Siemens understands that the U.S. Securities and Exchange Commission's enforcement division is conducting an informal inquiry into the matters at this time," it added in the notes to its consolidated financial statements for the quarter to the end of December.German prosecutors are investigating 200 million euros ($260 million) missing from Siemens's accounts that it suspects were transferred into foreign accounts and used as slush funds for bribes to win telecoms equipment contracts.Siemens also is conducting its own internal investigation into 420 million euros of dubious payments that were booked as consultancy fees over a seven-year period.Informal SEC inquiries can but do not necessarily result in formal investigations, under which the watchdog gains powers to subpoena documents and other information from a company.Siemens said its business could be hurt by the investigations and that it had not made any provisions for any possible future penalties that could be imposed on it. "The company's operating activities may also be negatively affected due to imposed penalties, compensatory damages or due to the exclusion from public procurement contracts," it said."No charges or provisions for any such penalties or damages have been accrued as management does not yet have enough information to reasonably estimate such amounts."Siemens added that the Munich prosecutor's investigation had led to related probes in Liechtenstein and Switzerland.Greek prosecutors were also investigating one of Siemens's former officers there, it said, and had questioned the chief executive of Siemens Greece and another employee as witnesses.

Eaton sets pay limit at CEO's request

Eaton Corp. (ETN) said Monday that at the request of Chairman and Chief Executive Alexander M. Cutler, it set a limit on what the company can pay him under its incentive plan.
The Cleveland-based industrial manufacturer said in a filing with the Securities and Exchange Commission that Cutler decided to limit the incentive award he received because recent company actions had adversely affected employees and forced plant closings.
Cutler's incentive awards for the 2003-2006 incentive-plan period will be no greater than his award for the 2002-2005 period, according to Monday's filing.
Under the plan the executive will be granted phantom share units, which will be converted to cash. Monday's filing didn't say how much Cutler was given under the 2002-2005 incentive plan. A company representative wasn't immediately available to comment.
Eaton shares recently traded at $76.30 each, up 65 cents.

Eaton Corporation Posts 4th Quarter Gain

Eaton Corp., a maker of industrial parts and components, said Monday its fourth-quarter earnings were up nearly 15 percent from a year ago, driven by continuing growth of its electrical and fluid power business segments.
Eaton earned $241 million, or $1.59 per share, in the quarter ended Dec. 31, compared with $210 million, or $138 per share, in the final quarter in 2005.
The earnings matched Wall Street expectations, based on a Thomson Financial survey of analysts.
Before charges tied to acquisitions, operating earnings per share in the fourth quarter were $1.66 per share, compared to $1.43 per share in the year-ago quarter, an increase of 16 percent. Sales in the quarter were $3.1 billion, 10 percent above the $2.84 billion during the same period a year ago.
For the year, Eaton's profit grew 18 percent to $950 million, or $6.22 per share, on sales of $12.37 billion.
In 2005, Eaton earned $805 million, or $5.23 per share, on sales of $11.12 billion.
Eaton boosted its quarterly dividend by 10 percent, from 39 cents per share to 43 cents per share and authorized an increase to 10 million for its repurchase of common shares.
The company provided guidance for projected per-share earnings for the first quarter of 2007 within a range of $1.30 to $1.40 and for the full year from $6.05 to $6.25.

Eaton Electrical Organizational Announcement

Date: January 4, 2007

RE: PQSO, US Commercial Sales

Stephen Crescenzo has accepted the position of Southeast Zone Manager and Bob Gaylord has accepted the position of West Coast Zone Manager within the PQSO Sales organization.

In their new roles, they will be responsible for the strategic management of regional sales resources to achieve sales/orders, market share, price, product mix and financial objectives for their respective zones, focusing on single-phase & three-phase UPS, Services Sales and related technologies. Each will report directly to me.

Stephen Crescenzo started his career with Eaton in 1997 working as an OEM account manager, then moved to OEM Channel Manager. From 2001 - 2005, Stephen took on the role of Federal Product and Integration Sales Manager, where he was responsible for providing power quality products and integration services to customers within the Federal Government sector. In 2006, Stephen was promoted to Federal Sales Manager within the Federal Segment. Stephen brings a unique set of skills and experiences to this position with his prior experience in the OEM, Distribution and Federal segments. He holds a Bachelors degree in Business Administration from Temple University in Philadelphia, PA.

Reporting to Stephen will be:
John Lowe, Sales Manager
John Schwing, Sales Manager
Keith Woodley, Sales Manager
Jack Gamble, Sales Manager
Thomas Blooming, Applications Engineer
Patricia Brown, UPS Service Sales Manager

The Southeast Zone will now include Texas, which was previously within the West Zone.

Bob Gaylord, in his most recent assignment, has been the Eaton Electrical GSF Industrial Team Leader for the San Francisco Bay Area, with responsibility for driving sales and managing the industrial and OEM team within the territory. He also had a geographic overlay as OEM Sales Manager for the San Francisco, Seattle, and Denver Districts.

Bob joined the company in 1982 and has held progressive assignments within Eaton Electrical GSS including; OEM Sales Engineer, Technical Sales Development Program Manager, OEM Response Center Manager, and District Manager. He holds a Bachelors degree in Mechanical Engineering from Union College in Schenectady, NY and an Executive MBA from St. Mary’s College in Moraga, CA.

Reporting to Bob will be:
Alan Chiste, Sales Manager
Linda Hagen, Sales Manager
Stephen Solis, Sales Manager
Robert Bokma, UPS Service Sales Manager

David Speidelsbach adds to his Metro Zone responsibility the addition of the Northeast Region, which better aligns with the Eaton Electrical GSS organization.

Continuing to report to David will be:
Mike Desautels, Direct Sales Engineer
Keith Watson, Direct Sales Engineer
Andy Pavelko, Sales Manager
Laurie Watson, UPS Service Sales Manager

Added to David’s team will be:
Joe Devito, Sales Manager
Rich Su, Applications Engineer
Mike Redman, who is joining Eaton as the Boston-based Sales Manager.

Dann McKeraghan continues as the Central Zone Manager and expands his team to include a direct sales presence in Chicago.

Continuing to report to Dann will be:
Dan Ellis, Sales Manager
Kevin Laas, Sales Manager
Sally Rhodes, Sales Manager
George Wasielewski, Sales Manager
Susan Bowe, UPS Service Sales Manager

Added to Dann’s team will be:
Alois Kuril, who is transferring to the team as an Applications Engineer supporting the Central Zone
Gil Vega, who is joining Eaton as a Direct Sales Engineer supporting the Central Zone

Please join me in welcoming Stephen Crescenzo, Bob Gaylord, Mike Redman, Alois Kuril, and Gil Vega to the PQSO Sales team!

Darrick Finan
US Commercial Sales Manager
PQSO Sales & Marketing Division

Fitch Ratings rates Eaton's debt high

CHICAGO (AP) - Fitch Ratings on Tuesday reiterated its debt ratings and outlook on Eaton Corp., but said the industrial manufacturer's recent acquisitions have driven its debt somewhat high.
Fitch presently rates the company's issuer default rating, senior unsecured bank facilities and senior unsecured debt at "A". Fitch rates its commercial paper at "F1". The outlook is stable.
Fitch said it views Eaton's leverage as somewhat high for the rating category, but added that the ratings assume the company will use its free cash flow to control debt and leverage over the long term. Eaton has exercised disciplined financial policies in the past and it has the capacity to reduce debt quickly in the absence of major acquisitions or share repurchases, Fitch noted.
In addition, Fitch said Eaton has successfully integrated previous acquisitions and continues to realign its business portfolio to reduce its exposure to the cyclical truck and automotive markets. Those factors help offset rating concerns about competitive environments in many of its markets, as well as an expected downturn in the truck segment in 2007.
Eaton's most recent acquisition activity came on Thursday, when it announced plans to acquire privately held AT Holdings Corp., parent company of aerospace supplier Argo-Tech Corp., for $695 million. Argo-Tech makes fuel pumps and systems for aerospace engines and airframes, as well as fueling systems for commercial and military aerospace markets.
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