Document VJ8XkjGRbrqxMKqD5VNOOgbEN

At December 31,1995, certain subsidiaries outside the United States ad operating loss carryforwards aggregating $181 million. Carryforwards of $131 million have no expiration dates and the balance expire at vari ous dates from 1996 through 2005. Reconciliations of income taxes at the United States Federal statu tory rate to the effective income tax rate for the years ended December 31 follow (in millions): 1995 Amount R*t Income taxes at the United States statutory rats State and local income taxes Adjustment of worldwide tax liabilities Possessions credit related to Puerto Rican operations Reduction of valuation allowance for deferred Income tax assets Adjustment of deferred Income taxes for change in statutory rates Effective tax rate differential on earnings of consolidated subsidiaries and associate companies outside the United States Other-net *207 19 12 (32) (11) (5) 3 $193 35.0% 3.1 2.0 (5.4) (18) (-8) .5 32.6% 1994 Rate 35.0% 2.8 1.6 (5.2) (.6) (.4) (13) 31.9% 1993 Rate 35.0% 1.5 1.4 (2.1) (23) .1 (2-1) 31.5% The Company has manufacturing facilities in Puerto Rico. These fa.^Ailities operate under tax relief and other incentives that expire at various ;es beginning in 2004 through 2013. No provision has been made for income taxes on undistributed earn ings of consolidated subsidiaries outside the United States of $408 million at December 31,1995, since the earnings retained have been reinvested, by the subsidiaries. If distributed, such remitted earnings would be subject to withholding taxes but substantially free of United States income taxes. Worldwide income tax payments, including Federal and state income taxes in the United States, in 1995,1994 and 1993 (in millions) were $166, $109 and $156, respectively. QUARTERLY DATA (Unaudited) Quarter ended (Mittons amp! lor oar share data) 1995 Net sales Gross margin Percent of sales Net income Per Common Share Net income Cash dividends paid Market price High Low 1994 Net sales Gross margin Percent of sales Net income Per Common Share Net income Cash dividends paid Market price High Low Doc.31 Sept. 30 June 30 Mar. 31 *1.661 430 26% 90 *1,672 429 26% 91 *1,758 469 27% 110 *1,731 466 27% 108 * 1.16 .40 { 1.18 .40 * 1.41 .40 * 1.39 .30 56% 49% 62% 52% 61% 51% 55% 45% *1.605 442 28% 89 *1,531 411 27% 84 *1,545 429 28% 86 *1.371 373 27% 74 * 1.15 .30 * 1.10 .30 S 1.13 .30 * 1.01 .30 54% 43% 54% 45% 58% 49% 62% 50% In the fourth quarter of 1995, the effective income tax rate for full year 1995 was adjusted to 32.69$ from 33.596. This adjustment reduced in come tax expense for the fourth quarter by $4 million. BUSINESS SEGMENT AND GEOGRAPHIC REGION INFORMATION Eaton is a global manufacturer of highly engineered products which serve the vehicle, industrial, construction, commercial and aerospace markets with operations located in 23 countries. Operations are classified among three business segments: Vehicle Components, Electrical and Electronic Controls and Defense Systems. The major classes of products included in each segment and other information follows. Vehicle Components Truck Components Heavy and medium-duty mechanical and au tomatic transmissions: power take-offs; drive, trailer and steering axles; brakes; anti-lock brake systems: locking differentials; engine valves; valve lifters; leaf springs; viscous fan drives; fans and fan shrouds; power steer ing pumps; tire pressure control systems; tire valves; collision warning systems and advanced drivetrain controls. Passenger Car Components Engine valves; hydraulic valve lifters; viscous fan drives; fans and fan shrouds; locking differentials; spring fluid dampers: superchargers and tire valves. 39 ! TT