Ladies and gentlemen thank you for standing by and welcome to the Eaton Third Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session; instructions will be given at that time. (Operator Instructions) As a remainder, this call is being recorded. I would now like to turn the conference over to our host Vice President of Investor Relations, Don Bullock. Please go ahead sir.

Good morning. I am Don Bullock, Senior Vice President of Investor Relations. Welcome to Eaton’s third quarter 2013 earnings conference call. Joining me this morning are Sandy Cutler, Chairman and CEO; and Rick Fearon, Vice Chairman and CFO. It has been our practice, we'll begin today's call with comments from Sandy followed by our traditional question-and-answer session. Before I do that I draw your attention to the statement on page two of our presentation regarding forward-looking statements included in the presentation. There we have outlined the factors that could cause actual results to differ from our statements. Those factors are noted in today’s press release and also related to the Form 8-K. Please take a moment to review this. In addition to the presentation – also in addition, the presentation also includes certain non-GAAP measures, it is defined by SEC rules. A reconciliation of those measures to the comparable GAAP equivalent is provided in the Investor Relations section of our website at www.eaton.com. With that I will turn it over to Sandy.

Great. Thanks Don and welcome everybody this morning. I’m going to work from the earnings presentation that was posted earlier today, I’m going to start on Page 3, since Don as already covered the forward-looking statement qualifications, that’s the chart that’s labeled highlight of the third quarter results. We are very pleased with the third quarter as we noticed in our press release all time record sales on operating earnings and again the $1.12 of operating earnings per share compared to our guidance of $1.05 to $1.15 within this point of $1.10. Our sales as we noted were up some 42%, slightly less than we had thought they would be at the beginning of the quarter, you may recall we haven’t provided guidance at the beginning of the quarter we talked about expectation of sales might increase by $75 million, the increase closer to $5 million so relatively flat overall revenues second quarter to third quarter. I’m really pleased when we look year-to-year, core revenue growth of 3%, I think that’s significant. Segment margins 15.6%, the same as our record second quarter, so we think on very similar volumes, a very strong achievement. We think the real news of the quarter is in this next bullet point, is really strengthening bookings in our electrical, hydraulics and aerospace as a reason we don’t quote vehicle here as we really don’t have bookings data in that business. So in those businesses we have got bookings 5% up in electrical, 8% up in hydraulic, 6% in aerospace, I think significantly October has also started strongly. And then significantly our Cooper integration activities and savings remain on track with the same projections we provided you at the end of the last quarter. If we turn to the next chart, one that’s labeled comparison to…

At this point in time, our operator will give you instructions and then we will turn it to questions.

(Operator Instructions)

Our first question comes from Steve Winoker with Sanford Bernstein.

Hi. Thanks and good morning.

Good morning.

Hi.

Just trying to make sure I understand that Slide 13 walk from 3Q to 4Q and just a little bit confused on -- is the core growth about 200, I get about $283 million or so implied based on your $125 million full year, is that in the range of what you’re talking about?

Chart 13?

I’m sorry, slide, yes, Slide 13, 3Q to 4Q, I’m basically looking at sort of what’s implied organically in terms of growth and then the implied incremental margin on that compared to, if you’re looking for $125 million in the full year now, therefore, given your run rate in 1Q and now 3 that sort of the math works out to $283 million implied in the fourth quarter. And then I’m looking for what kind of incremental on that? I’m just trying -- make sure I understand the seasonal volume commentary in light of it being a little bit lower and yet actually year-over-year yield that’s still going to be a positive for growth number, right?

I think the way we really to think about it, it’s roughly $70 million of volume lower than the third quarter of 2013 that’s roughly a 33% incremental, that’s what we’ve been using this year.

Okay. All right. And that $70 million captures in Cooper excluding the synergies?

Yes.

Okay, great. And what’s your assume pricing versus cost tailwind, how is that kind of played into your performance and where do you see that -- how do you see that outlook going forward?

We’re seeing I think as everyone has commented this year that commodities have been a little bit more duffle this year than they have been in other years. The way we try to take the things Steve is that we tried to run a model that basically says between productivity, new product introductions and price increases that we -- roughly come out equal versus commodity prices so no material headwind, tailwind this year.

Okay, okay. Are the pricing strengthen been pretty significant for a lot of -- I guess other companies that’s why I was wondering where you’re basically saying its neutral impact for Eaton?

That’s been our guidance for this year.

Okay. And just one last question, on your 2014 guidance, what -- how confident are you in that non-res construction piece of it and what maybe gets you some of that confidence in light of – this past year’s experience?

I’d say a couple of things Steve. We have been talking about this for several months with investors is that the way we think you have to think about the U.S. construction cycle, is that really the first couple of years coming out of this downturn in 2008 and 2009 were very atypical in that residential which is normally early driver, earlier cycle did not come back for all the reasons we understand. And you saw a short-term, a non-res boom and some of those numbers went up into double digits. We think we’re now into a more normal, if you look at the 2012, 2013, 2014, 2015 time period that is developers beginning to buy the land again because they have built out most of their residential areas that then leads to beginning of what we call the small commercial activity. These are the shopping malls, all of the strip stores that then leads you into the larger construction activity. If you look at the actual data which has just become available in the last two days because some of the delays of the data stream, the July, August data for non-res private put in place, I think surprised most people with the strength. We think that this building, we’re seeing pretty good bidding activity looking out ahead of us. And if you look at some of the consensus numbers that have also come out in the last couple of days from a number of the people who forecast U.S. put in place private. They are talking about numbers that would make a 5% type number next year look quite realistic.

Fantastic. Thanks.

Our next question comes from John Inch with Deutsche Bank. John Inch – Deutsche Bank: Hi, good morning everyone.

Good morning, John.

Good morning. John Inch – Deutsche Bank: Just to [indiscernible] on your point about price, what sort of mix or price are you seeing in your bookings increase that obviously and just confirm those ship over what duration kind of a year so that helps out the first part of 2014?

Yes. Bookings, let me just talk to kind of bookings timing for a minute. When you look at our electrical product sector, this largely in one month, I’d say month or maybe out the beginning of the next month but because this product, its standard product, it seems to be the type of thing that is stocked, distributed with carriers and they are refilling. So that’s to the most part kind of in and out business, in the electrical services and systems business that can be anything from a panel board that might ship in a couple of weeks to switch gear that might not ship till 6 to 8 months later. And so, you can quite a range and I think a good way to think about that is that’s generally a 3 to 4 months outlook if you will. When you are getting out of the hydraulics business, the distributor side generally when that’s coming in that tends to be shipped same month or the next month, the OEM side often can be orders that go out as far as six months or longer. And so what we are seeing there in hydraulics because I’m sure a number of people will have questions if you got a 8% increase in bookings so I want the fourth quarter immediately go up higher, which we would like. But we don’t think that’s necessarily going to happen as number of those orders are from both agriculture, construction, a variety of areas where people are kind of laying in their order pattern for next year. It’s part of the reason that we are a little bit more bullish thinking about that market for next year. On the Aerospace side, obviously when bookings, when aftermarket comes in that’s generally a 1 to 3 months that’s going to get shipped. The orders for the OEM side can go out quite a bit longer than that if you can imagine in terms of a build program for OEM platforms. John Inch – Deutsche Bank: So that makes sense. And then what about, what you are seeing with respect to the mix of your what’s your bookings look like, is it better or is it sort of consistent?

I won’t say consistent with what we have been seeing. No big changes one way or the other. John Inch – Deutsche Bank: Okay. And then just sort of interpret your guidance, do you think electrical products because obviously we don’t have compares right with Cooper pro forma or anything, if you take electrical products get better in terms of profitability or profit margins in the fourth quarter, I’m just curious how this is going to play out, maybe you can comment on both the products and the systems and services business.

Generally, again, what we will see is, in the electrical business the strongest quarters are normally your third and second quarters, your weakest quarter is normally the first quarter. And then as you think about the fourth quarter it tends to be the third strongest quarter if you will. So that trend is fairly true year-to-year you can always get a little bit of difference depending particularly in the electrical systems and services as to – you may have some large projects they are going to shift one year versus another. But, I think in the products business that’s a pretty good rule. John Inch – Deutsche Bank: So that sort of imply you are going to end the year around 15% margin for the products business. I guess, if I add all this up right and coming around –

We actually still think we are going to be closer to 16.5% in the products business and we think we will be around 14.5% for the full year in electrical systems and services. John Inch – Deutsche Bank: Okay, okay. I’m sorry. You are right. That does have a net worth. So we will think Sandy as you kind of look at sort of – what’s happening in non-resi and the progress you are making on Cooper kind of electrical products seem weaker this year but then there is some obviously signs of improvement. This business, I’m assuming we can still retain the 33% contribution margins in next year. It sounds like the business should be over 17% margin based on your guide all else equal unless I’m missing something.

Remember just one quick note, in terms of the rate of improvement, we definitely think the businesses will continue to improve because again remember, we are going to be dropping some $95 million of incremental year-to-year synergy into these two segments. But again, if could just go back to the guidance we have provided in early February for this year, we said that our normal incremental for the whole company would be around 28%, the reason it was 33% this year that we took $50 million of restructuring in the fourth quarter last year and that we really felt to be intellectually honest in this, we need to back that out and give you an incremental over there. So I think 28% incremental and some are between 25% and 30% that’s how we get to 28%. It’s probably a more realistic kind of overall margin for the company. We have not completed our profit planning for next year, so we are not providing a particular guidance but if you are to kind of use what we would have used this year without the restructuring from last year that would have been the range. John Inch – Deutsche Bank: Still sounds like you are driving toward over 70% -- 17% next year is all right?

We will see how the performance comes out and we will obviously give you a better insight on this when we get together to do our guidance for next year. John Inch – Deutsche Bank: Okay. Got it. Thank you.

Thanks John.

Our next comes from Julian Mitchell with Credit Suisse.

Hi. Thanks a lot. Just a question around the sort of non-Cooper related additional expense control, you said that this year now looking at $0.24 of help from that versus $0.15 back in July. How much sort of more you are doing right now in kind of Q4. In other words some of these non-Cooper cost out issues, they are going to be tailwind into next year as well, are you kind of drawing those to a close because the bookings are good and you expect the market to accelerate?

I understand the question. And I think the way to think about the additional savings beyond 55 we talked about as they drop into the third and the fourth quarter. We think the base of this year than it’s a realistic base to build off of as we think next year. Your point about the momentum, it does feel to us like there is a momentum change with these bookings and in spite of I think the fact that we all were somewhat encouraged watching the Ford Theater in Washington several weeks ago and that we all anticipate we are going to see another stage of that as we get to the early part of the winter spring next year. These economies feel like they are continuing to improve in spite of that and some of the businesses were that we had not seen as good order activity in the second quarter that reversed itself from the third quarter. So that gives us I guess Julian, the additional confidence that this sort of range we are thinking about for perspective market increases next year that’s very realistic to us.

Got it. Thanks. And then your OpEx was up quite a bit, I mean R&D to sales was up 40 bps year-on-year in Q3. Is that just a sort of top-up going on in some of the electrical businesses on R&D or is that something that sort of a multi-year program in some channel areas?

I say more a timing issue than anything else. Julian we have got, our development cycles in each of our businesses are fairly long and one of the areas we have really been carefully about trimming is that that basic investment in new power management solutions. So I don’t think there is a big conclusion to be drawn one way or the other there.

Got it. Thanks. And then just lastly very quickly, I remember that the beginning of the year you kind of, you tried to move away from talking about Eaton growth relative to a market growth, do you have any sort of sense on your growth rate that’s relative to the market so you kind of think it’s the markets and then you have plus 1% on top of that sort of thing?

Yes. We are still having a little bit of challenge, trying to get these data streams to settle down, it was not helped at all by the fact that we went through this period of not having U.S. government data. And so we don’t even have full data for the third quarter, some of the data just came out for the month of August. So I can’t give you a good feel on that one. I would say that in the industry associations where we get good market share data and one of those is for the electrical business here in the U.S. The news is quite encouraging. And whether that kind of shipment basis or even more strongly on the booking basis, I think its verifying our view of the incremental sales capability that we put in place with Cooper.

Thanks.

Our next question comes from Joe Ritchie with Goldman Sachs.

Good morning everyone.

Good morning.

Good morning

This is just a follow-up on the commentary on October having started strongly, Sandy, maybe you can provide a little bit more color by segment on where you are seeing the strength. And specifically, as it relates to electrical it looks like the comps get a little bit tougher in 4Q. And hence I’m wondering whether you can see an acceleration versus the 5% bookings growth number, you saw in 3Q.

All we can really do at this point is, is give you a sense for kind of year-over-year so far in October, we will see how November and December plays out. But, in both our electrical business and our Hydraulics business, particularly in the U.S. we are off to a very handsome start, I may put that way on year-on-year basis in October. Now, one month doesn’t a quarter make but its an awfully good start and we are very pleased by that. I think one of the reason is that I think its you worth talking about that October for a moment is that, I think you heard not only from us but from a lot of other companies that there was some strange kind of order patterns in flow businesses during the last two weeks of September. I can’t tell you, I don’t think our team can tell you that we know what that was related to but the early part of September was going quite well. The back end of September seem to slow down whether that was related to all the activity in Washington, we don’t know. But, the good news is, it snapped back strongly here in October and so whatever cause that seems to be behind us and we seem to be on with strong numbers. In spite of that slow down kind of September you saw that the 5% in our electrical businesses, you saw the 8% in hydraulics and you saw the 6% in aerospace. So we think we are powerful numbers in the third quarter and off to a really good start here in the fourth quarter.

That’s the type of commentary. And the government slow down the shutdown, did that have any impact at all to your 4Q estimate reduction?

I think really its our view of the market, what’s going on the market, that’s hard for us tie specifically what impact that as per se, if the markets just earned and behaving quite the way we thought they would this year. But, as we some of the activity we are seeing now and I think the whole back drop to this that – this is a gradually improving economy. It’s not rocketing back here in the U.S. So most significant change and we were talking about in the second quarter as well is that Europe seems to have bottomed. So regardless whether you think Europe is going to be a positive one or positive half or positive one and a half versus its being negative, this last year that’s a fairly powerful change year-to-year. And I think the other one that’s for us is significant and we are our watching, its what’s going on in Asia Pacific, where you had a very weak Australian economy. You got a Chinese economy going through very substantial transition and within that transition, the consumer side that for us for example auto has been quite strong. The major industrial in infrastructure has been quite weak. We are beginning to see some change in that. And the key issue for us now in China is to see the inventories or construction and mining equipment come into balance because its fairly important influencer for the overall global hydraulics market. We do not see that happening yet. We have said we thought it would be at least the middle of next year and I think that that probably the hardest piece for us to call in that respect. But, having said that positive Europe, a slowly growing U.S., a strong Latin America and stabilizing Asia is a lot better than what we have looked at in 2013.

Okay, great. I guess one more question on the Cooper revenue synergies, you just commented on how that’s progressing and as we get into next year I just want to make sure, I understand it correctly the 25% to 30% incremental you were talking about earlier that is x synergies, correct?

Yes. That is correct. And quick updates in terms of how the revenue synergy is going, we are quite pleased, we had commented when we rolled out this guidance originally, that’s the first year, would take a year to get a number changes put in place obviously to start to put the capabilities combined capabilities in front of our customers, we are very much on track on achieving, as you can see this roughly $10 million of incremental profits that come from I’m talking in tandem within the overall 115 in 2013 that jumps up to $35 million next year and we really pleased where we are right now. And so feel very good across those four prime elements that we talked about introducing service business capability to the Cooper Power Systems business, major increases in terms of our effectiveness across channel partners, the ability to move into countries where one company or the other was significantly stronger than the other than some of these target markets like oil and gas where its very clear that we have got a very substantial capabilities having put these two companies together and it may have one of the broadest offerings available in that segment. So, we are quite pleased with that and have a really great sense of confidence that we are right on top of these numbers.

Thanks everyone. I will get back in queue.

Our next question comes from Nigel Coe with Morgan Stanley.

Thanks. Good morning.

Good morning Nigel.

Yes. Look pretty good color here on 2014, so I appreciate that. Obviously, the incrementals next year will be partly a function of the mix of businesses – how your different businesses grow. And I just wanted to know, do you have any strong views in terms of how some of your high leverage businesses like truck, hydraulics and products will kind of compared to that 54%?

I think as we talked to the – it really does matter just as you mentioned, what that market percentage would be. I do think that the aerospace this is going to likely see demand that is fairly similar kind of demand increase we saw this year. We don’t see any of those fundamentals changing. I think the hydraulic business you correctly mentioned is one that has some fairly high incrementals and decrementals and we expect that business will have positive market experience next year versus the negative, its been struggling this year. And with all the work we have done in terms of try and improve profitability, incremental profitability and you can see that in that comparison of this quarter’s performance versus last year’s in hydraulics. We think there is an opportunity there obviously for us to do well. I think the electrical business is one that is likely to be close to those incremental numbers we mentioned. I think the biggest year-to-year market difference is likely to be in the hydraulics business.

Okay. And you mentioned the Chinese construction market being one of the big question mark for 2014 in hydraulics, obviously mining and ag are two big questions as well. I mean how do you view the progression of mining and ag? Maybe give us some current sense of what you are seeing right now in those term markets. You mentioned ag was quite strong but how do you apply to progress?

I think ag is frankly we talk a lot about as well, its one of the most difficult markets to call right now. We seem to have two schools of thoughts that are about 40 yards apart. Clearly, its been a big production year, prices have declined. It really depends a little bit by segment. We continue to think of the capital equipment market in South America will be quite strong. Again, we think Europe and the U.S. are replacement market, so they get heavily influenced by this issue of excess cash of the farmer and ability to reinvest. We follow really our major OEMs in this regard and one of the large ones that as a color that you recognize is quite bullish. Next year in terms of their numbers, so far that’s the order pattern we see and that’s what supported into comment when we got a stronger hydraulic booking led by ag this quarter. We will have to see. I think these are single digit – mid-single digit numbers. I don’t think these are big booming numbers more than that. Mining is very much depends up on which commodity is being mined, obviously coal everyone was down in the ground about it. But if you look at some of the shipments of coal to China recently that has began to increase fairly significantly that have to increase a lot before you are going to have a lot of additional commitment but the demand is starting to move in the right direction. Copper investment in the South America continues fairly actively in terms of changing by country because they are trying to get to places where there is better ore grade and yield and lower electrical cost. But, I would guess on this whole mining and construction area, its still mining it’s going to be slower than we saw a couple of years ago and constructions got to go through the bleed off of the inventory that particularly is still necessary in Asia.

Okay. And then just quickly on pension, you put down $3 million place order for next year, I think if you snap the line like on discount rate, you get a bit more than that. And have seen that prior loss amortization would be lower next year given the move in market return. So I’m wondering or there any offsets to discount rates and amortization.

The $20 million we have laid out Nigel assumes 4.7ish type discount rate obviously its going to differ from that that will impact in just about a $60 million impact for 25 basis point. The other factor is always that our plan when it was under 80% funded and our plan is funded in the high collectively the high 80s for both plans a little bit lower for the Eaton only plan because we are now over 80, we are now offering full lump sum settlements and that means that fees will retire because we are not completely funded it, there is a bigger expense. And so that will be a drag on the pension expense next year. So you got a balance out the interest rate whatever its going to be with the fact that you will have slightly higher lump sum settlement expenses.

Thank you very much.

Our next question comes from David Raso with the ISI Group.

Hi. Good morning.

Good morning, David.

Two questions, just trying to think through the end market guidance. This time last year you are coming of a quarter where the orders were down mid-single digits and you are still thinking up 2% to 3% on the end markets for next year. And it prove to be optimistic end markets now flat, but so just thinking about how you are going through the process of forecasting. This time last year borders down mid-single, thought up 2% to 3% the following year in end market. But now we are actually looking at up mid-single, October is off to a good start and you are thinking 3% to 4%. Simply that analysis tells you are you being more conservative on the guidance you saw last year you are too optimistic or should I read something about the end markets from not – in a way I think the 3% to 4% is actually maybe a little better than I would have thought but still if the orders are up this much going through 3% to 4%, its interesting compared to what you are thinking last year of a lot weaker orders?

Yes, I think David maybe the missing piece and it’s always a hard one to call is, what’s the relationship going to be between manufacturing industrial production which tends to be actually a better a surrogate for our end markets than simply GDP. We came into last year and we started the year really with the belief that industrial manufacturing production would be higher than GDP which is the normal relationship when GDP expands normally industrial manufacturing production expands more. That actually has not been true this year and for the reasons both of inventory reductions and lower CapEx spending, we think what we’ve seen is manufacturing industrial production be slightly less than GDP. Our expectation is over what we think is been an adjustment year and that year, in this year that we’re more likely to see the slightly stronger global GDP next year really led primarily by Europe going from a negative to a positive but a return to a pattern where manufacturing industrial production would be higher than an expanding GDP. That’s probably the biggest variance from that respect -- our fake out if you will is this year is that manufacturing industrial production is going to be lower than GDP and that had more of an impact than we foresaw coming into this year.

Yeah, I guess so even taking that thought further, let’s say you knew this year industrial production would be less of a relationship with GDP not below and say last year you said our orders just came and down mid single and we’re thinking 2013 end markets are flat, just even if you knew that then you would argue if your orders are up mid single right now and October is healthy even going in a three to four seems seven, an air of conservatism and clearly that is justified. I’m just trying to get into your head a little bit on what’s making you a bit cautious on that outlook? Is there something very tangible or is it you know a little bit maybe lessons learned from last year and wanting to start with a little more conservative relationship between your orders and how you’re seeing the end market?

A couple of things David, I would say remember one that some of our large portion of our orders in our business as I was mentioning earlier I think maybe John’s question come in and go out in the same month. So, they don’t necessarily build the foundation for the next year. We’ve seen this year-end slowdown occur three in the last four years and we have the prospects sometime in the first quarter of next year or having some more theatre in Washington. Hard to know exactly how that is going to impact the year. Our best estimate is just kind of 3% to 4% range we’re encouraged that as you correctly knows by both our third quarter bookings and the strong start in October love to see a November and December behind it, of that level of strength and then I think I would feel a little differently about three to four, but you have to say we’re off to a good start against it.

All right, I appreciate it. Thank you.

Our next question comes from Jeff Sprague with Vertical Research.

Thank you. Good morning everyone.

Good morning, Jeff.

Hi.

Just a couple more not on operating questions if we could cover the pension. Just thinking about interest expense, is interest expense finishes Q4 flat with Q3 your annualized benefit for 2014 relative to 2013 out of this some $20 million of the tail, I don’t know if that qualifies as very small but then on top of that, that you had some debt reduction that you’re expecting next year and so if you could maybe just kind of size what’s really going on there and if there is some other missing piece?

Yes, Jeff, it’s Rick. We do have a debt maturity of just over $500 million towards the end of the second quarter and clearly we have over the course of this year put on some things of floating swaps that you have to forecast exactly how those perform. All of that tells us we will have some reduction. We just haven’t quantified exactly how much the reduction is, but as a starting point looking at our interest expense and in Q3 and expecting that over the course of next year, it would likely come down some that’s a reasonable way to think about it.

And then I was just wondering also on kind of the step-up in pension expense sequentially this quarter and then actually the lack of the step-up in amortization I think on the Q2 call, there were some talk of some reiterating on some of the Cooper balance sheet items that was going to take amortization up, that didn’t happen, do those numbers track sideways from this Q3 level or if there is any change in run rate we should think about there?

They do track pretty well sideways into the fourth quarter. On pension the reason, the cost did increase from Q2 to Q3 really has become - because of the increase in the lump-sum settlement. We came out of restrictions on lump-sum settlement in the third quarter and so that’s the impact you’re seeing there. And on amortization we had made an adjustment to some of the purchase price bookings on Cooper at the end of the second quarter and that reset the amount of amortization and so yes there was handful of trade relatively sideways.

And just on other corporate, within the corporate Rick, you had the inventory step-up in Q1 that came - the next line got a little bit in Q2, it’s kind of back up again in Q3, how should we think about that? Is there any kind of discrete noise we can think about modeling or is that kind of a trend line assumption also?

I would assume that this other corporate was 97 in Q3 that is – the number in Q4 will be in the mid 90s as well, that’s our expectation.

And then finally just on tax, can you give us a little color what drove it down the way it did, it doesn’t seem as highly related to kind of income fluctuations as I would – it’s hard to guess, I know it’s much more complicated than that and but - should - give us a little color there and how we should think about cash tax is are they tracking as low or even lower than your book tax rate?

Yeah, at the start of this year coming off of the closing of Cooper November 30th of last year, we indicated this would be a year of transition as the very significant changes in our legal structure of the fact that we’re now in Irish Corporation and all of the related transaction to that settles down and so really what you’re seeing is the continuing effects of settling down that transaction. And it’s a complex thing to model all of the income effects from the various entities around the world and so you’re just seeing the impact of those effects. Next year, the 8% to 10% that we’re forecasting will be a much more normalized reflection of the structure that’s in place. And I might add that one reason that the rate will be higher next year from the 5% this year is in addition there was two years of benefit from the research and experimentation tax credit in the U.S. in 2013 and it’s our expectation right now that you probably won’t have any balance that from R&E tax credit in 2014 and so that itself there is a couple of rate points. And then the other changes, there were several one-off type impacts of the Cooper transaction and we don’t expect those next year either. And so when you take the 5% for this year you make those two adjustments you get into the 8% to 10% range.

Great. Thank you very much.

Our next question comes from Stephen Volkmann with Jefferies.

Hi good morning guys. It’s just made it. Most of the questions I guess have been answered, but I’m wondering Sandy as you were talking about incremental for next year. Does it make any sense to think about the productivity I guess gains what you’ve made this year to some of those lead into next year and maybe help us a little bit?

So I think the way and we’re as I mentioned earlier we’re not all the way through our final operating planning for next year, but I think the way to think about Steve there is so much the base for this year and they will work the incremental off of that date, so as the incremental synergies from the Cooper plus incremental that would get an additional non Cooper related synergy revenues.

Okay, great. That’s helpful. And then maybe just quickly, can you give us a sense of the - you mentioned some market share gains in electrical. Can you give us just a sense of exactly what we’re talking about there?

We don’t quote our exact share numbers but we’re really pleased that if even a stronger gain on the booking stream than it is on the shipment stream and I think that gives you an indication of kind of the momentum we have.

But just maybe types of products or types of end market?

It’s pretty broadly across the products that we sale in the U.S. and I think it’s a reflection of the fact that whether it’s in the channel or whether it’s working with users and OEMs, the capability we now have plus all the new products we’ve launched that are being received really, really well. I mentioned to you in the last call this WaveStream technology in our lighting business just got an off, it’s just a bang of a start and that’s the LED introduction and to really [indiscernible] lighting. We have introduced a whole new line of mid range UPS with the high efficiency that we’ve talked you about that we’ve always had in the large three phase that’s off to a great start as well. And I think that, that’s kind of push of new products plus the combined effectiveness we have is allowing to really drive this forward. So and more to follow as we come out of the fourth quarter but we’re very, very pleased with the momentum. Stephen Volkmann - Jeff & Co.: Super. And then just lastly quickly anything would you like us to keep in mind vis-à-vis capital allocation for 2014?

Well, I think as we’ve said before couple of elements here is, that we’re committed to the same practices we had around dividend that we don’t run either a yield model or a payout model but we expect to increase dividends over time in line with earnings. Number two, we want to continue this pay-down of debt as we’ve said and record details here in terms of the kind of payback schedule to get to a total of $2.1 billion pay-down from the start of our -- start of the Cooper acquisition. We generally make our U.S. pension contribution in January, so you ought to be counting on that again probably not out of pattern with what we’ve been doing in the last couple of years. And we think in terms of the M&A market it means that we’re not in the M&A market in any material way until we get that $2.1 billion payback and so I would say that’s the primary activity. And then capital expenditure is likely to be the same number we’ve talked about roughly 3% of whatever you project the current year’s revenues would be. So I’d say no dramatic change and we would continue to kind to buy-back shares only to the extent at this point that we’re offsetting options solution and we’ve generally suggested to you that’s kind of a planning number of around $100 million.

Okay. And our next question comes from Joshua Pokrzywinski with MKM Partners.

Hi good morning guys. Thanks for putting me in here.

Yes.

Just thinking about 2014 and the bookings growth here and you made some comments Sandy on commercial construction starting to pickup here in the U.S. And I guess historically you guys have talked about maybe greater strength or product capability and more the industrial side, in the power distribution industrial CapEx, those types of markets obviously that makes the change to a little bit with Cooper, but what sort of environment do you see characterize either our top line or earnings leverage if CapEx stay depressed but commercial picks up. Is that a positive environment for Eaton or is that kind of all wash out and be more neutral?

It’s a great question, Josh. If we go back to some of the guidance we provided in the first quarter of this year when we’re trying to give you a feel for what are the end markets that support our individual and our individual segments. Here we call it just a little bit less than 50% of our electrical products business, the portion is here in the U.S. is related to residential and non-residential construction. So obviously a powerful play on that continued cycle at this point. In the Electrical Systems and Services it’s around 30% of that particular business that plays in those two markets as well. Obviously, the hydraulics business has a play in terms of commercial construction and to a little less extent the residential construction. And the truck business obviously within our overall vehicle business has a play in that area obviously as residential housing and commercial construction picks up most of those materials are carried by a truck. So as we think about the environment of a strengthening residential and commercial construction market in the U.S. those are all very good things for us. Now when you get down within the overall mix of our U.S, private put in place construction about half that market is what we you call commercial, about half is what you would call the kind of heavy industrial side and that includes utility as well as mining as well as telecom and the traditional big areas like energy and power. Our market share is a very similar across that entire range. So our really there is do we see an overall private put in place number that’s a number like in that 5% range, that becomes pretty sweet music for us in terms of the end market conditions.

Okay. So you’re little agnostic, I guess within --

Yes.

Within some of those verticals?

We are.

Got you. Appreciate it. Thanks.

Our last question today comes from Eli Lustgarten with Longbow Securities.

Good morning. And thanks for letting me on.

Yes. Good morning Eli.

Hi, good morning.

One clarification, so you talked about the strength in orders, can you differentiate what’s going on in a marketplace from the easier comps that we [indiscernible] September, October, November from a year ago versus what you might consider more strength in the marketplace and particularly maybe more market share gains. It looks to me like your strength is more a combination of easier comps in some market share gains within electrical?

I just had have to go look in detail at all the future comps Eli, I would say, we tend to look at this not only a year-over-year but also on a quarter-over-quarter basis. And we saw a better activity here in this third quarter than we were seeing obviously a little earlier in the year. We think that’s a reflection that we’re starting to see Europe is clearly getting better in its bottom. We think the same as true in Asia and many of our markets. That was not true earlier this year. And the U.S. is on this kind of steady recovery and I think highly fancy but it’s getting better except for the occasional interruptions we have that’s come out of budget discussions. But it’s getting better and so, I think that maybe the most significant things that we’ve been watching kind of around the world is, it looks to us like the oil and gas industry is going to be spending a lot of money in 2014, 2015 and 2016, clearly the additional assets we put in front of that with the Cooper acquisition. We think are very advantageous and our combined capability helps. The power quality market the three-phased business which is one that was quite weak a year and a half ago as definitely picked up. This construction market and mobile and stationary users and hydraulics clearly we think that market is changing as well. So our feeling isn’t simply an issue of weaker comps. We think we’re seeing a momentum change.

All right. And final question, last year, you’re looking at roughly almost 1.5% margin improvement in effect with zero and market help. The Cooper -- the synergies are similar from Cooper incrementally year-over-year. So, if you’ve a chance of getting anything close to kind of a margin improvement in 2014 versus 2013, if you do get market growth if you are starting to think about?

I think that there is no question. If we can get some market expansion with incrementals, even this kind of -- if they turn out to be in this kind of 25% to 30%, that’s going to be helpful. And so I guess the way, I would urge you to think about this as you get to $95 million of incremental year-to-year synergies that’s a plus. And then we’ll get the incremental based upon whatever kind of volume that we can drive off this 3% to 4% anticipated market and then outgrowth of that end markets.

So getting a similar kind of margin improvement next year versus this year, it is something within a framework that we can think about and talk about given?

And again when you think about trying to select an incremental margin on the non-Cooper synergy volume, I think somewhere in that 25% to 30% is the right range and not the 33% that we use this year because we -- that as I mentioned earlier in the call, came from the fact that we took the $50 million of restructuring the previous year.

Great. Thank you very much.

Certainly.

Thank you very much for joining us today. As always Mark Doheny and I will be available to take your calls and questions immediately after our call today. And again thank you very much for joining us.

That does conclude our conference for today. Thank you for your participation and for using AT&T Teleconference Service. You may now disconnect.