But once again, we see opportunities to be better everywhere. As we look forward, we continue to experience powerful megatrends that are driving higher growth in our end markets and we’re investing to ensure that we’re capturing these opportunities while gaining market share. We’re also continuing to optimize the way we run the company, improving our operational execution, leveraging our scale and reducing our fixed costs. This is allowing us to invest like never before in R&D, in capacity expansion and in our people. So our expectations are high and our teams are looking forward to delivering another exceptional year. So with that, I’ll open things up for any questions that you may have.
Yan Jin: Thanks, Craig. [Operator Instructions] With that, I will turn it over to the operator to give you guys the operation.
Operator: [Operator Instructions] Then now this question will come from the line of Jeff Sprague from Vertical Research.
Jeff Sprague: Good luck, Tom. Craig, first question for me is just on the restructuring itself. We tend to think of these things being kind of contracyclical, right? Demand is weak. We’re in a recession, we do a heavy restructuring. It seems, I don’t know, odd or a little risky maybe to undertake a big move like this with such a strong demand pull through both the Electrical and Aero businesses. So can you maybe just address the risk mitigation and how you manage kind of maybe the capacity through this? I assume you’re also trying to increase capacity while you restructure but love some additional thoughts on that.
Craig Arnold: Jeff. Appreciate the question. And — I’m not sure for everybody else but I’m getting a little background noise on the call. I’m not sure — okay, that’s better. Jeff, we spent a lot of time as a company sorting this one out in terms of whether or not it made sense to take on these restructuring projects at this time. Because, to your point, things are going very well and we have perhaps more growth opportunities than we’ve ever had in the history of the company. But at the same time, we actually have more capacity today than we’ve had in a long time. As you’ll certainly be aware, we haven’t done many acquisitions over the last couple of years. In fact, we really haven’t done any. And so we actually have more bandwidth as an organization today to take on these projects.
And one of the things that we do as a company is that we always have a forward view of our opportunities to be better, to improve efficiencies, to eliminate redundancies, to build scale, to essentially leverage some of these new technologies that are coming forth. And so we, today, as an organization, as a leadership team, all agree with that. There’s probably no better time than right now to take on these projects, to improve our cost position and really set the company up for margin expansion for the next 3 years on top of the growth that we’re going to see as a business. So lots of confidence today in our ability to take it on and we have plenty of capacity as an organization to do so.
Tom Okray: And what I would just add, Jeff, is add — I think it would actually be riskier if we didn’t do it. Because the foundation of the restructuring program is simplification as well an elimination of waste which frees up human resource time to focus on the shift that we’ve been making into growth. So it actually would be riskier if we didn’t do it and it’s great to lean forward and execute it at a time of strength.
Craig Arnold: Yes. That’s a great point. I said that in my outbound commentary, this notion that essentially, we’re freeing up time in our operations so that they can focus on growth and improving our operational execution, while some of our corporate teams take on a number of these support services. So you’re absolutely right, Tom. Thanks for that amplification.
Jeff Sprague: Yes. And just a follow-up — the background noise might be me, I’m dialing through my computer here, juggling multiple phone calls and different cell phones going on; a crazy day here. Unrelated question, just on backlog. Obviously, it does provide a lot of visibility and comfort. But we’ve seen a couple of companies with big backlogs also have sales disappointments, because the backlog is big but it’s not fungible, right? Air pockets develop here and there. Maybe just kind of address that risk. Do you kind of see anything that you need to kind of navigate through from a timing standpoint, particularly given the way you illustrated the long kind of order conversion cycle on some of those project stuff that’s in the backlog?
Craig Arnold: Yes, no, I appreciate that question, Jeff and understand the nature of it. But I can just tell you, based upon at least what we’re seeing and the nature of our backlog today and as I’m sure you’re well aware of that, we, as Eaton and really, quite frankly, as an industry, we’ve had more demand than we’ve had capacity largely over the last couple of years. And so we think we have plenty of ability to accelerate, decelerate if necessary, backlog conversion to essentially keep the top line growing at an attractive rate in the event that you have some sort of order that would be moving in or out or some sort of lack of linearity in the order book itself. And so not a concern; we’ve not seen it to date. As we look at kind of the stratification of the backlog and when orders are due, we don’t have that concern.
Operator: And the next question is from Andrew Obin from Bank of America.
Andrew Obin: Seems like you guys are doing great, yes. Just a different way of asking, I guess, Jeff’s question. Can you just talk — you mentioned capacity additions. Can you just — and I appreciate that some of this is competitive. But what areas are you adding capacity? When will this capacity be available to really move the needle? And — yes and anything you’re doing differently on geographies post the whole COVID experience?
Craig Arnold: Yes, no. Appreciate the question, Andrew. And one of the things we tried to do in the last earnings call is add a little bit of color around this $1 billion of investment that we’re putting in as a company to support growth. And I would tell you, it’s really pretty broad-based. We talked about investments that we’re making to support growth in utilities, in transformers, in both regulators and our line insulation and protection equipment. We talked about, obviously, the huge growth that we’re seeing in data centers and growth in institutional markets and the investments that we’re making there in low and medium voltage assemblies and fitboards and panel boards. We’ve had to make investments in our core component circle breaker capacity.
And obviously, we’re making big investments in eMobility as well. So I think it’s actually fairly broad-based with respect to the product lines. As it relates to the geography, we’re clearly seeing much bigger investments, much faster growth in the Americas and that’s really where the — principally a lot of these big investments have gone. But we — to your question about timing, what we’re assuming in terms of our own capacity, industry capacity is another issue as we work through suppliers and some of the others in the value chain. But we think a lot of this capacity for us begins to phase in this year. And so sometime between, let’s say, the second quarter and the end of the year when we’ll have most of our investments done — and it certainly gives us the capacity to do more, assuming there aren’t other bottlenecks and restrictions, whether it be labor or others in the value chain.
