BUSINESS SEGMENT AND GEOGRAPHIC REGION INFORMATION

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing performance. Eaton’s segments are as follows:

Electrical Products and Electrical Systems and Services

The Electrical Products segment consists of electrical components, industrial components, residential products, single phase power quality, emergency lighting, fire detection, wiring devices, structural support systems, circuit protection, and lighting products. The Electrical Systems and Services segment consists of power distribution and assemblies, three phase power quality, hazardous duty electrical equipment, intrinsically safe explosion-proof instrumentation, utility power distribution, power reliability equipment, and services. The principal markets for these segments are industrial, institutional, governmental, utility, commercial, residential and information technology. These products are used wherever there is a demand for electrical power in commercial buildings, data centers, residences, apartment and office buildings, hospitals, factories, and utilities. The segments share several common global customers, but a large number of customers are located regionally. Sales are made directly to original equipment manufacturers, utilities, and certain other end users, as well as through distributors, resellers, and manufacturers' representatives.

Hydraulics

The Hydraulics segment is a global leader in hydraulics components, systems and services for industrial and mobile equipment. Eaton offers a wide range of power products including pumps, motors and hydraulic power units; a broad range of controls and sensing products including valves, cylinders and electronic controls; a full range of fluid conveyance products including industrial and hydraulic hose, fittings, and assemblies, thermoplastic hose and tubing, couplings, connectors, and assembly equipment; filtration systems solutions; heavy-duty drum and disc brakes; and golf grips. The principal markets for the Hydraulics segment include oil and gas, renewable energy, marine, agriculture, construction, mining, forestry, utility, material handling, truck and bus, machine tools, molding, primary metals, and power generation. Key manufacturing customers in these markets and other customers are located globally. Products are sold and serviced through a variety of channels.

Aerospace

The Aerospace segment is a leading global supplier of aerospace fuel, hydraulics, and pneumatic systems for commercial and military use. Products include hydraulic power generation systems for aerospace applications including pumps, motors, hydraulic power units, hose and fittings, electro-hydraulic pumps and power and load management systems; controls and sensing products including valves, cylinders, electronic controls, electromechanical actuators, sensors, displays and panels, aircraft flap and slat systems and nose wheel steering systems; fluid conveyance products, including hose, thermoplastic tubing, fittings, adapters, couplings, sealing and ducting; and fuel systems including fuel pumps, sensors, valves, adapters and regulators. The principal markets for the Aerospace segment are manufacturers of commercial and military aircraft and related after-market customers. These manufacturers and other customers operate globally. Products are sold and serviced through a variety of channels.

Vehicle

The Vehicle segment is a leader in the design, manufacture, marketing, and supply of drivetrain and powertrain systems and critical components that reduce emissions and improve fuel economy, stability, performance, and safety of cars, light trucks and commercial vehicles. Products include transmissions, clutches, hybrid power systems, superchargers, engine valves and valve actuation systems, cylinder heads, locking and limited slip differentials, transmission and engine controls, fuel vapor components, compressor control clutches for mobile refrigeration, fluid connectors and hoses for air conditioning and power steering, underhood plastic components, fluid conveyance products including, hose, thermoplastic tubing, fittings, adapters, couplings and sealing products for the global vehicle industry. The principal markets for the Vehicle segment are original equipment manufacturers and aftermarket customers of heavy-, medium-, and light-duty trucks, SUVs, CUVs, passenger cars and agricultural equipment.

Other Information

No single customer represented greater than 10% of net sales in 2013, 2012 or 2011, respectively.

The accounting policies of the business segments are generally the same as the policies described in Note 1, except that inventory and related cost of products sold of the segments are accounted for using the FIFO method and operating profit only reflects the service cost component related to pensions and other postretirement benefits. Intersegment sales and transfers are accounted for at the same prices as if the sales and transfers were made to third parties. These intersegment sales are eliminated in consolidation.

For purposes of business segment performance measurement, the Company does not allocate items that are of a non-operating nature or are of a corporate or functional governance nature. Corporate expenses consist of transaction costs associated with the acquisition of certain businesses and corporate office expenses including compensation, benefits, occupancy, depreciation, and other administrative costs. Identifiable assets of the business segments exclude goodwill, other intangible assets, and general corporate assets, which principally consist of cash, short-term investments, deferred income taxes, certain accounts receivable, certain property, plant and equipment, and certain other assets. See Note 2 for additional information about business acquisitions.

Business Segment Information



	2013			2012			2011
Net sales
Electrical Products	$	7,026		$	3,846		$	3,619
Electrical Systems and Services	6,430			3,872			3,557
Hydraulics	2,981			2,960			2,835
Aerospace	1,774			1,719			1,648
Vehicle	3,835			3,914			4,390
Total net sales	$	22,046		$	16,311		$	16,049

Segment operating profit
Electrical Products	$	1,090		$	640		$	531
Electrical Systems and Services	889			424			352
Hydraulics	355			369			438
Aerospace	252			213			244
Vehicle	592			570			695
Total segment operating profit	3,178			2,216			2,260

Corporate
Amortization of intangible assets	(437		)	(195		)	(190		)
Interest expense - net	(271		)	(208		)	(118		)
Pension and other postretirement benefits expense	(183		)	(162		)	(142		)
Inventory step-up adjustment	(34		)	(42		)	(5		)
Other corporate expense - net	(369		)	(358		)	(252		)
Income before income taxes	1,884			1,251			1,553
Income tax expense	11			31			201
Net income	1,873			1,220			1,352
Less net income for noncontrolling interests	(12		)	(3		)	(2		)
Net income attributable to Eaton ordinary shareholders	$	1,861		$	1,217		$	1,350

Business segment operating profit was reduced by acquisition integration charges as follows:



	2013		2012		2011
Electrical Products	$	44	$	4	$	1
Electrical Systems and Services	37		13		9
Hydraulics	36		16		4
Total	$	117	$	33	$	14

Corporate acquisition integration charges totaled $37 and $11 in 2013 and 2012, respectively. Corporate acquisition integration charges related primarily to the acquisition of Cooper and are included above in Other corporate expense - net.

Acquisition-related transaction costs, such as investment banking, legal and other professional fees, and costs associated with change in control agreements, are included above in Interest expense - net and Other corporate expense - net. These charges totaled $9 and $178 in 2013 and 2012, respectively. There were no significant Corporate acquisition-related transition costs in 2011. See Note 3 for additional information about acquisition integration charges and transaction costs.



	2013		2012		2011
Identifiable assets
Electrical Products	$	3,204	$	3,338	$	1,653
Electrical Systems and Services	2,683		2,408		1,242
Hydraulics	1,362		1,426		1,265
Aerospace	852		806		754
Vehicle	1,716		1,698		1,783
Total identifiable assets	9,817		9,676		6,697
Goodwill	14,495		14,443		5,537
Other intangible assets	7,186		7,580		2,192
Corporate	3,993		4,111		3,447
Total assets	$	35,491	$	35,810	$	17,873

Capital expenditures for property, plant and equipment
Electrical Products	$	152	$	108	$	76
Electrical Systems and Services	113		47		41
Hydraulics	80		60		70
Aerospace	29		27		21
Vehicle	161		148		172
Total	535		390		380
Corporate	79		203		188
Total expenditures for property, plant and equipment	$	614	$	593	$	568

Depreciation of property, plant and equipment
Electrical Products	$	151	$	78	$	74
Electrical Systems and Services	86		42		37
Hydraulics	65		61		54
Aerospace	27		26		26
Vehicle	133		136		147
Total	462		343		338
Corporate	54		38		29
Total depreciation of property, plant and equipment	$	516	$	381	$	367

Geographic Region Information

Net sales are measured based on the geographic destination of sales. Long-lived assets consist of property, plant and equipment - net.



	2013		2012		2011
Net sales
United States	$	11,092	$	7,789	$	7,165
Canada	1,154		918		815
Latin America	2,113		1,588		1,952
Europe	5,112		3,997		4,092
Asia Pacific	2,575		2,019		2,025
Total	$	22,046	$	16,311	$	16,049

Long-lived assets
United States	$	1,966	$	1,914	$	1,227
Canada	28		33		27
Latin America	331		346		247
Europe	856		845		649
Asia Pacific	652		648		452
Total	$	3,833	$	3,786	$	2,602