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 Americas and Electrical Rest of World

The Electrical segments are global leaders in electrical components and systems for power quality, distribution and control. Products include circuit breakers, switchgear, UPS systems, power distribution units, panelboards, loadcenters, motor controls, meters, sensors, relays and inverters. The principal markets for the Electrical Americas and Electrical Rest of World 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 and through distributors, resellers and manufacturers representatives.

Cooper

The Cooper segment manufactures, markets and sells electrical products, including circuit protection, hazardous duty electrical equipment, intrinsically safe explosion-proof instrumentation, emergency lighting, fire detection and mass notification systems, security products, support systems, enclosures, specialty connectors, wiring devices, plugs, receptacles, switches, lighting fixtures and controls. The segment also manufactures, markets and sells products for use by utilities and in industry for electrical power transmission and distribution, including distribution switchgear, transformers, transformer terminations and accessories, capacitors, voltage regulators, surge arresters, energy automation solutions and other related power systems components. The principal markets for the Cooper segment are industrial, institutional, governmental, utility, commercial, residential and information technology. These customers operate globally. Cooper's products are sold and serviced through a variety of channels.

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.

Truck

The Truck segment is a leader in the design, manufacture and marketing of a complete line of drivetrain and powertrain systems and components for performance, fuel economy and safety for commercial vehicles. Products include transmissions, clutches and hybrid power systems. The principal markets for the Truck segment are original equipment manufacturers and after-market customers of heavy-, medium-, and light-duty trucks and passenger cars. These manufacturers and other customers are located globally.

Automotive

The Automotive segment is a leading supplier of automotive drivetrain and powertrain systems for performance, fuel economy and safety including critical components that reduce emissions and fuel consumption and improve stability, performance, fuel economy and safety of cars, light trucks and commercial vehicles. Products include 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 automotive industry. The principal markets for the Automotive segment are original equipment manufacturers and aftermarket customers of light-duty trucks, SUVs, CUVs, and passenger cars. These manufacturers and other customers are located globally.

Other Information

No single customer represented greater than 10% of net sales in 2012, 2011 or 2010, 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

	2012			2011			2010
Net sales
Electrical Americas	$	4,517		$	4,192		$	3,675
Electrical Rest of World	2,731			2,984			2,748
Cooper	470			—			—
Hydraulics	2,960			2,835			2,212
Aerospace	1,719			1,648			1,536
Truck	2,309			2,644			1,997
Automotive	1,605			1,746			1,547
Total net sales	$	16,311		$	16,049		$	13,715

Segment operating profit
Electrical Americas	$	749		$	605		$	529
Electrical Rest of World	249			278			264
Cooper	66			—			—
Hydraulics	369			438			279
Aerospace	213			244			220
Truck	420			486			245
Automotive	150			209			163
Total segment operating profit	2,216			2,260			1,700

Corporate
Amortization of intangible assets	(195		)	(190		)	(181		)
Interest expense-net	(208		)	(118		)	(136		)
Pension and other postretirement benefits expense	(162		)	(142		)	(120		)
Inventory step-up adjustment	(42		)	(5		)	—
Other corporate expense-net	(358		)	(252		)	(227		)
Income before income taxes	1,251			1,553			1,036
Income tax expense	31			201			99
Net income	1,220			1,352			937
Less net income for noncontrolling interests	(3		)	(2		)	(8		)
Net income attributable to Eaton ordinary shareholders	$	1,217		$	1,350		$	929

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



	2012		2011		2010
Electrical Americas	$	7	$	8	$	2
Electrical Rest of World	8		2		33
Cooper	2		—		—
Hydraulics	16		4		1
Aerospace	—		—		4
Total	$	33	$	14	$	40

Corporate acquisition integration charges, primarily related to the acquisition of Cooper, totaled $11 in 2012 and are included above in Other corporate expense-net. Acquisition-related transaction costs, such as investment banking, legal and other professional fees, are included above in Interest expense-net and Other corporate expense-net. In 2012, these charges totaled $178 and were related primarily to the acquisition of Cooper. There were no significant Corporate acquisition-related transaction costs in 2011 or 2010. See Note 3 for additional information about acquisition integration charges and transaction costs.

Business Segment Information



	2012		2011		2010
Identifiable assets
Electrical Americas	$	1,480	$	1,364	$	1,272
Electrical Rest of World	1,531		1,531		1,630
Cooper	2,867		—		—
Hydraulics	1,427		1,265		1,080
Aerospace	806		754		726
Truck	819		920		866
Automotive	879		863		904
Total identifiable assets	9,809		6,697		6,478
Goodwill	14,396		5,537		5,454
Other intangible assets	6,779		2,192		2,272
Corporate	4,864		3,447		3,048
Total assets	$	35,848	$	17,873	$	17,252

Capital expenditures for property, plant and equipment
Electrical Americas	$	87	$	65	$	59
Electrical Rest of World	51		52		49
Cooper	17		—		—
Hydraulics	60		70		45
Aerospace	27		21		21
Truck	69		80		59
Automotive	79		92		61
Total	390		380		294
Corporate	203		188		100
Total expenditures for property, plant and equipment	$	593	$	568	$	394

Depreciation of property, plant and equipment
Electrical Americas	$	54	$	53	$	55
Electrical Rest of World	55		58		56
Cooper	11		—		—
Hydraulics	61		54		52
Aerospace	26		26		25
Truck	66		74		76
Automotive	70		73		77
Total	343		338		341
Corporate	38		29		28
Total depreciation of property, plant and equipment	$	381	$	367	$	369

Geographic Region Information

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



	2012		2011		2010
Net sales
United States	$	7,789	$	7,165	$	6,166
Canada	918		815		666
Latin America	1,588		1,952		1,629
Europe	3,997		4,092		3,532
Asia Pacific	2,019		2,025		1,722
Total	$	16,311	$	16,049	$	13,715

Long-lived assets
United States	$	2,038	$	1,227	$	1,102
Canada	32		27		25
Latin America	337		247		275
Europe	834		649		664
Asia Pacific	636		452		411
Total	$	3,877	$	2,602	$	2,477