Industrial Sector Craig Arnold

New York Analyst Meeting March 1, 2013

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We offer compelling power management solutions

Hydraulics
2012 Sales $3.0B

Hydraulic motion and control products that efficiently solve the worlds most demanding needs for power

Aerospace
2012 Sales $1.7B

Hydraulic, fuel, pneumatic, and electrical products that deliver safe and efficient solutions for aircraft

Vehicle
2012 Sales $3.9B

Transmissions and engine air management products that efficiently transfer power and improve fuel economy, emissions and safety

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While serving a diverse set of end markets

Aerospace
Business Jets Civil Rotorcraft Commercial Aftermarket Commercial Transports General Aviation Military Aftermarket Military Fighters Military Rotorcraft Regional Jets

Hydraulics
Agriculture Construction Oil & Gas / Marine Filtration Discrete Manufacturing Material Handling Commercial Vehicles Processing Recreation Alternative Energy

Vehicle
Ag / Off Highway Line Haul Passenger Vehicles Pickup & Delivery Vocational Vehicles

Continue to focus on higher growth markets

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With continued focus on key market drivers

Key Market Drivers
Growth of emerging markets

Eatons Growth Drivers

Expansion in China, India, Brazil and Eastern Europe Investing in technology and product leadership Strategic acquisitions and alliances

Increasing customer demands on cost, quality and delivery

Cost of fossil fuels New regulations and the need to reduce environmental impact

Focus on energy markets, fuel efficiency, reduced emissions and safety

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Our Hydraulics business serves large and diverse end markets

2012 sales of $3.0B Business Mix
70% Mobile 30% Stationary 50% Direct 50% Distribution
Other

Market Mix
Recreation Construction

Processing

Growth Drivers
Attractive end-markets Product innovation Emerging markets Acquisitions and alliances

Material Handling Agriculture Manufacturing

Commercial Vehicles

Oil & Gas / Energy

Expected 2013 operating margin of 13.5%

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Now more profitable across the economic cycle

Sales ($B)

Eaton end markets and sales levels similar in 2008 and 2012 We repositioned our Hydraulics business to improve flexibility
Improved product mix Workforce reductions Plant consolidation Global footprint optimization
-

3 2 1

Hydraulics Market and Base Sales

Mkt PMI

200 150 100 50 0

2008
15% 10% 5% 0%

2012

Base Operating Margin 2.5 pts

Improved business model results in higher profitability through the economic cycle

2008

2012

Improved operating margins by 2.5 pts

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And positioned for growth across key end-markets

Construction and Mining
$10B market driven by infrastructure build out 2012 Wins: $40M Sany, Hyundai, Terex, JCB High Growth End Markets

Agriculture and Forestry

$4.5B market supported by population and income growth, and housing recovery 2012 Wins: $20M John Deere, CNH, Mahindra & Mahindra, Liebherr, Rostelmash
Oil & Gas Agriculture & Forestry

CAGR 7.5% 5.5%

Oil and Gas

$3B market benefiting from favorable energy trends 2012 Wins: $50M NOV, ZPMC, Transocean, Keppel Fels Ltd, FMC
2012 2016

Construction 6.5% & Mining

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With ongoing investment in key technologies

Investing to meet our customers future needs
Intelligent hydraulic solutions to increase productivity Materials innovation to improve performance Increased hydraulic power density to drive efficiency New Product Sales
CAGR 20%

Launching industry leading technologies

LifeSense hose Power on demand solutions Laser clad coating

Commercializing tomorrows products

Efficient and quiet piston pumps Next generation smart industrial proportional valves Next generation feed filters
2012 2016

$140M in incremental revenues from new product launches by 2016

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While investing to grow in emerging markets

$10B addressable market, growing at 7% CAGR Emerging markets are demanding
Local content preference; language barriers, import duties Require fast lead-times Emerging Markets Sales
CAGR 18%

We are growing our presence

Localizing products Expanding sales and engineering Creating strategic alliances

Emerging market wins: $130M

Clutches and brakes for Oil & Gas applications in China Hydraulic power units for palm oil mills in South East Asia Heavy Duty pumps for transit mixer applications in China
2012 2016

$300M in incremental revenues from emerging markets by 2016

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Jeil acquisition expands our presence in the global excavator market

Global excavator market is a $2.5B hydraulic opportunity Jeil provides a broader coverage
A leading manufacturer of swing and track drive motors for excavators Located in Busan, Korea 2011 Sales of $189M Global Excavator Market
CAGR = 8%

Strategic Rationale Innovative technology fills product gaps for the high growth excavator market Low cost solution to expand sales with China local OEMs Strengthens Asia Pacific presence Jeil provides access to a $600M segment of the excavator market
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2012

2016

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Recent acquisitions to accelerate revenue and profit growth

2012-2016 Sales

We have acquired 5 businesses in the past 2 years; $700M in sales

Begerow, Internormen, Jeil, Polimer, Tuthill Couplings

15% 7%

Base CAGR

Expanded portfolio and emerging market access strengthened our global position Actively executing synergy plans
Rolling out the Eaton Business System Capturing sales synergies Realizing scale benefits

Acquisition CAGR

2012-2016 Profits
30% 15%

Base CAGR

Acquisition CAGR

Acquired business revenue and profit growth is 2x base

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Hydraulics margin expectations remain high

Hydraulics Operating Margin %

17% 13%

2012

Restructuring

Base Volume

Acquisition Synergies

2015 Goal

4 points of margin improvement

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Our Aerospace business has breadth across many markets and platforms
2012 sales of $1.7B Business Mix
Commercial: 65% Military: 35% Original Equipment: 65% Aftermarket: 35%

Market Mix
General Rotorcraft Military Aviation Transport Business Jet Regional Transport

Military Fighters

Military Rotorcraft

Growth Drivers
On the right platforms Aftermarket programs and service Innovation and system solutions
Large Transport Other

Expected 2013 operating margin of 14%

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We see continued growth in commercial transports

$3.5B OE commercial large transport segment growing at 6.5% annually Single Aisle Still ramping, 5% YoY growth
Leading pump supplier for hydraulic and fuel systems, including main fuel engine pumps Extensive content with fluid and air conveyance, sensing and control components
3% CAGR 10% CAGR

Commercial Large Transport Industry

6.5% CAGR

Widebody Next generation growth

3x the content on the A350 over legacy platform 4x the content on B787 over legacy platform 4x the content on A380 over legacy platform
2012 Single Aisle Widebody 2016

$170M in incremental annual revenues by 2016

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And were growing our position on business jets

$750M global business jet market is poised for growth of 10% CAGR through 2016 New platforms entering service with more Eaton technology; 2-3x the content
Dassault SMS Hydraulic System Learjet 85 Fuel Inerting and Hydraulic Systems Hondajet Fuel and Hydraulic Systems Eaton Sales Business Jets
14% CAGR

2012 Wins: $85M in program value

Conveyance couplings and hoses Stab trim actuation components Landing gear handle
2012 2016

$70M in incremental annual revenues by 2016

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Our component technology will enable growth in commercial aftermarket

Focused efforts in the $2B commercial aftermarket growing at 4% 2012 Aftermarket wins: $180M
CRJ Flap actuators B737 Horizontal stab trim upgrade A320 ACMP retrofit

A320 Retrofit
4800 Airbus A320s in service Eaton offers industry-leading motor pumps
3x the reliability of nearest competitor High capacity fans reduce overheating Optimized impeller for efficient flow Tight tolerances eliminate leakage

Modification and upgrade opportunities: $200M

B767 Cargo door actuation B737 Horizontal stab trim upgrade A320 Landing gear hose retrofit

A fleet of 200 aircraft will:

Log 1.4M pump flight hours each year Save $20M over 2 decades of service Improve dispatch reliability

$80M in incremental annual revenues in 2016

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Military revenues grow despite decline in spending

$4.5B global OE military market US is ~60% of global defense spending; -3% CAGR through 2016 We have more content than ever on the right platforms >$55M of growth driven by top programs
F-35, A400M, F-15, KC-46A, KC-390
2012 2016

Military OE Sales Forecast

2% CAGR

$65M in outgrowth in 2016 versus a declining defense market

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And wins in military aftermarket will also offset reduced spending

$3B global military aftermarket; -3% CAGR through 2016 2012 Aftermarket wins: $110M
CH53 Circuit breakers, hydraulic starter repair EFA Fuel pumps, valves and couplings UH60 Couplings, electromechanical actuators Eaton Military Aftermarket Sales
3% CAGR

Growth in spending on key platforms will continue

30% CAGR on F-18, F-15 and F-35 modification spending

Campaigns to pursue $340M in new aftermarket opportunities

2012 2016

$60M in outgrowth in 2016 in a declining defense market

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Were also designing efficient components for tomorrows fleet

Investing to meet customers future needs
Smart components with embedded intelligence Material innovation enables sustainability Improved power density to drive efficiency

Plug-In Circuit Breakers

$150M global circuit breaker market Eaton engineers a virtually wireless, plug-in circuit breaker solution
Up to 40% lighter Operates 40C cooler More reliable and easier to maintain

Launching industry leading technologies

Digital fuel gauges ArcAlertTM circuit breakers Variable displacement ring pumps

Recent program wins: $35M

Commercializing tomorrows products

Next generation high pressure / high flow pumps Composite compatible components Smart actuation

Airbus A350XWB Bombardier C-series

$30M annual sales opportunity by 2020

Innovative components driving profitable growth

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We are transitioning from development to production on many platforms

Across all segments in our industry, the fleet is being refreshed 15 next generation platforms entering service with Eaton content over the next 3 years
A350XWB, A400M, LJ85, Legacy 450/500
Development Program Spending

Focus remains on flawless execution and operational efficiency as programs shift from development to production

New development programs will continue, but at more historical levels

2010 2011 2012 2013 2014 2015 2016

Margins will expand as development costs decrease

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Aerospace margins improve with better mix and program management

Aerospace Operating Margin %

16% 12.4%

2012

Volume

Aftermarket Mix

Program Spending

2015 Goal

3.6 points of margin improvement

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Vehicle is well positioned to serve global OEMs

2012 sales of $3.9B Business Mix
North America: 50% South America: 20% EMEA: 20% APAC: 10%

Market Mix
Ag / Off Highway Other

Line Haul

Passenger

Growth Drivers
Fuel economy Emission reduction Emerging markets
Vocational Pickup and Delivery

Expected 2013 operating margin of 16%

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Truck business is now more diversified than ever

Eaton Truck Sales Mix

In 2006, our Truck sales were 51% of total sales A Decade of Change Strategic initiatives drive significant growth in our business
Growth in light and medium duty South America expansion Gains in aftermarket Shift to automation
2006 2012 2016
51% 43% 30% Other NA Manual HD

70% of revenue comes from outside traditional market by 2016

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But Heavy Duty manual transmissions are still a large and important market
$1B NAFTA manual HD truck market remains flat but still 70% of the total market in 2016 Manual transmissions still provide the lowest total lifecycle cost Eaton is the NAFTA market leader for Heavy Duty manual transmissions New Fuller Advantage Manual Transmissions Lightweight transmissions improve fuel economy
Fleet of 1,000 units saves >$500K/yr in fuel costs
NAFTA Manual HD Sales Forecast

Reduces maintenance and operating costs

Innovative dry sump reduces lubrication by 50%; 1% greater fuel economy
2012 2016

New technology drives continued improvement in our value proposition

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And were well positioned to grow in automation

$4.3B global market, growing at 12% CAGR 25% of the total market by 2016 40-50% higher price than equivalent manual product We offer the industrys broadest coverage with our UltraShift Plus transmissions
Offer tailored solutions for unique markets 8% better fuel economy than torque convertor Automated Transmission Sales
20% CAGR

2014 launch of Medium Duty dual clutch automatic transmission 2012 wins: $60M annual sales
Navistar, Kenworth, Penske, Shaanxi Heavy Duty Automobile
2012 2016

$170M in incremental automated transmission annual revenues by 2016

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Our Superchargers enable downsizing and down speeding of engines

$8B boosting market growing at 12% CAGR through 2016 Eaton Superchargers enable fuel economy improvements and reduces emissions Proven track record of performance
In production today, 11 engines, 48 vehicles
1.2L Supercharged 3-Cylinder 98 horsepower: 24% improvement 95 g/km CO2: 17% reduction 57 mpg: 21% increase Total Eaton content: 5x increase

Recent Supercharger Win

Nissan Micra Dig-S

Launching: 5 engines, 6 new vehicles Booked business drives 20% CAGR through 2016 Plus, pursuing $300M of opportunities
25 engines in development

Booked business doubles the business by 2016

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Eaton valvetrain technologies are delivering significant revenue growth

$4.3B valvetrain market, growing at 4.5% Eaton innovation enables fuel economy improvement:
Hollow valves allows hotter engines Cylinder deactivation when not needed Variable Valve Lifter optimizes combustion Valvetrain Sales Forecast
11% CAGR

11 platforms in production, launching 8 new programs Our manufacturing footprint offers customers a global partner Wards 10 Best Engines for 2013, 7 include Eaton valve technology
2012 2016

$400M in annual incremental revenues by 2016

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And our investment in local manufacturing is enabling growth in China

China is the worlds largest auto market; 19M units, 9% CAGR through 2016 Winning programs with advanced technology Accelerating localization to meet demand
Doubling capacity at existing manufacturing facility in Jining Valve and Valve Actuation China Sales Forecast
25% CAGR

Continuing to win new programs

Leading customers include: Shanghai GM, VW, Dongfeng, Great Wall
2012 2016

$100M in annual incremental revenues by 2016

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Vehicle Group is well positioned for margin growth

Vehicle Group Operating Margin %

17% 14.6%

2012

Restructuring

Volume

Product Mix

2015 Goal

2.4 points of margin improvement

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Industrial Sector Summary

Focused on addressing mega trends with unique power management solutions Strengthening our global presence to drive growth
Investing in high growth markets Increasing content on OEM development programs Adding acquisitions and alliances that expand our served market

Improving mix with high value technologies and gains in aftermarket Proactive restructuring to align with markets Well positioned to achieve margin goals Delivering results and investing for the future
2013 Eaton. All rights reserved..

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 2013 Eaton. All rights reserved..

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