Investor Presentaiton
Defined Benefits Plans
Pension Plans
During 2022, the fair value of plan assets in the Company's employee pension plans decreased $1,798 million to $4,121
million at December 31, 2022. The decrease in plan assets was primarily due to lower than expected return on plan assets and
the impact of negative currency translation. At December 31, 2022, the net unfunded position of $499 million in pension
liabilities consisted of $573 million in plans that have no funding requirements and $125 million in plans that require funding,
offset by $199 million in plans that are overfunded.
Funding requirements are a major consideration in making contributions to Eaton's pension plans. With respect to the
Company's pension plans worldwide, the Company intends to contribute annually not less than the minimum required by
applicable law and regulations. In 2022, $116 million was contributed to the pension plans. The Company anticipates making
$108 million of contributions to certain pension plans during 2023. The funded status of the Company's pension plans at the
end of 2023, and future contributions, will depend primarily on the actual return on assets during the year and the discount rate
used to calculate certain benefits at the end of the year. For additional information about pension plans see Note 9.
Supply Chain Finance Program
The Company negotiates payment terms directly with its suppliers for the purchase of goods and services. In addition, a
third-party financial institution offers a voluntary supply chain finance (SCF) program that enables certain of the Company's
suppliers, at the supplier's sole discretion, to sell receivables due from the Company to the financial institution on terms directly
negotiated with the financial institution. If a supplier elects to participate in the SCF program, the supplier decides which
invoices are sold to the financial institution and the Company has no economic interest in a supplier's decision to sell an
invoice. The SCF program does not have a significant impact on the Company's liquidity as payments by the Company to
participating suppliers are paid to the financial institution on the invoice due date, regardless of whether an individual invoice is
sold by the supplier to the financial institution. The amounts due to the financial institution for suppliers that participate in the
SCF program are included in Accounts payable on the Company's Consolidated Balance Sheets, and the associated payments
are included in operating activities on the Consolidated Statements of Cash Flows. At December 31, 2022 and 2021, Accounts
payable included $208 million and $151 million, respectively, payable to suppliers that have elected to participate in the SCF
program.
Guaranteed Debt
Issuers, Guarantors and Guarantor Structure
Eaton Corporation has issued senior notes pursuant to indentures dated April 1, 1994 (the 1994 Indenture), November 20,
2012 (the 2012 Indenture), September 15, 2017 (the 2017 Indenture) and August 23, 2022 (as supplemented by the First and
Second Supplemental Indentures of the same date, the 2022 Indenture). The senior notes of Eaton Corporation are registered
under the Securities Act of 1933, as amended (the Registered Senior Notes). Eaton Capital Unlimited Company, a subsidiary of
Eaton, is the issuer of four outstanding series of debt securities sold in offshore transactions under Regulation S promulgated
under the Securities Act (the Eurobonds). The Eurobonds and the Registered Senior Notes (together, the Senior Notes)
comprise substantially all of Eaton's long-term indebtedness.
Substantially all of the Senior Notes, together with the credit facilities described above under Liquidity and Financial
Condition (the Credit Facilities), are guaranteed by Eaton and 17 of its subsidiaries. Accordingly, they rank equally with each
other. However, because these obligations are not secured, they would be effectively subordinated to any existing or future
secured indebtedness of Eaton and its subsidiaries. As of December 31, 2022, Eaton has no material, long-term secured debt.
The guaranteed Registered Senior Notes are also structurally subordinated to the liabilities of Eaton's subsidiaries that are not
guarantors. Except as described below under Future Guarantors, Eaton is not obligated to cause its subsidiaries to guarantee the
Registered Senior Notes.
The table set forth in Exhibit 22 filed with this Form 10-K details the primary obligors and guarantors with respect to the
guaranteed Registered Senior Notes.
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