UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, ~~2017~~2019

Commission file number 000-54863

EATON CORPORATION plc

(Exact name of registrant as specified in its charter)



Ireland				98-1059235
(State or other jurisdiction of incorporation or organization)				(IRS Employer Identification Number)

Eaton House,	30 Pembroke Road,	Dublin 4,	Ireland	D04 Y0C2
(Address of principal executive offices)				(Zip Code)

+353

1637 2900

(Registrant's telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Ordinary shares ($0.01 par value)

ETN

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ☑ No o☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ☑ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer," “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filerþ	☑	Accelerated filero	☐	Non-accelerated filero	☐
Smaller reporting companyo	☐	Emerging growth companyo	☐	(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange

Act. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No þ☑

There were ~~440.6~~413.4 million Ordinary Shares outstanding as of September 30, ~~2017~~2019.



TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS	2
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2634
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3241
ITEM 4. CONTROLS AND PROCEDURES	3241
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	3242
ITEM 1A. RISK FACTORS	3242
ITEM 2. UNRESTRICTED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3342
ITEM ~~5. OTHER INFORMATION~~6. EXHIBITS	3343
~~ITEM 6. EXHIBITS~~SIGNATURES	3344
~~SIGNATURES~~	34
~~EXHIBIT INDEX~~	35
~~EX-12~~
~~EX-31.1~~
~~EX-31.2~~
~~EX-32.1~~
~~EX-32.2~~
~~EX-101 INSTANCE DOCUMENT~~
~~EX-101 SCHEMA DOCUMENT~~
~~EX-101 CALCULATION LINKBASE DOCUMENT~~
~~EX-101 DEFINITION LINKBASE DOCUMENT~~
~~EX-101 LABELS LINKBASE DOCUMENT~~
~~EX-101 PRESENTATION LINKBASE DOCUMENT~~

PART I — FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS.

EATON CORPORATION plc

CONSOLIDATED STATEMENTS OF INCOME


	Three months ended September 30					Nine months ended September 30						Three months ended September 30					Nine months ended September 30
(In millions except for per share data)	2017		2016			2017			2016			2019			2018		2019			2018
Net sales	$	5,211	$	4,987		$	15,191		$	14,880		$	5,314		$	5,412	$	16,152		$	16,150

Cost of products sold	3,469		3,371			10,229			10,081			3,512			3,597		10,782			10,841
Selling and administrative expense	916		853			2,703			2,642			885			889		2,709			2,679
Research and development expense	147		146			440			444			147			138		454			439
Interest expense - net	60		59			181			173			54			67		183			205
Gain on sale of business	1,077		—			1,077			—
Other expense (income) - net	5		(15		)	(10		)	(28		)
Arbitration decision expense												—			275		—			275
Other (income) expense - net												(2		)	7		(35		)	13
Income before income taxes	1,691		573			2,725			1,568			718			439		2,059			1,698
Income tax expense	292		51			378			151			116			23		299			184
Net income	1,399		522			2,347			1,417			602			416		1,760			1,514
Less net (income) loss for noncontrolling interests	—		1			(1		)	1
Less net income for noncontrolling interests												(1		)	—		(1		)	—
Net income attributable to Eaton ordinary shareholders	$	1,399	$	523		$	2,346		$	1,418		$	601		$	416	$	1,759		$	1,514

Net income per share attributable to Eaton ordinary shareholders
Diluted	$	3.14	$	1.15		$	5.23		$	3.09		$	1.44		$	0.95	$	4.16		$	3.45
Basic	3.16		1.15			5.26			3.10			1.44			0.96		4.18			3.47

Weighted-average number of ordinary shares outstanding
Diluted	445.2		455.6			448.3			457.9			418.4			436.3		422.5			438.4
Basic	442.6		453.9			445.9			456.5			416.6			433.5		420.7			435.8

Cash dividends declared per ordinary share	$	0.60	$	0.57		$	1.80		$	1.71		$	0.71		$	0.66	$	2.13		$	1.98

The accompanying notes are an integral part of these condensed consolidated financial statements.

EATON CORPORATION plc

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three months ended September 30						Nine months ended September 30						Three months ended September 30						Nine months ended September 30
(In millions)	2017			2016			2017			2016			2019			2018			2019			2018
Net income	$	1,399		$	522		$	2,347		$	1,417		$	602		$	416		$	1,760		$	1,514
Less net (income) loss for noncontrolling interests	—			1			(1		)	1
Less net income for noncontrolling interests													(1		)	—			(1		)	—
Net income attributable to Eaton ordinary shareholders	1,399			523			2,346			1,418			601			416			1,759			1,514

Other comprehensive income (loss), net of tax
Other comprehensive (loss) income, net of tax
Currency translation and related hedging instruments	195			(22		)	743			(57		)	(252		)	(132		)	(235		)	(546		)
Pensions and other postretirement benefits	16			45			53			132			35			40			88			122
Cash flow hedges	(12		)	1			(11		)	(33		)	(42		)	(6		)	(75		)	(2		)
Other comprehensive income (loss) attributable to Eaton ordinary shareholders	199			24			785			42
Other comprehensive loss attributable to Eaton ordinary shareholders													(259		)	(98		)	(222		)	(426		)

Total comprehensive income attributable to Eaton ordinary shareholders	$	1,598		$	547		$	3,131		$	1,460		$	342		$	318		$	1,537		$	1,088

The accompanying notes are an integral part of these condensed consolidated financial statements.

EATON CORPORATION plc

~~CONDENSED~~ CONSOLIDATED BALANCE SHEETS


(In millions)	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
Assets
Current assets
Cash	$	791		$	543		$	549		$	283
Short-term investments	843			203			281			157
Accounts receivable - net	3,962			3,560			3,787			3,858
Inventory	2,457			2,254			2,901			2,785
Prepaid expenses and other current assets	396			381			494			507
Total current assets	8,449			6,941			8,012			7,590

Property, plant and equipment
Land and buildings	2,498			2,369			2,436			2,466
Machinery and equipment	5,940			5,670			6,257			6,106
Gross property, plant and equipment	8,438			8,039			8,693			8,572
Accumulated depreciation	(4,952		)	(4,596		)	(5,210		)	(5,105		)
Net property, plant and equipment	3,486			3,443			3,483			3,467

Other noncurrent assets
Goodwill	13,545			13,201			13,337			13,328
Other intangible assets	5,354			5,514			4,657			4,846
Operating lease assets							444			—
Deferred income taxes	264			360			294			293
Other assets	1,627			960			1,668			1,568
Total assets	$	32,725		$	30,419		$	31,895		$	31,092

Liabilities and shareholders’ equity
Current liabilities
Short-term debt	$	5		$	14		$	2		$	414
Current portion of long-term debt	1,494			1,552			6			339
Accounts payable	2,039			1,718			2,290			2,130
Accrued compensation	434			379			421			457
Other current liabilities	1,928			1,822			1,942			1,814
Total current liabilities	5,900			5,485			4,661			5,154

Noncurrent liabilities
Long-term debt	7,273			6,711			8,013			6,768
Pension liabilities	1,328			1,659			1,239			1,304
Other postretirement benefits liabilities	366			368			322			321
Operating lease liabilities							333			—
Deferred income taxes	327			321			309			349
Other noncurrent liabilities	895			934			1,118			1,054
Total noncurrent liabilities	10,189			9,993			11,334			9,796

Shareholders’ equity
Eaton shareholders’ equity	16,593			14,897
Ordinary shares (413.4 million outstanding in 2019 and 423.6 million in 2018)							4			4
Capital in excess of par value							12,151			12,090
Retained earnings							8,062			8,161
Accumulated other comprehensive loss							(4,367		)	(4,145		)
Shares held in trust							(2		)	(3		)
Total Eaton shareholders’ equity							15,848			16,107
Noncontrolling interests	43			44			52			35
Total equity	16,636			14,941			15,900			16,142
Total liabilities and equity	$	32,725		$	30,419		$	31,895		$	31,092

The accompanying notes are an integral part of these condensed consolidated financial statements.

EATON CORPORATION plc

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine months ended September 30						Nine months ended September 30
(In millions)	2017			2016			2019			2018
Operating activities
Net income	$	2,347		$	1,417		$	1,760		$	1,514
Adjustments to reconcile to net cash provided by operating activities
Depreciation and amortization	685			700			668			680
Deferred income taxes	(181		)	(105		)	(71		)	(211		)
Pension and other postretirement benefits expense	161			177			115			123
Contributions to pension plans	(447		)	(114		)	(89		)	(99		)
Contributions to other postretirement benefits plans	(14		)	(26		)	(11		)	(26		)
Gain on sale of business	(843		)	—
Changes in working capital	(144		)	(206		)	6			62
Other - net	223			89			136			(205		)
Net cash provided by operating activities	1,787			1,932			2,514			1,838

Investing activities
Capital expenditures for property, plant and equipment	(351		)	(346		)	(441		)	(411		)
Proceeds from sale of business	600			—
Cash received from acquisitions of businesses, net of cash acquired	—			1
Purchases of short-term investments - net	(621		)	(29		)
Cash paid for acquisitions of businesses, net of cash acquired							(277		)	—
Sales (purchases) of short-term investments - net							(132		)	329
Proceeds (payments) for settlement of currency exchange contracts not designated as hedges - net							26			(122		)
Other - net	(63		)	3			(8		)	(52		)
Net cash used in investing activities	(435		)	(371		)	(832		)	(256		)

Financing activities
Proceeds from borrowings	1,000			633			1,232			80
Payments on borrowings	(553		)	(666		)	(757		)	(486		)
Cash dividends paid	(803		)	(780		)	(907		)	(864		)
Exercise of employee stock options	59			60			40			28
Repurchase of shares	(789		)	(567		)	(978		)	(600		)
Employee taxes paid from shares withheld	(21		)	(18		)	(45		)	(24		)
Other - net	(8		)	(5		)	(8		)	(2		)
Net cash used in financing activities	(1,115		)	(1,343		)	(1,423		)	(1,868		)

Effect of currency on cash	11			8			7			52
Total increase in cash	248			226
Total increase (decrease) in cash							266			(234		)
Cash at the beginning of the period	543			268			283			561
Cash at the end of the period	$	791		$	494		$	549		$	327

The accompanying notes are an integral part of these condensed consolidated financial statements.

EATON CORPORATION plc

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Amounts are in millions unless indicated otherwise (per share data assume dilution).


Note 1.	BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Eaton Corporation plc (Eaton or the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles (US GAAP) for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) have been made that are necessary for a fair presentation of the condensed consolidated financial statements for the interim periods.

This Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in Eaton’s ~~2016~~2018 Form 10-K. The interim period results are not necessarily indicative of the results to be expected for the full year. Management has evaluated subsequent events through the date this Form 10-Q was filed with the Securities and Exchange Commission.

~~During~~Leases

The Company determines if an arrangement is a lease at inception. Operating lease assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. As most leases do not provide an implicit interest rate, Eaton uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The length of a lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. The Company made an accounting policy election to not recognize lease assets or liabilities for leases with a term of 12 months or less. Additionally, when accounting for leases, the Company combines payments for leased assets, related services and other components of a lease.

Adoption of New Accounting Standards

Eaton adopted Accounting Standard Update 2016-02, Leases (Topic 842), and related amendments, in the first quarter of ~~2017,~~2019 using the optional transition method and has not restated prior periods. The Company ~~adopted Accounting Standards Update 2016-09, Compensation-Stock Compensation (Topic 718): Improvements~~elected to ~~Employee Share-Based Payment Accounting, (ASU 2016-09). Upon adoption,~~use the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the carry forward of historical lease classification of existing leases. The Company recorded ~~deferred tax assets of $48 for all excess tax benefits that had not been previously recognized. This was accomplished through~~ a cumulative-effect adjustment of less than $1 to retained earnings. ASU 2016-09 also requires that all excess tax benefits and deficiencies generated in the current and future periods be recorded as income tax benefit or expense in the reporting period in which they occur. These excess tax benefits and deficiencies, which were previously required to be presented as financing activities on the Company’s Condensed Consolidated Statements of Cash Flows, are now classified as operating activities prospectively. The Company also reclassified $21 and $18 for the first nine months of 2017 and 2016, respectively, from operating activities to financing activities on the Company’s Condensed Consolidated Statements of Cash Flows for withholding payments made to taxing authorities from shares withheld from employees. The Company will continue to estimate forfeitures as part of recording equity-based compensation expense.

~~Certain prior year amounts have been reclassified to conform to the current year presentation.~~

~~Recently Issued Accounting Pronouncements~~

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASU 2014-09). This accounting standard supersedes all existing US GAAP revenue recognition guidance. Under ASU 2014-09, a company will recognize revenue when it transfers the control of promised goods or services to customers in an amount that reflects the consideration which the company expects to collect in exchange for those goods or services. ASU 2014-09 will require additional disclosures in the notes to the consolidated financial statements and is effective for annual and interim reporting periods beginning after December 15, 2016. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date (ASU 2015-14). This accounting standard defers the effective date of ASU 2014-09 for one year and permits early adoptionearnings as of January 1, 2019. Additionally, the ~~original effective date.~~

A cross-functional implementation team has been established consisting of representatives from all of our business segments to review current accounting policies and practices to identify potential differences that would result from applying the requirementsadoption of the new standard ~~to revenue contracts.~~resulted in the recording of lease assets and lease liabilities for operating leases of $435 and $446, respectively, as of January 1, 2019. The ~~implementation team performed a review of samples of customer contracts across the Company’s significant revenue streams. Based on this evaluation~~adoption of the ~~revenue streams,~~standard did not have a material impact to the ~~Company believes there will be little difference~~Consolidated Statements of Income or Cash Flows.

Eaton adopted Accounting Standard Update 2017-12, Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities, in revenue recorded under the current and new standards. Certain revenue streams will move from point-in-time or multiple elements to over time because of the continuous transfer of control to customers. The Company is also in the process of implementing the appropriate changes to business processes and controls to support recognition and disclosure under the new standard, including evaluating new qualitative and quantitative disclosures that will include information on the nature, amount, timing and significant judgments impacting revenue from contracts with customers. Eaton plans to adopt the standard as of the first quarter ~~of 2018~~2019 using the modified retrospective approach for hedge instruments that existed at the date of adoption. ASU 2017-12 is intended to better align the Company's risk management activities with financial reporting for hedging relationships. The standard eliminates the requirement to separately measure and ~~will record a cumulative adjustment~~report hedge ineffectiveness, expands the ability to ~~equity for open contracts as~~hedge specific risk components, and generally requires the change in value of ~~January 1, 2018.~~

~~In February 2016,~~ the ~~Financial Accounting Standards Board issued Accounting Standards Update 2016-02, Leases (Topic 842), (ASU 2016-02). This accounting standard requires that a lessee recognize a lease asset~~hedge instrument and ~~a lease liability on its balance sheet for all leases, including operating leases, with a term greater than 12 months. ASU 2016-02 will require additional disclosures~~hedged item to be presented in the ~~notes to~~same income statement line. The new disclosure requirements were applied on a prospective basis and comparative information has not been restated. The adoption of the standard did not have a material impact on the consolidated financial statements and is effective for annual and interim reporting periods beginning after December 15, 2018. A project team has been formed to evaluate and implement the new standard, including the use of third-party lease accounting software. Eaton is evaluating the impact of ASU 2016-02 and an estimate of the impact to the consolidated financial statements cannot be made at this time.statements.


Note 2.	~~SALE~~ACQUISITIONS AND DIVESTITURES OF ~~A BUSINESS~~BUSINESSES

Acquired controlling interest of Ulusoy Elektrik Imalat Taahhut ve Ticaret A.S.

On April 15, 2019, Eaton completed the acquisition of an 82.275% controlling interest in Ulusoy Elektrik Imalat Taahhut ve Ticaret A.S. (Ulusoy Elektrik), a leading manufacturer of electrical switchgear based in Ankara, Turkey, with a primary focus on medium-voltage solutions for industrial and utility customers. Its sales for the 12 months ended September 30, 2018 were $126. The purchase price for the shares is approximately $214 on a cash and debt free basis. As required by the Turkish capital markets legislation, Eaton filed an application to execute a mandatory tender offer for the remaining shares shortly after the transaction closed. During the tender offer, Eaton purchased additional shares for $33 through July 2019 to increase its ownership interest to 93.7%. Ulusoy Elektrik is reported within the Electrical Systems and Services business segment.

Acquisition of Innovative Switchgear Solutions, Inc.

On July ~~31, 2017,~~19, 2019, Eaton ~~sold~~acquired Innovative Switchgear Solutions, Inc. (ISG), a ~~50% interest~~specialty manufacturer of medium-voltage electrical equipment serving the North American utility, commercial and industrial markets. Its 2018 sales were approximately $18. ISG will be reported within the Electrical Systems and Services business segment.

Agreement to acquire Souriau-Sunbank Connection Technologies

On July 22, 2019, Eaton committed to acquire the Souriau-Sunbank Connection Technologies (Souriau-Sunbank) business of TransDigm Group Inc. for $920. Headquartered in ~~its heavy-duty and medium-duty commercial vehicle automated transmission business~~Versailles, France, Souriau-Sunbank is a global leader in highly engineered electrical interconnect solutions for $600 in cash to Cummins, Inc. The new joint venture is named Eaton Cummins Automated Transmission Technologies. The Company recognized a pre-tax gain of $1,077, of which $533 related to the pre-tax gain from the $600 proceeds from the sale and $544 related to the Company’s remaining 50% investmentharsh environments in the ~~joint venture being remeasured to fair value. The after-tax gain was $843. The fair value is based on the price paid to Eaton~~aerospace, defense, industrial, energy, and transport markets. Its sales for the ~~50% interest sold~~12 months ended June 30, 2019 were $363. The purchase agreement was signed on October 28, 2019. The transaction is subject to ~~Cummins, Inc.~~customary closing conditions and ~~further supported~~is expected to close by the end of 2019.

Sale of Lighting business

On March 1, 2019, Eaton announced it plans to pursue a ~~discounted~~tax-free spin-off of its Lighting business. On October 15, 2019, Eaton entered into an agreement to sell its Lighting business to Signify N.V. for a cash ~~flow model.~~purchase price of $1.4 billion. The decision to sell the Lighting business comes after completing a comprehensive review of various potential transaction alternatives. The Lighting business, which had sales of $1.7 billion in 2018 as part of the Electrical Products segment, serves customers in commercial, industrial, residential and municipal markets. Eaton ~~will account~~expects the Lighting business to be classified as held for sale during the fourth quarter of 2019. The transaction is subject to customary closing conditions and regulatory approvals and is expected to close in the first quarter of 2020.

Plan to divest Automotive Fluid Conveyance business

On March 1, 2019, Eaton announced it plans to sell its ~~investment on the equity method of accounting.~~Automotive Fluid Conveyance business.


Note 3.	ACQUISITION INTEGRATION AND DIVESTITURE CHARGES

Eaton incurs integration charges related to acquired businesses, and transaction and other charges to divest and exit businesses. A summary of these charges follows:



	Three months ended September 30				Nine months ended September 30
	2019		2018		2019		2018
Electrical Products	$	4	$	—	$	6	$	—
Electrical Systems and Services	3		—		4		—
Corporate	32		—		55		—
Total acquisition integration and divestiture charges before income tax	39		—		65		—
Income taxes	4		—		5		—
Total after income taxes	$	35	$	—	$	60	$	—
Per ordinary share - diluted	$	0.08	$	—	$	0.14	$	—

Three months ended
September 30 Nine months ended
September 30
2017 2016 2017 2016
Electrical Products $ 1
$ 1
$ 3
$ 2
Electrical Systems and Services —
—
—
1
Total acquisition integration charges before income taxes 1
1
3
3
Income taxes —
—
1
1
Total after income taxes $ 1
$ 1
$ 2
$ 2
Per ordinary share - diluted $ —
$ —
$ —
$ —

Business segment ~~acquisition integration~~ charges in ~~2017~~2019 related to the ~~integration~~planned divestiture of ~~Ephesus~~the Lighting ~~Inc. (Ephesus), which was acquired in 2015. The charges associated with Ephesus were included in Selling~~business and ~~administrative expense. Business segment acquisition integration charges in 2016 related to~~ the ~~integration~~acquisitions of ~~Ephesus~~Ulusoy Elektrik and ~~Oxalis Group Ltd. (Oxalis), which was acquired in 2015. The charges associated with Ephesus~~ISG, and were included in Cost of products sold, ~~and~~ Selling and administrative expense ~~while the charges associated with Oxalis were included in Cost of products sold.~~or Research and development expense. In Business Segment Information, the charges reduced Operating profit of the related business segment.

Corporate charges in 2019 are primarily related to the planned divestiture of the Lighting business and other charges to exit businesses, and were included in Selling and administrative expense and Other (income) expense-net. In Business Segment Information, the charges were included in Other corporate expense - net.

See Note 1415 for additional information about business segments.


Note 4.	~~RESTRUCTURING CHARGES~~REVENUE RECOGNITION

~~During 2015, Eaton announced its commitment~~Sales are recognized when obligations under the terms of the contract are satisfied and control of promised goods or services have transferred to ~~undertake actions~~our customers. Sales are measured at the amount of consideration the Company expects to ~~reduce its cost structure~~be paid in ~~all business~~exchange for these products or services.

The Company’s 6 operating segments and ~~at corporate. Restructuring charges incurred for~~ the ~~three~~following tables disaggregate sales by lines of businesses, geographic destination, market channel or end market.



	Three months ended September 30, 2019
Net sales	United States		Rest of World		Total
Electrical Products	$	1,073	$	713	$	1,786
Electrical Systems and Services	1,034		538		1,572
Hydraulics	267		336		603

	Original Equipment Manufacturers		Aftermarket, Distribution and End User
Aerospace	$	298	$	215	513

	Commercial		Passenger and Light Duty
Vehicle	$	371	$	390	761

eMobility					79

Total					$	5,314



	Three months ended September 30, 2018
Net sales	United States		Rest of World		Total
Electrical Products	$	1,055	$	734	$	1,789
Electrical Systems and Services	1,000		519		1,519
Hydraulics	301		369		670

	Original Equipment Manufacturers		Aftermarket, Distribution and End User
Aerospace	$	269	$	209	478

	Commercial		Passenger and Light Duty
Vehicle	$	451	$	425	876

eMobility					80

Total					$	5,412



	Nine months ended September 30, 2019
Net sales	United States		Rest of World		Total
Electrical Products	$	3,235	$	2,160	$	5,395
Electrical Systems and Services	3,059		1,559		4,618
Hydraulics	863		1,124		1,987

	Original Equipment Manufacturers		Aftermarket, Distribution and End User
Aerospace	$	884	$	648	1,532

	Commercial		Passenger and Light Duty
Vehicle	$	1,227	$	1,147	2,374

eMobility					246

Total					$	16,152



	Nine months ended September 30, 2018
Net sales	United States		Rest of World		Total
Electrical Products	$	3,048	$	2,279	$	5,327
Electrical Systems and Services	2,877		1,536		4,413
Hydraulics	907		1,196		2,103

	Original Equipment Manufacturers		Aftermarket, Distribution and End User
Aerospace	$	799	$	600	1,399

	Commercial		Passenger and Light Duty
Vehicle	$	1,333	$	1,335	2,668

eMobility					240

Total					$	16,150

The timing of revenue recognition, billings and ~~nine months ended~~cash collections results in billed accounts receivable, unbilled receivables (revenue recognized exceeds amount billed to the customer), and deferred revenue (advance payments and billings in excess of revenue recognized). Accounts receivables from customers were $3,384 and $3,402 at September 30, ~~2017,~~2019 and December 31, 2018, respectively. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. These assets and liabilities are reported on the Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period. Unbilled receivables were ~~$22~~$104 and ~~$75,~~$94 at September 30, 2019 and December 31, 2018, respectively, and ~~were $23~~are recorded in Prepaid expenses and ~~$121 for~~other current assets. The increase in unbilled receivables was primarily due to revenue recognized and not yet billed, partially offset by billings to customers during the ~~three and nine months ended September 30, 2016, respectively. The charges associated with restructuring activities~~quarter.

Changes in the deferred revenue liabilities are ~~anticipated to be $100 in 2017.~~

~~A summary of restructuring charges by type~~as follows:

Three months ended
September 30 Nine months ended
September 30
2017 2016 2017 2016
Workforce reductions $ 10
$ 18
$ 35
$ 95
Plant closings and other 12
5
40
26
Total $ 22
$ 23
$ 75
$ 121



	Deferred Revenue
Balance at December 31, 2018	$	248
Customer deposits and billings	680
Revenue recognized in the period	(683		)
Translation	1
Balance at September 30, 2019	$	246



	Deferred Revenue
Balance at January 1, 2018	$	227
Customer deposits and billings	696
Revenue recognized in the period	(676		)
Translation	(6		)
Balance at September 30, 2018	$	241

A ~~summary~~significant portion of ~~restructuring charges~~open orders placed with Eaton are by ~~segment follows:~~original equipment manufacturers or distributors. These open orders are not considered firm as they have been historically subject to releases by customers. In measuring backlog of unsatisfied or partially satisfied obligations, only the amount of orders to which customers are firmly committed are included. Using this criterion, total backlog at September 30, 2019 and December 31, 2018 was approximately $5.4 billion and $5.3 billion, respectively. At September 30, 2019 and December 31, 2018, Eaton expects to recognize approximately 86% and 87%, respectively, of this backlog in the next twelve months and the rest thereafter.

Three months ended
September 30 Nine months ended
September 30
2017 2016 2017 2016
Electrical Products $ —
$ 1
$ 14
$ 27
Electrical Systems & Services —
7
7
20
Hydraulics 9
10
26
44
Aerospace —
(1 ) 1
3
Vehicle 2
5
7
22
Corporate 11
1
20
5
Total $ 22
$ 23
$ 75
$ 121

~~A summary of liabilities related to workforce reductions, plant closings and other associated costs announced in 2015 follows:~~

Workforce reductions Plant closings and other Total
Balance at December 31, 2015 $ 54
$ —
$ 54
  Liability recognized 177
34
211
  Payments (116 ) (13 ) (129 )
  Other adjustments (2 ) (20 ) (22 )
Balance at December 31, 2016 113
1
114
Liability recognized 35
40
75
Payments (78 ) (25 ) (103 )
Other adjustments (3 ) (12 ) (15 )
Balance at September 30, 2017 $ 67
$ 4
$ 71

These charges were included in Cost of products sold, Selling and administrative expenses or Other income-net, as appropriate. In Business Segment Information, the charges reduced Operating profit of the related business segment. See Note 14 for additional information about business segments.


Note 5.	GOODWILL

Change in the carrying amount of goodwill by segment follows:



	December 31, 2018		Additions		Translation			September 30, 2019
Electrical Products	$	6,562	$	—	$	(97	)	$	6,465
Electrical Systems and Services	4,241		164		(29		)	4,376
Hydraulics	1,212		—		(23		)	1,189
Aerospace	941		—		(3		)	938
Vehicle	292		—		(3		)	289
eMobility	80		—		—			80
Total	$	13,328	$	164	$	(155	)	$	13,337

Electrical
Products

Electrical
Systems and
Services
Hydraulics Aerospace Vehicle Total
December 31, 2016 $ 6,497
$ 4,203
$ 1,221
$ 938
$ 342
$ 13,201
Goodwill written off from sale of business —
—
—
—
(52 ) (52 )
Translation 235
114
34
8
5
396
September 30, 2017 $ 6,732
$ 4,317
$ 1,255
$ 946
$ 295
$ 13,545

The 2019 additions to goodwill relate to the anticipated synergies of acquiring Ulusoy Elektrik and ISG. The allocations of the purchase price from these acquisitions are preliminary and will be completed during the measurement period.


Note 6.	LEASES

Eaton leases certain manufacturing facilities, warehouses, distribution centers, office space, vehicles and equipment. Most real estate leases contain renewal options. The exercise of lease renewal options is at the Company's sole discretion. The Company's lease agreements typically do not contain any significant guarantees of asset values at the end of a lease or restrictive covenants. Payments within certain lease agreements are adjusted periodically for changes in an index or rate.

The components of lease expense follows:



	Three months ended September 30, 2019			Nine months ended September 30, 2019
Operating lease cost	$	41		$	119
Finance lease cost:
Amortization of lease assets	1			3
Interest on lease liabilities	—			1
Short-term lease cost	13			40
Variable lease cost	6			17
Sublease income	(1		)	(3		)
Total lease cost	$	60		$	177

The net gain recorded on sale leaseback transactions for the nine months ended September 30, 2019 was $16.

Supplemental cash flow information related to leases follows:



	Nine months ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows - payments on operating leases	$	(118	)
Operating cash outflows - interest payments on finance leases	(1		)
Financing cash outflows - payments on finance lease obligations	(3		)

Lease assets obtained in exchange for new lease obligations:
Operating leases	$	95
Finance leases	17

Supplemental balance sheet information related to leases follows:



	September 30, 2019
Operating Leases
Operating lease assets	$	444

Other current liabilities	124
Operating lease liabilities	333
Total operating lease liabilities	$	457

Finance Leases
Land and buildings	$	16
Machinery and equipment	17
Accumulated depreciation	(14		)
Net property, plant and equipment	$	19

Current portion of long-term debt	$	6
Long-term debt	14
Total finance lease liabilities	$	20

Weighted-average remaining lease term
Operating leases	5.1 years
Finance leases	3.6 years

Weighted-average discount rate
Operating leases	3.6		%
Finance leases	5.9		%

Maturities of lease liabilities at September 30, 2019 follows:



	Operating Leases		Finance Leases
2019	$	40	$	2
2020	137		7
2021	106		6
2022	75		4
2023	50		3
Thereafter	105		1
Total lease payments	$	513	$	23
Less imputed interest	56		3
Total present value of lease liabilities	$	457	$	20

~~Note 6. DEBT~~A summary of minimum rental commitments at December 31, 2018 under noncancelable operating leases, which expire at various dates and in most cases contain renewal options, for each of the next five years and thereafter in the aggregate, follow:



	Operating Leases
2019	$	165
2020	133
2021	106
2022	75
2023	53
Thereafter	110
Total lease commitments	$	642


Note 7.	DEBT

On ~~September 15, 2017,~~May 14, 2019, a subsidiary of Eaton issued ~~senior~~euro denominated notes ~~(the~~(2019 Euro Notes) with a face ~~amount~~value of ~~$1,000.~~€1,100 ($1,232 based on the May 14, 2019 spot rate), in accordance with Regulation S promulgated under the Securities Act of 1933, as amended. The 2019 Euro Notes are comprised of two tranches of ~~$700~~€600 and ~~$300,~~€500, which mature in ~~2027~~2021 and ~~2047,~~2025, respectively, with interest payable ~~semi-annually~~annually at a respective rate of ~~3.1%~~0.02% and ~~3.9%~~0.70%. The issuer received proceeds totaling ~~$993~~€1,097 ($1,229 based on the May 14, 2019 spot rate) from the issuance, net of financing ~~costs.~~costs and discounts. The 2019 Euro Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton and certain of its direct and indirect subsidiaries. The 2019 Euro Notes contain customary optional redemption and par call provisions. The 2019 Euro Notes also contain a change of control provision which requires the Company to make an offer to purchase all or any part of the 2019 Euro Notes at a purchase price of 101% of the principal amount plus accrued and unpaid interest. The capitalized deferred financing fees are amortized in Interest expense-net over the respective terms of the 2019 Euro Notes. The 2019 Euro Notes are subject to customary non-financial covenants.

Note 7.8. RETIREMENT BENEFITS PLANS

The components of retirement benefits expense follow:



	United States pension benefit expense						Non-United States pension benefit expense						Other postretirement benefits expense
	Three months ended September 30
	2019			2018			2019			2018			2019			2018
Service cost	$	22		$	25		$	14		$	16		$	—		$	1
Interest cost	35			30			13			13			3			3
Expected return on plan assets	(59		)	(63		)	(25		)	(27		)	—			—
Amortization	15			24			10			9			(3		)	(4		)
	13			16			12			11			—			—
Settlements, curtailments and special termination benefits	13			13			2			1			—			—
Total expense	$	26		$	29		$	14		$	12		$	—		$	—


	United States pension benefit expense						Non-United States pension benefit expense						Other postretirement benefits expense
	Nine months ended September 30
	2019			2018			2019			2018			2019			2018
Service cost	$	68		$	75		$	43		$	48		$	1		$	2
Interest cost	103			91			42			40			10			10
Expected return on plan assets	(176		)	(190		)	(79		)	(80		)	(1		)	(2		)
Amortization	46			71			29			29			(10		)	(10		)
	41			47			35			37			—			—
Settlements, curtailments and special termination benefits	36			38			3			1			—			—
Total expense	$	77		$	85		$	38		$	38		$	—		$	—

United States
pension benefit expense Non-United States
pension benefit expense Other postretirement
benefits expense
Three months ended September 30
2017 2016 2017 2016 2017 2016
Service cost $ 24
$ 28
$ 18
$ 16
$ 1
$ 1
Interest cost 30
31
14
16
4
4
Expected return on plan assets (61 ) (63 ) (24 ) (23 ) (1 ) (2 )
Amortization 21
23
13
8
(3 ) (2 )
14
19
21
17
1
1
Settlements 17
24
4
—
—
—
Total expense $ 31
$ 43
$ 25
$ 17
$ 1
$ 1

United States
pension benefit expense Non-United States
pension benefit expense Other postretirement
benefits expense
Nine months ended September 30
2017 2016 2017 2016 2017 2016
Service cost $ 72
$ 83
$ 53
$ 49
$ 2
$ 3
Interest cost 92
94
41
48
11
13
Expected return on plan assets (183 ) (188 ) (70 ) (71 ) (3 ) (5 )
Amortization 62
69
38
25
(9 ) (6 )
43
58
62
51
1
5
Settlements and special termination benefits 51
63
4
—
—
—
Total expense $ 94
$ 121
$ 66
$ 51
$ 1
$ 5

The components of retirement benefits expense other than service costs are included in Other (income) expense - net.

~~In 2017, Eaton expects to make contributions to the United States pension plans of $375, including $370 contributed through September 30, 2017.~~


Note 8.9.	LEGAL CONTINGENCIES

Eaton is subject to a broad range of claims, administrative and legal proceedings such as lawsuits that relate to contractual allegations, tax audits, patent infringement, personal injuries, antitrust matters, and employment-related matters. Eaton is also subject to asbestos claims from historic products which may have contained asbestos. Insurance may cover some of the costs associated with these claims and proceedings. Although it is not possible to predict with certainty the outcome or cost of these matters, the Company believes they will not have a material adverse effect on the consolidated financial statements.

In December 2011, Pepsi-Cola Metropolitan Bottling Company, Inc. (“Pepsi”) filed an action against (a) Cooper Industries, LLC, Cooper Industries, Ltd., Cooper Holdings, Ltd., Cooper US, Inc., and Cooper Industries plc (collectively, “Cooper”), (b) M&F Worldwide Corp., Mafco Worldwide Corp., Mafco Consolidated Group LLC, and PCT International Holdings, Inc. (collectively, “Mafco”), and (c) the Pneumo Abex Asbestos Claims Settlement Trust (the “Trust”) in Texas state court. Pepsi alleged that it was harmed by a 2011 settlement agreement (“2011 Settlement”) among Cooper, Mafco, and Pneumo Abex, LLC (“Pneumo,” which prior to the 2011 Settlement was a Mafco subsidiary), which settlement resolved litigation that Pneumo had previously brought against Cooper involving, among other things, a guaranty related to Pneumo’s friction products business. In November 2015, after a Texas court ruled that Pepsi's claims should be heard in arbitration, Pepsi filed a demand for arbitration against Cooper, Mafco, the Trust, and Pneumo. Pepsi subsequently dropped claims against all parties except Cooper. An arbitration under the auspices of the American Arbitration Association commenced in October 2017. Pepsi’s experts ~~have~~ opined, among other things, that the value contributed to the Trust for a release of the guaranty was ~~approximately $440~~ below reasonably equivalent value, and that an inability of Pneumo to satisfy future liabilities ~~may~~could result in plaintiffs suing Pepsi under various theories. Cooper submitted various expert reports and, among other things, Cooper’s experts ~~opine~~opined that Pepsi ~~has~~had no basis to seek any damages and that Cooper paid reasonably equivalent value for the release of its indemnity obligations under the guaranty. The ~~Company believes~~arbitration proceedings closed in December 2017. On July 11, 2018, the arbitration panel made certain findings and concluded that the ~~claims~~value contributed to the Trust did not constitute reasonably equivalent value, but ordered the parties to recalculate the amount that should have been contributed to the Trust as of the date of the 2011 transaction. Based on the findings made by the panel and the recalculation ordered by the panel, Cooper believed that no additional amount should be contributed. Pepsi ~~are without merit,~~argued that an additional $347 should be contributed. Cooper and its expert disagreed with Pepsi’s argument and believed that Pepsi’s recalculation was flawed and failed to comply with the instructions of the panel. On August 23, 2018, the panel issued its final award and ordered Cooper to pay $293 to Pneumo Abex. On August 30, 2018, Pepsi sought to confirm the award in Texas state court, which Cooper opposed on October 9, 2018. Cooper further requested that the ~~ultimate resolution~~court vacate the award on various grounds, including that Cooper was prejudiced by the conduct of ~~this matter will not have~~the proceedings, the panel exceeded its powers, and because the panel denied Cooper a ~~material impact on~~full and fair opportunity to present certain evidence. The court confirmed the ~~Company’s consolidated financial statements.~~

~~In December 2010, a Brazilian court held that a judgment obtained by a Brazilian company, Raysul, against another Brazilian company, Saturnia,~~award at the confirmation hearing, which was ~~sold by Eaton in 2006, could be enforced against Eaton Ltda. The judgment was based~~held on ~~an alleged violation of an agency agreement between Raysul and Saturnia. At March 31, 2016,~~October 12, 2018. On November 2, 2018, the Company ~~had a total accrual of 100 Brazilian Reais related~~appealed. On November 28, 2018, the Company paid $297, the full judgment plus accrued post-judgment interest, to ~~this matter ($31 based on June 2016 exchange rates). In June 2016, Eaton signed a settlement agreement~~Pneumo Abex and ~~resolved~~preserved its rights, including to appeal. On April 25, 2019, the ~~matter, which did not have a material impact on the consolidated financial statements.~~appeal that Cooper filed was dismissed.


Note 9.10.	INCOME TAXES

The effective income tax rate for the third quarter and the first nine months of ~~2017~~2019 was expense of ~~17.3%~~16.0% and ~~13.9%, respectively,~~14.5% compared to expense of ~~8.8%~~5.2% and ~~9.6%~~10.8% for the third quarter and first nine months of 2016. The tax rate for the third quarter and first nine months of 2017 includes $234 of tax expense on the gain related to the Eaton Cummins joint venture transaction, which closed during the third quarter and is discussed in Note 2. Excluding the impact from the Eaton Cummins joint venture transaction, the effective income tax rate for the third quarter and first nine months of 2017 was expense of 9.5% and 8.8%, respectively.2018. The increase in the effective tax rate in the third quarter and first nine months of ~~2017~~2019 was primarily due to the inclusion of $69 of tax benefit on the arbitration decision expense recorded during the third quarter of 2018 (discussed in Note 9), as well as greater levels of income in higher tax jurisdictions. The decrease in the effective tax rate in the first nine months of 2017 was due to the resolution of tax contingencies in lower tax jurisdictions and the excess tax benefits recognized for employee share-based payments pursuant to the adoption of ASU 2016-09 as discussed in Note 1.

On July 26, 2017, the United States Tax Court issued a ruling in the previously-disclosed dispute between Eaton Corporation, a subsidiary of the Company (“Eaton Corp”) and the Internal Revenue Service (the “IRS”).

As the Company has previously disclosed, ~~the IRS issued~~Eaton's United States subsidiaries ("Eaton US") received a Notice in ~~2011~~2014 from the Internal Revenue Service ("IRS") for ~~Eaton Corp’s 2005 and 2006~~ tax years ~~proposing~~2007 through 2010 which included proposed assessments involving two issues: the recognition of ~~$75 million in additional taxes plus $52 million in penalties related primarily to~~income for several of Eaton US's controlled foreign corporations, and transfer pricing adjustments for products manufactured in ~~Eaton~~the Company's facilities in Puerto Rico and the Dominican Republic and sold to affiliated companies located in the ~~U.S.~~United States. The Company believed the proposed assessments were without merit and contested both matters in the United States Tax Court ("Tax Court"). Eaton US and the IRS both moved for partial summary judgment on the controlled foreign corporation income recognition issue. The Tax Court heard oral arguments on the motions in January 2018, following which the Court ordered further briefing, which was completed in March 2018. On February 25, 2019, the Tax Court granted the IRS's motion for partial summary judgment and denied Eaton's. The Company intends to appeal the Tax Court's partial summary judgment decision to the United States Sixth Circuit Court of Appeals. The Company believes that it will be successful on appeal and has not recorded any additional impact of the Tax Court's decision in its consolidated financial statements. As previously disclosed, the ~~IRS also proposed adjustments related to the same~~ transfer pricing issue in another Notice issued in 2014 for the 2007 through 2010 tax years. Eaton has set its transfer prices for products sold between these affiliates at the same prices that it sells such products to third parties, as required by two successive Advance Pricing Agreements (APAs) Eaton Corp entered into with the IRS. The IRS cancelled the APAs and made the proposed adjustmentsincluded in the ~~2011 and 2014 Notices, which Eaton Corp disputed~~Notice remains unresolved at this point. The total potential impact of the Tax Court's partial summary judgment decision on the controlled foreign corporation income recognition issue is not estimable until all matters in the ~~Tax Court. The Tax Court case involved both whether the APAs should be enforced and, if not, the appropriate transfer pricing methodology. The Tax Court held a trial for the 2005 and 2006~~open tax years ~~the outcome of which also applies to the transfer pricing matter in the 2007 through 2010 tax years.~~

The Tax Court agreed with Eaton Corp that the IRS must abide by the terms of the APAs for the tax years 2005-2006, a finding that is also applicable to the 2007-2010 years. The Tax Court’s ruling on the APAs did not have ~~a material impact on Eaton’s consolidated financial statements.~~

been resolved.

Note ~~10.~~11. EQUITY

On October 22, 2013, Eaton's Board of Directors adopted a share repurchase program (the 2013 Program). Under the 2013 Program, the ordinary shares were expected to be repurchased over time, depending on market conditions, the market price of ordinary shares, capital levels, and other considerations. During the first quarter of 2016, 1.5 million ordinary shares were repurchased under the 2013 Program in the open market at a total cost of $82. On February 24, 2016, the Board of Directors ~~approved~~adopted a ~~new~~ share repurchase program for share repurchases up to $2,500 of ordinary shares (2016 Program). During the nine months ended September 30, 2018, 7.7 million ordinary shares were repurchased under the 2016 Program in the open market at a total cost of $600. No ordinary shares were repurchased during the three months ended September 30, 2018. On February 27, 2019, the Board of Directors adopted a new share repurchase program for share repurchases up to $5,000 of ordinary shares (2019 Program). Under the ~~2016~~2019 Program, the ordinary shares are expected to be repurchased over time, depending on market conditions, the market price of ordinary shares, capital levels, and other considerations. During the three and nine months ended September 30, ~~2017, 4.4~~2019, 6.8 million and ~~10.7~~11.9 million ordinary shares, respectively, were repurchased under the ~~2016~~2019 Program in the open market at a total cost of ~~$324~~$539 and $789, respectively. During the three and nine months ended September 30, 2016, 3.7 million and 7.7 million ordinary shares, respectively, were repurchased under the 2016 Program in the open market at a total cost of $243 and $485,$949, respectively.

The changes in Shareholders’ equity follow:

Eaton
shareholders’
equity

Noncontrolling
interests

Total
equity
Balance at December 31, 2016 $ 14,897
$ 44
$ 14,941
Cumulative-effect adjustment upon adoption of ASU 2016-09 48
—
48
Net income 2,346
1
2,347
Other comprehensive income 785
—
785
Cash dividends paid (803 ) (3 ) (806 )
Issuance of shares under equity-based compensation plans - net 109
—
109
Repurchase of shares (789 ) —
(789 )
Changes in noncontrolling interest - net —
1
1
Balance at September 30, 2017 $ 16,593
$ 43
$ 16,636



	Ordinary shares				Capital in excess of par value			Retained earnings			Accumulated other comprehensive loss			Shares held in trust			Total Eaton shareholders' equity			Noncontrolling interests			Total equity
	Ordinary shares
(In millions)	Shares		Dollars
Balance at December 31, 2018	423.6		$	4	$	12,090		$	8,161		$	(4,145	)	$	(3	)	$	16,107		$	35		$	16,142
Net income	—		—		—			522			—			—			522			—			522
Other comprehensive income, net of tax											67						67			—			67
Cash dividends paid and accrued	—		—		—			(309		)	—			—			(309		)	(1		)	(310		)
Issuance of shares under equity-based compensation plans	1.4		—		(5		)	1			—			—			(4		)	—			(4		)
Repurchase of shares	(1.9	)	—		—			(150		)	—			—			(150		)	—			(150		)
Balance at March 31, 2019	423.1		$	4	$	12,085		$	8,225		$	(4,078	)	$	(3	)	$	16,233		$	34		$	16,267
Net income	—		—		—			636			—			—			636			—			636
Other comprehensive loss, net of tax											(30		)				(30		)				(30		)
Cash dividends paid	—		—		—			(300		)	—			—			(300		)	(1		)	(301		)
Issuance of shares under equity-based compensation plans	0.1		—		27			(1		)	—			1			27			—			27
Acquisition of a business	—		—		—			—			—			—			—			51			51
Acquisition of noncontrolling interest obtained through tender offer	—		—		—			—			—			—			—			(29		)	(29		)
Repurchase of Shares	(3.2	)	—		—			(260		)	—			—			(260		)	—			(260		)
Balance at June 30, 2019	420.0		$	4	$	12,112		$	8,300		$	(4,108	)	$	(2	)	$	16,306		$	55		$	16,361
Net income	—		—		—			601			—			—			601			1			602
Other comprehensive loss, net of tax											(259		)				(259		)				(259		)
Cash dividends paid	—		—		—			(298		)	—			—			(298		)	—			(298		)
Issuance of shares under equity-based compensation plans	0.2		—		39			(2		)	—			—			37			—			37
Acquisition of noncontrolling interest obtained through tender offer	—		—		—			—			—			—			—			(4		)	(4		)
Repurchase of Shares	(6.8	)	—		—			(539		)	—			—			(539		)	—			(539		)
Balance at September 30, 2019	413.4		$	4	$	12,151		$	8,062		$	(4,367	)	$	(2	)	$	15,848		$	52		$	15,900



	Ordinary shares				Capital in excess of par value		Retained earnings			Accumulated other comprehensive loss			Shares held in trust			Total Eaton shareholders' equity			Noncontrolling interests			Total equity
	Ordinary shares
(In millions)	Shares		Dollars
Balance at December 31, 2017	439.9		$	4	$	11,987	$	8,669		$	(3,404	)	$	(3	)	$	17,253		$	37		$	17,290
Cumulative-effect adjustment upon adoption of ASU 2014-09	—		—		—		(2		)	—			—			(2		)	—			(2		)
Cumulative-effect adjustment upon adoption of ASU 2016-16	—		—		—		(199		)	—			—			(199		)	—			(199		)
Net income	—		—		—		488			—			—			488			(1		)	487
Other comprehensive income, net of tax										296						296			—			296
Cash dividends paid and accrued	—		—		—		(290		)	—			—			(290		)	—			(290		)
Issuance of shares under equity-based compensation plans	1.1		—		18		(1		)	—			—			17			—			17
Changes in noncontrolling interest of consolidated subsidiaries - net	—		—		—		—			—			—			—			2			2
Repurchase of shares	(3.7	)	—		—		(300		)	—			—			(300		)	—			(300		)
Balance at March 31, 2018	437.3		$	4	$	12,005	$	8,365		$	(3,108	)	$	(3	)	$	17,263		$	38		$	17,301
Net income	—		—		—		610			—			—			610			1			611
Other comprehensive loss, net of tax	—									(624		)				(624		)				(624		)
Cash dividends paid	—		—		—		(288		)	—			—			(288		)	(1		)	(289		)
Issuance of shares under equity-based compensation plans	—		—		28		—			—			1			29			—			29
Changes in noncontrolling interest of consolidated subsidiaries - net	—		—		—		—			—			—			—			(3		)	(3		)
Repurchase of Shares	(4.0	)	—		—		(300		)	—			—			(300		)	—			(300		)
Balance at June 30, 2018	433.3		$	4	$	12,033	$	8,387		$	(3,732	)	$	(2	)	$	16,690		$	35		$	16,725
Net income	—		—		—		416			—			—			416			—			416
Other comprehensive loss, net of tax										(98		)	—			(98		)	—			(98		)
Cash dividends paid	—		—		—		(286		)	—			—			(286		)	—			(286		)
Issuance of shares under equity-based compensation plans	0.1		—		33		—			—			(1		)	32			—			32
Balance at September 30, 2018	433.4		$	4	$	12,066	$	8,517		$	(3,830	)	$	(3	)	$	16,754		$	35		$	16,789

The changes in Accumulated other comprehensive loss follow:



	Currency translation and related hedging instruments			Pensions and other postretirement benefits			Cash flow hedges			Total
Balance at December 31, 2018	$	(2,864	)	$	(1,278	)	$	(3	)	$	(4,145	)
Other comprehensive (loss) income before reclassifications	(235		)	7			(72		)	(300		)
Amounts reclassified from Accumulated other comprehensive loss	—			81			(3		)	78
Net current-period Other comprehensive (loss) income	(235		)	88			(75		)	(222		)
Balance at September 30, 2019	$	(3,099	)	$	(1,190	)	$	(78	)	$	(4,367	)

Currency translation and related hedging instruments Pensions and other postretirement benefits
Cash flow
hedges
Total
Balance at December 31, 2016 $ (3,062 ) $ (1,380 ) $ (6 ) $ (4,448 )
Other comprehensive (loss) income
   before reclassifications
743
(46 ) (19 ) 678
Amounts reclassified from Accumulated other
   comprehensive loss (income)
—
99
8
107
Net current-period Other comprehensive
   income (loss)
743
53
(11 ) 785
Balance at September 30, 2017 $ (2,319 ) $ (1,327 ) $ (17 ) $ (3,663 )

The reclassifications out of Accumulated other comprehensive loss follow:



	Nine months ended September 30, 2019				Consolidated statements of income classification
Amortization of defined benefit pensions and other postretirement benefits items
Actuarial loss and prior service cost	$	(104	)	¹
Tax benefit	23
Total, net of tax	(81		)

Gains and (losses) on cash flow hedges
Currency exchange contracts	4				Net sales and Cost of products sold
Tax expense	(1		)
Total, net of tax	3

Total reclassifications for the period	$	(78	)

Nine months ended September 30, 2017
Consolidated statements
of income classification
Amortization of defined benefit pensions and other postretirement benefits items
Actuarial loss and prior service cost $ (146 )
¹

Tax benefit 47

Total, net of tax (99 )

Gains and (losses) on cash flow hedges
Currency exchange contracts (12 ) Cost of products sold
Tax benefit 4

Total, net of tax (8 )

Total reclassifications for the period $ (107 )

¹ These components of Accumulated other comprehensive loss are included in the computation of net periodic benefit cost. See Note 78 for additional information about pension and other postretirement benefits items.

Net Income Per Share Attributable to Eaton Ordinary Shareholders

A summary of the calculation of net income per share attributable to Eaton ordinary shareholders follows:



	Three months ended September 30				Nine months ended September 30
(Shares in millions)	2019		2018		2019		2018
Net income attributable to Eaton ordinary shareholders	$	601	$	416	$	1,759	$	1,514

Weighted-average number of ordinary shares outstanding - diluted	418.4		436.3		422.5		438.4
Less dilutive effect of equity-based compensation	1.8		2.8		1.8		2.6
Weighted-average number of ordinary shares outstanding - basic	416.6		433.5		420.7		435.8

Net income per share attributable to Eaton ordinary shareholders
Diluted	$	1.44	$	0.95	$	4.16	$	3.45
Basic	1.44		0.96		4.18		3.47

Three months ended
September 30 Nine months ended
September 30
(Shares in millions) 2017 2016 2017 2016
Net income attributable to Eaton ordinary shareholders $ 1,399
$ 523
$ 2,346
$ 1,418

Weighted-average number of ordinary shares outstanding - diluted 445.2
455.6
448.3
457.9
Less dilutive effect of equity-based compensation 2.6
1.7
2.4
1.4
Weighted-average number of ordinary shares outstanding - basic 442.6
453.9
445.9
456.5

Net income per share attributable to Eaton ordinary shareholders
Diluted $ 3.14
$ 1.15
$ 5.23
$ 3.09
Basic 3.16
1.15
5.26
3.10

For the third quarter and first nine months of ~~2017, 0.2~~2019, 0.8 million and ~~0.6~~1.1 million stock options, respectively, were excluded from the calculation of diluted net income per share attributable to Eaton ordinary shareholders because the exercise price of the options exceeded the average market price of the ordinary shares during the period and their effect, accordingly, would have been antidilutive. For the third quarter and first nine months of ~~2016, 1.5~~2018, 0.5 million and ~~1.8~~0.4 million stock options, respectively, were excluded from the calculation of diluted net income per share attributable to Eaton ordinary shareholders because the exercise price of the options exceeded the average market price of the ordinary shares during the period and their effect, accordingly, would have been antidilutive.


Note ~~11.~~12.	FAIR VALUE MEASUREMENTS

Fair value is measured based on an exit price, representing the amount that would be received to sell an asset or paid to satisfy a liability in an orderly transaction between market participants. Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a fair value hierarchy is established, which categorizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

A summary of financial instruments recognized at fair value, and the fair value measurements used, follows:



	Total			Level 1		Level 2			Level 3
September 30, 2019
Cash	$	549		$	549	$	—		$	—
Short-term investments	281			281		—			—
Net derivative contracts	(52		)	—		(52		)	—

December 31, 2018
Cash	$	283		$	283	$	—		$	—
Short-term investments	157			157		—			—
Net derivative contracts	14			—		14			—

Total Level 1 Level 2 Level 3
September 30, 2017
Cash $ 791
$ 791
$ —
$ —
Short-term investments 843
843
—
—
Net derivative contracts 28
—
28
—

December 31, 2016
Cash $ 543
$ 543
$ —
$ —
Short-term investments 203
203
—
—
Net derivative contracts (3 ) —
(3 ) —

Eaton values its financial instruments using an industry standard market approach, in which prices and other relevant information is generated by market transactions involving identical or comparable assets or liabilities. No financial instruments were measured using unobservable inputs.

Other Fair Value Measurements

Long-term debt and the current portion of long-term debt had a carrying value of ~~$8,767~~$8,019 and fair value of ~~$9,078~~$8,600 at September 30, ~~2017~~2019 compared to ~~$8,263~~$7,107 and ~~$8,477,~~$7,061, respectively, at December 31, ~~2016.~~2018. The fair value of Eaton's debt instruments were estimated using prevailing market interest rates on debt with similar creditworthiness, terms and maturities, and are considered a Level 2 fair value measurement.

As discussed in Note 2, on July 31, 2017 Eaton sold a 50% interest in its heavy-duty and medium-duty commercial vehicle automated transmission business to Cummins, Inc. Eaton's remaining 50% interest was remeasured to a fair value of $600 on July 31, 2017 using a discounted cash flow model which is considered a Level 3 fair value measurement. The model includes estimates of future cash flows, future growth rates, terminal value amounts, and the applicable weighted-average cost of capital used to discount those estimated cash flows. Eaton will account for its investment on the equity method of accounting.


Note ~~12.~~13.	DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

In the normal course of business, Eaton is exposed to certain risks related to fluctuations in interest rates, currency exchange rates and commodity prices. The Company uses various derivative and non-derivative financial instruments, primarily interest rate swaps, currency forward exchange contracts, currency swaps and, ~~to a lesser extent,~~ commodity contracts to manage risks from these market fluctuations. The instruments used by Eaton are straightforward, non-leveraged instruments. The counterparties to these instruments are financial institutions with strong credit ratings. Eaton maintains control over the size of positions entered into with any one counterparty and regularly monitors the credit rating of these institutions. Such instruments are not purchased and sold for trading purposes.

Derivative financial instruments are accounted for at fair value and recognized as assets or liabilities in the ~~Condensed~~ Consolidated Balance Sheets. Accounting for the gain or loss resulting from the change in the fair value of the derivative financial instrument depends on whether it has been designated, and is effective, as part of a hedging relationship and, if so, as to the nature of the hedging activity. Eaton formally documents all relationships between derivative financial instruments accounted for as designated hedges and the hedged item, as well as its risk-management objective and strategy for undertaking the hedge transaction. This process includes linking derivative financial instruments to a recognized asset or liability, specific firm commitment, forecasted transaction, or net investment in a foreign operation. These financial instruments can be designated as:

Hedges of the change in the fair value of a recognized fixed-rate asset or liability, or the firm commitment to acquire such an asset or liability (a fair value hedge); for these hedges, the gain or loss from the derivative financial instrument, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in income during the period of change in fair value.

Hedges of the variable cash flows of a recognized variable-rate asset or liability, or the forecasted acquisition of such an asset or liability (a cash flow hedge); for these hedges, the ~~effective portion of the~~ gain or loss from the derivative financial instrument is recognized in Accumulated other comprehensive ~~loss~~income and reclassified to income in the same period when the gain or loss on the hedged item is included in income.

Hedges of the currency exposure related to a net investment in a foreign operation (a net investment hedge); for these hedges, the ~~effective portion of the~~ gain or loss from the derivative financial instrument is recognized in Accumulated other comprehensive ~~loss~~income and reclassified to income in the same period when the gain or loss related to the net investment in the foreign operation is included in income.

The gain or loss from a derivative financial instrument designated as a hedge ~~that is effective~~ is classified in the same line of the Consolidated Statements of Income as the offsetting loss or gain on the hedged item. The ~~change~~cash flows resulting from these financial instruments are classified in ~~fair value~~operating activities on the Condensed Consolidated Statements of ~~a derivative financial instrument that is not effective as a hedge is immediately recognized in income.~~Cash Flows.

For derivatives that are not designated as a hedge, any gain or loss is immediately recognized in income. The majority of derivatives used in this manner relate to risks resulting from assets or liabilities denominated in a foreign currency and certain commodity contracts that arise in the normal course of business. ~~Gains and losses associated with commodity hedge contracts are classified in Cost of products sold.~~

Eaton uses certain of its debt denominated in foreign currency to hedge portions of its net investments in foreign operations against foreign currency exposure (net investment hedges). Foreign currency denominated debt designated as a non-derivative net investment hedging ~~instruments on an after-tax basis was $89 at September 30, 2017 and $86 at December 31, 2016, and designated~~instrument had a carrying value on a pre-tax basis ~~was $643~~of $1,788 at September 30, ~~2017~~2019 and ~~$572~~$623 at December 31, ~~2016.~~2018.

Derivative Financial Statement Impacts

The fair value of derivative financial instruments recognized in the ~~Condensed~~ Consolidated Balance Sheets follows:



	Notional amount		Other current assets		Other noncurrent assets		Other current liabilities		Other noncurrent liabilities		Type of hedge	Term
September 30, 2019
Derivatives designated as hedges
Fixed-to-floating interest rate swaps	$	2,225	$	—	$	71	$	—	$	—	Fair value	15 months to 16 years
Forward starting floating-to-fixed interest rate swaps	500		—		1		—		77		Cash flow	14 to 34 years
Currency exchange contracts	1,104		11		—		17		14		Cash flow	1 to 36 months
Commodity contracts	11		—		—		—		—		Cash flow	1 to 7 months
Total			$	11	$	72	$	17	$	91

Derivatives not designated as hedges
Currency exchange contracts	$	4,364	$	14			$	41				1 to 12 months
Total			$	14			$	41

December 31, 2018
Derivatives designated as hedges
Fixed-to-floating interest rate swaps	$	2,550	$	—	$	22	$	1	$	26	Fair value	3 months to 16 years
Forward starting floating-to-fixed interest rate swaps	100		—		—		—		3		Cash flow	34 years
Currency exchange contracts	951		19		2		11		8		Cash flow	1 to 36 months
Total			$	19	$	24	$	12	$	37

Derivatives not designated as hedges
Currency exchange contracts	$	3,886	$	40			$	20				1 to 12 months
Total			$	40			$	20

Notional
amount

Other
current
assets

Other
noncurrent
assets

Other
current
liabilities

Other
noncurrent
liabilities

Type of
hedge
Term
September 30, 2017
Derivatives designated as hedges
Fixed-to-floating interest rate
swaps
$ 3,715
$ 2
$ 56
$ —
$ 7
Fair value 2 months to 17 years
Currency exchange contracts 921
4
6
25
5
Cash flow 1 to 36 months
Total $ 6
$ 62
$ 25
$ 12

Derivatives not designated as
hedges

Currency exchange contracts $ 3,022
$ 21
$ 24
1 to 12 months
Commodity contracts 1
—
—
1 to 12 months
Total $ 21

$ 24

December 31, 2016
Derivatives designated as hedges
Fixed-to-floating interest rate
swaps
$ 3,765
$ 1
$ 65
$ —
$ 8
Fair value 3 months to 18 years
Forward starting floating-to-fixed
interest rate swaps
450
—
19
—
1
Cash flow 11 years
Currency exchange contracts 802
11
1
22
17
Cash flow 1 to 36 months
Total $ 12
$ 85
$ 22
$ 26

Derivatives not designated as
hedges

Currency exchange contracts $ 5,333
$ 31
$ 85
1 to 12 months
Commodity contracts 10
2
—
1 to 12 months
Total $ 33

$ 85

The currency exchange contracts shown in the table above as derivatives not designated as hedges are primarily contracts entered into to manage currency volatility or exposure on intercompany ~~sales~~receivables, payables and loans. While Eaton does not elect hedge accounting treatment for these derivatives, Eaton targets managing 100% of the intercompany balance sheet exposure to minimize the effect of currency volatility related to the movement of goods and services in the normal course of its operations. This activity represents the great majority of these currency exchange contracts.

As of September 30, 2019, the volume of outstanding commodity contracts that were entered into to hedge forecasted transactions:



	September 30, 2019
Commodity	(millions of pounds)	Term
Copper	4	1 to 7 months

The following amounts were recorded on the Consolidated Balance Sheets related to fixed-to-floating interest rate swaps:



	Carrying amount of the hedged assets (liabilities)			Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged asset (liabilities)^(a)
Location on Consolidated Balance Sheets	September 30, 2019			September 30, 2019
Long-term debt	$	(2,838	)	$	(112	)

^(a) At September 30, 2019, these amounts include the cumulative liability amount of fair value hedging adjustments remaining for which the hedge accounting has been discontinued of $41.

The impact of hedging activities to the Consolidated Statements of Income are as follow:



	Three months ended September 30, 2019
	Net Sales			Cost of products sold			Interest expense - net
Amounts from Consolidated Statements of Income	$	5,314		$	3,512		$	54

Gain (loss) on derivatives designated as cash flow hedges
Currency exchange contracts
Hedged item	$	1		$	(1	)	$	—
Derivative designated as hedging instrument	(1		)	1			—

Commodity contracts
Hedged item	$	—		$	—		$	—
Derivative designated as hedging instrument	—			—			—

Gain (loss) on derivatives designated as fair value hedges
Fixed-to-floating interest rate swaps
Hedged item	$	—		$	—		$	(13	)
Derivative designated as hedging instrument	—			—			13



	Nine months ended September 30, 2019
	Net Sales			Cost of products sold			Interest expense - net
Amounts from Consolidated Statements of Income	$	16,152		$	10,782		$	183

Gain (loss) on derivatives designated as cash flow hedges
Currency exchange contracts
Hedged item	$	6		$	(10	)	$	—
Derivative designated as hedging instrument	(6		)	10			—

Commodity contracts
Hedged item	$	—		$	—		$	—
Derivative designated as hedging instrument	—			—			—

Gain (loss) on derivatives designated as fair value hedges
Fixed-to-floating interest rate swaps
Hedged item	$	—		$	—		$	(76	)
Derivative designated as hedging instrument	—			—			76

The impact of derivatives not designated as hedges to the Consolidated Statements of Income are as follow:



	Gain (loss) recognized in Consolidated Statements of Income			Consolidated Statements of Income classification
	Three months ended September 30
	2019
Gain (loss) on derivatives not designated as hedges
Currency exchange contracts	$	(40	)	Other expense - net
Commodity Contracts	1			Cost of products sold
Total	$	(39	)

	Gain (loss) recognized in Consolidated Statements of Income			Consolidated Statements of Income classification
	Nine months ended September 30
	2019
Gain (loss) on derivatives not designated as hedges
Currency exchange contracts	$	8		Other income - net
Commodity Contracts	1			Cost of products sold
Total	$	9

The impact of derivative and non-derivative instruments designated as hedges to the Consolidated ~~Statement~~Statements of Income and Comprehensive Income follow:



	Gain (loss) recognized in other comprehensive (loss) income						Location of gain (loss) reclassified from Accumulated other comprehensive loss	Gain (loss) reclassified from Accumulated other comprehensive loss
	Three months ended September 30							Three months ended September 30
	2019			2018				2019		2018
Derivatives designated as cash flow hedges
Forward starting floating-to-fixed interest rate swaps	$	(46	)	$	—		Interest expense - net	$	—	$	—
Currency exchange contracts	(8		)	(12		)	Net sales and Cost of products sold	—		(4		)
Commodity contracts	—			—			Cost of products sold	—		—
Non-derivative designated as net investment hedges
Foreign currency denominated debt	3			5			Other income - net	—		—
Total	$	(51	)	$	(7	)		$	—	$	(4	)


	Gain (loss) recognized in other comprehensive (loss) income						Location of gain (loss) reclassified from Accumulated other comprehensive loss	Gain (loss) reclassified from Accumulated other comprehensive loss
	Nine months ended September 30							Nine months ended September 30
	2019			2018				2019		2018
Derivatives designated as cash flow hedges
Forward starting floating-to-fixed interest rate swaps	$	(73	)	$	—		Interest expense - net	$	—	$	—
Currency exchange contracts	(18		)	(14		)	Net sales and Cost of products sold	4		(12		)
Commodity contracts	—			—			Cost of products sold	—		—
Non-derivative designated as net investment hedges
Foreign currency denominated debt	15			22			Other income - net	—		—
Total	$	(76	)	$	8			$	4	$	(12	)

Gain (loss) recognized in
other comprehensive
(loss) income

Location of gain (loss)
reclassified from
Accumulated other
comprehensive loss

Gain (loss) reclassified
from Accumulated other
comprehensive loss
Three months ended
September 30 Three months ended
September 30
2017 2016 2017 2016
Derivatives designated as
cash flow hedges

Forward starting floating-to-fixed
interest rate swaps
$ (10 ) $ 1
Interest expense - net $ —
$ —
Interest rate locks (9 ) —
Interest expense - net —
—
Currency exchange contracts (6 ) (3 ) Cost of products sold (7 ) (4 )
Total $ (25 ) $ (2 ) $ (7 ) $ (4 )

Gain (loss) recognized in
other comprehensive
(loss) income Location of gain (loss)
reclassified from
Accumulated other
comprehensive loss Gain (loss) reclassified
from Accumulated other
comprehensive loss
Nine months ended
September 30 Nine months ended
September 30
2017 2016 2017 2016
Derivatives designated as cash
flow hedges
Forward starting floating-to-fixed
interest rate swaps $ (15 ) $ (18 ) Interest expense - net $ —
$ —
Interest rate locks (9 ) —
Interest expense - net —
—
Currency exchange contracts (5 ) (35 ) Cost of products sold (12 ) (3 )
Total $ (29 )
$ (53 )

$ (12 )
$ (3 )
At September 30, 2019 and September 30, 2018, losses of $5 and $9, respectively, of estimated unrealized net gains or losses associated with our cash flow hedges were expected to be reclassified to income from Accumulated other comprehensive loss within the next twelve months. These reclassifications relate to our designated foreign currency and commodity hedges that will mature in the next 12 months.

~~Amounts recognized in net income follow:~~Note 14. INVENTORY

Three months ended
September 30 Nine months ended
September 30
2017
2016 2017 2016
Derivatives designated as fair value hedges
Fixed-to-floating interest rate swaps $ (4 ) $ (28 ) $ (7 ) $ 78
Related long-term debt converted to floating interest
rates by interest rate swaps
4
28
7
(78 )
$ —
$ —
$ —
$ —

~~Gains and losses described above were recognized in Interest expense - net.~~


~~Note 13.~~	~~INVENTORY~~

Inventory ~~accounted for using the first-in, first out (FIFO) method~~ is carried at lower of cost or net realizable value. ~~Inventory accounted for using the last-in, first-out (LIFO) method is carried at lower of cost or market.~~ The components of inventory follow:



	September 30, 2019		December 31, 2018
Raw materials	$	1,094	$	1,077
Work-in-process	578		500
Finished goods	1,229		1,208
Total inventory	$	2,901	$	2,785

September 30,
2017 December 31,
2016
Raw materials $ 959
$ 880
Work-in-process 434
396
Finished goods 1,167
1,074
Inventory at FIFO 2,560
2,350
Excess of FIFO over LIFO cost (103 ) (96 )
Total inventory $ 2,457
$ 2,254


Note ~~14.~~15.	BUSINESS SEGMENT 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 operating segments are Electrical Products, Electrical Systems and Services, Hydraulics, Aerospace, Vehicle, and ~~Vehicle.~~eMobility. Operating profit includes the operating profit from intersegment sales. For additional information regarding Eaton’s business segments, see Note 1516 to the Consolidated Financial Statements contained in the ~~2016~~2018 Form 10-K.



	Three months ended September 30						Nine months ended September 30
	2019			2018			2019			2018
Net sales
Electrical Products	$	1,786		$	1,789		$	5,395		$	5,327
Electrical Systems and Services	1,572			1,519			4,618			4,413
Hydraulics	603			670			1,987			2,103
Aerospace	513			478			1,532			1,399
Vehicle	761			876			2,374			2,668
eMobility	79			80			246			240
Total net sales	$	5,314		$	5,412		$	16,152		$	16,150

Segment operating profit
Electrical Products	$	358		$	343		$	1,050		$	984
Electrical Systems and Services	284			234			751			628
Hydraulics	72			94			232			285
Aerospace	129			105			372			284
Vehicle	139			166			397			464
eMobility	4			10			16			35
Total segment operating profit	986			952			2,818			2,680

Corporate
Amortization of intangible assets	(93		)	(95		)	(280		)	(289		)
Interest expense - net	(54		)	(67		)	(183		)	(205		)
Pension and other postretirement benefits expense	(5		)	(3		)	(7		)	(4		)
Arbitration decision expense	—			(275		)	—			(275		)
Other corporate expense - net	(116		)	(73		)	(289		)	(209		)
Income before income taxes	718			439			2,059			1,698
Income tax expense	116			23			299			184
Net income	602			416			1,760			1,514
Less net income for noncontrolling interests	(1		)	—			(1		)	—
Net income attributable to Eaton ordinary shareholders	$	601		$	416		$	1,759		$	1,514

Three months ended
September 30 Nine months ended
September 30
2017 2016 2017 2016
Net sales
Electrical Products $ 1,857
$ 1,767
$ 5,371
$ 5,231
Electrical Systems and Services 1,421
1,436
4,168
4,207
Hydraulics 634
562
1,854
1,702
Aerospace 438
436
1,303
1,328
Vehicle 861
786
2,495
2,412
Total net sales $ 5,211
$ 4,987
$ 15,191
$ 14,880

Segment operating profit
Electrical Products $ 346
$ 331
$ 957
$ 924
Electrical Systems and Services 196
197
545
534
Hydraulics 80
61
214
161
Aerospace 84
88
244
251
Vehicle 150
122
397
377
Total segment operating profit 856
799
2,357
2,247

Corporate
Amortization of intangible assets (98 ) (99 ) (288 ) (297 )
Interest expense - net (60 ) (59 ) (181 ) (173 )
Pension and other postretirement benefits expense (16 ) (18 ) (38 ) (45 )
Gain on sale of business 1,077
—
1,077
—
Other corporate expense - net (68 ) (50 ) (202 ) (164 )
Income before income taxes 1,691
573
2,725
1,568
Income tax expense 292
51
378
151
Net income 1,399
522
2,347
1,417
Less net (income) loss for noncontrolling interests —
1
(1 ) 1
Net income attributable to Eaton ordinary shareholders $ 1,399
$ 523
$ 2,346
$ 1,418


Note ~~15.~~16.	CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

~~On November 14, 2013 and September 15, 2017,~~The Registered Senior Notes issued by Eaton Corporation are registered ~~senior notes~~ under the Securities Act of ~~1933 (the Senior Notes).~~1933. Eaton and certain ~~other~~ of Eaton's 100% owned direct and indirect subsidiaries (the Guarantors) fully and unconditionally guaranteed (subject, in the case of the Guarantors, other than Eaton, to customary release provisions as described below), on a joint and several basis, the Registered Senior Notes. The following condensed consolidating financial statements are included so that separate financial statements of Eaton, Eaton Corporation and each of the Guarantors are not required to be filed with the Securities and Exchange Commission. The consolidating adjustments primarily relate to eliminations of investments in subsidiaries and intercompany balances and transactions. The condensed consolidating financial statements present investments in subsidiaries using the equity method of accounting. See Note 7 of Eaton's 2018 Form 10-K for additional information related to the Registered Senior Notes.

The guarantee of a Guarantor that is not a parent of the issuer will be automatically and unconditionally released and discharged in the event of any sale of the Guarantor or of all or substantially all of its assets, or in connection with the release or termination of the Guarantor as a guarantor under all other U.S. debt securities or U.S. syndicated credit facilities, subject to limitations set forth in the indenture. The guarantee of a Guarantor that is a direct or indirect parent of the issuer will only be automatically and unconditionally released and discharged in connection with the release or termination of such Guarantor as a guarantor under all other debt securities or syndicated credit facilities (in both cases, U.S. or otherwise), subject to limitations set forth in the indenture.

During ~~2017~~2019 and ~~2016,~~2018, the Company undertook certain steps to restructure ownership of various subsidiaries. The transactions were entirely among wholly-owned subsidiaries under the common control of Eaton. ~~This restructuring has~~These restructurings have been reflected as of the beginning of the earliest period presented below.



CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017
CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019																		CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019
	Eaton Corporation plc			Eaton Corporation			Guarantors			Other subsidiaries			Consolidating adjustments			Total		Eaton Corporation plc			Eaton Corporation			Guarantors			Other subsidiaries			Consolidating adjustments			Total
Net sales	$	—		$	1,695		$	1,669		$	3,223		$	(1,376	)	$	5,211	$	—		$	1,744		$	1,826		$	2,996		$	(1,252	)	$	5,314

Cost of products sold	—			1,322			1,225			2,294			(1,372		)	3,469		—			1,339			1,301			2,127			(1,255		)	3,512
Selling and administrative expense	32			330			200			354			—			916		2			368			199			316			—			885
Research and development expense	—			53			54			40			—			147		—			37			35			75			—			147
Interest expense (income) - net	—			62			5			(7		)	—			60		—			59			5			(10		)	—			54
Gain on Sale of Business	—			560			—			517			—			1,077
Other expense (income) - net	23			1			(31		)	12			—			5		1			3			2			(8		)	—			(2		)
Equity in loss (earnings) of subsidiaries, net of tax	(1,573		)	(237		)	(1,900		)	(706		)	4,416			—		(611		)	(217		)	(797		)	(677		)	2,302			—
Intercompany expense (income) - net	119			(33		)	335			(421		)	—			—		7			(50		)	513			(470		)	—			—
Income (loss) before income taxes	1,399			757			1,781			2,174			(4,420		)	1,691		601			205			568			1,643			(2,299		)	718
Income tax expense (benefit)	—			120			18			154			—			292		—			3			(27		)	139			1			116
Net income (loss)	1,399			637			1,763			2,020			(4,420		)	1,399		601			202			595			1,504			(2,300		)	602
Less net loss (income) for noncontrolling interests	—			—			—			(1		)	1			—		—			—			—			(1		)	—			(1		)
Net income (loss) attributable to Eaton ordinary shareholders	$	1,399		$	637		$	1,763		$	2,019		$	(4,419	)	$	1,399	$	601		$	202		$	595		$	1,503		$	(2,300	)	$	601

Other comprehensive income (loss)	$	199		$	(15	)	$	200		$	267		$	(452	)	$	199	$	(259	)	$	(26	)	$	(268	)	$	(705	)	$	999		$	(259	)
Total comprehensive income (loss) attributable to Eaton ordinary shareholders	$	1,598		$	622		$	1,963		$	2,286		$	(4,871	)	$	1,598	$	342		$	176		$	327		$	798		$	(1,301	)	$	342

CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016

Eaton
Corporation
plc

Eaton
Corporation
Guarantors
Other
subsidiaries

Consolidating
adjustments
Total
Net sales $ —
$ 1,660
$ 1,592
$ 3,032
$ (1,297 ) $ 4,987

Cost of products sold —
1,329
1,168
2,168
(1,294 ) 3,371
Selling and administrative expense 2
332
195
324
—
853
Research and development expense —
59
44
43
—
146
Interest expense (income) - net —
59
4
(3 ) (1 ) 59
Other expense (income) - net (1 ) 2
6
(22 ) —
(15 )
Equity in loss (earnings) of
   subsidiaries, net of tax
(628 ) (173 ) (914 ) (228 ) 1,943
—
Intercompany expense (income) - net 104
(34 ) 333
(403 ) —
—
Income (loss) before income taxes 523
86

756

1,153

(1,945 )
573
Income tax expense (benefit) —
(11 ) 11
52
(1 ) 51
Net income (loss) 523
97

745

1,101

(1,944 )
522
Less net loss (income) for
   noncontrolling interests
—
—
—
—
1
1
Net income (loss) attributable to
   Eaton ordinary shareholders
$ 523
$ 97

$ 745

$ 1,101

$ (1,943 )
$ 523

Other comprehensive income (loss) $ 24
$ 24
$ 29
$ 3
$ (56 ) $ 24
Total comprehensive income
   (loss) attributable to Eaton
   ordinary shareholders
$ 547
$ 121
$ 774
$ 1,104
$ (1,999 ) $ 547

CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017


CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018																			CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018
	Eaton Corporation plc			Eaton Corporation			Guarantors			Other subsidiaries			Consolidating adjustments			Total			Eaton Corporation plc			Eaton Corporation			Guarantors			Other subsidiaries			Consolidating adjustments			Total
Net sales	$	—		$	4,963		$	4,936		$	9,378		$	(4,086	)	$	15,191		$	—		$	1,808		$	1,814		$	3,134		$	(1,344	)	$	5,412

Cost of products sold	—			3,948			3,638			6,723			(4,080		)	10,229			—			1,419			1,320			2,202			(1,344		)	3,597
Selling and administrative expense	98			998			591			1,016			—			2,703			3			356			197			333			—			889
Research and development expense	—			164			154			122			—			440			—			33			37			68			—			138
Interest expense (income) - net	—			180			16			(15		)	—			181			—			68			3			(4		)	—			67
Gain on Sale of Business	—			560			—			517			—			1,077
Arbitration decision expense																			—			—			275			—			—			275
Other expense (income) - net	71			8			(69		)	(20		)	—			(10		)	(3		)	11			4			(5		)	—			7
Equity in loss (earnings) of subsidiaries, net of tax	(2,858		)	(612		)	(3,625		)	(931		)	8,026			—			(430		)	(191		)	(892		)	(433		)	1,946			—
Intercompany expense (income) - net	343			(106		)	1,007			(1,244		)	—			—			14			33			579			(626		)	—			—
Income (loss) before income taxes	2,346			943			3,224			4,244			(8,032		)	2,725			416			79			291			1,599			(1,946		)	439
Income tax expense (benefit)	—			120			37			222			(1		)	378			—			(10		)	(91		)	124			—			23
Net income (loss)	2,346			823			3,187			4,022			(8,031		)	2,347			416			89			382			1,475			(1,946		)	416
Less net loss (income) for noncontrolling interests	—			—			—			(3		)	2			(1		)	—			—			—			—			—			—
Net income (loss) attributable to Eaton ordinary shareholders	$	2,346		$	823		$	3,187		$	4,019		$	(8,029	)	$	2,346		$	416		$	89		$	382		$	1,475		$	(1,946	)	$	416

Other comprehensive income (loss)	$	785		$	35		$	792		$	998		$	(1,825	)	$	785		$	(98	)	$	(22	)	$	(94	)	$	(240	)	$	356		$	(98	)
Total comprehensive income (loss) attributable to Eaton ordinary shareholders	$	3,131		$	858		$	3,979		$	5,017		$	(9,854	)	$	3,131		$	318		$	67		$	288		$	1,235		$	(1,590	)	$	318

CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
Eaton Corporation plc
Eaton
Corporation
Guarantors
Other
subsidiaries

Consolidating
adjustments
Total
Net sales $ —
$ 4,842
$ 4,815
$ 8,962
$ (3,739 ) $ 14,880

Cost of products sold —
3,788
3,571
6,462
(3,740 ) 10,081
Selling and administrative expense 6
1,048
589
999
—
2,642
Research and development expense —
176
140
128
—
444
Interest expense (income) - net —
169
13
(13 ) 4
173
Other expense (income) - net (1 ) 3
10
(40 ) —
(28 )
Equity in loss (earnings) of
   subsidiaries, net of tax
(1,726 ) (495 ) (2,398 ) (457 ) 5,076
—
Intercompany expense (income) - net 303
(104 ) 901
(1,100 ) —
—
Income (loss) before income taxes 1,418
257
1,989
2,983
(5,079 ) 1,568
Income tax expense (benefit) —
9
24
119
(1 ) 151
Net income (loss) 1,418
248
1,965
2,864
(5,078 ) 1,417
Less net loss (income) for
   noncontrolling interests
—
—
—
(2 ) 3
1
Net income (loss) attributable to
   Eaton ordinary shareholders
$ 1,418
$ 248
$ 1,965
$ 2,862
$ (5,075 ) $ 1,418

Other comprehensive income (loss) $ 42
$ 68
$ 59
$ (7 ) $ (120 ) $ 42
Total comprehensive income (loss) attributable to Eaton
ordinary shareholders $ 1,460
$ 316
$ 2,024
$ 2,855
$ (5,195 ) $ 1,460

CONDENSED CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 2017

Eaton
Corporation
plc

Eaton
Corporation
Guarantors
Other
subsidiaries

Consolidating
adjustments
Total
Assets
Current assets
Cash $ 1
$ 181
$ 15
$ 594
$ —
$ 791
Short-term investments —
—
—
843
—
843
Accounts receivable - net —
386
1,404
2,172
—
3,962
Intercompany accounts
   receivable
1
1,136
3,616
3,802
(8,555 ) —
Inventory —
330
683
1,529
(85 ) 2,457
Prepaid expenses and
   other current assets
—
89
45
233
29
396
Total current assets 2
2,122

5,763

9,173
(8,611 ) 8,449

Property, plant and
   equipment - net
—
835
687
1,964
—
3,486

Other noncurrent assets
Goodwill —
1,303
6,293
5,949
—
13,545
Other intangible assets —
159
3,305
1,890
—
5,354
Deferred income taxes —
692
—
270
(698 ) 264
Investment in subsidiaries 35,826
14,062
77,001
13,661
(140,550 ) —
Intercompany loans receivable —
7,459
2,655
58,045
(68,159 ) —
Other assets —
794
153
680
—
1,627
Total assets $ 35,828
$ 27,426
$ 95,857
$ 91,632
$ (218,018 ) $ 32,725

Liabilities and
   shareholders’ equity

Current liabilities
Short-term debt $ —
$ —
$ —
$ 5
$ —
$ 5
Current portion of
   long-term debt
—
1,455
36
3
—
1,494
Accounts payable —
382
456
1,201
—
2,039
Intercompany accounts payable 262
3,739
3,614
940
(8,555 ) —
Accrued compensation —
111
57
266
—
434
Other current liabilities 1
636
283
1,009
(1 ) 1,928
Total current liabilities 263
6,323
4,446
3,424
(8,556 ) 5,900

Noncurrent liabilities
Long-term debt —
6,295
969
9
—
7,273
Pension liabilities —
331
76
921
—
1,328
Other postretirement
   benefits liabilities
—
195
98
73
—
366
Deferred income taxes —
—
677
348
(698 ) 327
Intercompany loans payable 18,972
2,013
45,719
1,455
(68,159 ) —
Other noncurrent liabilities —
287
230
378
—
895
Total noncurrent liabilities 18,972
9,121

47,769

3,184

(68,857 )
10,189

Shareholders’ equity
Eaton shareholders' equity 16,593
11,982
43,642
84,985
(140,609 ) 16,593
Noncontrolling interests —
—
—
39
4
43
Total equity 16,593
11,982
43,642
85,024
(140,605 ) 16,636
Total liabilities and equity $ 35,828
$ 27,426

$ 95,857

$ 91,632

$ (218,018 )
$ 32,725




CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019
	Eaton Corporation plc			Eaton Corporation			Guarantors			Other subsidiaries			Consolidating adjustments			Total
Net sales	$	—		$	5,326		$	5,548		$	9,168		$	(3,890	)	$	16,152

Cost of products sold	—			4,150			3,967			6,552			(3,887		)	10,782
Selling and administrative expense	8			1,089			609			1,003			—			2,709
Research and development expense	—			113			110			231			—			454
Interest expense (income) - net	—			194			14			(23		)	(2		)	183
Other expense (income) - net	(12		)	1			(20		)	(4		)	—			(35		)
Equity in loss (earnings) of subsidiaries, net of tax	(1,785		)	(699		)	(2,359		)	(2,072		)	6,915			—
Intercompany expense (income) - net	30			(48		)	1,386			(1,368		)	—			—
Income (loss) before income taxes	1,759			526			1,841			4,849			(6,916		)	2,059
Income tax expense (benefit)	—			18			(62		)	343			—			299
Net income (loss)	1,759			508			1,903			4,506			(6,916		)	1,760
Less net loss (income) for noncontrolling interests	—			—			—			(1		)	—			(1		)
Net income (loss) attributable to Eaton ordinary shareholders	$	1,759		$	508		$	1,903		$	4,505		$	(6,916	)	$	1,759

Other comprehensive income (loss)	$	(222	)	$	(22	)	$	(215	)	$	(612	)	$	849		$	(222	)
Total comprehensive income (loss) attributable to Eaton ordinary shareholders	$	1,537		$	486		$	1,688		$	3,893		$	(6,067	)	$	1,537




CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018
	Eaton Corporation plc			Eaton Corporation			Guarantors			Other subsidiaries			Consolidating adjustments			Total
Net sales	$	—		$	5,306		$	5,304		$	9,567		$	(4,027	)	$	16,150

Cost of products sold	—			4,198			3,845			6,824			(4,026		)	10,841
Selling and administrative expense	8			1,093			575			1,003			—			2,679
Research and development expense	—			109			113			217			—			439
Interest expense (income) - net	—			203			11			(11		)	2			205
Arbitration decision expense	—			—			275			—			—			275
Other expense (income) - net	(22		)	25			31			(21		)	—			13
Equity in loss (earnings) of subsidiaries, net of tax	(1,531		)	(628		)	(2,588		)	(1,716		)	6,463			—
Intercompany expense (income) - net	31			35			1,623			(1,689		)	—			—
Income (loss) before income taxes	1,514			271			1,419			4,960			(6,466		)	1,698
Income tax expense (benefit)	—			(23		)	(119		)	327			(1		)	184
Net income (loss)	1,514			294			1,538			4,633			(6,465		)	1,514
Less net loss (income) for noncontrolling interests	—			—			—			—			—			—
Net income (loss) attributable to Eaton ordinary shareholders	$	1,514		$	294		$	1,538		$	4,633		$	(6,465	)	$	1,514

Other comprehensive income (loss)	$	(426	)	$	(37	)	$	(394	)	$	(1,012	)	$	1,443		$	(426	)
Total comprehensive income (loss) attributable to Eaton ordinary shareholders	$	1,088		$	257		$	1,144		$	3,621		$	(5,022	)	$	1,088

CONDENSED CONSOLIDATING BALANCE SHEETS DECEMBER 31, 2016
CONDENSED CONSOLIDATING BALANCE SHEETS SEPTEMBER 30, 2019														CONDENSED CONSOLIDATING BALANCE SHEETS SEPTEMBER 30, 2019

	Eaton Corporation plc		Eaton Corporation		Guarantors		Other subsidiaries		Consolidating adjustments			Total		Eaton Corporation plc		Eaton Corporation		Guarantors		Other subsidiaries		Consolidating adjustments			Total
Assets
Current assets
Cash	$	1	$	92	$	4	$	446	$	—		$	543	$	—	$	222	$	—	$	327	$	—		$	549
Short-term investments	—		—		—		203		—			203		—		—		—		281		—			281
Accounts receivable - net	—		536		1,049		1,975		—			3,560		—		475		1,289		2,023		—			3,787
Intercompany accounts receivable	5		954		4,023		3,633		(8,615		)	—		9		855		1,957		2,681		(5,502		)	—
Inventory	—		342		642		1,349		(79		)	2,254		—		577		857		1,546		(79		)	2,901
Prepaid expenses and other current assets	—		77		42		237		25			381		—		100		32		347		15			494
Total current assets	6		2,001		5,760		7,843		(8,669		)	6,941		9		2,229		4,135		7,205		(5,566		)	8,012

Property, plant and equipment - net	—		857		706		1,880		—			3,443		—		851		669		1,963		—			3,483

Other noncurrent assets
Goodwill	—		1,355		6,293		5,553		—			13,201		—		1,330		6,705		5,302		—			13,337
Other intangible assets	—		169		3,442		1,903		—			5,514		—		123		2,941		1,593		—			4,657
Operating lease assets														—		159		62		223		—			444
Deferred income taxes	—		904		—		228		(772		)	360		—		351		—		278		(335		)	294
Investment in subsidiaries	32,795		13,743		72,938		12,577		(132,053		)	—		16,939		26,627		73,052		27,306		(143,924		)	—
Intercompany loans receivable	—		7,605		2,061		56,598		(66,264		)	—		9		5,736		7,334		60,233		(73,312		)	—
Other assets	—		491		134		335		—			960		—		778		159		731		—			1,668
Total assets	$	32,801	$	27,125	$	91,334	$	86,917	$	(207,758	)	$	30,419	$	16,957	$	38,184	$	95,057	$	104,834	$	(223,137	)	$	31,895

Liabilities and shareholders’ equity
Current liabilities
Short-term debt	$	—	$	—	$	8	$	6	$	—		$	14	$	—	$	—	$	—	$	2	$	—		$	2
Current portion of long-term debt	—		1,250		296		6		—			1,552		—		4		—		2		—			6
Accounts payable	1		372		252		1,093		—			1,718		—		494		508		1,288		—			2,290
Intercompany accounts payable	281		3,870		3,115		1,349		(8,615		)	—		9		1,355		2,981		1,157		(5,502		)	—
Accrued compensation	—		98		58		223		—			379		—		99		59		263		—			421
Other current liabilities	1		591		291		941		(2		)	1,822		1		588		269		1,086		(2		)	1,942
Total current liabilities	283		6,181		4,020		3,618		(8,617		)	5,485		10		2,540		3,817		3,798		(5,504		)	4,661

Noncurrent liabilities
Long-term debt	—		5,767		936		8		—			6,711		—		5,900		2,107		6		—			8,013
Pension liabilities	—		610		161		888		—			1,659		—		378		127		734		—			1,239
Other postretirement benefits liabilities	—		198		99		71		—			368		—		167		82		73		—			322
Operating lease liabilities														—		116		47		170		—			333
Deferred income taxes	—		—		732		361		(772		)	321		—		—		458		186		(335		)	309
Intercompany loans payable	17,621		2,603		44,788		1,252		(66,264		)	—		1,099		5,272		65,822		1,119		(73,312		)	—
Other noncurrent liabilities	—		327		211		396		—			934		—		454		304		360		—			1,118
Total noncurrent liabilities	17,621		9,505		46,927		2,976		(67,036		)	9,993		1,099		12,287		68,947		2,648		(73,647		)	11,334

Shareholders’ equity
Eaton shareholders' equity	14,897		11,439		40,387		80,285		(132,111		)	14,897		15,848		23,357		22,293		98,336		(143,986		)	15,848
Noncontrolling interests	—		—		—		38		6			44		—		—		—		52		—			52
Total equity	14,897		11,439		40,387		80,323		(132,105		)	14,941		15,848		23,357		22,293		98,388		(143,986		)	15,900
Total liabilities and equity	$	32,801	$	27,125	$	91,334	$	86,917	$	(207,758	)	$	30,419	$	16,957	$	38,184	$	95,057	$	104,834	$	(223,137	)	$	31,895

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017

Eaton
Corporation
plc

Eaton
Corporation
Guarantors
Other
subsidiaries

Consolidating
adjustments
Total
Net cash provided by (used in)
   operating activities
$ 528
$ (296 ) $ 802
$ 2,365
$ (1,612 ) $ 1,787

Investing activities
Capital expenditures for property,
   plant and equipment
—
(63 ) (75 ) (213 ) —
(351 )
Cash received from sales (paid for acquisitions) of affiliates —
—
(92 ) 92
—
—
Purchases of short-term investments - net —
—
—
(621 ) —
(621 )
Investments in affiliates (90 ) (108 ) —
(90 ) 288
—
Return of investments in affiliates —
—
20
—
(20 ) —
Loans to affiliates —
(29 ) —
(4,754 ) 4,783
—
Repayments of loans from affiliates —
303
46
3,816
(4,165 ) —
Proceeds from sale of business —
330
—
270
—
600
Other - net —
(36 ) 2
(29 ) —
(63 )
Net cash provided by (used in) investing activities (90 ) 397

(99 )
(1,529 )
886

(435 )

Financing activities
Proceeds from borrowings —
1,000
—
—
—
1,000
Payments on borrowings —
(250 ) (297 ) (6 ) —
(553 )
Proceeds from borrowings from
   affiliates
1,917
1,873
965
28
(4,783 ) —
Payments on borrowings from
   affiliates
(822 ) (2,904 ) (352 ) (87 ) 4,165
—
Capital contributions from affiliates —
—
90
198
(288 ) —
Return of capital to affiliates —
—
—
(20 ) 20
—
Other intercompany financing
   activities
—
287
(290 ) 3
—
—
Cash dividends paid (803 ) —
—
—
—
(803 )
Cash dividends paid to affiliates —
—
(803 ) (809 ) 1,612
—
Exercise of employee stock options 59
—
—
—
—
59
Repurchase of shares (789 ) —
—
—
—
(789 )
Employee taxes paid from shares withheld —
(14 ) (4 ) (3 ) —
(21 )
Other - net —
(4 ) (1 ) (3 ) —
(8 )
Net cash provided by (used in)
   financing activities
(438 ) (12 )
(692 )
(699 )
726

(1,115 )

Effect of currency on cash —
—
—
11
—
11
Total increase (decrease) in cash —
89

11

148

—

248
Cash at the beginning of the period 1
92
4
446
—
543
Cash at the end of the period $ 1
$ 181

$ 15

$ 594

$ —

$ 791

CONDENSED CONSOLIDATING BALANCE SHEETS DECEMBER 31, 2018

	Eaton Corporation plc		Eaton Corporation		Guarantors		Other subsidiaries		Consolidating adjustments			Total
Assets
Current assets
Cash	$	1	$	21	$	—	$	261	$	—		$	283
Short-term investments	—		—		—		157		—			157
Accounts receivable - net	—		483		1,400		1,975		—			3,858
Intercompany accounts receivable	—		1,575		1,851		2,968		(6,394		)	—
Inventory	—		540		766		1,555		(76		)	2,785
Prepaid expenses and other current assets	—		107		32		354		14			507
Total current assets	1		2,726		4,049		7,270		(6,456		)	7,590

Property, plant and equipment - net	—		843		678		1,946		—			3,467

Other noncurrent assets
Goodwill	—		1,330		6,705		5,293		—			13,328
Other intangible assets	—		128		3,054		1,664		—			4,846
Deferred income taxes	—		340		—		288		(335		)	293
Investment in subsidiaries	16,476		25,956		71,334		25,557		(139,323		)	—
Intercompany loans receivable	1,508		5,912		8,406		59,078		(74,904		)	—
Other assets	—		746		117		705		—			1,568
Total assets	$	17,985	$	37,981	$	94,343	$	101,801	$	(221,018	)	$	31,092

Liabilities and shareholders’ equity
Current liabilities
Short-term debt	$	—	$	388	$	—	$	26	$	—		$	414
Current portion of long-term debt	—		338		—		1		—			339
Accounts payable	—		476		416		1,238		—			2,130
Intercompany accounts payable	32		1,127		3,206		2,029		(6,394		)	—
Accrued compensation	—		135		71		251		—			457
Other current liabilities	30		525		259		1,002		(2		)	1,814
Total current liabilities	62		2,989		3,952		4,547		(6,396		)	5,154

Noncurrent liabilities
Long-term debt	—		5,814		945		7		2			6,768
Pension liabilities	—		383		130		791		—			1,304
Other postretirement benefits liabilities	—		166		83		72		—			321
Deferred income taxes	—		1		508		175		(335		)	349
Intercompany loans payable	1,816		5,182		66,507		1,399		(74,904		)	—
Other noncurrent liabilities	—		389		291		374		—			1,054
Total noncurrent liabilities	1,816		11,935		68,464		2,818		(75,237		)	9,796

Shareholders’ equity
Eaton shareholders' equity	16,107		23,057		21,927		94,401		(139,385		)	16,107
Noncontrolling interests	—		—		—		35		—			35
Total equity	16,107		23,057		21,927		94,436		(139,385		)	16,142
Total liabilities and equity	$	17,985	$	37,981	$	94,343	$	101,801	$	(221,018	)	$	31,092

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019																			CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

	Eaton Corporation plc			Eaton Corporation			Guarantors			Other subsidiaries			Consolidating adjustments			Total			Eaton Corporation plc			Eaton Corporation			Guarantors			Other subsidiaries			Consolidating adjustments			Total
Net cash provided by (used in) operating activities	$	(158	)	$	(17	)	$	(285	)	$	2,392		$	—		$	1,932		$	(67	)	$	980		$	415		$	1,186		$	—		$	2,514

Investing activities
Capital expenditures for property, plant and equipment	—			(62		)	(75		)	(209		)	—			(346		)	—			(74		)	(88		)	(279		)	—			(441		)
Cash received from acquisitions of businesses, net of cash acquired	—			—			1			—			—			1
Cash paid for acquisitions of businesses, net of cash acquired																			—			—			(30		)	(247		)	—			(277		)
Sales (purchases) of short-term investments - net	—			—			2			(31		)	—			(29		)	—			—			—			(132		)	—			(132		)
Investments in affiliates	(1,250		)	—			(120		)	(1,370		)	2,740			—
Return of investments in affiliates	—			—			47			—			(47		)	—
Loans to affiliates	—			(287		)	(655		)	(6,457		)	7,399			—			—			(470		)	(280		)	(5,044		)	5,794			—
Repayments of loans from affiliates	—			1,288			—			4,501			(5,789		)	—			—			663			—			3,156			(3,819		)	—
Proceeds (payments) for settlement of currency exchange contracts not designated as hedges - net																			—			—			—			26			—			26
Other - net	—			—			30			(27		)	—			3			—			(21		)	32			(19		)	—			(8		)
Net cash provided by (used in) investing activities	(1,250		)	939			(770		)	(3,593		)	4,303			(371		)	—			98			(366		)	(2,539		)	1,975			(832		)

Financing activities
Proceeds from borrowings	—			22			611			—			—			633			—			—			1,232			—			—			1,232
Payments on borrowings	—			(408		)	(240		)	(18		)	—			(666		)	—			(726		)	—			(31		)	—			(757		)
Proceeds from borrowings from affiliates	3,333			2,815			1,059			192			(7,399		)	—			1,927			2,689			428			750			(5,794		)	—
Payments on borrowings from affiliates	(637		)	(3,453		)	(1,658		)	(41		)	5,789			—			(16		)	(2,781		)	(458		)	(564		)	3,819			—
Capital contributions from affiliates	—			—			1,370			1,370			(2,740		)	—
Return of capital to affiliates	—			—			—			(47		)	47			—
Other intercompany financing activities	—			158			(81		)	(77		)	—			—			—			(23		)	(1,239		)	1,262			—			—
Cash dividends paid	(780		)	—			—			—			—			(780		)	(907		)	—			—			—			—			(907		)
Exercise of employee stock options	60			—			—			—			—			60			40			—			—			—			—			40
Repurchase of shares	(567		)	—			—			—			—			(567		)	(978		)	—			—			—			—			(978		)
Employee taxes paid from shares withheld	—			(12		)	(4		)	(2		)	—			(18		)	—			(36		)	(6		)	(3		)	—			(45		)
Other - net	—			—			(3		)	(2		)	—			(5		)	—			—			(6		)	(2		)	—			(8		)
Net cash provided by (used in) financing activities	1,409			(878		)	1,054			1,375			(4,303		)	(1,343		)	66			(877		)	(49		)	1,412			(1,975		)	(1,423		)

Effect of currency on cash	—			—			—			8			—			8			—			—			—			7			—			7
Total increase (decrease) in cash	1			44			(1		)	182			—			226			(1		)	201			—			66			—			266
Cash at the beginning of the period	—			26			7			235			—			268			1			21			—			261			—			283
Cash at the end of the period	$	1		$	70		$	6		$	417		$	—		$	494		$	—		$	222		$	—		$	327		$	—		$	549

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

	Eaton Corporation plc			Eaton Corporation			Guarantors			Other subsidiaries			Consolidating adjustments			Total
Net cash provided by (used in) operating activities	$	(11	)	$	(174	)	$	393		$	1,718		$	(88	)	$	1,838

Investing activities
Capital expenditures for property, plant and equipment	—			(75		)	(74		)	(262		)	—			(411		)
Sales (purchases) of short-term investments - net	—			—			—			329			—			329
Investments in affiliates	—			(36		)	—			—			36			—
Loans to affiliates	—			(100		)	(84		)	(4,764		)	4,948			—
Repayments of loans from affiliates	—			647			956			3,893			(5,496		)	—
Proceeds (payments) for settlement of currency exchange contracts not designated as hedges - net	—			11			—			(133		)	—			(122		)
Other - net	—			(26		)	3			(29		)	—			(52		)
Net cash provided by (used in) investing activities	—			421			801			(966		)	(512		)	(256		)

Financing activities
Proceeds from borrowings	4			65			—			11			—			80
Payments on borrowings	—			(450		)	(35		)	(1		)	—			(486		)
Proceeds from borrowings from affiliates	2,671			1,995			183			99			(4,948		)	—
Payments on borrowings from affiliates	(1,227		)	(2,775		)	(654		)	(840		)	5,496			—
Capital contributions from affiliates	—			—			—			36			(36		)	—
Other intercompany financing activities	—			788			(687		)	(101		)	—			—
Cash dividends paid	(864		)	—			—			—			—			(864		)
Cash dividends paid to affiliates	—			—			—			(88		)	88			—
Exercise of employee stock options	28			—			—			—			—			28
Repurchase of shares	(600		)	—			—			—			—			(600		)
Employee taxes paid from shares withheld	—			(16		)	(5		)	(3		)	—			(24		)
Other - net	—			(1		)	—			(1		)	—			(2		)
Net cash provided by (used in) financing activities	12			(394		)	(1,198		)	(888		)	600			(1,868		)

Effect of currency on cash	—			—			—			52			—			52
Total increase (decrease) in cash	1			(147		)	(4		)	(84		)	—			(234		)
Cash at the beginning of the period	—			183			18			360			—			561
Cash at the end of the period	$	1		$	36		$	14		$	276		$	—		$	327


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Amounts are in millions of dollars or shares unless indicated otherwise (per share data assume dilution).

COMPANY OVERVIEW

Eaton Corporation plc (Eaton or the Company) is a power management company with ~~2016~~2018 net sales of ~~$19.7~~$21.6 billion. The Company provides energy-efficient solutions that help its customers effectively manage electrical, hydraulic, and mechanical power more ~~efficiently,~~reliably, safely, and sustainably. Eaton has approximately ~~96,000~~100,000 employees in over 6059 countries and sells products to customers in more than 175 countries.

Summary of Results of Operations

A summary of Eaton’s Net sales, Net income attributable to Eaton ordinary shareholders, and Net income per share attributable to Eaton ordinary shareholders - diluted follows:


	Three months ended September 30				Nine months ended September 30				Three months ended September 30				Nine months ended September 30
	2017		2016		2017		2016		2019		2018		2019		2018
Net sales	$	5,211	$	4,987	$	15,191	$	14,880	$	5,314	$	5,412	$	16,152	$	16,150
Net income attributable to Eaton ordinary shareholders	1,399		523		2,346		1,418		601		416		1,759		1,514
Net income per share attributable to Eaton ordinary shareholders - diluted	$	3.14	$	1.15	$	5.23	$	3.09	$	1.44	$	0.95	$	4.16	$	3.45

On July 22, 2019, Eaton committed to acquire the Souriau-Sunbank Connection Technologies (Souriau-Sunbank) business of TransDigm Group Inc. for $920. Headquartered in ~~its heavy-duty and medium-duty commercial vehicle automated transmission business~~Versailles, France, Souriau-Sunbank is a global leader in highly engineered electrical interconnect solutions for $600 in cash to Cummins, Inc. The Company recognized a pre-tax gain of $1,077, of which $533 related to the pre-tax gain from the $600 proceeds from the sale and $544 related to the Company’s remaining 50% investmentharsh environments in the ~~joint venture being remeasured~~aerospace, defense, industrial, energy, and transport markets. Its sales for the 12 months ended June 30, 2019 were $363. The purchase agreement was signed on October 28, 2019. The transaction is subject to ~~fair value. The after-tax gain was $843. Eaton will account for its investment on~~customary closing conditions and is expected to close by the ~~equity method~~end of ~~accounting.~~2019.

~~During 2015,~~On March 1, 2019, Eaton announced it plans to pursue a ~~multi-year restructuring initiative~~tax-free spin-off of its Lighting business. On October 15, 2019, Eaton entered into an agreement to ~~reduce~~sell its ~~cost structure~~Lighting business to Signify N.V. for a cash purchase price of $1.4 billion. The decision to sell the Lighting business comes after completing a comprehensive review of various potential transaction alternatives. The Lighting business, which had sales of $1.7 billion in 2018 as part of the Electrical Products segment, serves customers in commercial, industrial, residential and ~~gain efficiencies in all~~municipal markets. Eaton expects the Lighting business ~~segments~~to be classified as held for sale during the fourth quarter of 2019. The transaction is subject to customary closing conditions and ~~at corporate in order~~regulatory approvals and is expected to ~~respond to declining market conditions. Restructuring charges~~close in the ~~third~~first quarter ~~and first nine months~~ of ~~2017 were $22 and $75, respectively, and were $23 and $121 in 2016, respectively. Charges from this initiative are primarily comprised of severance costs. Restructuring charges are anticipated~~2020.

On March 1, 2019, Eaton announced it plans to ~~be $100 in 2017 and incremental savings in 2017 are anticipated to be $155.~~sell its Automotive Fluid Conveyance business.

RESULTS OF OPERATIONS

Non-GAAP Financial Measures

The following discussion of Consolidated Financial Results and Business Segment Results of Operations includes certain non-GAAP financial measures. These financial measures include ~~operating~~adjusted earnings, ~~operating~~adjusted earnings per ordinary share, and operating profit before acquisition integration and divestiture charges for each business segment as well as corporate, each of which differs from the most directly comparable measure calculated in accordance with generally accepted accounting principles (GAAP). A reconciliation of ~~operating~~adjusted earnings and ~~operating~~adjusted earnings per ordinary share to the most directly comparable GAAP measure is included in the table below. Operating profit before acquisition integration and divestiture charges is reconciled in the discussion of the operating results of each business segment, and excludes acquisition integration and divestiture expense related primarily to ~~integration~~the planned divestiture of ~~Ephesus~~the Lighting ~~Inc.~~business and the acquisitions of Ulusoy Elektrik and ISG discussed in ~~2017 and 2016 and Oxalis Group Ltd. in 2016.~~Note 2. Management believes that these financial measures are useful to investors because they exclude certain transactions, allowing investors to more easily compare Eaton’s financial performance period to period. Management uses this information in monitoring and evaluating the on-going performance of Eaton and each business segment. For additional information on acquisition integration and divestiture charges, see Note 3 to the Condensed Consolidated Financial Statements.

Consolidated Financial Results


	Three months ended September 30						Increase (decrease)			Nine months ended September 30								Increase (decrease)		Three months ended September 30								Increase (decrease)		Nine months ended September 30						Increase (decrease)
	2017			2016					2017				2016				2019				2018					2019				2018						Increase (decrease)
Net sales	$	5,211		$	4,987		Increase (decrease)	4.5	%		$	15,191			$	14,880		Increase (decrease)			2	%	$	5,314			$	Increase (decrease)	5,412		(2	)%	$	16,152		$	16,150	—	%
Gross profit	1,742			1,616			8	%		4,962				4,799				3	%	1,802				1,815				(1	)%	5,370			5,309			1	%
Percent of net sales	33.4		%	32.4		%				32.7		%		32.3		%				33.9		%		33.5		%				33.2		%	32.9		%
Income before income taxes	1,691			573			195	%		2,725				1,568				74	%	718				439				64	%	2,059			1,698			21	%
Net income	1,399			522			168	%		2,347				1,417				66	%	602				416				45	%	1,760			1,514			16	%
Less net loss (income) for noncontrolling interests	—			1						(1		)		1
Less net income for noncontrolling interests																				(1		)		—						(1		)	—
Net income attributable to Eaton ordinary shareholders	1,399			523			167	%		2,346				1,418				65	%	601				416				44	%	1,759			1,514			16	%
Excluding acquisition integration charges, after-tax (Note 3)	1			1						2				2
Operating earnings	$	1,400		$	524		167	%		$	2,348			$	1,420			65	%
Excluding acquisition integration and divestiture charges, after-tax (Note 3)																				35				—						60			—
Adjusted earnings																				$	636			$	416			53	%	$	1,819		$	1,514		20	%

Net income per share attributable to Eaton ordinary shareholders - diluted	$	3.14		$	1.15		173	%		$	5.23			$	3.09			69	%	$	1.44			$	0.95			52	%	$	4.16		$	3.45		21	%
Excluding per share impact of acquisition integration charges, after-tax (Note 3)	—			—						—				—
Operating earnings per ordinary share	$	3.14		$	1.15		173	%		$	5.23			$	3.09			69	%
Excluding per share impact of acquisition integration and divestiture charges, after-tax (Note 3)																				0.08				—						0.14			—
Adjusted earnings per ordinary share																				$	1.52			$	0.95			60	%	$	4.30		$	3.45		25	%

Net Sales

Net sales ~~increased 4.5%~~decreased 2% in the third quarter of ~~2017~~2019 compared to the third quarter of ~~2016~~2018 due to ~~an increase~~a decrease of ~~3.5%~~1% in organic sales and ~~an increase~~a decrease of 1%1.5% from the impact of ~~positive~~negative currency ~~translation.~~translation, partially offset by an increase of 0.5% from the acquisitions of businesses. The decrease in organic sales in the third quarter of 2019 was primarily due to lower sales volumes in the Vehicle and Hydraulics business segments, partially offset by higher sales volumes in the Electrical Products, Electrical Systems and Services, and Aerospace business segments. Net sales ~~increased 2%~~were flat in the first nine months of ~~2017~~2019 compared to the first nine months of ~~2016~~2018 due to an increase of 2% in organic ~~sales.~~sales, offset by a decrease of 2% from the impact of negative currency translation. Organic sales grew in the first nine months of 2019 due to higher sales volumes in the Electrical Products, Electrical Systems and Services, and Aerospace business segments, partially offset by lower sales volumes in the Vehicle and Hydraulics business segments.

Gross Profit

Gross profit margin increased from 33.5% in the third quarter of 2018 to 33.9% in the third quarter of 2019, and from 32.9% in the first nine months of 2018 to 33.2% in the first nine months of 2019. The increase in ~~organic sales~~gross profit margin in the third quarter and first nine months of ~~2017~~2019 was primarily due to higher sales volumes and other operating improvements in ~~the~~ Electrical Products ~~Hydraulics,~~ and ~~Vehicle~~Electrical Systems and Services business ~~segments.~~

~~Gross Profit~~

~~Gross profit margin increased from 32.4% in the third quarter of 2016 to 33.4% in the third quarter of 2017,~~segments, and ~~from 32.3% in the first nine months of 2016 to 32.7% in the first nine months of 2017. The increase in gross profit margin was primarily due to~~ higher sales volumes ~~savings from restructuring actions,~~ and ~~lower restructuring charges,~~favorable product mix in the Aerospace business segment, partially offset by ~~commodity inflation~~lower sales volumes in the Vehicle and ~~the impact of three recent hurricanes and the earthquake in Mexico City.~~Hydraulics business segments.

Income Taxes

Net Income

Net income attributable to Eaton ordinary shareholders of ~~$1,399~~$601 in the third quarter of ~~2017~~2019 increased ~~167%~~44% compared to Net income attributable to Eaton ordinary shareholders of ~~$523~~$416 in the third quarter of ~~2016.~~2018. Net income ~~attributable~~attributable to Eaton ordinary shareholders of $1,759 in the first nine months of ~~2017 was $2,346, an increase~~ of~~65%~~2019 increased 16% compared t~~o $1,418~~to Net income attributable to Eaton ordinary shareholders of $1,514 in the first nine months of ~~2016. The increase~~2018. Net income in 2018 included after-tax expense of $206 from the arbitration decision discussed in Note 9. Excluding this item, the decrease in the third quarter of 2019 was primarily due to lower sales volumes, higher acquisition integration and divestiture charges, and a higher effective income tax rate. Excluding the 2018 arbitration decision, the increase in the first nine months of ~~2017~~2019 was primarily due to ~~the $843 after-tax gain from the sale of business discussed in Note 2,~~ higher sales volumes, ~~savings from restructuring actions, and lower restructuring charges,~~ partially offset by a higher effective income tax ~~rate, commodity inflation, and the impact of three recent hurricanes and the earthquake in Mexico City.~~rate.

Net income per ordinary share in the third quarter and first nine months of ~~2017~~2018 both included ~~$1.89 and $1.88, respectively,~~$0.48 from the ~~gain on~~impact of the ~~sale of business~~arbitration decision discussed in Note 2.9. Net income per ordinary share increased to ~~$3.14~~$1.44 in the third quarter of ~~2017~~2019 compared to ~~$1.15~~$0.95 in the third quarter of ~~2016.~~2018. Net in~~come~~income per ordinary share increased to ~~$5.23 in the first nine months of 2017 compared~~ to ~~$3.09~~$4.16 in the first nine months of ~~2016~~.2019 compared to $3.45 in the first nine months of 2018. The increase in the Net income per ordinary share in the third quarter and first nine months of ~~2017~~ 2019 was due to higher Net income attributable to Eaton ordinary shareholders and the impact of the Company's share repurchases over the past year.

~~Operating~~Adjusted Earnings

~~Operating~~Adjusted earnings of ~~$1,400~~$636 in the third quarter of ~~2017~~2019 increased ~~167%~~53% compared to ~~Operating~~Adjusted earnings of ~~$524~~$416 in the third quarter of ~~2016.~~ ~~Operating~~2018. Adjusted earnings of $1,819 in the first nine months of ~~2017 was~~ ~~$2,348, an~~ ~~increase of 65%~~2019 increased 20% compared to ~~$1,420~~Adjusted earnings of $1,514 in the first nine months of ~~2016.~~2018. The increase in ~~Operating~~Adjusted earnings in the third quarter and ~~the~~ first nine months of ~~2017~~2019 was primarily due to higher Net income attributable to Eaton ordinary ~~shareholders.~~shareholders excluding higher acquisition integration and divestiture charges.

~~Operating~~Adjusted earnings per ordinary share increased to ~~$3.14~~$1.52 in the third quarter of ~~2017~~2019 compared to ~~$1.15~~$0.95 in the third quarter of ~~2016. Operating~~2018. Adjusted earnings per ordinary share increased to ~~$5.23~~$4.30 first nine months of 2019 compared to $3.45 in the first nine months of ~~2017 compared to $3.09 in the first nine months of 2016.~~2018. The increase in ~~Operating~~Adjusted earnings per ordinary share in the third quarter and first nine months of ~~2017~~2019 was due to higher ~~Operating~~Adjusted earnings and the impact of the Company's share repurchases over the past year.

Business Segment Results of Operations

The following is a discussion of Net sales, operating profit and operating margin by business segment, which includes a discussion of operating profit and operating profit margin before acquisition integration and divestiture charges. For additional information related to acquisition integration and divestiture charges, see Note 3 to the Condensed Consolidated Financial Statements.

Electrical Products


	Three months ended September 30						Increase (decrease)			Nine months ended September 30								Increase (decrease)		Three months ended September 30								Increase (decrease)		Nine months ended September 30						Increase (decrease)
	2017			2016					2017				2016				2019				2018					2019				2018						Increase (decrease)
Net sales	$	1,857		$	1,767		Increase (decrease)	5	%		$	5,371			$	5,231		Increase (decrease)			3	%	$	1,786			$	Increase (decrease)	1,789		—	%	$	5,395		$	5,327	1	%

Operating profit	$	346		$	331		5	%		$	957			$	924			4	%	$	358			$	343			4	%	$	1,050		$	984		7	%
Operating margin	18.6		%	18.7		%				17.8		%		17.7		%				20.0		%		19.2		%				19.5		%	18.5		%

Acquisition integration charges	$	1		$	1					$	3			$	2
Acquisition integration and divestiture charges																				$	4			$	—					$	6		$	—

Before acquisition integration charges
Before acquisition integration and divestiture charges
Operating profit	$	347		$	332		5	%		$	960			$	926			4	%	$	362			$	343			6	%	$	1,056		$	984		7	%
Operating margin	18.7		%	18.8		%				17.9		%		17.7		%				20.3		%		19.2		%				19.6		%	18.5		%

Net sales ~~increased 5%~~were flat in the third quarter of ~~2017~~2019 compared to the third quarter of ~~2016~~2018 due to an increase of 4%1% in organic sales, offset by a decrease of 1% from the impact of negative currency translation. Organic sales grew in the third quarter of 2019 primarily driven by strength in residential and commercial construction markets in North America, partially offset by a decline in industrial controls globally. Net sales increased 1% in the first nine months of 2019 compared to the first nine months of 2018 due to an increase of 3% in organic sales, partially offset by a decrease of 2% from the impact of negative currency translation. Organic sales grew in the first of nine months of 2019 in North America, primarily driven by growth in commercial, residential and industrial applications.

The operating margin increased from 19.2% in the third quarter of 2018 to 20.0% in the third quarter of 2019 and from 18.5% in the first nine months of 2018 to 19.5% in the first nine months of 2019 primarily due to higher sales volumes and other operating improvements.

The operating margin before acquisition integration and divestiture charges increased from 19.2% in the third quarter of 2018 to 20.3% in the third quarter of 2019 and from 18.5% in the first nine months of 2018 to 19.6% in the first nine months of 2019 primarily due to an increase in the operating margin.

Electrical Systems and Services



	Three months ended September 30						Increase (decrease)		Nine months ended September 30						Increase (decrease)
	2019			2018			Increase (decrease)		2019			2018			Increase (decrease)
Net sales	$	1,572		$	1,519		3	%	$	4,618		$	4,413		5	%

Operating profit	$	284		$	234		21	%	$	751		$	628		20	%
Operating margin	18.1		%	15.4		%			16.3		%	14.2		%

Acquisition integration and divestiture charges	$	3		$	—				$	4		$	—

Before acquisition integration and divestiture charges
Operating profit	$	287		$	234		23	%	$	755		$	628		20	%
Operating margin	18.3		%	15.4		%			16.3		%	14.2		%

Net sales increased 3% in the third quarter of 2019 compared to the third quarter of 2018 due to an increase of 3% in organic sales and an increase of 1.5% from the acquisitions of businesses, partially offset by a decrease of 1.5% from the impact of negative currency translation. The increase in organic sales in the third quarter of 2019 was primarily driven by strength in data centers, commercial construction and engineering services. Net sales increased 5%in the first nine months of 2019 compared to the first nine months of 2018 due to an increase of 5% in organic sales and an increase of 1% from the acquisition of a business, partially offset by a decrease of 1% from the impact of ~~positive~~negative currency translation. ~~Net~~The increase in organic sales ~~increased 3%~~ in the first nine months of ~~2017~~2019 was primarily driven by strength in commercial construction, industrial projects and data centers.

The operating margin increased from 15.4% in the third quarter of 2018 to 18.1% in the third quarter of 2019 and from 14.2% in the first nine months of 2018 to 16.3% in the first nine months of 2019 primarily due to higher sales volumes and other operating improvements.

The operating margin before acquisition integration and divestiture charges increased from 15.4% in the third quarter of 2018 to 18.3% in the third quarter of 2019 and from 14.2% in the first nine months of 2018 to 16.3% in the first nine months of 2019 primarily due to an increase in the operating margin.

Hydraulics



	Three months ended September 30						Increase (decrease)		Nine months ended September 30						Increase (decrease)
	2019			2018			Increase (decrease)		2019			2018			Increase (decrease)
Net sales	$	603		$	670		(10	)%	$	1,987		$	2,103		(6	)%

Operating profit	$	72		$	94		(23	)%	$	232		$	285		(19	)%
Operating margin	11.9		%	14.0		%			11.7		%	13.6		%

Net sales decreased 10% in the third quarter of 2019 compared to the third quarter of 2018 due to a decrease of 8% in organic sales and a decrease of 2% from the impact of negative currency translation. Net sales decreased 6% in the first nine months of 2019 compared to the first nine months of ~~2016 due to an increase of 3% in organic sales. Organic sales growth in the third quarter and first nine months of 2017 was driven by growth in the Americas and Europe.~~

Operating margin decreased from 18.7% in the third quarter of 2016 to 18.6% in the third quarter of 2017 primarily due to the impact of recent natural disasters and commodity inflation, partially offset by higher sales volumes and savings from restructuring actions. ~~Operating margin~~ ~~increased~~ ~~from17.7% in the first nine months of~~ ~~2016~~ ~~to 17.8% in the first nine months of~~ ~~2017 primarily due to higher sales volumes, savings from restructuring actions and lower restructuring charges, partially offset by commodity inflation and the impact of recent natural disasters.~~

Operating margin before acquisition integration charges decreased from 18.8% in the third quarter of 2016 to 18.7% in the third quarter of 2017 due to a decrease in operating margin. Operating margin before acquisition integration charges increased from 17.7% in the first nine months of 2016 to 17.9% in the first nine months of 2017 due to an increase in operating margin.

~~Electrical Systems and Services~~

Three months ended
September 30 Increase (decrease) Nine months ended
September 30 Increase (decrease)
2017 2016 2017 2016
Net sales $ 1,421
$ 1,436
(1 )% $ 4,168
$ 4,207
(1 )%

Operating profit $ 196
$ 197
(1 )% $ 545
$ 534
2 %
Operating margin 13.8 % 13.7 % 13.1 % 12.7 %

Acquisition integration charges $ —
$ —
$ —
$ 1

Before acquisition integration charges
Operating profit $ 196
$ 197
(1 )% $ 545
$ 535
2 %
Operating margin 13.8 % 13.7 % 13.1 % 12.7 %

~~Net sales decreased 1% in the third quarter of 2017 compared to the third quarter of 2016~~2018 due to a decrease of 2%3% in organic sales ~~partially offset by an increase of 1%~~and 3% from the impact of ~~positive~~negative currency translation. ~~Net sales decreased 1% in the first nine months of 2017 compared to the first nine months of 2016 due to a decrease of 1% in organic sales.~~ The decrease in organic sales in the third quarter and first nine months of ~~2017~~2019 was primarily due to ~~softness~~weakness in ~~North American assembly markets.~~global mobile equipment markets and destocking at both OEMs and distributors.

~~Operating~~The operating margin ~~increased~~decreased from ~~13.7%~~14.0% in the third quarter of ~~2016~~2018 to ~~13.8%~~11.9% in the third quarter of ~~2017. Operating margin increased~~2019 and from ~~12.7%~~13.6% in the first nine months of ~~2016~~2018 to ~~13.1%~~11.7% in the first nine months of ~~2017. These increases are~~2019 primarily due to ~~savings from restructuring actions~~lower sales volumes, unfavorable product mix and ~~lower restructuring charges,~~operating inefficiencies.

Aerospace



	Three months ended September 30						Increase (decrease)		Nine months ended September 30						Increase (decrease)
	2019			2018			Increase (decrease)		2019			2018			Increase (decrease)
Net sales	$	513		$	478		7	%	$	1,532		$	1,399		10	%

Operating profit	$	129		$	105		23	%	$	372		$	284		31	%
Operating margin	25.1		%	22.0		%			24.3		%	20.3		%

Net sales increased 7% in the third quarter of 2019 compared to the third quarter of 2018 due to an increase of 8% in organic sales, partially offset by ~~commodity inflation.~~

~~Operating margin before acquisition integration charges~~a decrease of 1% from the impact of negative currency translation. Net sales increased ~~from 12.7%~~10% in the first nine months of ~~2016 to 13.1% in the first nine months of 2017 due to an increase in operating margin.~~

~~Hydraulics~~

Three months ended
September 30 Increase (decrease) Nine months ended
September 30 Increase (decrease)
2017 2016 2017 2016
Net sales $ 634
$ 562
13 % $ 1,854
$ 1,702
9 %

Operating profit $ 80
$ 61
31 % $ 214
$ 161
33 %
Operating margin 12.6 % 10.9 % 11.5 % 9.5 %

~~Net sales increased 13% in the third quarter of 2017 compared to the third quarter of 2016 due to an increase of 13% in organic sales. Net sales increased 9% in the first nine months of 2017~~2019 compared to the first nine months of ~~2016~~2018 due to an increase of ~~10%~~11% in organic sales, partially offset by a decrease of 1% from the impact of negative currency translation. The increase in organic sales in the third quarter and first nine months of ~~2017~~2019 was primarily due to strength in ~~global~~the commercial OEM ~~markets~~market and ~~distribution channels.~~the commercial aftermarket.

~~Operating~~The operating margin increased from ~~10.9%~~22.0% in the third quarter of ~~2016~~2018 to ~~12.6%~~25.1% in ~~the~~ third quarter of ~~2017~~2019 and from 20.3% in the first nine months of 2018 to 24.3% in the first nine months of 2019 primarily due to higher sales volumes ~~partially offset by commodity inflation. Operating margin increased~~ ~~from 9.5% in the first nine months of~~ ~~2016~~ ~~to 11.5% in the first nine months of~~ ~~2017 primarily due to higher sales volumes, savings from restructuring actions~~ and ~~lower restructuring charges, partially offset by commodity inflation.~~favorable product mix.

~~Aerospace~~Vehicle


	Three months ended September 30						Increase (decrease)			Nine months ended September 30								Increase (decrease)		Three months ended September 30								Increase (decrease)		Nine months ended September 30						Increase (decrease)
	2017			2016					2017				2016				2019				2018					2019				2018						Increase (decrease)
Net sales	$	438		$	436		Increase (decrease)	—	%		$	1,303			$	1,328		Increase (decrease)			(2	)%	$	761			$	Increase (decrease)	876		(13	)%	$	2,374		$	2,668	(11	)%

Operating profit	$	84		$	88		(5	)%		$	244			$	251			(3	)%	$	139			$	166			(16	)%	$	397		$	464		(14	)%
Operating margin	19.2		%	20.2		%				18.7		%		18.9		%				18.3		%		18.9		%				16.7		%	17.4		%

Net sales ~~were flat~~decreased 13% in the third quarter of ~~2017~~2019 compared to the third quarter of ~~2016 with no change in organic sales or currency translation. Net sales decreased 2% in the first nine months of 2017 compared to the first nine months of 2016~~2018 due to a decrease of 1%12% in organic sales and a decrease of 1% from the impact of negative currency translation. Net sales decreased 11% in the first nine months of 2019 compared to the first nine months of 2018 due to a decrease of 9% in organic sales and a decrease of 2% from the impact of negative currency translation. The decrease in organic sales in the third quarter and first nine months of ~~2017~~2019 was ~~primarily due~~driven by weakness in global light vehicle markets and revenues transferring over to ~~lower sales in military aftermarket, business and regional jets, and lower cost reimbursements on certain engineering programs, partially offset by growth in commercial transports.~~the Eaton Cummins Automated Transmission Technologies joint venture.

~~Operating margin decreased from 20.2% in the third quarter of 2016 to 19.2% in third quarter of 2017 primarily due to unfavorable product mix. Operating~~The operating margin decreased from 18.9% in the ~~first nine months~~third quarter of ~~2016~~2018 to ~~18.7%~~18.3% in the third quarter of 2019and from 17.4% in the first nine months of ~~2017~~2018 to 16.7% in the first nine months of 2019 primarily due to lower sales ~~volumes and unfavorable product mix, partially offset by savings from restructuring actions.~~volumes.

~~Vehicle~~eMobility


	Three months ended September 30						Increase (decrease)			Nine months ended September 30								Increase (decrease)		Three months ended September 30								Increase (decrease)		Nine months ended September 30						Increase (decrease)
	2017			2016					2017				2016				2019				2018					2019				2018						Increase (decrease)
Net sales	$	861		$	786		Increase (decrease)	10	%		$	2,495			$	2,412		Increase (decrease)			3	%	$	79			$	Increase (decrease)	80		(1	)%	$	246		$	240	3	%

Operating profit	$	150		$	122		23	%		$	397			$	377			5	%	$	4			$	10			(60	)%	$	16		$	35		(54	)%
Operating margin	17.4		%	15.5		%				15.9		%		15.6		%				5.1		%		12.5		%				6.5		%	14.6		%

Net sales ~~increased 10%~~decreased 1% in the third quarter of ~~2017~~2019 compared to the third quarter of ~~2016~~2018 due to ~~an increase of 9% in organic sales and an increase of 2% from the impact of positive currency translation, partially offset by a~~ decrease of 1% from the ~~sale~~impact of ~~a business discussed in Note 2. The increase in organic sales in the third quarter of 2017 was driven by growth in all regions, with particular strength in the North American Class 8 truck market.~~negative currency translation. Net sales increased 3% in the first nine months of ~~2017~~2019 compared to the first nine months of ~~2016~~2018 due to an increase of 2%4% in organic sales, ~~and an increase~~partially offset by a decrease of 1% from the impact of ~~positive~~negative currency translation. The increase in organic sales in the first nine months of ~~2017~~2019 was ~~primarily~~ due to growth in North America.

~~Operating~~The operating margin ~~increased~~decreased from ~~15.5%~~12.5% in the third quarter of ~~2016~~2018 to ~~17.4%~~5.1% in the third quarter of ~~2017 primarily due to higher sales volumes. Operating m~~ar~~gin increased~~2019 and from ~~15.6%~~14.6% in the first nine months of ~~2016~~2018 to ~~15.9%~~6.5% in the first nine months of ~~2017~~ 2019 primarily due to ~~higher sales volumes, savings from restructuring actions~~increased research and ~~lower restructuring costs, partially offset by unfavorable product mix and commodity inflation.~~

development costs.

Corporate Expense ~~(Income)~~


	Three months ended September 30					Increase (decrease)			Nine months ended September 30								Increase (decrease)		Three months ended September 30								Increase (decrease)		Nine months ended September 30					Increase (decrease)
	2017			2016				2017				2016				2019				2018					2019				2018					Increase (decrease)
Amortization of intangible assets	$	98		$	99	Increase (decrease)	(1	)%		$	288			$	297		Increase (decrease)			(3	)%	$	93			$	Increase (decrease)	95		(2	)%	$	280	$	289	(3	)%
Interest expense - net	60			59		2	%		181				173				5	%	54				67				(19	)%	183			205		(11	)%
Pension and other postretirement benefits expense	16			18		(11	)%		38				45				(16	)%	5				3				67	%	7			4		75	%
Gain on sale of business	(1,077		)	—		NM			(1,077		)		—				NM
Arbitration decision expense																			—				275				NM		—			275		NM
Other corporate expense - net	68			50		36	%		202				164				23	%	116				73				59	%	289			209		38	%
Total corporate expense (income)	$	(835	)	$	226	(469	)%		$	(368	)		$	679			(154	)%
Total corporate expense																			$	268			$	513			(48	)%	$	759		$	982	(23	)%

Total corporate ~~income~~expense was ~~$835~~$268 in the third quarter of ~~2017~~2019 compared to corporate expense of ~~$226~~$513 in the third quarter of ~~2016.~~2018. Total corporate ~~income~~expense was ~~$368~~$759 in the first nine months of ~~2017~~2019 compared to corporate expense of ~~$679~~$982 in the first nine months of ~~2016.~~2018. The ~~change~~decrease in Total corporate expense ~~(income)~~ for the third quarter and first nine months of ~~2017~~2019 was primarily due to ~~a gain on sale of business~~the 2018 arbitration decision discussed in Note 2,9, partially offset by ~~an increase~~higher acquisition integration and divestiture charges discussed in ~~other corporate expense - net driven by an increase to the LIFO inventory reserve and higher corporate restructuring expenses.~~Note 2.

LIQUIDITY, CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION

Financial Condition and Liquidity

Eaton’s objective is to finance its business through operating cash flow and an appropriate mix of equity and long-term and short-term debt. By diversifying its debt maturity structure, Eaton reduces liquidity risk. The Company maintains access to the commercial paper markets through a $2,000 commercial paper program, which is supported by credit facilities in the aggregate principal amount of $2,000. There were no borrowings outstanding under these revolving credit facilities at September 30, ~~2017.~~2019. Over the course of a year, cash, short-term investments and short-term debt may fluctuate in order to manage global liquidity. Eaton believes it has the operating flexibility, cash flow, cash and short-term investment balances, and access to capital markets in excess of the liquidity necessary to meet future operating needs of the business as well as scheduled payments of long-term debt.

Eaton was in compliance with each of its debt covenants for all periods presented.

Sources and Uses of Cash

Operating Cash Flow

Net cash provided by operating activities was ~~$1,787~~$2,514 in the first nine months of ~~2017, a decrease~~2019, an increase of ~~$145~~$676 in the source of cash compared to ~~$1,932~~$1,838 in the first nine months of ~~2016.~~2018. The ~~decrease~~increase in net cash provided by operating activities in the first nine months of ~~2017~~2019 was driven by higher ~~pension contributions, including $350 contributed~~net income compared to ~~Eaton's U.S. qualified pension plans, partially offset by a lower increase in working capital.~~2018. Other-net includes the impact of foreign currency gains and losses related to the remeasurement of intercompany balance sheet exposures, which have no impact on Operating cash flow.

Investing Cash Flow

Net cash used in investing activities was ~~$435~~$832 in the first nine months of ~~2017,~~2019, an increase in the use of cash of ~~$64~~$576 compared to ~~$371~~$256 in the first nine m~~onths~~months of ~~2016.~~2018. The increase in the use of cash was primarily driven by ~~an increase in~~ net purchases of short-term investments of ~~$621~~$132 in ~~2017~~2019 compared to ~~$29~~net sales of $329 in ~~2016,~~2018, and cash paid for business acquisitions discussed in Note 2, partially offset by $26 of net proceeds in 2019 compared to net payments of ~~$600~~$122 in 2018 from the ~~sale~~settlement of ~~a business~~currency exchange contracts not designated as hedges discussed in Note 2.13.

Financing Cash Flow

Net cash used in financing activities was ~~$1,115~~$1,423 in the first nine months of ~~2017,~~2019, a decrease of ~~$228~~$445 in the use of cash compared to ~~$1,343~~$1,868 in the first nine months of ~~2016.~~2018. The decrease in the use of cash was primarily due to ~~an increase of $367 in~~higher proceeds from borrowings ~~which totaled $1,000~~of $1,232 in ~~2017~~2019 compared to $80 in 2018, partially offset by higher share repurchases of $978 in 2019 compared to $600 in 2018, and ~~$633 in 2016, and a decrease of $113 in~~higher payments on borrowings ~~which totaled $553~~of $757 in ~~2017 and $666 in 2016. This was partially offset by a $222 increase in share repurchases during the first nine months of 2017~~2019 compared to ~~the first nine months of 2016.~~$486 in 2018.

FORWARD-LOOKING STATEMENTS

This Form 10-Q Report contains forward-looking statements concerning ~~expected pension contributions,~~the anticipated ~~stock repurchases, the impact~~completion of the ~~adoption~~divestiture of ~~ASU 2014-09,~~our Lighting business, the anticipated completion of the acquisition of Souriau-Sunbank Connection Technologies and ~~the costs and benefits of restructuring actions,~~legal contingencies, among other matters. These statements may discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to Eaton, based on current beliefs of management as well as assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or expressions. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside Eaton’s control. The following factors could cause actual results to differ materially from those in the forward-looking statements: ~~unexpected results from the implementation of ASU 2014-09,~~ unanticipated changes in the markets for the Company’s business segments; unanticipated downturns in business relationships with customers or their purchases from us; the potential effects on our businesses from natural disasters; the availability of credit to customers and suppliers; competitive pressures on sales and pricing; unanticipated changes in the cost of material and other production costs, or unexpected costs that cannot be recouped in product pricing; the introduction of competing technologies; unexpected technical or marketing difficulties; unexpected claims, charges, litigation or dispute resolutions; strikes or other labor unrest; the impact of acquisitions and divestitures; unanticipated difficulties integrating acquisitions; new laws and governmental regulations; interest rate changes; tax rate changes or exposure to additional income tax liability; stock market and currency fluctuations; war, civil or political unrest or terrorism; and unanticipated deterioration of economic and financial conditions in the United States and around the world. Eaton does not assume any obligation to update these forward-looking statements.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There have been no material changes in exposures to market risk since December 31, ~~2016.~~2018.


ITEM 4.	CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures - Pursuant to SEC Rule 13a-15, an evaluation was performed under the supervision and with the participation of Eaton’s management, including Craig Arnold - Principal Executive Officer; and Richard H. Fearon - Principal Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, management concluded that Eaton’s disclosure controls and procedures were effective as of September 30, ~~2017~~2019.

Disclosure controls and procedures are designed to ensure that information required to be disclosed in Eaton’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Eaton’s reports filed under the Exchange Act is accumulated and communicated to management, including Eaton’s Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.

During the third quarter of ~~2017,~~2019, there was no change in Eaton’s internal control over financial reporting that materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

PART II — OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS.

Information regarding the Company's current legal proceedings is presented in Note 89 of the Notes to the Condensed Consolidated Financial Statements.


ITEM 1A.	RISK FACTORS.

“Item 1A. Risk Factors” in Eaton's ~~2016~~2018 Form 10-K includes a discussion of the Company's risk factors. There have been no material changes from the risk factors described in the ~~2016~~2018 Form 10-K.


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

During the third quarter of ~~2017, 4.4~~2019, 6.8 million ordinary shares were repurchased in the open market at a total cost of ~~$324~~$539 million. These shares were repurchased under the program approved by the Board on February ~~24, 2016.~~27, 2019 (the 2019 Program). A summary of the shares repurchased in the third quarter of ~~2017~~2019 follows:


Month	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions)		Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions)
July	—	$	—	—	$	1,388	780,496	$	82.87	780,496	$	4,292
August	4,415,144	$	73.29	4,415,144	$	1,064	5,667,541	$	78.32	5,667,541	$	4,227
September	—	$	—	—	$	1,064	384,208	$	78.08	384,208	$	3,783
Total	4,415,144	$	73.29	4,415,144			6,832,245	$	78.82	6,832,245	3,753


ITEM 5.	~~OTHER INFORMATION.~~

~~Disclosure Pursuant to Section 13r of the Exchange Act~~

Set forth below is a description of all matters reported by us pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 and Section 13(r) of the Exchange Act. Concurrently with the filing of this Quarterly Report, we are filing a notice pursuant to Section 13(r) of the Exchange Act that such matters have been disclosed in this Quarterly Report.

During the third quarter, certain of our wholly-owned non-U.S. subsidiaries sold various electrical products to customers in Iran. We received total revenue of approximately 1,015,072 Euros and realized net profits of approximately 282,649 Euros from the sales (approximately $1,197,983 and $333,581 in whole U.S. dollars, respectively). One or more of our non-U.S. subsidiaries intend to continue doing business in Iran under General License H in compliance with U.S. economic sanctions and export control laws, though the Company has no assets or employees in Iran.


~~ITEM~~ 6.	EXHIBITS.

~~Exhibits — See Exhibit Index attached.~~

~~SIGNATURES~~

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



			~~EATON CORPORATION plc~~
			~~Registrant~~

~~Date:~~	~~October 31, 2017~~	~~By:~~	~~/s/ Richard H. Fearon~~
			~~Richard H. Fearon~~
			~~Principal Financial Officer~~
			~~(On behalf of the registrant and as Principal Financial Officer)~~

Eaton Corporation plc

Third Quarter ~~2017~~2019 Report on Form 10-Q

~~Exhibit Index~~



3 (i)		Certificate of Incorporation — Incorporated by reference to the Form S-8 filed November 30, 2012

3 (ii)		Amended and Restated Memorandum and Articles of Incorporation — Incorporated by reference to the Form 8-K filed on May 1, 2017

4.1		Indenture dated as of November 20, 2012, among Turlock Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 of Eaton Corporation plc's Form 8-K Current Report filed on November 26, 2012 (Commission File No. 333-182303))

4.2		Supplemental Indenture No. 1, dated as of November 30, 2012, among Eaton Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 of the registrant's Form S-4 filed on September 6, 2013)

4.3		Supplemental Indenture No. 2, dated as of January 8, 2013, among Eaton Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference Exhibit 4.3 of the registrant's Form S-4 filed on September 6, 2013)

4.4		Supplemental Indenture No. 3, dated as of December 20, 2013, among Eaton Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference Exhibit 4.4 of the registrant's Form 10-K filed on February 28, 2018)

4.5		Supplemental Indenture No. 4, dated as of December 20, 2017 and effective as of January 1, 2018, among Eaton Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference Exhibit 4.5 of the registrant's Form 10-K filed on February 28, 2018)

4.6		Supplemental Indenture No. 5, dated as of February 16, 2018, among Eaton Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference Exhibit 4.6 of the registrant's Form 10-K filed on February 28, 2018)

4.7		Pursuant to Regulation S-K Item 601(b)(4), Eaton agrees to furnish to the SEC, upon request, a copy of the instruments defining the rights of holders of its long-term debt other than those set forth in Exhibits ~~4.1-4.3~~(4.1 - 4.6) hereto

12		Ratio of Earnings to Fixed Charges — Filed in conjunction with this Form 10-Q Report *

31.1		Certification of Principal Executive Officer (Pursuant to Rule 13a-14(a)) — Filed in conjunction with this Form 10-Q Report *

31.2		Certification of Principal Financial Officer (Pursuant to Rule 13a-14(a)) — Filed in conjunction with this Form 10-Q Report *

32.1		Certification of Principal Executive Officer (Pursuant to Rule 13a-14(b) as adopted pursuant to Section 906 of the Sarbanes-Oxley Act) — Filed in conjunction with this Form 10-Q Report *

32.2		Certification of Principal Financial Officer (Pursuant to Rule 13a-14(b) as adopted pursuant to Section 906 of the Sarbanes-Oxley Act) — Filed in conjunction with this Form 10-Q Report *

101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. *

101.SCH		XBRL Taxonomy Extension Schema Document *

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document *

101.DEF		XBRL Taxonomy Extension Label Definition Document *

101.LAB		XBRL Taxonomy Extension Label Linkbase Document *

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document *

104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)



*		Submitted electronically herewith.

~~Attached as Exhibit 101~~

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report ~~are~~to be signed on its behalf by the ~~following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Income for the~~ ~~three~~ ~~months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016, (ii) Consolidated Statements of Comprehensive Income for the~~ ~~three~~ ~~months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016, (iii) Condensed Consolidated Balance Sheets at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016, (iv) Condensed Consolidated Statements of Cash Flows for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~ ~~and (v) Notes to Condensed Consolidated Financial Statements for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~.undersigned, thereunto duly authorized.



			EATON CORPORATION plc
			Registrant

Date:	October 29, 2019	By:	/s/ Richard H. Fearon
			Richard H. Fearon
			Principal Financial Officer
			(On behalf of the registrant and as Principal Financial Officer)



	Workforce reductions			Plant closings and other			Total
Balance at December 31, 2015	$	54		$	—		$	54
Liability recognized	177			34			211
Payments	(116		)	(13		)	(129		)
Other adjustments	(2		)	(20		)	(22		)
Balance at December 31, 2016	113			1			114
Liability recognized	35			40			75
Payments	(78		)	(25		)	(103		)
Other adjustments	(3		)	(12		)	(15		)
Balance at September 30, 2017	$	67		$	4		$	71



	Electrical Products		Electrical Systems and Services		Hydraulics		Aerospace		Vehicle			Total
December 31, 2016	$	6,497	$	4,203	$	1,221	$	938	$	342		$	13,201
Goodwill written off from sale of business	—		—		—		—		(52		)	(52		)
Translation	235		114		34		8		5			396
September 30, 2017	$	6,732	$	4,317	$	1,255	$	946	$	295		$	13,545



	Eaton shareholders’ equity			Noncontrolling interests			Total equity
Balance at December 31, 2016	$	14,897		$	44		$	14,941
Cumulative-effect adjustment upon adoption of ASU 2016-09	48			—			48
Net income	2,346			1			2,347
Other comprehensive income	785			—			785
Cash dividends paid	(803		)	(3		)	(806		)
Issuance of shares under equity-based compensation plans - net	109			—			109
Repurchase of shares	(789		)	—			(789		)
Changes in noncontrolling interest - net	—			1			1
Balance at September 30, 2017	$	16,593		$	43		$	16,636



	Nine months ended September 30, 2017				Consolidated statements of income classification
Amortization of defined benefit pensions and other postretirement benefits items
Actuarial loss and prior service cost	$	(146	)	¹
Tax benefit	47
Total, net of tax	(99		)

Gains and (losses) on cash flow hedges
Currency exchange contracts	(12		)		Cost of products sold
Tax benefit	4
Total, net of tax	(8		)

Total reclassifications for the period	$	(107	)