Item 1. FINANCIAL STATEMENTS.

EATON CORPORATION plc

CONSOLIDATED STATEMENTS OF INCOME

			Three months ended September 30												Nine months ended September 30
(In millions except for per share data)			2021						2020						2021						2020
Net sales			$	4,923					$	4,526					$	14,830					$	13,171
Cost of products sold			3,338						3,051						10,067						9,230
Selling and administrative expense			834						754						2,505						2,310
Research and development expense			152						132						454						411
Interest expense - net			37						41						112						113
Gain on sale of businesses			617						—						617						221
Other expense - net			66						23						38						135
Income before income taxes			1,113						525						2,271						1,193
Income tax expense			483						78						676						254
Net income			630						447						1,595						939
Less net income for noncontrolling interests			(1)						(1)						(2)						(4)
Net income attributable to Eaton ordinary shareholders			$	629					$	446					$	1,593					$	935
Net income per share attributable to Eaton ordinary shareholders
Diluted			$	1.57					$	1.11					$	3.97					$	2.31
Basic			1.58						1.11						4.00						2.32
Weighted-average number of ordinary shares outstanding
Diluted			401.9						402.3						401.4						404.9
Basic			398.9						400.4						398.7						403.3
Cash dividends declared per ordinary share			$	0.76					$	0.73					$	2.28					$	2.19

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
(In millions)			2021						2020						2021						2020
Net income			$	630					$	447					$	1,595					$	939
Less net income for noncontrolling interests			(1)						(1)						(2)						(4)
Net income attributable to Eaton ordinary shareholders			629						446						1,593						935
Other comprehensive income (loss), net of tax
Currency translation and related hedging instruments			170						217						78						(276)
Pensions and other postretirement benefits			83						16						291						128
Cash flow hedges			(10)						43						38						(95)
Other comprehensive income (loss) attributable to Eaton ordinary shareholders			243						276						407						(243)
Total comprehensive income attributable to Eaton ordinary shareholders			$	872					$	722					$	2,000					$	692

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

EATON CORPORATION plc

CONSOLIDATED BALANCE SHEETS

(In millions)			September 30, 2021						December 31, 2020
Assets
Current assets
Cash			$	271					$	438
Short-term investments			389						664
Accounts receivable - net			3,393						2,904
Inventory			2,802						2,109
Assets held for sale			—						2,487
Prepaid expenses and other current assets			632						576
Total current assets			7,487						9,178
Property, plant and equipment
Land and buildings			2,248						2,184
Machinery and equipment			5,563						5,404
Gross property, plant and equipment			7,811						7,588
Accumulated depreciation			(4,786)						(4,624)
Net property, plant and equipment			3,025						2,964
Other noncurrent assets
Goodwill			14,767						12,903
Other intangible assets			6,041						4,175
Operating lease assets			448						428
Deferred income taxes			422						426
Other assets			1,938						1,750
Total assets			$	34,128					$	31,824
Liabilities and shareholders’ equity
Current liabilities
Short-term debt			$	428					$	1
Current portion of long-term debt			116						1,047
Accounts payable			2,591						1,987
Accrued compensation			489						351
Liabilities held for sale			—						468
Other current liabilities			2,290						2,027
Total current liabilities			5,914						5,881
Noncurrent liabilities
Long-term debt			8,520						7,010
Pension liabilities			1,029						1,588
Other postretirement benefits liabilities			273						330
Operating lease liabilities			343						326
Deferred income taxes			494						277
Other noncurrent liabilities			1,541						1,439
Total noncurrent liabilities			12,200						10,970
Shareholders’ equity
Ordinary shares (398.6 million outstanding in 2021 and 398.1 million in 2020)			4						4
Capital in excess of par value			12,411						12,329
Retained earnings			7,345						6,794
Accumulated other comprehensive loss			(3,788)						(4,195)
Shares held in trust			(1)						(2)
Total Eaton shareholders’ equity			15,971						14,930
Noncontrolling interests			43						43
Total equity			16,014						14,973
Total liabilities and equity			$	34,128					$	31,824

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
(In millions)			2021						2020
Operating activities
Net income			$	1,595					$	939
Adjustments to reconcile to net cash provided by operating activities
Depreciation and amortization			684						603
Deferred income taxes			(123)						(7)
Pension and other postretirement benefits expense			41						159
Contributions to pension plans			(318)						(92)
Contributions to other postretirement benefits plans			(15)						(16)
Gain on sale of businesses			(197)						(91)
Changes in working capital			(299)						357
Other - net			—						149
Net cash provided by operating activities			1,368						2,001
Investing activities
Capital expenditures for property, plant and equipment			(412)						(291)
Cash paid for acquisitions of businesses, net of cash acquired			(4,500)						(200)
Proceeds from sales of businesses, net of cash sold			3,110						1,408
Investments in associate companies			(124)						(19)
Sales (purchases) of short-term investments - net			264						(121)
Payments for settlement of currency exchange contracts not designated as hedges - net			(3)						(28)
Other - net			(23)						(40)
Net cash provided by (used in) investing activities			(1,688)						709
Financing activities
Proceeds from borrowings			1,798						—
Payments on borrowings			(1,011)						(7)
Short-term debt, net			430						(253)
Cash dividends paid			(916)						(884)
Exercise of employee stock options			48						31
Repurchase of shares			(122)						(1,464)
Employee taxes paid from shares withheld			(46)						(36)
Other - net			(15)						(6)
Net cash provided by (used in) financing activities			166						(2,619)
Effect of currency on cash			(13)						(30)
Less: Increase in cash classified as held for sale			—						(2)
Total increase (decrease) in cash			(167)						59
Cash at the beginning of the period			438						370
Cash at the end of the period			$	271					$	429

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 2020 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.

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

**Note 2.**ACQUISITIONS AND DIVESTITURES OF BUSINESSES

Acquisition of Power Distribution, Inc.

On February 25, 2020, Eaton acquired Power Distribution, Inc. a leading supplier of mission critical power distribution, static switching, and power monitoring equipment and services for data centers and industrial and commercial customers. The company is headquartered in Richmond, Virginia, and had 2019 sales of $125 million. Power Distribution, Inc. is reported within the Electrical Americas business segment.

Sale of Lighting business

On March 2, 2020, Eaton sold its Lighting business to Signify N.V. for a cash purchase price of $1.4 billion. As a result of the sale, the Company recognized a pre-tax gain of $221 million in 2020. The Lighting business, which had sales of $1.6 billion in 2019 as part of the Electrical Americas business segment, served customers in commercial, industrial, residential, and municipal markets.

Acquisition of Tripp Lite

On March 17, 2021, Eaton acquired Tripp Lite for $1.65 billion, net of cash received. Tripp Lite is a leading supplier of power quality products and connectivity solutions including single-phase uninterruptible power supply systems, rack power distribution units, surge protectors, and enclosures for data centers, industrial, medical, and communications markets in the Americas. Tripp Lite had sales of over $400 million in 2020. Tripp Lite is reported within the Electrical Americas business segment.

The acquisition of Tripp Lite has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed on the acquisition date, as well as measurement period adjustments recorded as of September 30, 2021. These preliminary estimates will continue to be revised during the measurement period as third-party valuations are received and finalized, further information becomes available and additional analyses are performed, and these differences could have a material impact on Eaton's preliminary purchase price allocation. The current measurement period adjustments did not have a material impact to the Consolidated Statements of Income.

(In millions)												Preliminary Allocation						Measurement Period Adjustments						Adjusted Preliminary Allocation
Short-term investments												$	5					$	—					$	5
Accounts receivable												94						—						94
Inventory												184						—						184
Prepaid expenses and other current assets												6						(1)						5
Property, plant and equipment												6						—						6
Other intangible assets												630						—						630
Accounts payable												(13)						—						(13)
Other current liabilities												(32)						(3)						(35)
Other noncurrent liabilities												(157)						(4)						(161)
Total identifiable net assets												723						(8)						715
Goodwill												928						8						936
Total consideration, net of cash received												$	1,651					$	—					$	1,651

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Tripp Lite. Goodwill recognized as a result of the acquisition is not deductible for tax purposes. Other intangible assets of $630 million include customer relationships, trademarks and technology. Given the timing of the acquisition, Eaton utilized a benchmarking approach based on similar acquisitions to determine the preliminary fair values for intangible assets. See Note 6 for additional information about goodwill.

Eaton's 2021 Condensed Consolidated Financial Statements include Tripp Lite’s results of operations, including segment operating profit of $96 million on sales of $283 million, from the date of acquisition through September 30, 2021.

Acquisition of Green Motion SA

On March 22, 2021, Eaton acquired Green Motion SA, a leading designer and manufacturer of electric vehicle charging hardware and related software based in Switzerland. Green Motion SA was acquired for $105 million, including $49 million of cash paid at closing and $56 million of estimated fair value of contingent future consideration based on 2023 and 2024 revenue performance. The fair value of contingent consideration liabilities is estimated by discounting contingent payments expected to be made, and may increase or decrease based on changes in revenue estimates and discount rates, with a maximum possible undiscounted value of $109 million. Green Motion SA is reported within the Electrical Global business segment.

Acquisition of a 50% stake in HuanYu High Tech

On March 29, 2021, Eaton acquired a 50 percent stake in HuanYu High Tech, a subsidiary of HuanYu Group that manufactures and markets low-voltage circuit breakers and contactors in China, and throughout the Asia-Pacific region. HuanYu High Tech had 2019 sales of $106 million and has production operations in Wenzhou, China. Eaton accounts for this investment on the equity method of accounting and is reported within the Electrical Global business segment.

Acquisition of Cobham Mission Systems

On June 1, 2021, Eaton acquired Cobham Mission Systems (CMS) for $2.80 billion, net of cash received. CMS is a leading manufacturer of air-to-air refueling systems, environmental systems, and actuation primarily for defense markets. CMS had sales of over $700 million in 2020. CMS is reported within the Aerospace business segment.

The acquisition of CMS has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed on the acquisition date, as well as measurement period adjustments recorded as of September 30, 2021. These preliminary estimates will continue to be revised during the measurement period as third-party valuations are received and finalized, further information becomes available and additional analyses are performed, and these differences could have a material impact on Eaton's preliminary purchase price allocation. The current measurement period adjustments did not have a material impact to the Consolidated Statements of Income.

(In millions)												Preliminary Allocation						Measurement Period Adjustments						Adjusted Preliminary Allocation
Accounts receivable												$	84					$	—					$	84
Inventory												179						(1)						178
Prepaid expenses and other current assets												45						(4)						41
Property, plant and equipment												86						—						86
Other intangible assets												1,575						—						1,575
Other assets												19						—						19
Accounts payable												(40)						—						(40)
Other current liabilities												(159)						7						(152)
Other noncurrent liabilities												(77)						—						(77)
Total identifiable net assets												1,712						2						1,714
Goodwill												1,088						(2)						1,086
Total consideration, net of cash received												$	2,800					$	—					$	2,800

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring CMS. As a result of the acquisition, goodwill of $292 million recognized in the United States is expected to be deductible for tax purposes. Other intangible assets of $1,575 million include customer relationships, technology and backlog. Given the timing of the acquisition, Eaton utilized a benchmarking approach based on similar acquisitions to determine the preliminary fair values for intangible assets. See Note 6 for additional information about goodwill.

Eaton's 2021 Condensed Consolidated Financial Statements include CMS’s results of operations, including segment operating profit of $65 million on sales of $252 million, from the date of acquisition through September 30, 2021.

Acquisition of a 50% stake in Jiangsu YiNeng Electric's busway business

On June 25, 2021, Eaton acquired a 50 percent stake in Jiangsu YiNeng Electric's busway business, which manufactures and markets busway products in China and had sales of $60 million in 2020. Eaton accounts for this investment on the equity method of accounting and is reported within the Electrical Global business segment.

Sale of Hydraulics business

On January 21, 2020, Eaton entered into an agreement to sell its Hydraulics business to Danfoss A/S, a Danish industrial company. The Hydraulics business is a global leader in hydraulics components, systems, and services for industrial and mobile equipment. The business had sales of $1.8 billion in 2020.

During the first quarter of 2020, the Company determined the Hydraulics business met the criteria to be classified as held for sale. Therefore, assets and liabilities of the business have been presented as held for sale in the Consolidated Balance Sheet as of December 31, 2020. Assets and liabilities classified as held for sale are measured at the lower of carrying value or fair value less costs to sell. No write-down was required as fair value of the Hydraulics business assets less the costs to sell exceed their respective carrying values. Depreciation and amortization expense was not recorded for the period in which Other long-lived assets were classified as held for sale.

The Company used the relative fair value method to allocate goodwill to the Hydraulics business. The fair value of the Hydraulics business was estimated based on a combination of the price paid to Eaton by Danfoss A/S and a discounted cash flow model. 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. The weighted-average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt market holders of a business enterprise. These analyses require the exercise of judgments, including judgments about appropriate discount rates, perpetual growth rates, revenue growth, and margin assumptions.

The assets and liabilities classified as held for sale for the Hydraulics business on the December 31, 2020 Consolidated Balance Sheet are as follows:

(In millions)												December 31, 2020
Accounts receivable - net												$	345
Inventory												369
Prepaid expenses and other current assets												18
Net property, plant and equipment												504
Goodwill												920
Other intangible assets												248
Operating lease assets												61
Deferred income taxes												6
Other noncurrent assets												16
Assets held for sale - current												$	2,487
Accounts payable												$	241
Accrued compensation												26
Other current liabilities												101
Pension liabilities												60
Operating lease liabilities												35
Deferred income taxes												3
Other noncurrent liabilities												2
Liabilities held for sale - current												$	468

On August 2, 2021, Eaton completed the sale of the Hydraulics business to Danfoss A/S. As a result of the sale, the Company received $3.1 billion, net of cash sold, and recognized a pre-tax gain of $617 million, subject to post-closing adjustments to be negotiated with Danfoss A/S. The Hydraulics business did not meet the criteria to be classified as discontinued operations as the sale does not represent a strategic shift that will have a major effect on the Company's operations.

Note 3. REVENUE RECOGNITION

Sales are recognized when obligations under the terms of the contract are satisfied and control of promised goods or services have transferred to our customers. Sales are measured at the amount of consideration the Company expects to be paid in exchange for these products or services.

The Company’s operating segments and the following tables disaggregate sales by lines of businesses, geographic destination, market channel or end market.

			Three months ended September 30												Nine months ended September 30
(In millions)			2021						2020						2021						2020
Electrical Americas
Products			$	594					$	562					$	1,669					$	1,725
Systems			1,260						1,137						3,656						3,252
Total			$	1,854					$	1,699					$	5,325					$	4,977
Electrical Global
Products			$	887					$	671					$	2,446					$	1,926
Systems			534						525						1,646						1,525
Total			$	1,421					$	1,196					$	4,092					$	3,451
Hydraulics
United States			$	77					$	191					$	534					$	601
Rest of World			102						248						766						756
Total			$	179					$	439					$	1,300					$	1,357
Aerospace
Original Equipment Manufacturers			$	281					$	230					$	728					$	754
Aftermarket			238						158						575						527
Industrial and Other			226						152						586						400
Total			$	745					$	540					$	1,889					$	1,681
Vehicle
Commercial			$	364					$	284					$	1,090					$	742
Passenger and Light Duty			276						289						879						756
Total			$	640					$	573					$	1,969					$	1,498
eMobility			$	84					$	79					$	255					$	207
Total net sales			$	4,923					$	4,526					$	14,830					$	13,171

The timing of revenue recognition, billings and 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 $2,976 million and $2,539 million at September 30, 2021 and December 31, 2020, 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 $169 million and $90 million at September 30, 2021 and December 31, 2020, respectively, and are recorded in Prepaid expenses and other current assets. The increase in unbilled receivables reflects higher revenue recognized and not yet billed during the quarter, and unbilled receivables from the acquisition of Cobham Mission Systems.

Changes in the deferred revenue liabilities are as follows:

(In millions)			Deferred Revenue
Balance at January 1, 2021			$	257
Customer deposits and billings			891
Revenue recognized in the period			(858)
Deferred revenue from business acquisitions			99
Translation and other			(8)
Balance at September 30, 2021			$	381

(In millions)			Deferred Revenue
Balance at January 1, 2020			$	234
Customer deposits and billings			753
Revenue recognized in the period			(728)
Translation			1
Deferred revenue reclassified to held for sale			(11)
Balance at September 30, 2020			$	249

A significant portion of open orders placed with Eaton are by 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, 2021 was approximately $7.3 billion. At September 30, 2021, Eaton expects to recognize approximately 87% of this backlog in the next twelve months and the rest thereafter.

Note 4. CREDIT LOSSES FOR RECEIVABLES

Receivables are exposed to credit risk based on the customers’ ability to pay which is influenced by, among other factors, their financial liquidity position. Eaton’s receivables are generally short-term in nature with a majority outstanding less than 90 days.

Eaton performs ongoing credit evaluation of its customers and maintains sufficient allowances for potential credit losses. The Company evaluates the collectability of its receivables based on the length of time the receivable is past due, and any anticipated future write-offs based on historic experience adjusted for market conditions. The Company’s segments, supported by our global credit department, perform the credit evaluation and monitoring process to estimate and manage credit risk. The process includes an evaluation of credit losses for both the overall segment receivable and specific customer balances. The process also includes review of customer financial information and credit ratings, approval and monitoring of customer credit limits, and an assessment of market conditions. The Company may also require prepayment from customers to mitigate credit risk. Receivable balances are written off against an allowance for credit losses after a final determination of collectability has been made.

Accounts receivable are net of an allowance for credit losses of $46 million and $48 million at September 30, 2021 and December 31, 2020. The change in the allowance for credit losses includes expense and net write-offs, none of which are significant.

Note 5. INVENTORY

Inventory is carried at lower of cost or net realizable value. The components of inventory follow:

(In millions)			September 30, 2021						December 31, 2020
Raw materials			$	1,038					$	803
Work-in-process			601						498
Finished goods			1,163						808
Total inventory			$	2,802					$	2,109

Note 6. GOODWILL

Change in the carrying amount of goodwill by segment follows:

(In millions)						January 1, 2021						Additions																								Translation						September 30, 2021
Electrical Americas						$	6,456					$	936																							$	(8)					$	7,384
Electrical Global						4,295						64																								(134)						4,225
Aerospace						1,777						1,086																								(76)						2,787
Vehicle						293						—																								(3)						290
eMobility						82						—																								(1)						81
Total						$	12,903					$	2,086																							$	(222)					$	14,767

The 2021 additions to goodwill relate to the anticipated synergies of acquiring Cobham Mission Systems, Tripp Lite, and Green Motion SA. The allocations of the purchase price from these acquisitions are preliminary and will be completed during the measurement periods.

Note 7. DEBT

On March 8, 2021, a subsidiary of Eaton issued Euro denominated notes (2021 Euro Notes) with a face value of €1,500 million ($1,798 million), in accordance with Regulation S promulgated under the Securities Act of 1933, as amended. The 2021 Euro Notes are comprised of two tranches of €900 million and €600 million, which mature in 2026 and 2030, respectively, with interest payable annually at a respective rate of 0.128% and 0.577%. The issuer received proceeds totaling €1,494 million ($1,790 million) from the issuance, net of financing costs and discounts. The senior 2021 Euro Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton and certain of its direct and indirect subsidiaries. The 2021 Euro Notes contain customary optional redemption and par call provisions. The 2021 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 2021 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 2021 Euro Notes. The 2021 Euro Notes are subject to customary non-financial covenants.

On May 17, 2021, the Company entered into a $2,500 million 364-day revolving credit facility, which brought the Company’s total revolving credit facilities to $4,500 million. At June 30, 2021, the Company had access to the commercial paper markets through its $4,500 million commercial paper program, of which $3,372 million was outstanding including funds to finance the acquisition of Cobham Mission Systems discussed in Note 2. Eaton used the proceeds from the sale of the Hydraulics business, which was completed August 2, 2021, to reduce its outstanding commercial paper borrowings.

On September 22, 2021, the Company downsized the 364-day revolving credit facility from $2,500 million to $500 million, which reduced the Company's total revolving credit facilities to $2,500 million. In September 2021, the Company also downsized its commercial paper program to $2,500 million. There were no borrowings outstanding under Eaton’s revolving credit facilities at September 30, 2021. The Company had access to the commercial paper markets through its $2,500 million commercial paper program, of which $421 million was outstanding on September 30, 2021.

On October 4, 2021, the Company replaced its existing $500 million 364-day revolving credit facility, $750 million five-year revolving credit facility, $500 million four-year revolving credit facility, and $750 million five-year revolving credit facility, with a new $500 million 364-day revolving credit facility and a new $2,000 million five-year revolving credit facility that will expire on October 4, 2026. The revolving credit facilities totaling $2,500 million are used to support commercial paper borrowings and are fully and unconditionally guaranteed by Eaton and certain of its direct and indirect subsidiaries on an unsubordinated, unsecured basis. The Company maintains access to the commercial paper markets through its $2,500 million commercial paper program.

Note 8. RETIREMENT BENEFITS PLANS

The components of retirement benefits expense (income) follow:

			United States pension benefit expense (income)												Non-United States pension benefit expense (income)												Other postretirement benefits expense (income)
			Three months ended September 30
(In millions)			2021						2020						2021						2020						2021						2020
Service cost			$	9					$	25					$	17					$	19					$	1					$	—
Interest cost			19						26						9						11						1						3
Expected return on plan assets			(56)						(59)						(30)						(27)						—						(1)
Amortization			8						26						18						15						(3)						(3)
			(20)						18						14						18						(1)						(1)
Settlements, curtailments and special termination benefits			20						14						15						1						(1)						—
Total expense (income)			$	—					$	32					$	29					$	19					$	(2)					$	(1)
			United States pension benefit expense (income)												Non-United States pension benefit expense (income)												Other postretirement benefits expense (income)
			Nine months ended September 30
(In millions)			2021						2020						2021						2020						2021						2020
Service cost			$	29					$	73					$	55					$	55					$	1					$	1
Interest cost			52						78						30						33						4						7
Expected return on plan assets			(167)						(174)						(90)						(81)						—						(1)
Amortization			28						77						55						44						(4)						(9)
			(58)						54						50						51						1						(2)
Settlements, curtailments and special termination benefits			46						49						16						7						(1)						—
Total expense (income)			$	(12)					$	103					$	66					$	58					$	—					$	(2)

During 2020, the Company announced it was freezing its United States pension plans for its non-union employees. The freeze was effective January 1, 2021 for non-union U.S. employees whose retirement benefit was determined under a cash balance formula and is effective January 1, 2026 for non-union U.S. employees whose retirement benefit is determined under a final average pay formula.

During the third quarter and first nine months of 2021, the Company recognized settlement losses from lump-sum distributions of $21 million and $48 million, respectively, and remeasured certain pension plans as a result of lump-sum distributions exceeding the sum of service and interest costs for the year. These remeasurements resulted in increases of $49 million for the third quarter of 2021 and decreases of $132 million for the first nine months of 2021 in pension liabilities and other comprehensive loss.

Total retirement benefits expense for the third quarter and first nine months of 2021 of $27 million and $54 million, respectively, included $13 million of settlement and curtailment expense related to the sale of the Hydraulics business discussed in Note 2.

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

Note 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.

Note 10. INCOME TAXES

The effective income tax rate for the third quarter of 2021 was expense of 43.4% compared to expense of 14.8% for the third quarter of 2020. The effective income tax rate for the first nine months of 2021 was expense of 29.8% compared to expense of 21.3% for the first nine months of 2020. The increase in the effective tax rates in the third quarter and first nine months of 2021 was primarily due to the tax impact on the gain from the sale of the Hydraulics business in 2021 discussed in Note 2.

In 2011, the United States Internal Revenue Service (“IRS”) issued a Statutory Notice of Deficiency (the “2011 Notice”) for the Company’s United States subsidiaries (“Eaton US”) for the 2005 and 2006 tax years. The 2011 Notice proposed assessments of $75 million in additional taxes plus $52 million in penalties related primarily to transfer pricing adjustments for products manufactured in the Company's facilities in Puerto Rico and the Dominican Republic and sold to affiliated companies located in the United States. Eaton US has set its transfer prices for products sold between these affiliates at the same prices that Eaton US sells such products to third parties as required by two successive Advance Pricing Agreements (APAs) Eaton US entered into with the IRS that governed the 2005-2010 tax years. Eaton US has continued to apply the arms-length transfer pricing methodology for 2011 through the current reporting period. Immediately prior to the 2011 Notice being issued, the IRS sent a letter stating that it was retrospectively canceling the APAs. Eaton US contested the proposed assessments in United States Tax Court. The case involved both whether the APAs should be enforced and, if not, the appropriate transfer pricing methodology. On July 26, 2017, the United States Tax Court issued a ruling in which it agreed with Eaton US that the IRS must abide by the terms of the APAs for the tax years 2005-2006. The Tax Court’s ruling on the APAs did not have a material impact on Eaton’s consolidated financial statements. On May 24, 2021, the IRS filed a notice to appeal the Tax Court’s ruling to the United States Sixth Circuit Court of Appeals, and on October 7, 2021 the IRS formally filed its appeal. The Company continues to believe it will prevail on appeal and does not expect the final resolution to have a material impact on its consolidated financial statements.

During the second quarter of 2021, the IRS completed its examination of the consolidated income tax returns of Eaton US for tax years 2014 through 2016 and has proposed a number of adjustments primarily related to certain transfer pricing tax positions, including adjustments similar to those proposed and previously disclosed for prior audit periods for products manufactured in the Company’s facilities in Puerto Rico and the Dominican Republic and sold to affiliated companies located in the U.S., and adjustments related to intercompany financing. The Company intends to pursue its administrative appeals alternatives. The Company believes that final resolution of the proposed adjustments will not have a material impact on its consolidated financial statements.

During 2010, the Company received a tax assessment, which included interest and penalties, in Brazil for the tax years 2005 through 2008 that relates to the amortization of certain goodwill generated from the acquisition of third-party businesses and corporate reorganizations. In 2018, the Company received an unfavorable result at the final tax administrative appeals level. In August 2021, the Company was notified of a recalculation from an original alleged tax deficiency of $24 million plus $67 million of interest and penalties to a revised alleged tax deficiency of $31 million plus $99 million of interest and penalties (translated at the September 30, 2021 exchange rate). During 2014, the Company received a tax assessment, which included interest and penalties, for the 2009 through 2012 tax years (primarily relating to the same issues concerning the 2005 through 2008 tax years). In November 2019, the Company received an unfavorable result at the final tax administrative appeals level, resulting in an alleged tax deficiency of $26 million plus $92 million of interest and penalties (translated at the September 30, 2021 exchange rate). The Company is challenging both of the assessments in the judicial system. Challenges in the judicial system are expected to take up to 10 years to resolve and require provision of certain assets as security for the alleged deficiencies. As of December 31, 2020, the Company pledged Brazilian real estate assets with net book value of $10 million (translated at the September 30, 2021 exchange rate). During 2021, the Company pledged additional Brazilian real estate assets with net book value of $9 million and provided additional security in the form of a bond of $75 million and cash deposit of $10 million (translated at the September 30, 2021 exchange rate). The Company continues to believe that final resolution of both of the assessments will not have a material impact on its consolidated financial statements.

The ultimate outcome of these matters cannot be predicted with certainty given the complex nature of tax controversies. Should the ultimate outcome of these matters deviate from our reasonable expectations, they may have a material adverse impact on the Company’s consolidated financial statements. However, Eaton believes that its interpretations of tax law, and application of tax laws to our facts, are correct and that its accrual of unrecognized income tax benefits is appropriate with respect to these matters.

Note 11. EQUITY

On February 27, 2019, the Board of Directors adopted a share repurchase program for share repurchases up to $5,000 million of ordinary shares (2019 Program). Under the 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, 2021, 0.3 million and 0.9 million ordinary shares, respectively, were repurchased under the 2019 Program in the open market at a total cost of $46 million and $122 million, respectively. During the three and nine months ended September 30, 2020, 1.7 million and 15.9 million ordinary shares, respectively, were repurchased under the 2019 Program in the open market at a total cost of $177 million and $1,477 million, respectively.

The changes in Shareholders’ equity follow:

			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
(In millions)			Shares						Dollars
Balance at January 1, 2021			398.1						$	4					$	12,329					$	6,794					$	(4,195)					$	(2)					$	14,930					$	43					$	14,973
Net income			—						—						—						458						—						—						458						1						459
Other comprehensive loss, net of tax																											(30)												(30)												(30)
Cash dividends paid and accrued			—						—						—						(309)						—						—						(309)						—						(309)
Issuance of shares under equity-based compensation plans			0.9						—						6						(1)						—						—						5						—						5
Changes in noncontrolling interest of consolidated subsidiaries - net			—						—						—						—						—						—						—						(2)						(2)
Repurchase of shares			(0.5)						—						—						(59)						—						—						(59)						—						(59)
Balance at March 31, 2021			398.5						$	4					$	12,335					$	6,883					$	(4,225)					$	(2)					$	14,995					$	42					$	15,037
Net income			—						—						—						506						—						—						506						—						506
Other comprehensive income, net of tax																											194												194												194
Cash dividends paid			—						—						—						(304)						—						—						(304)						—						(304)
Issuance of shares under equity-based compensation plans			0.2						—						33						—						—						1						34						—						34
Repurchase of shares			(0.1)						—						—						(17)						—						—						(17)						—						(17)
Balance at June 30, 2021			398.6						$	4					$	12,368					$	7,068					$	(4,031)					$	(1)					$	15,408					$	42					$	15,450
Net income			—						—						—						629						—						—						629						1						630
Other comprehensive income, net of tax																											243												243												243
Cash dividends paid			—						—						—						(303)						—						—						(303)						—						(303)
Issuance of shares under equity-based compensation plans			0.3						—						43						(3)						—						—						40						—						40
Repurchase of shares			(0.3)						—						—						(46)						—						—						(46)						—						(46)
Balance at September 30, 2021			398.6						$	4					$	12,411					$	7,345					$	(3,788)					$	(1)					$	15,971					$	43					$	16,014

			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
(In millions)			Shares						Dollars
Balance at January 1, 2020			413.3						$	4					$	12,200					$	8,170					$	(4,290)					$	(2)					$	16,082					$	51					$	16,133
Net income			—						—						—						438						—						—						438						—						438
Other comprehensive loss, net of tax																											(676)												(676)												(676)
Cash dividends paid and accrued			—						—						—						(300)						—						—						(300)						(5)						(305)
Issuance of shares under equity-based compensation plans			0.9						—						3						(1)						—						(1)						1						—						1
Changes in noncontrolling interest of consolidated subsidiaries - net			—						—						—						—						—						—						—						(3)						(3)
Repurchase of shares			(14.2)						—						—						(1,300)						—						—						(1,300)						—						(1,300)
Balance at March 31, 2020			400.0						$	4					$	12,203					$	7,007					$	(4,966)					$	(3)					$	14,245					$	43					$	14,288
Net income			—						—						—						51						—						—						51						3						54
Other comprehensive income, net of tax																											157												157												157
Cash dividends paid			—						—						—						(292)						—						—						(292)						(1)						(293)
Issuance of shares under equity-based compensation plans			0.1						—						25						1						—						1						27						—						27
Changes in noncontrolling interest of consolidated subsidiaries - net			—						—						—						—						—						—						—						2						2
Balance at June 30, 2020			400.1						$	4					$	12,228					$	6,767					$	(4,809)					$	(2)					$	14,188					$	47					$	14,235
Net income			—						—						—						446						—						—						446						1						447
Other comprehensive income, net of tax																											276												276												276
Cash dividends paid			—						—						—						(292)						—						—						(292)						(2)						(294)
Issuance of shares under equity-based compensation plans			0.2						—						38						(3)						—						—						35						—						35
Changes in noncontrolling interest of consolidated subsidiaries - net			—						—						—						—						—						—						—						(4)						(4)
Repurchase of shares			(1.7)						—						—						(177)						—						—						(177)						—						(177)
Balance at September 30, 2020			398.6						$	4					$	12,266					$	6,741					$	(4,533)					$	(2)					$	14,476					$	42					$	14,518

The changes in Accumulated other comprehensive loss follow:

(In millions)			Currency translation and related hedging instruments						Pensions and other postretirement benefits						Cash flow hedges						Total
Balance at January 1, 2021			$	(2,647)					$	(1,481)					$	(67)					$	(4,195)
Other comprehensive income (loss) before reclassifications			(291)						178						41						(72)
Amounts reclassified from Accumulated other comprehensive loss (income)			369						113						(3)						479
Net current-period Other comprehensive income (loss)			78						291						38						407
Balance at September 30, 2021			$	(2,569)					$	(1,190)					$	(29)					$	(3,788)

The reclassifications out of Accumulated other comprehensive loss follow:

(In millions)			Nine months ended September 30, 2021						Consolidated statements of income classification
Currency translation losses
Sale of business			$	(369)					Gain on sale of businesses
Tax benefit			—
Total, net of tax			(369)
Amortization of defined benefit pensions and other postretirement benefits items
Actuarial loss and prior service cost			(140)			1
Tax benefit			27
Total, net of tax			(113)
Gains and (losses) on cash flow hedges
Currency exchange contracts			(2)						Net sales and Cost of products sold
Commodity contracts			7						Cost of products sold
Tax expense			(2)
Total, net of tax			3
Total reclassifications for the period			$	(479)

1 These components of Accumulated other comprehensive loss are included in the computation of net periodic benefit cost. See Note 8 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
(In millions except for per share data)			2021						2020						2021						2020
Net income attributable to Eaton ordinary shareholders			$	629					$	446					$	1,593					$	935
Weighted-average number of ordinary shares outstanding - diluted			401.9						402.3						401.4						404.9
Less dilutive effect of equity-based compensation			3.0						1.9						2.7						1.6
Weighted-average number of ordinary shares outstanding - basic			398.9						400.4						398.7						403.3
Net income per share attributable to Eaton ordinary shareholders
Diluted			$	1.57					$	1.11					$	3.97					$	2.31
Basic			1.58						1.11						4.00						2.32

For the third quarter and first nine months of 2021, all stock options were included in the calculation of diluted net income per share attributable to Eaton ordinary shareholders because they were all dilutive. For the third quarter and first nine months of 2020, 0.3 million and 0.8 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 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 and contingent consideration recognized at fair value, and the fair value measurements used, follows:

(In millions)			Total						Level 1						Level 2						Level 3
September 30, 2021
Cash			$	271					$	271					$	—					$	—
Short-term investments			389						389						—						—
Net derivative contracts			26						—						26						—
Contingent consideration from acquisition of Green Motion (Note 2)			(56)						—						—						(56)
December 31, 2020
Cash			$	438					$	438					$	—					$	—
Short-term investments			664						664						—						—
Net derivative contracts			31						—						31						—

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.

Other Fair Value Measurements

Long-term debt and the current portion of long-term debt had a carrying value of $8,636 million and fair value of $9,359 million at September 30, 2021 compared to $8,057 million and $9,075 million, respectively, at December 31, 2020. 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.

Note 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, 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 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 gain or loss from the derivative financial instrument is recognized in Accumulated other comprehensive 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 gain or loss from the derivative financial instrument is recognized in Accumulated other comprehensive 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 is classified in the same line of the Consolidated Statements of Income as the offsetting loss or gain on the hedged item. The cash flows resulting from these financial instruments are classified in operating activities on the Condensed Consolidated Statements of 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.

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 non-derivative net investment hedging instruments had a carrying value on an after-tax basis of $2,941 million at September 30, 2021 and $2,020 million at December 31, 2020.

Derivative Financial Statement Impacts

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

(In millions)			Notional amount						Other current assets						Other noncurrent assets						Other current liabilities						Other noncurrent liabilities						Type of hedge						Term
September 30, 2021
Derivatives designated as hedges
Fixed-to-floating interest rate swaps			$	1,800					$	2					$	65					$	—					$	—					Fair value						11 months to 13 years
Forward starting floating-to-fixed interest rate swaps			1,000						—						40						—						69						Cash flow						11 to 31 years
Currency exchange contracts			1,271						10						3						15						2						Cash flow						1 to 36 months
Commodity contracts			50						2						—						3						—						Cash flow						1 to 12 months
Total									$	14					$	108					$	18					$	71
Derivatives not designated as hedges
Currency exchange contracts			$	6,089					$	17											$	25																	1 to 12 months
Commodity contracts			27						1												—																		1 month
Total									$	18											$	25
December 31, 2020
Derivatives designated as hedges
Fixed-to-floating interest rate swaps			$	2,075					$	2					$	100					$	—					$	—					Fair value						6 months to 14 years
Forward starting floating-to-fixed interest rate swaps			900						—						17						—						108						Cash flow						12 to 32 years
Currency exchange contracts			946						20						6						20						1						Cash flow						1 to 36 months
Commodity contracts			24						4						—						—						—						Cash flow						1 to 12 months
Total									$	26					$	123					$	20					$	109
Derivatives not designated as hedges
Currency exchange contracts			$	5,227					$	43											$	34																	1 to 12 months
Commodity contracts			18						2												—																		1 month
Total									$	45											$	34

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 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. The cash flows resulting from the settlement of these derivatives have been classified in investing activities in the Condensed Consolidated Statements of Cash Flows.

As of September 30, 2021, the volume of outstanding commodity contracts that were entered into to hedge forecasted transactions:

Commodity						September 30, 2021																		Term
Copper						9												millions of pounds						1 to 12 months
Gold						1,351												Troy ounces						1 to 12 months
Silver						476,721												Troy ounces						1 to 12 months

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

(In millions)			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, 2021									December 31, 2020						September 30, 2021						December 31, 2020
Long-term debt			$	(2,413)								$	(2,688)					$	(101)					$	(139)

(a) At September 30, 2021 and December 31, 2020, these amounts include the cumulative liability amount of fair value hedging adjustments remaining for which the hedge accounting has been discontinued of $34 million and $37 million, respectively.

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

			Three months ended September 30, 2021
(In millions)			Net sales						Cost of products sold						Interest expense - net
Amounts from Consolidated Statements of Income			$	4,923					$	3,338					$	37
Gain (loss) on derivatives designated as cash flow hedges
Currency exchange contracts
Hedged item			$	—					$	(3)					$	—
Derivative designated as hedging instrument			—						3						—
Commodity contracts
Hedged item			$	—					$	(2)					$	—
Derivative designated as hedging instrument			—						2						—
Gain (loss) on derivatives designated as fair value hedges
Fixed-to-floating interest rate swaps
Hedged item			$	—					$	—					$	9
Derivative designated as hedging instrument			—						—						(9)

			Three months ended September 30, 2020
(In millions)			Net sales						Cost of products sold						Interest expense - net
Amounts from Consolidated Statements of Income			$	4,526					$	3,051					$	41
Gain (loss) on derivatives designated as cash flow hedges
Currency exchange contracts
Hedged item			$	4					$	3					$	—
Derivative designated as hedging instrument			(4)						(3)						—
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			$	—					$	—					$	11
Derivative designated as hedging instrument			—						—						(11)

			Nine months ended September 30, 2021
(In millions)			Net sales						Cost of products sold						Interest expense - net
Amounts from Consolidated Statements of Income			$	14,830					$	10,067					$	112
Gain (loss) on derivatives designated as cash flow hedges
Currency exchange contracts
Hedged item			$	4					$	(2)					$	—
Derivative designated as hedging instrument			(4)						2						—
Commodity contracts
Hedged item			$	—					$	(7)					$	—
Derivative designated as hedging instrument			—						7						—
Gain (loss) on derivatives designated as fair value hedges
Fixed-to-floating interest rate swaps
Hedged item			$	—					$	—					$	35
Derivative designated as hedging instrument			—						—						(35)

			Nine months ended September 30, 2020
(In millions)			Net sales						Cost of products sold						Interest expense - net
Amounts from Consolidated Statements of Income			$	13,171					$	9,230					$	113
Gain (loss) on derivatives designated as cash flow hedges
Currency exchange contracts
Hedged item			$	9					$	4					$	—
Derivative designated as hedging instrument			(9)						(4)						—
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			$	—					$	—					$	(58)
Derivative designated as hedging instrument			—						—						58

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
(In millions)			2021												2020
Gain (loss) on derivatives not designated as hedges
Currency exchange contracts			$	(32)											$	49					Interest expense - net
Commodity contracts			1												—						Cost of products sold
Total			$	(31)											$	49

			Gain (loss) recognized in Consolidated Statements of Income												Consolidated Statements of Income classification
			Nine months ended September 30
(In millions)			2021												2020
Gain (loss) on derivatives not designated as hedges
Currency exchange contracts			$	(9)											$	(54)					Interest expense - net
Commodity contracts			10												1						Cost of products sold
Total			$	1											$	(53)

The impact of derivative and non-derivative instruments designated as hedges to the Consolidated 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
(In millions)			2021						2020												2021						2020
Derivatives designated as cash flow hedges
Forward starting floating-to-fixed interest rate swaps			$	1					$	35					Interest expense - net						$	—					$	—
Currency exchange contracts			(6)						11						Net sales and Cost of products sold						3						(6)
Commodity contracts			(3)						1						Cost of products sold						2						—
Non-derivative designated as net investment hedges
Foreign currency denominated debt			74						(83)						Interest expense - net						—						—
Total			$	66					$	(36)											$	5					$	(6)
			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
(In millions)			2021						2020												2021						2020
Derivatives designated as cash flow hedges
Forward starting floating-to-fixed interest rate swaps			$	62					$	(101)					Interest expense - net						$	—					$	—
Currency exchange contracts			(11)						(34)						Net sales and Cost of products sold						(2)						(12)
Commodity contracts			2						2						Cost of products sold						7						—
Non-derivative designated as net investment hedges
Foreign currency denominated debt			178						(78)						Interest expense - net						—						—
Total			$	231					$	(211)											$	5					$	(12)

At September 30, 2021, a loss of $6 million 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.

Note 14. RESTRUCTURING CHARGES

In the second quarter of 2020, Eaton decided to undertake a multi-year restructuring program to reduce its cost structure and gain efficiencies in its business segments and at corporate in order to respond to declining market conditions. Restructuring charges incurred under this program were $214 million in 2020 and $63 million for the nine months ended September 30, 2021. These restructuring activities are expected to incur additional expenses of $33 million in 2021, and $10 million in 2022, primarily comprised of plant closing and other costs, resulting in total estimated charges of $320 million for the entire program.

A summary of restructuring program charges by type follows:

			Three months ended September 30												Nine months ended September 30
(In millions except for per share data)			2021						2020						2021						2020
Workforce reductions			$	19					$	3					$	19					$	169
Plant closing and other			15						7						44						28
Total before income taxes			34						10						63						197
Income tax benefit			9						2						15						41
Total after income taxes			$	25					$	8					$	48					$	156
Per ordinary share - diluted			$	0.06					$	0.02					$	0.12					$	0.39

Restructuring program charges related to the following segments:

			Three months ended September 30												Nine months ended September 30
(In millions)			2021						2020						2021						2020
Electrical Americas			$	5					$	3					$	13					$	16
Electrical Global			11						2						13						53
Aerospace			1						2						4						32
Vehicle			5						3						16						93
eMobility			—						—						1						1
Corporate			12						—						16						2
Total			$	34					$	10					$	63					$	197

A summary of liabilities related to workforce reductions, plant closing and other associated costs follows:

(In millions)			Workforce reductions						Plant closing and other						Total
Balance at January 1, 2020			$	—					$	—					$	—
Liability recognized			172						42						214
Payments, utilization and translation			(33)						(39)						(72)
Balance at December 31, 2020			139						3						142
Liability recognized			19						44						63
Payments, utilization and translation			(55)						(33)						(88)
Balance at September 30, 2021			$	103					$	14					$	117

These restructuring program charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other expense - net, as appropriate. In Business Segment Information, these restructuring program charges are treated as Corporate items. See Note 15 for additional information about business segments.

Note 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 Americas, Electrical Global, Aerospace, Vehicle, and eMobility. On August 2, 2021, Eaton completed the sale of the Hydraulics business. Operating profit includes the operating profit from intersegment sales. For additional information regarding Eaton's business segments, see Note 17 to the Consolidated Financial Statements contained in the 2020 Form 10-K.

			Three months ended September 30												Nine months ended September 30
(In millions)			2021						2020						2021						2020
Net sales
Electrical Americas			$	1,854					$	1,699					$	5,325					$	4,977
Electrical Global			1,421						1,196						4,092						3,451
Hydraulics			179						439						1,300						1,357
Aerospace			745						540						1,889						1,681
Vehicle			640						573						1,969						1,498
eMobility			84						79						255						207
Total net sales			$	4,923					$	4,526					$	14,830					$	13,171
Segment operating profit (loss)
Electrical Americas			$	402					$	377					$	1,127					$	993
Electrical Global			285						198						757						542
Hydraulics			20						43						177						135
Aerospace			164						100						391						315
Vehicle			115						80						349						140
eMobility			(8)						(2)						(21)						(3)
Total segment operating profit			978						796						2,780						2,122
Corporate
Intangible asset amortization expense			(126)						(90)						(326)						(265)
Interest expense - net			(37)						(41)						(112)						(113)
Pension and other postretirement benefits income (expense)			14						(9)						44						(29)
Restructuring program charges			(34)						(10)						(63)						(197)
Other income (expense) - net			318						(121)						(52)						(325)
Income before income taxes			1,113						525						2,271						1,193
Income tax expense			483						78						676						254
Net income			630						447						1,595						939
Less net income for noncontrolling interests			(1)						(1)						(2)						(4)
Net income attributable to Eaton ordinary shareholders			$	629					$	446					$	1,593					$	935