BUSINESS SEGMENT AND GEOGRAPHIC REGION INFORMATION

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing performance. Eaton’s segments are as follows:

Electrical Products and Electrical Systems and Services

The Electrical Products segment consists of electrical components, industrial components, residential products, single phase power quality, emergency lighting, fire detection, wiring devices, structural support systems, circuit protection, and lighting products. The Electrical Systems and Services segment consists of power distribution and assemblies, three phase power quality, hazardous duty electrical equipment, intrinsically safe explosion-proof instrumentation, utility power distribution, power reliability equipment, and services. The principal markets for these segments are industrial, institutional, governmental, utility, commercial, residential and information technology. These products are used wherever there is a demand for electrical power in commercial buildings, data centers, residences, apartment and office buildings, hospitals, factories, utilities, and industrial and energy facilities. The segments share several common global customers, but a large number of customers are located regionally. Sales are made directly to original equipment manufacturers, utilities, and certain other end users, as well as through distributors, resellers, and manufacturers' representatives.

Hydraulics

The Hydraulics segment is a global leader in hydraulics components, systems and services for industrial and mobile equipment. Eaton offers a wide range of power products including pumps, motors and hydraulic power units; a broad range of controls and sensing products including valves, cylinders and electronic controls; a full range of fluid conveyance products including industrial and hydraulic hose, fittings, and assemblies, thermoplastic hose and tubing, couplings, connectors, and assembly equipment; filtration systems solutions; industrial drum and disc brakes; and golf grips. The principal markets for the Hydraulics segment include oil and gas, renewable energy, marine, agriculture, construction, mining, forestry, utility, material handling, truck and bus, machine tools, molding, primary metals, and power generation. Key manufacturing customers in these markets and other customers are located globally. Products are sold and serviced through a variety of channels.

Aerospace

The Aerospace segment is a leading global supplier of aerospace fuel, hydraulics, and pneumatic systems for commercial and military use. Products include hydraulic power generation systems for aerospace applications including pumps, motors, hydraulic power units, hose and fittings, electro-hydraulic pumps; controls and sensing products including valves, cylinders, electronic controls, electromechanical actuators, sensors, aircraft flap and slat systems and nose wheel steering systems; fluid conveyance products, including hose, thermoplastic tubing, fittings, adapters, couplings, sealing and ducting; and fuel systems including fuel pumps, sensors, valves, adapters and regulators. In addition, products included power and load management systems and displays and panels until these businesses were sold in May of 2014. The principal markets for the Aerospace segment are manufacturers of commercial and military aircraft and related after-market customers. These manufacturers and other customers operate globally. Products are sold and serviced through a variety of channels.

Vehicle

The Vehicle segment is a leader in the design, manufacture, marketing, and supply of drivetrain and powertrain systems and critical components that reduce emissions and improve fuel economy, stability, performance, and safety of cars, light trucks and commercial vehicles. Products include transmissions, clutches, hybrid power systems, superchargers, engine valves and valve actuation systems, cylinder heads, locking and limited slip differentials, transmission controls, fuel vapor components, fluid connectors and conveyance products for the global vehicle industry. The principal markets for the Vehicle segment are original equipment manufacturers and aftermarket customers of heavy-, medium-, and light-duty trucks, SUVs, CUVs, passenger cars and agricultural equipment.

Other Information

No single customer represented greater than 10% of net sales in 2015, 2014 or 2013, respectively.

The accounting policies of the business segments are generally the same as the policies described in Note 1, except that inventory and related cost of products sold of the segments are accounted for using the FIFO method and operating profit only reflects the service cost component related to pensions and other postretirement benefits. Intersegment sales and transfers are accounted for at the same prices as if the sales and transfers were made to third parties. These intersegment sales are eliminated in consolidation. Operating profit includes the operating profit from intersegment sales.

For purposes of business segment performance measurement, the Company does not allocate items that are of a non-operating nature or are of a corporate or functional governance nature. Corporate expenses consist of transaction costs associated with the acquisition of certain businesses and corporate office expenses including compensation, benefits, occupancy, depreciation, and other administrative costs. Identifiable assets of the business segments exclude goodwill, other intangible assets, and general corporate assets, which principally consist of cash, short-term investments, deferred income taxes, certain accounts receivable, certain property, plant and equipment, and certain other assets.

Business Segment Information



	2015			2014			2013
Net sales
Electrical Products	$	6,976		$	7,254		$	7,026
Electrical Systems and Services	5,931			6,457			6,430
Hydraulics	2,459			2,975			2,981
Aerospace	1,807			1,860			1,774
Vehicle	3,682			4,006			3,835
Total net sales	$	20,855		$	22,552		$	22,046

Segment operating profit
Electrical Products	$	1,156		$	1,184		$	1,090
Electrical Systems and Services	776			843			889
Hydraulics	246			367			355
Aerospace	310			273			252
Vehicle	645			645			592
Total segment operating profit	3,133			3,312			3,178

Corporate
Litigation settlements	—			(644		)	—
Amortization of intangible assets	(406		)	(431		)	(437		)
Interest expense - net	(232		)	(227		)	(271		)
Pension and other postretirement benefits expense	(130		)	(138		)	(183		)
Inventory step-up adjustment	—			—			(34		)
Other corporate expense - net	(220		)	(111		)	(369		)
Income before income taxes	2,145			1,761			1,884
Income tax expense (benefit)	164			(42		)	11
Net income	1,981			1,803			1,873
Less net income for noncontrolling interests	(2		)	(10		)	(12		)
Net income attributable to Eaton ordinary shareholders	$	1,979		$	1,793		$	1,861

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



	2015		2014		2013
Electrical Products	$	25	$	66	$	44
Electrical Systems and Services	15		51		37
Hydraulics	2		12		36
Total	$	42	$	129	$	117

Corporate acquisition integration charges totaled $5, $25 and $37 in 2015, 2014 and 2013, respectively. Corporate acquisition integration charges related primarily to the acquisition of Cooper and are included above in Other corporate expense - net.

Acquisition-related transaction costs, such as investment banking, legal and other professional fees, and costs associated with change in control agreements, are included above in Interest expense - net and Other corporate expense - net. These charges totaled $9 in 2013. There were no Corporate acquisition-related transition costs in 2014 and 2015. See Note 3 for additional information about acquisition integration charges and transaction costs.



	2015		2014		2013
Identifiable assets
Electrical Products	$	2,538	$	3,012	$	3,204
Electrical Systems and Services	2,285		2,512		2,683
Hydraulics	1,138		1,315		1,362
Aerospace	841		832		852
Vehicle	1,579		1,668		1,716
Total identifiable assets	8,381		9,339		9,817
Goodwill	13,479		13,893		14,495
Other intangible assets	6,014		6,556		7,186
Corporate	3,157		3,741		3,993
Total assets	$	31,031	$	33,529	$	35,491

Capital expenditures for property, plant and equipment
Electrical Products	$	137	$	170	$	152
Electrical Systems and Services	94		147		113
Hydraulics	61		79		80
Aerospace	33		28		29
Vehicle	119		160		161
Total	444		584		535
Corporate	62		48		79
Total expenditures for property, plant and equipment	$	506	$	632	$	614

Depreciation of property, plant and equipment
Electrical Products	$	137	$	148	$	151
Electrical Systems and Services	82		90		86
Hydraulics	67		67		65
Aerospace	28		28		27
Vehicle	113		130		133
Total	427		463		462
Corporate	52		51		54
Total depreciation of property, plant and equipment	$	479	$	514	$	516

Geographic Region Information

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



	2015		2014		2013
Net sales
United States	$	11,396	$	11,701	$	11,092
Canada	969		1,113		1,154
Latin America	1,726		1,988		2,113
Europe	4,379		5,074		5,112
Asia Pacific	2,385		2,676		2,575
Total	$	20,855	$	22,552	$	22,046

Long-lived assets
United States	$	1,982	$	1,988	$	1,966
Canada	19		25		28
Latin America	243		306		331
Europe	734		799		856
Asia Pacific	587		632		652
Total	$	3,565	$	3,750	$	3,833