<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[x] Annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 30, 1998
Or
[ ] Transition report pursuant to Section 15(d) of the Securities Exchange
Act of 1934
For the transition period from _____________ to ___________
Commission file number ____________________________________
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
AEROQUIP-VICKERS SAVINGS AND PROFIT SHARING PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Eaton Corporation,
1111 Superior Avenue,
Cleveland, Ohio 44114-2584
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
(Name of Plan)
AEROQUIP-VICKERS SAVINGS AND
PROFIT SHARING PLAN
Date: September 1, 1999 By: Eaton Corporation Pension
Administration Committee
By: /s/ S. J. Cook
-------------------
(Signature)
S. J. Cook
Vice President-Human Resources
Eaton Corporation
<PAGE> 2
FINANCIAL STATEMENTS
AEROQUIP-VICKERS
SAVINGS AND PROFIT-SHARING PLAN
YEARS ENDED DECEMBER 31, 1998 AND 1997
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE> 3
Aeroquip-Vickers
Savings and Profit-Sharing Plan
Financial Statements
Years ended December 31, 1998 and 1997
CONTENTS
Report of Independent Auditors................................................1
Audited Financial Statements
Statements of Assets Available for Plan Benefits..............................2
Statements of Changes in Assets Available for Plan Benefits...................3
Notes to Financial Statements.................................................4
Supplemental Schedules
Line 27a - Schedule of Assets Held for Investment Purposes...................14
Line 27d - Schedule of Reportable Transactions...............................15
<PAGE> 4
[ERNST & YOUNG LLP LETTERHEAD]
Report of Independent Auditors
Administrative Committee
Aeroquip-Vickers
Savings and Profit-Sharing Plan
We have audited the accompanying statements of assets available for plan
benefits of the Aeroquip-Vickers Savings and Profit-Sharing Plan as of December
31, 1998 and 1997, and the related statement of changes in assets available for
plan benefits for the year ended December 31, 1998. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets available for plan benefits of the Plan at
December 31, 1998 and 1997, and the changes in its assets available for plan
benefits for the year ended December 31, 1998, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes as of December 31, 1998, and reportable
transactions for the year then ended, are presented for purposes of additional
analysis and are not a required part of the financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of
management. The supplemental schedules have been subjected to the auditing
procedures applied in our audit of the 1998 financial statements and, in our
opinion, are fairly stated in all material respects in relation to the 1998
financial statements taken as a whole.
Ernst & Young LLP
Cleveland, OH
June 11, 1999
1
<PAGE> 5
<TABLE>
<CAPTION>
Aeroquip-Vickers Savings and Profit-Sharing Plan
Statements of Assets Available for Plan Benefits
DECEMBER 31
1998 1997
------------------------------------
<S> <C> <C>
ASSETS (Note 1)
Contributions receivable from employer $ 23,623,629 $ 27,508,579
Contributions receivable from employees -- 302,958
Investments:
Fixed Income Fund 245,763,003 231,860,798
Vanguard Mutual Funds 445,404,620 388,303,242
Aeroquip-Vickers Stock Fund (Note 8) 47,267,654 46,772,500
Cincinnati Milacron Stock Fund 858,168 1,378,428
Loans receivable from plan participants 19,541,011 17,856,938
------------------------------
758,834,456 686,171,906
------------------------------
Assets available for plan benefits $782,458,085 $713,983,443
==============================
</TABLE>
See accompanying notes.
2
<PAGE> 6
<TABLE>
<CAPTION>
Aeroquip-Vickers Savings and Profit-Sharing Plan
Statements of Changes in Assets Available for Plan Benefits
Year ended December 31, 1998
<S> <C>
Additions:
Contributions by employees $ 24,565,166
Contributions by employer 30,755,413
Net investment income:
Interest 17,875,573
Dividends 27,977,000
------------
45,852,573
Realized and unrealized gains on investments 20,507,683
------------
121,680,835
Deductions:
Distributions to participants 53,084,733
Investment management fees 99,609
Asset transfers out due to sales of facilities 21,853
------------
53,206,195
------------
Net additions 68,474,640
Assets available for plan benefits at beginning of year 713,983,445
------------
Assets available for plan benefits at end of year $782,458,085
============
</TABLE>
See accompanying notes.
3
<PAGE> 7
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements
December 31, 1998
1. DESCRIPTION OF THE PLAN
The Aeroquip-Vickers Savings and Profit-Sharing Plan (the Plan) is a defined
contribution plan. Eligible participants include all U. S. regular full-time
salaried employees and non-bargaining hourly employees of Aeroquip-Vickers, Inc.
("Company") and its subsidiaries, Aeroquip Corporation ("Aeroquip") and Vickers,
Incorporated ("Vickers"), on their ninety-first day of employment. Bargaining
unit employees are eligible to participate only if the bargaining agreement
permits participation. Temporary employees who work less than 1,000 hours during
a 12-month period and interns are not eligible to participate in the Plan.
Participants may contribute to the Plan on a pretax basis by salary reduction up
to 15 percent of their annual compensation (in increments of 1 percent) up to an
annual limit imposed by the Internal Revenue Service ($10,000 in 1998).
The contribution receivable amount primarily consists of the profit sharing
contributions for the year. Profit-sharing contributions to the Plan by the
Company are based on the level of return on net assets. These contributions are
paid to the Plan by the Company during the first quarter of the following year.
Information concerning the Plan document, matching and profit-sharing
contributions and vesting is contained in the summary plan description ("SPD")
for the plan. Copies of the SPD are available from the Human Resource Services
department of the Company.
In December 1995, the Company acquired the Electronic Systems Division (ESD) of
Cincinnati Milacron, Inc. The ESD employees' retirement funds were transferred
into the Plan in March 1996 and such participants became eligible for
participation in the Plan as of the date of transfer. Participants were given
the option to retain their investment in the Cincinnati Milacron Stock fund or
to direct their funds into any options available within the Plan.
4
<PAGE> 8
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
On December 7, 1996, the Company acquired the Electrical Engineering &
Manufacturing Company (EEMCO), a division of DATRON, Inc. The EEMCO employees'
funds were transferred into the Plan in February 1997 and such participants
became eligible for participation in the Plan as of the date of transfer.
On July 25, 1997, the Company sold its interest in two manufacturing facilities
to its 51%-owned subsidiary, Aeroquip Inoac Company. The two manufacturing
facilities employees' retirement funds were transferred out of this plan in
September 1997 and such participants were terminated from the plan as of the
date of transfer.
Each participant individually directs his or her contributions and
Aeroquip-Vickers' contributions, except for 25 percent of Aeroquip-Vickers
profit-sharing contribution, into one or more of the following investment funds
(in multiples of 1 percent).
(1) The Fixed Income Fund is invested in fully benefit-responsive insurance
company investment contracts, including synthetic investment contracts,
bank investment contracts and their equivalents. These contracts pay a
negotiated fixed or variable interest rate for a period of one to five
years. At December 31, 1998 and 1997, the investment contracts had a
weighted average crediting interest rate of 7.80% and 6.92%,
respectively. The average yield on these contracts was 7.27% and 6.68%
for the years ended December 31, 1998 and 1997, respectively.
Contracts are negotiated with insurance companies or financial
institutions rated AA+ by Standard and Poor's or its equivalent and
have a maximum average contract life of five years.
(2) Vanguard Mutual Funds are managed by The Vanguard Fiduciary Trust
Company. There are nine individual mutual funds in which participants
may invest:
(a) Vanguard Treasury Money Market Portfolio Fund (Money Market
Fund): Money in the Money Market Fund is 100 percent invested
in securities backed by the full faith and credit of the U. S.
Government. It seeks the maximum current income that is
consistent with the preservation of capital and liquidity.
Average maturities for the securities held by the Money Market
Fund are normally maintained in the range of 30 - 60 days and
no longer than one year.
5
<PAGE> 9
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
(b) Vanguard LifeStrategy Portfolios - Conservative Growth
Portfolio (LifeStrategy Conservative Growth Fund): Money in
the Conservative Growth Portfolio is invested in a portfolio
of Vanguard mutual funds that emphasizes either equity, fixed
income, or money market securities and seeks to provide a
combination of income and low-to-moderate growth by investing
in a combination of stocks, bonds, and short-term reserves.
(c) Vanguard Fixed Income Securities - Long-term Corporate
Portfolio Fund (Fixed Income Securities Fund): Money in the
Fixed income Securities Fund is invested in a diversified
portfolio of long-term investment grade bonds which seeks to
provide a high and sustainable level of current income
consistent with the maintenance of principal and liquidity.
(d) Vanguard STAR Portfolio Fund (STAR Fund): Money in the STAR
Fund is invested in a portfolio of Vanguard mutual funds that
emphasizes either equity, fixed income or money market
securities. It is designed as a balanced "fund of funds" for
long-term investors.
(e) Vanguard/Windsor II Fund (Windsor II Fund): Money in the
Windsor II Fund is invested in stocks which, in the opinion of
the fund's investment manager, are undervalued in the
marketplace. The stocks held in the Windsor II Fund tend to
offer above-average dividend yields and will normally have
below-average price-to earnings ratios and below-average
price-to-book value ratios relative to the stock market in
general.
(f) Vanguard Index Trust - 500 Portfolio Fund (Index Fund): Money
in the Index Fund is invested in stocks of the companies which
make up the Standard & Poor's 500 Composite Stock Price Index.
The objective of the Index Fund is to match the performance of
the Standard & Poor's 500 Index.
(g) Vanguard LifeStrategy Portfolios - Growth Portfolio
(LifeStrategy Growth Fund): Money in the Growth Portfolio is
invested in a portfolio of Vanguard mutual funds that
emphasizes either equity, fixed income, or money market
securities and seeks to provide a combination of long-term
growth and income by investing in a combination of stocks,
bonds, and short-term reserves.
6
<PAGE> 10
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
(h) Vanguard/Morgan Growth Fund (Morgan Growth Fund): Money in the
Morgan Growth Fund is invested primarily in stocks of
"established growth" companies. The companies will normally be
medium and larger size companies with above-average growth in
sales and earnings over extended periods.
(i) Vanguard International Growth Portfolio Fund (International
Growth Fund): Money in the International Growth Fund is
invested in non-U. S. stocks that have been selected for their
growth potential. The International Growth Fund tends to be
widely diversified both geographically and in terms of size of
companies.
(3) Aeroquip-Vickers Stock Fund (see Note 8) is invested in
Aeroquip-Vickers common stock. Cash dividends paid on shares held by
the Trust are used to purchase additional shares for participant
accounts. Twenty-five percent of each participant's profit-sharing
allocation is automatically invested in the Aeroquip-Vickers Stock Fund
until distribution to the participant or until the participant reaches
age 55. Upon reaching age 55, the participant has the option to
redirect the investment from the Aeroquip-Vickers Stock Fund into any
of the other available funds.
Participants may also elect to have additional amounts over
Aeroquip-Vickers' 25 percent profit-sharing contribution invested in
the Aeroquip-Vickers Stock Fund. Aeroquip-Vickers common stock is
acquired in open market purchases at fair market value. Participant
directed contributions to the Aeroquip-Vickers Stock Fund amounted to
$1,939,923 and $1,661,888 for the years ended December 31, 1998 and
1997, respectively, with accumulated participant contributions and
earnings of $27,686,220 and $19,120,338 at December 31, 1998 and 1997,
respectively.
(4) The Cincinnati Milacron Stock Fund is invested in Cincinnati Milacron
Common Stock. Cash dividends paid on shares held by the Trust are used
to purchase additional shares for participant accounts. No
contributions, rollovers, or transfers are permitted into the fund.
7
<PAGE> 11
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
The Plan invests in shares of mutual funds managed by an affiliate of Vanguard
Fiduciary Trust Company ("VFTC"). The VFTC acts as trustee for only those
investments as defined by the Plan. Transactions in such investments qualify as
party-in-interest transactions which are exempt from the prohibited transaction
rules.
Participants of the Plan have general purpose and home loans available. Under a
general purpose or home loan, a participant may borrow up to the lesser of
one-half of his or her vested account balance or the total of his or her pretax,
matching and roll-in contributions to the Plan, up to a maximum of $50,000. In
no event may the aggregate amount of loans exceed $50,000. All loans are repaid
to the Plan in equal installments through payroll deductions over a period not
to exceed five years for general purpose and twenty years for home loans.
Interest is charged at the prime rate, plus 1 percent at the loan origination
date.
Aeroquip-Vickers, Inc. reserves the right to amend, modify or terminate the Plan
at any time.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accounting records of the Plan are maintained on the accrual basis.
INVESTMENT VALUATION AND INCOME RECOGNITION
Marketable securities are stated at aggregate fair value and are valued at the
last sales price quoted by a national securities exchange on the last business
day of the plan year. Mutual funds are stated at the net asset value on the last
business day of the plan year. The difference between fair value and the cost of
investments is reflected in the statement of changes in assets available for
plan benefits as unrealized gains (losses) on investments.
Guaranteed investment contracts are stated at contract value. The contract value
of these fully benefit-responsive contracts approximates the fair value.
8
<PAGE> 12
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans receivable are stated at cost which approximates fair value.
Realized gains or losses on the sales of investments represent the differences
between the proceeds received upon the sale and the cost of investments sold,
determined on an average cost basis.
3. DISTRIBUTIONS
A participant is entitled to the distributions provided by the contributions and
income thereon (including realized and unrealized gains and losses) allocated to
the participant's account.
Upon termination of employment due to retirement, total and permanent disability
or death, a participant or his or her spousal beneficiary will be entitled to
receive a distribution of the participant's entire account without regard to the
Plan's vesting rules: (i) in one lump sum amount; or (ii) in monthly
installments of a fixed amount or over a specified period of time in an amount
of at least $100 per month. Distribution payments to non-spousal beneficiaries
will be made in a lump sum only. If the value of a participant's account is less
than $3,500, the plan administrator will distribute the participant's entire
interest in one lump sum payment.
Profit-sharing and matching contributions and their earnings may be withdrawn
prior to age 59-1/2 in an amount not to exceed the value of the pretax
contributions account at December 31, 1993 and only after all after-tax
contributions and their earnings have been withdrawn. Withdrawals of
profit-sharing allocations and matching contributions during a participant's
employment are not permitted prior to age 59-1/2, unless the participant can
show financial hardship for which he or she has no other available resources.
Such situations are limited to: (i) certain medical expenses; (ii) payment of
tuition and related educational fees for post-secondary education for the next
year; (iii) costs related to the purchase of a principal residence; or (iv)
payments necessary to avoid eviction from, or a foreclosure on the mortgage of,
the participant's principal residence.
9
<PAGE> 13
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
4. INCOME TAX STATUS
The Plan has received a favorable determination letter from the Internal Revenue
Service stating that the Plan is qualified under section 401(a) of the Internal
Revenue Code of 1986 (the "Code") and that the trust, therefore, is exempt from
taxation. Once qualified, the Plan is required to operate in conformity with the
Code to maintain its qualification. The Plan Administrator believes the Plan is
being operated in compliance with the applicable requirements of the Code and,
therefore, believes that the Plan is qualified and the related trust is tax
exempt.
5. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of additions and deductions during the reporting period.
Actual results could differ from those estimates.
10
<PAGE> 14
<TABLE>
<CAPTION>
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
6. CHANGES IN ASSETS BY INVESTMENT OPTION
Aeroquip- Cincinnati
Fixed Vanguard Vickers Milacron
Income Fund Mutual Funds Stock Fund Stock Fund
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets available for plan benefits at December 31, 1997 $ 231,860,799 $ 388,303,288 $ 46,772,500 $ 1,378,433
Reclassification of prior year contributions receivable 5,357,334 15,006,194 7,574,845
----------------------------------------------------------------
237,218,133 403,309,482 54,347,345 1,378,433
Additions:
Contributions:
Employee 5,066,601 18,448,142 1,050,423
Employer 5,759,305 18,184,249 6,811,859
----------------------------------------------------------------
10,825,906 36,632,391 7,862,282
Net investment income:
Interest 16,258,835
Dividends 26,873,417 1,082,083 21,500
Realized and unrealized gains on investments 42,664,510 (21,903,633) (253,194)
----------------------------------------------------------------
27,084,741 106,170,318 (12,959,268) (231,694)
Deductions:
Distributions to participants 19,877,622 28,541,336 3,265,784 5,958
Investment management fees 22,906 68,337 8,252 114
Asset transfers out due to sales of facilities 2,934 9,436 7,875
----------------------------------------------------------------
19,903,462 28,619,109 3,281,911 6,072
----------------------------------------------------------------
Net additions prior to transfers 7,181,279 77,551,209 (16,241,179) (237,766)
Net transfers among investment funds 5,460,273 (22,596,511) 15,828,877 (282,500)
Assets available for plan benefits at December 31, 1998 $ 249,859,685 $ 458,264,180 $ 53,935,043 $ 858,167
================================================================
Investment amount included in assets available for plan benefits:
December 31, 1998 $ 245,763,003 $ 445,404,620 $ 47,267,654 $ 858,168
================================================================
December 31,1997 $ 231,860,798 $ 388,303,242 $ 46,772,500 $ 1,378,428
================================================================
<CAPTION>
Participant Contributions
Loans Receivable Total
----------------------------------------------
<S> <C> <C> <C>
Assets available for plan benefits at December 31, 1997 $ 17,730,050 $ 27,938,375 $ 713,983,445
Reclassification of prior year contributions receivable 2 (27,938,375) --
----------------------------------------------
17,730,052 -- 713,983,445
Additions:
Contributions:
Employee 24,565,166
Employer 30,755,413
----------------------------------------------
55,320,579
Net investment income:
Interest 1,616,738 17,875,573
Dividends 27,977,000
Realized and unrealized gains on investments 20,507,683
----------------------------------------------
1,616,738 121,680,835
Deductions:
Distributions to participants 1,394,033 53,084,733
Investment management fees 99,609
Asset transfers out due to sales of facilities 1,608 21,853
----------------------------------------------
1,395,641 53,206,195
----------------------------------------------
Net additions prior to transfers 221,097 68,474,640
Net transfers among investment funds 1,589,861 --
----------------------------------------------
Assets available for plan benefits at December 31, 1998 $ 19,541,010 $ -- $ 782,458,085
==============================================
Investment amount included in assets available for plan benefits:
December 31, 1998 $ 19,541,011 $ -- $ 758,834,456
==============================================
December 31,1997 $ 17,856,938 $ -- $ 686,171,906
==============================================
</TABLE>
11
<PAGE> 15
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
7. VANGUARD MUTUAL FUNDS
A summary of the activity within the separate Vanguard Mutual Fund options for
the year ended December 31, 1998 is as follows:
<TABLE>
<CAPTION>
LifeStrategy Fixed
Money Conservative Income
Market Growth Securities Star
Fund Fund Fund Fund
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets available for plan benefits at December 31, 1997 $ 16,064,455 $ 3,408,126 $ 5,421,025 $ 102,515,386
Reclassification of prior year contributions receivable 3,322,140 117,189 221,528 2,941,051
----------------------------------------------------------------
19,386,595 3,525,315 5,642,553 105,456,437
Additions:
Contributions:
Employee 1,460,821 331,103 344,327 3,297,520
Employer 3,574,173 205,556 281,218 3,248,296
---------------------------------------------------------------
5,034,994 536,659 625,545 6,545,816
Dividends 943,057 327,484 672,182 8,506,689
Realized and unrealized gains on investments 423,633 9,289 3,371,691
---------------------------------------------------------------
5,978,051 1,287,776 1,307,016 18,424,196
Deductions:
Distributions to participants 2,287,921 315,876 1,051,049 6,129,366
Investment management fees 13,688 853 594 21,968
Asset transfers out due to sales of facilities 4,229
---------------------------------------------------------------
2,301,609 316,729 1,051,643 6,155,563
---------------------------------------------------------------
Net additions prior to transfers 3,676,442 971,047 255,373 12,268,633
Net transfers among investment funds 1,290,616 2,757,139 3,670,678 (11,959,246)
---------------------------------------------------------------
Assets available for plan benefits at December 31, 1998 $ 24,353,653 $ 7,253,501 $ 9,568,604 $ 105,765,824
===============================================================
Investment amount included in assets available for plan benefits:
December 31, 1998 $ 21,340,616 $ 7,105,342 $ 9,318,313 $ 103,574,121
===============================================================
December 31,1997 $ 16,064,455 $ 3,408,126 $ 5,421,025 $ 102,515,386
===============================================================
<CAPTION>
LifeStrategy Morgan
Windsor II Index 500 Growth Growth
Fund Fund Fund Fund
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets available for plan benefits at December 31, 1997 $ 88,863,479 $ 101,121,055 $ 3,079,518 $ 43,025,550
Reclassification of prior year contributions receivable 2,700,866 3,145,753 197,786 1,551,034
----------------------------------------------------------------
91,564,345 104,266,808 3,277,304 44,576,584
Additions:
Contributions:
Employee 4,035,321 4,781,371 464,427 2,250,202
Employer 3,411,997 4,267,624 373,113 1,899,307
----------------------------------------------------------------
7,447,318 9,048,995 837,540 4,149,509
Dividends 9,968,435 1,982,408 186,410 3,797,256
Realized and unrealized gains on investments 3,925,642 26,140,605 636,306 4,871,560
----------------------------------------------------------------
21,341,395 37,172,008 1,660,256 12,818,325
Deductions:
Distributions to participants 5,878,638 8,131,710 289,273 3,117,067
Investment management fees 15,293 8,754 1,055 3,909
Asset transfers out due to sales of facilities 5,207
----------------------------------------------------------------
5,893,931 8,145,671 290,328 3,120,976
----------------------------------------------------------------
Net additions prior to transfers 15,447,464 29,026,337 1,369,928 9,697,349
Net transfers among investment funds (6,524,596) (3,256,090) 1,045,059 (4,493,674)
----------------------------------------------------------------
Assets available for plan benefits at December 31, 1998 $ 100,487,213 $ 130,037,044 $ 5,692,291 $ 49,780,259
================================================================
Investment amount included in assets available for plan benefits:
December 31, 1998 $ 98,226,344 $ 127,189,820 $ 5,418,342 $ 48,514,594
================================================================
December 31,1997 $ 88,863,479 $ 101,121,009 $ 3,079,518 $ 43,025,550
================================================================
<CAPTION>
Total
International Vanguard
Growth Mutual
Fund Funds
-------------------------------
<S> <C> <C>
Assets available for plan benefits at December 31, 1997 $ 24,804,694 $ 388,303,288
Reclassification of prior year contributions receivable 808,847 15,006,194
------------------------------
25,613,541 403,309,482
Additions:
Contributions:
Employee 1,483,050 18,448,142
Employer 922,965 18,184,249
------------------------------
2,406,015 36,632,391
Dividends 489,496 26,873,417
Realized and unrealized gains on investments 3,285,784 42,664,510
------------------------------
6,181,295 106,170,318
Deductions:
Distributions to participants 1,340,436 28,541,336
Investment management fees 2,223 68,337
Asset transfers out due to sales of facilities 9,436
------------------------------
1,342,659 28,619,109
------------------------------
Net additions prior to transfers 4,838,636 77,551,209
Net transfers among investment funds (5,126,397) (22,596,511)
------------------------------
Assets available for plan benefits at December 31, 1998 $ 25,325,780 $ 458,264,180
==============================
Investment amount included in assets available for plan benefits:
December 31, 1998 $ 24,717,128 $ 445,404,620
==============================
December 31,1997 $ 24,804,694 $ 388,303,242
</TABLE>
12
<PAGE> 16
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
8. SUBSEQUENT EVENT
On February 1, 1999, Eaton Corporation and Aeroquip-Vickers, Inc. announced that
the companies had entered into an "Agreement and Plan of Merger" whereby Eaton
Corporation would acquire all of the outstanding shares of Aeroquip-Vickers,
Inc. for $58 per share in cash. The merger was finalized in April 1999. All
participants with 401(k) investments in Aeroquip-Vickers stock were redeemed by
Eaton for $58 per share with the proceeds being reinvested in Vanguard Mutual
Funds based on the participant's investment election for future contributions.
If notification of investment elections was not received, all monies were
invested in The Vanguard U.S.
Money Market Treasury Fund.
9. YEAR 2000 ISSUE (UNAUDITED)
The Plan Sponsor has determined that it will be necessary to take certain steps
in order to ensure that the Plan's information systems are prepared to handle
year 2000 dates. The Plan Sponsor is taking a two phase approach. The first
phase addresses internal systems that must be modified or replaced to function
properly. Both internal and external resources are being utilized to replace or
modify existing software applications, and test the software and equipment for
the year 2000 modifications. The Plan Sponsor anticipates substantially
completing this phase of the project by June 1999. Costs associated with
modifying software and equipment are not estimated to be significant and will be
paid by the Plan Sponsor.
For the second phase of the project, Plan management established formal
communications with its third party service providers to determine that they
have developed plans to address their own year 2000 problems as they relate to
the Plan's operations. All third party service providers have indicated that
they will be year 2000 compliant by early 1999. If modification of data
processing systems of either the Plan, the Plan Sponsor, or its service
providers are not completed timely, the year 2000 problem could have a material
impact on the operations of the Plan. Plan management has not developed a
contingency plan, because they are confident that all systems will be year 2000
ready.
13
<PAGE> 17
Supplemental Schedules
<PAGE> 18
<TABLE>
<CAPTION>
Aeroquip-Vickers Savings and Profit-Sharing Plan
Employer Identification No. 34-4288310
Plan No. 015
Line 27a - Schedule of Assets Held for Investment Purpose
December 31, 1998
CURRENT
IDENTITY OF ISSUE INVESTMENT TYPE COST VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
*Vanguard 500 Index Fund Registered Investment Company $ 76,040,010.35 $127,189,820.41
*Vanguard International Growth Fund Registered Investment Company 20,482,770.00 24,717,129.05
*Vanguard LifeStrategy Conservative Growth Fund Registered Investment Company 6,633,386.69 7,105,341.61
*Vanguard LifeStrategy Growth Fund Registered Investment Company 4,734,730.78 5,418,341.80
*Vanguard LT Corporate Fund Registered Investment Company 9,115,714.61 9,318,313.42
*Vanguard Morgan Growth Fund Registered Investment Company 39,032,886.20 48,514,593.51
*Vanguard STAR Fund Registered Investment Company 88,040,535.65 103,574,121.22
*Vanguard Treasury Money Market Registered Investment Company 21,340,615.50 21,340,615.50
*Vanguard Windsor II Fund Registered Investment Company 80,067,743.95 98,226,343.68
*Aeroquip-Vickers Stock Fund Company Stock Fund 56,309,848.99 47,267,654.44
*Cincinnati Milacron Stock Company Stock Fund 893,555.89 858,168.42
*Participant loans 6% - 10% - 19,541,010.69
*Aeroquip-Vickers Fixed Income Fund Unallocated Insurance Contract 245,763,002.61 245,763,002.61
--------------------
Total assets held for investment purposes $758,834,456.36
====================
* - Party-in-interest
</TABLE>
14
<PAGE> 19
<TABLE>
<CAPTION>
Aeroquip-Vickers Savings and Profit-Sharing Plan
Employer Identification No. 34-4288310
Plan No. 015
Line 27d - Schedule of Reportable Transactions
Year Ended December 31, 1998
HISTORICAL
IDENTITY OF PARTY DESCRIPTION OF ASSET (INCLUDE INTEREST PURCHASE SELLING COST
INVOLVED RATE AND MATURITY IN THE CASE OF A LOAN) PRICE PRICE OF ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Vanguard Group Vanguard 500 Index Fund $43,220,552.44
The Vanguard Group Vanguard 500 Index Fund $43,363,493.59 $34,658,923.35
The Vanguard Group Vanguard STAR Fund 24,435,768.22
The Vanguard Group Vanguard STAR Fund 26,748,731.01 23,152,898.76
The Vanguard Group Vanguard Treasury Money Market 20,722,269.68
The Vanguard Group Vanguard Treasury Money Market 15,447,613.05 15,447,613.05
The Vanguard Group Vanguard Windsor II Fund 37,763,908.13
The Vanguard Group Vanguard Windsor II Fund 32,340,093.95 27,174,824.33
The Vanguard Group Aeroquip-Vickers Fixed Income Fund 94,966,381.30
The Vanguard Group Aeroquip-Vickers Fixed Income Fund 81,064,172.97 81,064,172.97
N/A Aeroquip-Vickers Stock Fund 48,713,526.20
N/A Aeroquip-Vickers Stock Fund 26,314,738.83 23,906,604.10
<CAPTION>
CURRENT
VALUE OF
ASSET ON
IDENTITY OF PARTY DESCRIPTION OF ASSET (INCLUDE INTEREST TRANSACTION HISTORICAL
INVOLVED RATE AND MATURITY IN THE CASE OF A LOAN) DATE GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Vanguard Group Vanguard 500 Index Fund $43,220,552.44
The Vanguard Group Vanguard 500 Index Fund 43,363,493.59 $8,704,570.24
The Vanguard Group Vanguard STAR Fund 24,435,768.22
The Vanguard Group Vanguard STAR Fund 26,748,731.01 3,595,832.25
The Vanguard Group Vanguard Treasury Money Market 20,722,269.68
The Vanguard Group Vanguard Treasury Money Market 15,447,613.05 -
The Vanguard Group Vanguard Windsor II Fund 37,763,908.13
The Vanguard Group Vanguard Windsor II Fund 32,340,093.95 5,165,269.62
The Vanguard Group Aeroquip-Vickers Fixed Income Fund 94,966,381.30
The Vanguard Group Aeroquip-Vickers Fixed Income Fund 81,064,172.97 -
N/A Aeroquip-Vickers Stock Fund 48,713,526.20
N/A Aeroquip-Vickers Stock Fund 26,314,738.83 2,408,134.73
</TABLE>
15
