<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 (Fee required)
For the fiscal year ended December 31, 1998
Or
[ ] Transition report pursuant to Section 15(d) of the Securities Exchange
Act of 1934 (Fee required)
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:
EATON CORPORATION LINCOLN PLANT SHARE PURCHASE AND
INVESTMENT PLAN AND TRUST
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
Exhibit
The following exhibit is filed herewith:
Exhibit No.
(23) Consent of Independent Auditors 10
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)
EATON CORPORATION LINCOLN
PLANT SHARE PURCHASE AND
INVESTMENT PLAN AND TRUST
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Date: June 28, 1999 By: Eaton Corporation Pension
Administration Committee
By: /s/ S. J. Cook
------------------------------
(Signature)
S. J. Cook
Vice President-Human Resources
Eaton Corporation
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Audited Financial Statements
and Supplemental Schedules
LINCOLN PLANT
SHARE PURCHASE AND INVESTMENT
PLAN AND TRUST
PLAN NUMBER: 152
DECEMBER 31, 1998 AND 1997
PLAN SPONSOR
Eaton Corporation
Eaton Center
Cleveland, Ohio 44114
(216) 523-5000
Employer Identification Number: 34-0196300
PLAN ADMINISTRATOR
Eaton Corporation
Corporate Compensation and
Organization Committee
Eaton Center
Cleveland, Ohio 44114
(216) 523-5000
<PAGE> 4
Report of Independent Auditors
Corporate Compensation and Organization Committee of
Eaton Corporation
Lincoln Plant Share Purchase and
Investment Plan and Trust
We have audited the accompanying statements of net assets available for benefits
of the Lincoln Plant Share Purchase and Investment Plan and Trust as of December
31, 1998 and 1997 and the related statement of changes in net assets available
for 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 net assets available for benefits of the Plan at
December 31, 1998 and 1997, and the changes in its net assets available for
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 the
Plan's management. The Fund Information in the statement of net assets available
for benefits and the statement of changes in net assets available for benefits
is presented for purposes of additional analysis rather than to present the net
assets available for benefits and changes in net assets available for benefits
of each fund. The supplemental schedules and Fund Information have been
subjected to auditing procedures applied in our audits of the financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
Cleveland, Ohio
June 11, 1999
1
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<TABLE>
<CAPTION>
Lincoln Plant Share Purchase and Investment Plan and Trust
Statement of Net Assets Available for Benefits, with Fund Information
December 31, 1998
Victory Victory Victory Eaton
Prism Victory Stock Special International Common
Magic Balanced Index Value Growth Shares Loan
Fund Fund Fund Fund Fund Fund Fund Total
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Eaton Corporation Common Shares $ 499,269 $ 499,269
Mutual funds $ 208,046 $ 380,797 $ 137,786 $ 112,783 839,412
Common/collective trust $ 279,943 279,943
Participant loans receivable $ 64,100 64,100
EB Money Market Fund 1,221 1,221
-------------------------------------------------------------------------------------------------
Total investments 279,943 208,046 380,797 137,786 112,783 500,490 64,100 1,683,945
Receivables:
Employee contributions 2,243 1,459 2,235 1,118 1,016 4,126 12,197
Interest 23 23
-------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 282,186 $ 209,505 $ 383,032 $ 138,904 $ 113,799 $ 504,639 $ 64,100 $ 1,696,165
=================================================================================================
</TABLE>
See notes to financial statements.
2
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<TABLE>
<CAPTION>
Lincoln Plant Share Purchase and Investment Plan and Trust
Statement of Net Assets Available for Benefits, with Fund Information
December 31, 1997
Victory Victory Victory Eaton
Prism Victory Stock Special International Common
Magic Balanced Index Value Growth Shares Loan
Fund Fund Fund Fund Fund Fund Fund Total
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Eaton Corporation Common Shares $ 522,113 $ 522,113
Mutual funds $ 150,670 $ 221,285 $ 144,071 $ 85,773 601,799
Common/collective trust $ 230,159 230,159
Participant loans receivable $ 28,276 28,276
EB Money Market Fund 1,230 1,230
--------------------------------------------------------------------------------------------------
Total investments 230,159 150,670 221,285 144,071 85,773 523,343 28,276 1,383,577
Receivables:
Interest 30 30
--------------------------------------------------------------------------------------------------
Total assets 230,159 150,670 221,285 144,071 85,773 523,373 28,276 1,383,607
LIABILITIES
Accrued purchase of investments 6,086 6,086
--------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 230,159 $ 150,670 $ 221,285 $ 144,071 $ 85,773 $ 517,287 $ 28,276 $ 1,377,521
==================================================================================================
</TABLE>
See notes to financial statements.
3
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<TABLE>
<CAPTION>
Lincoln Plant Share Purchase and Investment Plan and Trust
Statement of Changes in Net Assets Available for Benefits, with Fund Information
Year Ended December 31, 1998
Victory Victory Victory Eaton
Prism Victory Stock Special International Common
Magic Balanced Index Value Growth Shares Loan
Fund Fund Fund Fund Fund Fund Fund Total
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ADDITIONS
Employee contributions $ 62,665 $ 38,070 $ 60,402 $ 32,270 $ 28,045 $113,002 $ 334,454
Interest 55 223 $ 2,811 3,089
Dividends 16,277 37,766 6,305 4,004 10,843 75,195
----------------------------------------------------------------------------------------------
Total additions 62,720 54,347 98,168 38,575 32,049 124,068 2,811 412,738
DEDUCTIONS
Distributions to participants 699 3,802 2,335 3,630 1,255 29,230 637 41,588
Fees and expenses 1,258 1,258
----------------------------------------------------------------------------------------------
Total deductions 699 3,802 2,335 3,630 1,255 30,488 637 42,846
Net realized and unrealized
appreciation (depreciation) in 14,746 13,391 34,494 (19,293) 11,533 (106,119) (51,248)
fair value of investments
Net interfund transfers (24,740) (5,101) 31,420 (20,819) (14,301) (109) 33,650
----------------------------------------------------------------------------------------------
Net increase (decrease) 52,027 58,835 161,747 (5,167) 28,026 (12,648) 35,824 318,644
Net assets available for benefits at
beginning of year 230,159 150,670 221,285 144,071 85,773 517,287 28,276 1,377,521
----------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS
AT END OF YEAR $ 282,186 $209,505 $383,032 $138,904 $113,799 $504,639 $ 64,100 $1,696,165
==============================================================================================
</TABLE>
See notes to financial statements.
4
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Lincoln Plant Share Purchase and Investment
Plan and Trust
Notes to Financial Statements
December 31, 1998 and 1997
A. SIGNIFICANT ACCOUNTING POLICIES
Investments are stated at fair value as measured by quoted prices in active
markets except for the Prism Magic Fund where the investments are stated at fair
value as determined by the trustee. The participant loans receivable are valued
at their outstanding balances, which approximate fair value.
The cost of shares sold for mutual funds and Eaton Common Shares Fund is based
upon the average cost of each participant's shares sold for purposes of
determining realized gains and losses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect amounts
reported in the financial statements and accompanying notes. Actual results
could differ from these estimates.
B. DESCRIPTION OF THE PLAN
Effective January 1, 1994, Eaton Corporation (the "Company" or "Plan Sponsor")
established a 401(k) profit sharing plan and trust to be known as the Lincoln
Plant Share Purchase and Investment Plan and Trust (the "Plan").
The Plan provides that all union employees of the Lincoln Plant will be eligible
for membership in the Plan on the date at which the employee has completed sixty
days of service with the Company.
Eligible employees may elect to make before-tax and after-tax contributions from
1 to 15 percent of their compensation. Contributions are allocated by the
employee to the six investment funds:
<TABLE>
<CAPTION>
Fund Description Sponsor
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Prism Magic Fund Insurance Company Contracts Key Bank
Victory Balanced Fund Common Stocks and Fixed Income Victory Broker Dealer Services
Securities
Victory Stock Index Fund Standard & Poor's 500 Index Victory Broker Dealer Services
Victory Special Value Fund Small to Mid-Size Corporate Stocks Victory Broker Dealer Services
Victory International Growth Fund International Stocks Victory Broker Dealer Services
Eaton Common Shares Fund Company Stock Eaton Corporation
</TABLE>
5
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Lincoln Plant Share Purchase and Investment
Plan and Trust
Notes to Financial Statements - Continued
B. DESCRIPTION OF THE PLAN--CONTINUED
Each participant's account is credited with the participant's contribution and
allocations of Plan's earnings and administrative expenses. Allocations are
based on participant account balances. The benefit to which a participant is
entitled is the benefit that can be provided from the participant's account.
Participants are immediately vested in their contributions and actual earnings
thereon. On termination of service a participant is eligible to receive a
lump-sum amount equal to the value of the participant's account.
Participants may borrow from their fund accounts up to the lesser of $50,000 or
50% of their vested account balance, reduced by their highest outstanding loan
balance during the preceding 12 months. Loan transactions are treated as a
transfer from the investment fund to the loan fund. Loan terms range from 1-5
years except for loans used for the purchase of a primary residence. The loans
are secured by the balance in the participant's account and bear interest at a
rate based on the prime interest rates as determined daily by the Trustee.
Principal and interest is paid ratably through monthly payroll deductions.
All administrative and transaction costs, management fees and expenses of the
Plan shall be paid by the trustee from the trust unless such costs, fees and
expenses are paid by the Company.
The Company may amend, modify, suspend or terminate the Plan. No amendment,
modification, suspension or termination of the Plan shall have the effect of
providing that any amounts then held under the Plan may be used or diverted to
any purpose other than for the exclusive benefit of members or their
beneficiaries.
Information about the Plan is contained in the Plan document, which is available
from the Human Resources Department upon request.
6
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Lincoln Plant Share Purchase and Investment
Plan and Trust
Notes to Financial Statements - Continued
C. INVESTMENT ASSETS
Key Trust Company of Ohio, N.A., trustee of the plan, holds the Plan's
investment assets and executes transactions.
The fair value of individual investments that represent 5% or more of the Plan's
net assets available for benefits are as follows:
DECEMBER 31
1998 1997
-------------------------------
Prism Magic Fund $ 279,943 $ 230,159
Victory Balanced Fund 208,046 150,670
Victory Stock Index Fund 380,797 221,285
Victory Special Value Fund 137,786 144,071
Victory International Growth Fund 112,783 85,773
Eaton Corporation Common Shares 499,269 522,113
D. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated December 23, 1997, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code (the "Code") and, therefore, the related trust 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.
E. TRANSACTIONS WITH PARTIES-IN-INTEREST
Party-in-interest transactions included the investment in the special funds of
the trustee and the payment of administrative expenses by the Company. Such
transactions are exempt from being prohibited transactions.
F. SUBSEQUENT EVENT
Effective May 1, 1999 the Plan was merged into the Eaton Corporation 401(k)
Savings Plan and Trust ("Eaton 401(k) Plan"). On that same date all participants
became eligible to participate in the Eaton 401(k) Plan. The assets transferred
to the Eaton 401(k) Plan in May 1999 were approximately $1.9 million.
7
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Lincoln Plant Share Purchase and Investment Plan and Trust
EIN: 34-0196300 Plan No.: 152
Form 5500, Line 27(a)--Schedule of Assets Held for Investment Purposes
December 31, 1998
<TABLE>
<CAPTION>
Description of Current
Identity of Issue Investment Cost Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* KeyBank:
Prism Magic Fund 21,779 units $ 248,867 $ 279,943
Victory Balanced Fund 14,162 shares 179,668 208,046
Victory Stock Index Fund 17,928 shares 300,367 380,797
Victory Special Value Fund 9,814 shares 134,619 137,786
Victory International Growth Fund 7,948 shares 103,924 112,783
Employee Benefits Money Market Fund 1,221 units 1,221 1,221
* Eaton Corporation Common Shares 7,063 shares 525,184 499,269
* Participant Loans Receivable 8.75%--9.75%,
variable maturities 64,100
-----------------------------------
$ 1,493,850 $ 1,683,945
===================================
</TABLE>
* Indicates a party-in-interest to the Plan.
8
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Lincoln Plant Share Purchase and Investment Plan and Trust
EIN: 34-0196300 Plan No.: 152
Form 5500, Line 27(d)--Schedule of Reportable Transactions
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Purchase Selling Cost of Current Net Gain
Description of Asset Price Price Asset Value (Loss)
------------------------------------------------------------------------------------------------------
CATEGORY (III)--SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS
<S> <C> <C> <C> <C> <C>
* Key Bank--
Employee Benefits Money
Market Fund $ 187,418 $ 187,418 $ 187,418
$ 187,427 187,427 187,427
Victory Stock Index Fund 138,187 138,187 138,187
13,169 9,678 13,169 $ 3,491
* Eaton Common Shares 127,731 127,731 127,731
44,456 41,436 44,456 3,020
</TABLE>
There were no category (i), (ii) or (iv) reportable transactions during the year
ended December 31, 1998.
*Indicates a party-in-interest to the Plan.
9
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-13869) pertaining to the Lincoln Plant Share Purchase and Investment
Plan and Trust of our report dated June 11, 1999, with respect to the financial
statements and schedules of the Lincoln Plant Share Purchase and Investment Plan
and Trust included in this Annual Report (Form 11-K) for the year ended December
31, 1998.
/s/ Ernst & Young LLP
Cleveland, Ohio
June 23, 1999
10
