<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:
THE EATON CORPORATION INVESTMENT PLAN FOR HOURLY EMPLOYEES OF
THE HYDRAULICS DIVISION HUTCHINSON PLANT
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 11
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)
THE EATON CORPORATION
INVESTMENT PLAN FOR HOURLY
EMPLOYEES OF THE HYDRAULICS
DIVISION HUTCHINSON PLANT
<PAGE> 2
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
<PAGE> 3
AUDITED FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULES
EATON CORPORATION
INVESTMENT PLAN FOR HOURLY
EMPLOYEES OF THE HYDRAULICS
DIVISION-HUTCHINSON PLANT
PLAN NUMBER: 089
DECEMBER 31, 1998 AND 1997
PLAN SPONSOR
Eaton Corporation
Eaton Center
Cleveland, Ohio 44114
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
Eaton Corporation Investment Plan for Hourly Employees of the
Hydraulics Division--Hutchinson Plant
We have audited the accompanying statements of net assets available for benefits
of the Eaton Corporation Investment Plan for Hourly Employees of the Hydraulics
Division--Hutchinson Plant 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 purpose 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. The supplemental schedules are the responsibility of the Plan's
management. The Fund Information in the statements 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 the changes in net assets available for
benefits of each fund. The supplemental schedules and Fund Information have been
subjected to the 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
<PAGE> 5
Eaton Corporation Investment Plan for Hourly Employees
of the Hydraulics Division--Hutchinson Plant
Statement of Net Assets Available for Benefits,
with Fund Information
December 31, 1998
<TABLE>
<CAPTION>
Victory Victory Victory Eaton
Victory Stock Special International Prism Common
Balanced Index Value Growth Magic 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 $ 917,954 $ 917,954
Mutual funds $ 405,558 $ 1,068,994 $ 346,074 $ 154,991 1,975,617
Common/collective trusts $ 4,544,904 4,544,904
Participant loans receivable $323,529 323,529
Other investments 2,004 2,004
-------------------------------------------------------------------------------------------------
Total investments 405,558 1,068,994 346,074 154,991 4,544,904 919,958 323,529 7,764,008
Receivables:
Contributions receivable 1,121 2,195 1,116 546 8,450 2,434 15,862
Interest receivable 33 33
-------------------------------------------------------------------------------------------------
Total assets 406,679 1,071,189 347,190 155,537 4,553,354 922,425 323,529 7,779,903
-------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 406,679 $ 1,071,189 $ 347,190 $ 155,537 $ 4,553,354 $ 922,425 $323,529 $ 7,779,903
=================================================================================================
</TABLE>
See notes to financial statements.
2
<PAGE> 6
EATON CORPORATION INVESTMENT PLAN FOR HOURLY EMPLOYEES
OF THE HYDRAULICS DIVISION--HUTCHINSON PLANT
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Victory Victory Victory Eaton
Victory Stock Special International Prism Common
Balanced Index Value Growth Magic 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 $ 943,730 $ 943,730
Mutual funds $ 315,252 $ 658,364 $ 351,692 $ 107,996 1,433,304
Common/collective trusts $ 4,320,551 4,320,551
Participant loans receivable $ 297,474 297,474
Other investments 8,465 8,465
-------------------------------------------------------------------------------------------------
Total investments 315,252 658,364 351,692 107,996 4,320,551 952,195 297,474 7,003,524
Receivables:
Interest receivable 40 40
-------------------------------------------------------------------------------------------------
Total assets 315,252 658,364 351,692 107,996 4,320,551 952,235 297,474 7,003,564
LIABILITIES
Accrued purchase of investments 5,914 5,914
-------------------------------------------------------------------------------------------------
Total liabilities 5,914 5,914
-------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 315,252 $ 658,364 $ 351,692 $ 107,996 $ 4,320,551 $ 946,321 $ 297,474 $ 6,997,650
=================================================================================================
</TABLE>
See notes to financial statements.
3
<PAGE> 7
EATON CORPORATION INVESTMENT PLAN FOR HOURLY EMPLOYEES
OF THE HYDRAULICS DIVISION--HUTCHINSON PLANT
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Victory Victory Victory Eaton
Victory Stock Special International Prism Common
Balanced Index Value Growth Magic Shares Loan
Fund Fund Fund Fund Fund Fund Fund Total
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ADDITIONS
Contributions--employee $ 75,871 $ 128,775 $ 77,962 $ 29,346 $ 445,963 $ 133,360 $ 891,277
Interest income 122 879 $ 26,469 27,470
Dividend income 32,746 104,544 15,861 5,477 20,400 179,028
-------------------------------------------------------------------------------------------------
Total additions 108,617 233,319 93,823 34,823 446,085 154,639 26,469 1,097,775
DEDUCTIONS
Distributions to participants 7,569 15,553 2,475 621 418,142 9,254 3,528 457,142
Fees and expenses 2,365 2,365
-------------------------------------------------------------------------------------------------
Total deductions 7,569 15,553 2,475 621 418,142 11,619 3,528 459,507
Net realized and unrealized
appreciation (depreciation)
in fair value of investments 27,167 100,291 (52,596) 15,123 256,685 (202,685) 143,985
Net interfund transfers (36,788) 94,768 (43,254) (1,784) (51,825) 35,769 3,114 0
-------------------------------------------------------------------------------------------------
Net increase (decrease) 91,427 412,825 (4,502) 47,541 232,803 (23,896) 26,055 782,253
Net assets available for benefits
at beginning of year 315,252 658,364 351,692 107,996 4,320,551 946,321 297,474 6,997,650
-------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS
AT END OF YEAR $ 406,679 $ 1,071,189 $ 347,190 $ 155,537 $ 4,553,354 $ 922,425 $ 323,529 $7,779,903
==================================================================================================
</TABLE>
See notes to financial statements.
4
<PAGE> 8
EATON CORPORATION INVESTMENT PLAN FOR HOURLY EMPLOYEES
OF THE HYDRAULICS DIVISION--HUTCHINSON PLANT
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 the mutual funds and the Eaton Common Shares Fund is
based upon the average cost of each participant's shares sold.
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions in
certain circumstances that affect amounts reported in the accompanying financial
statements and notes. Actual results could differ from these estimates.
B. DESCRIPTION OF THE PLAN
The Eaton Corporation Investment Plan for Hourly Employees of the Hydraulics
Division--Hutchinson Plant (the "Plan") generally provides that all hourly
employees of the Hydraulics Division--Hutchinson Plant, to which the Corporate
Compensation and Organization Committee of Eaton Corporation (the "Company" or
the "Plan Sponsor") has extended eligibility (other than temporary employees and
employees covered by a collective bargaining agreement that does not specify
coverage under the Plan), will be eligible for membership in the Plan on the
date at which the employee has attained age 18.
Eligible employees may make either before-tax or after-tax contributions from 1
to 15 percent of their base pay. All contributions to the Plan are
non-forfeitable at all times as defined in the Plan document.
5
<PAGE> 9
EATON CORPORATION INVESTMENT PLAN FOR HOURLY EMPLOYEES
OF THE HYDRAULICS DIVISION--HUTCHINSON PLANT
NOTES TO FINANCIAL STATEMENTS--CONTINUED
B. DESCRIPTION OF THE PLAN--CONTINUED
Contributions are allocated by the employee to the six investment funds:
<TABLE>
<CAPTION>
Fund Description Sponsor
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 Stock Victory Broker Dealer Services
Victory International Growth Fund International Stock Victory Broker Dealer Services
Prism Magic Fund Insurance Company Contracts Key Bank
Eaton Common Shares Fund Company Stock Eaton Corporation
</TABLE>
Each participant's account is credited with the participant's contribution and
an allocation of the Plan's earnings and administrative expenses. Allocations
are based on 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 plus actual earnings thereon. On
termination of service a participant is eligible to receive a lump-sum amount
equal to the value of his account.
Participants may borrow from their fund accounts a minimum of $1,000, up to a
maximum equal to the lessor 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 (to) the investment
fund and loan fund. Loan terms range from 1-5 years or up to 10 years 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 determined daily by the
Trustee. Principal and interest is paid ratably through monthly payroll
deductions.
The Company elected to pay certain administrative costs during 1998 on behalf of
the Plan.
6
<PAGE> 10
EATON CORPORATION INVESTMENT PLAN FOR HOURLY EMPLOYEES
OF THE HYDRAULICS DIVISION--HUTCHINSON PLANT
NOTES TO FINANCIAL STATEMENTS--CONTINUED
B. DESCRIPTION OF THE PLAN--CONTINUED
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.
C. INVESTMENTS
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 represented 5% or more of the
Plan's net assets available for benefits are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
------------------------------------
<S> <C> <C>
Victory Balanced Fund $ 405,558 $ 315,252
Victory Stock Index Fund 1,068,994 658,364
Victory Special Value Fund 346,074 351,692
Prism Magic Fund 4,544,904 4,320,551
Eaton Corporation Common Shares 917,954 943,730
</TABLE>
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 (IRC) and, therefore, the related trust is exempt
from taxation. Once qualified, the Plan is required to operate in conformity
with the IRC to maintain its qualification. The Plan Administrator believes the
Plan is being operated in compliance with the applicable requirements of the IRC
and, therefore, believes that the Plan is qualified and the related trust is tax
exempt.
7
<PAGE> 11
EATON CORPORATION INVESTMENT PLAN FOR HOURLY EMPLOYEES
OF THE HYDRAULICS DIVISION--HUTCHINSON PLANT
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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. 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 mid-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 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 they will be year
2000 compliant by mid-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 an 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.
8
<PAGE> 12
EATON CORPORATION INVESTMENT PLAN FOR HOURLY EMPLOYEES
OF THE HYDRAULICS DIVISION--HUTCHINSON PLANT
EIN: 34-0196300 PLAN NUMBER 089
FORM 5500, ITEM 27(a)--SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Current
Identity of Issue, Borrower or Similar Party Description of Investment Cost Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* Eaton Corporation Common Shares 12,986 shares $ 892,911 $ 917,954
* KeyBank:
Victory Balanced Fund 27,608 units 359,505 405,558
Victory International Growth Fund 10,923 units 143,579 154,991
Victory Special Value Fund 24,649 units 348,589 346,074
Victory Stock Index Fund 50,329 units 890,146 1,068,994
Prism Magic Fund 353,579 units 3,892,116 4,544,904
Employee Benefits Money Market Fund* 2,004 units 2,004 2,004
* Participant loans receivable 8.25-10%; variable
maturities 323,529
-------------------------------
$ 6,528,850 $ 7,764,008
===============================
</TABLE>
* Indicates party-in-interest to the Plan.
9
<PAGE> 13
EATON CORPORATION INVESTMENT PLAN FOR HOURLY EMPLOYEES
OF THE HYDRAULICS DIVISION--HUTCHINSON PLANT
EIN: 34-0196300 PLAN NUMBER 089
FORM 5500, ITEM 27(d)--SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Purchase Selling Cost of Current
Description of Asset Price Price Asset Value Net Gain
- -----------------------------------------------------------------------------------------------------------------------
CATEGORY (iii)--SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS
<S> <C> <C> <C> <C> <C>
* Key Bank
Prism Magic Fund $ 547,039 $ 547,039 $ 547,039
$ 579,371 504,506 579,371 $ 74,865
Employee Benefits Money Market
Fund 272,825 272,825 272,825
279,286 279,286 279,286
Victory Stock Index Fund 419,769 419,769 419,769
109,430 90,624 109,430 18,806
</TABLE>
There were no category (i), (ii) or (iv) reportable transactions during the year
ended December 31, 1998.
* Indicates party-in-interest to the Plan.
10
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-13873) pertaining to the Eaton Corporation Investment Plan for
Hourly Employees of the Hydraulics Division - Hutchinson Plant of our report
dated June 11, 1999, with respect to the financial statements and schedules of
the Eaton Corporation Investment Plan for Hourly Employees of the Hydraulics
Division - Hutchinson Plant included in this Annual Report (Form 11-K) for the
year ended December 31, 1998.
/s/ Ernst & Young LLP
Cleveland, Ohio
June 23, 1999
11
