<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:
CUTLER-HAMMER DE PUERTO RICO COMPANY RETIREMENT SAVINGS 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
Exhibit
The following exhibit is filed herewith:
Exhibit No.
(23) Consent of Independent Auditors 12
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)
CUTLER-HAMMER DE PUERTO RICO
COMPANY RETIREMENT SAVINGS PLAN
<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
CUTLER-HAMMER DE PUERTO RICO
COMPANY RETIREMENT SAVINGS PLAN
PLAN NUMBER 002
DECEMBER 31, 1998 AND 1997
PLAN SPONSOR
Cutler-Hammer de Puerto Rico Company
P.O. Box 146
Aguas Buenas, Puerto Rico 00607
(787) 732-7891
Employer Identification Number: 34-1756466
PLAN ADMINISTRATOR
Cutler-Hammer de Puerto Rico Company
Retirement Savings Plan Committee
P.O. Box 146
Aguas Buenas, Puerto Rico 00607
(787) 732-7891
<PAGE> 4
Report of Independent Auditors
Corporate Compensation and Organization Committee of
Eaton Corporation
Cutler-Hammer de Puerto Rico Company
Retirement Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the Cutler-Hammer de Puerto Rico Company Retirement Savings Plan 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. These supplemental schedules are the responsibility of the
Plan's management. The Fund Information in the statements of net assets
available for benefits and the statements 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 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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Cutler-Hammer de Puerto Rico Company
Retirement Savings Plan
Statement of Net Assets Available for Benefits, with Fund Information
December 31, 1998
<TABLE>
<CAPTION>
EB Magic Indexed Eaton
Fund Stock Fund Stock Fund Total
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
Eaton Corporation Common Shares $ 1,038,972 $ 1,038,972
Mutual funds $ 4,243,942 4,243,942
Common/collective trust $ 5,856,744 5,856,744
Money market fund 1,567 5,095 6,662
--------------------------------------------------------------------
Total investments 5,856,744 4,245,509 1,044,067 11,146,320
Receivables:
Contributions receivable-employer 31,663 26,156 11,013 68,832
Contributions receivable-employee 83,460 68,945 29,029 181,434
Interest receivable 3 151 6 160
--------------------------------------------------------------------
Total assets 5,971,870 4,340,761 1,084,115 11,396,746
LIABILITIES
Accrued purchase of investment 5,080 5,080
--------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 5,971,870 $ 4,340,761 $ 1,079,035 $ 11,391,666
====================================================================
</TABLE>
See notes to financial statements.
<PAGE> 6
Cutler-Hammer de Puerto Rico Company
Retirement Savings Plan
Statement of Net Assets Available for Benefits, with Fund Information
December 31, 1997
<TABLE>
<CAPTION>
EB Magic Indexed Eaton
Fund Stock Fund Stock Fund Total
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
Eaton Corporation Common Shares $ 1,160,161 $ 1,160,161
Mutual funds $ 2,009,078 2,009,078
Common/collective trust $ 5,605,446 5,605,446
Money market funds 687 99,033 99,720
--------------------------------------------------------------------
Total investments 5,605,446 2,009,765 1,259,194 8,874,405
Receivables:
Contributions receivable-employer 32,801 9,979 8,392 51,172
Contributions receivable-employee 81,580 24,818 20,872 127,270
Interest receivable 131 83 120 334
--------------------------------------------------------------------
Total assets 5,719,958 2,044,645 1,288,578 9,053,181
LIABILITIES
Accrued purchase of investment 98,996 98,996
--------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 5,719,958 $ 2,044,645 $ 1,189,582 $ 8,954,185
====================================================================
</TABLE>
See notes to financial statements.
3
<PAGE> 7
Cutler-Hammer de Puerto Rico Company
Retirement Savings Plan
Statement of Changes in Net Assets Available For Benefits,
with Fund Information
Year Ended December 31, 1998
<TABLE>
<CAPTION>
EB Magic Indexed Eaton
Fund Stock Fund Stock Fund Total
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
ADDITIONS
Contributions--Employees $ 832,746 $ 656,665 $ 321,427 $ 1,810,838
Contributions--Employer 343,715 223,117 112,020 678,852
Interest 2,172 5,846 962 8,980
Dividends 394,596 24,508 419,104
--------------------------------------------------------------------
Total additions 1,178,633 1,280,224 458,917 2,917,774
DEDUCTIONS
Distributions to participants 537,034 246,694 136,078 919,806
--------------------------------------------------------------------
Total deductions 537,034 246,694 136,078 919,806
Net realized and unrealized
appreciation (depreciation) 369,592 335,515 (265,594) 439,513
in fair value of investments
Net interfund transfers (759,279) 927,071 (167,792)
--------------------------------------------------------------------
Net increase (decrease) 251,912 2,296,116 (110,547) 2,437,481
Net assets available for benefits
at beginning of year 5,719,958 2,044,645 1,189,582 8,954,185
====================================================================
NET ASSETS AVAILABLE FOR
BENEFITS AT END OF YEAR $ 5,971,870 $ 4,340,761 $ 1,079,035 $ 11,391,666
====================================================================
</TABLE>
See notes to financial statements.
4
<PAGE> 8
Cutler-Hammer de Puerto Rico Company
Retirement Savings Plan
Notes to Financial Statements
December 31, 1998 and 1997
A. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Investments are stated at fair value as measured by quoted prices in active
markets except for the EB Magic Fund, for which the investments are stated at
fair value as determined by the trustee.
The cost of shares sold for mutual funds and common shares 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 the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from these estimates.
B. DESCRIPTION OF PLAN
Effective February 1, 1994, Cutler-Hammer de Puerto Rico Company (the "Company"
or the "Plan Sponsor") a wholly-owned subsidiary of Eaton Corporation,
established a defined contribution plan to be known as the Cutler-Hammer de
Puerto Rico Company Retirement Savings Plan (the "Plan").
The Plan provides that all employees of the Company are eligible immediately
upon employment.
Eligible employees may elect to make before-tax contributions to the Plan up to
a maximum of 8% of their compensation. The Company has agreed to voluntarily
contribute 50% of the employee contributions not exceeding 2% of the total
compensation of the employee.
5
<PAGE> 9
Cutler-Hammer de Puerto Rico Company
Retirement Savings Plan
Notes to Financial Statements--Continued
B. DESCRIPTION OF PLAN--CONTINUED
Contributions are allocated by the employee to the three investment funds:
<TABLE>
<CAPTION>
Fund Description Sponsor
- --------------------------------------------------------------------------------
<S> <C> <C>
EB Magic Fund Insurance Company Key Bank
Contracts
Indexed Stock Fund Publicly-traded Victory Broker
Common Stocks Dealer Services
Eaton Stock Fund Company Stock Eaton Corporation
</TABLE>
All administrative and transaction costs, management fees and expenses of the
Plan shall be paid by the Company.
Each participant's account is credited with the participant's contributions and
allocations of Company contributions, Plan earnings and administrative expenses.
Allocations are based on participant earnings or account balances, as defined.
The benefit to which a participant is entitled is the benefit that can be
provided from the participant's account. On termination of service, a
participant may receive a lump-sum amount equal to the vested value of his or
her account.
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in the Company contribution portion of their accounts plus
actual earnings thereon is based on years of continuous service. Participants
are 100% vested after three years of credited service or upon the death of the
participant. Forfeitures of non-vested amounts shall be used to reduce future
Company contributions.
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
<PAGE> 10
Cutler-Hammer de Puerto Rico Company
Retirement Savings Plan
Notes to Financial Statements--Continued
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 represent 5% or more of the Plan's
net assets available for benefits are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
--------------------------------------
<S> <C> <C>
EB Managed Guaranteed Investment Contract Fund $ 5,856,744 $ 5,605,446
Victory Stock Index Fund 4,243,942 2,009,078
Eaton Corporation Common Shares 1,038,972 1,160,161
</TABLE>
D. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
--------------------
<S> <C>
Net assets available for benefits per the financial
statements $ 11,391,666
Amounts allocated to withdrawing participants (246,530)
---------------
NET ASSETS AVAILABLE FOR BENEFITS PER FORM 5500 $ 11,145,136
===============
</TABLE>
7
<PAGE> 11
Cutler-Hammer de Puerto Rico Company
Retirement Savings Plan
Notes to Financial Statements--Continued
D. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500--CONTINUED
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998
--------------------
<S> <C>
Benefits paid to participants per the financial
statements $ 919,806
Add: Amounts allocated to withdrawing
participants at December 31, 1998 246,530
--------------------
BENEFITS PAID TO PARTICIPANTS PER FORM 5500 $ 1,166,336
====================
</TABLE>
Amounts allocated to withdrawing participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
December 31, 1998 but not yet paid.
E. INCOME TAX STATUS
The Plan has received a determination letter from the Puerto Rico Treasury
Department stating that the Plan meets the requirements for qualification under
Puerto Rico income tax laws and that the related trust is exempt from income
taxes.
F. 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. Such transactions are
exempt from being prohibited transactions.
8
<PAGE> 12
Cutler-Hammer de Puerto Rico Company
Retirement Savings Plan
Notes to Financial Statements--Continued
G. 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 that 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.
9
<PAGE> 13
Cutler-Hammer de Puerto Rico Company
Retirement Savings Plan
EIN 34-1756466 Plan Number: 002
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:
EB Managed Guaranteed Investment
Contract Fund 447,746 units $ 4,905,364 $ 5,856,744
Victory Stock Index Fund 199,809 shares 3,527,201 4,243,942
EB Money Market Fund 6,662 units 6,662 6,662
* Eaton Corporation Common Shares 14,698 shares 1,040,706 1,038,972
-----------------------------------
$ 9,479,933 $ 11,146,320
===================================
</TABLE>
* Indicates a party-in-interest to the Plan.
10
<PAGE> 14
Cutler-Hammer de Puerto Rico Company
Retirement Savings Plan
EIN 34-1756466 Plan Number: 002
Form 5500, Line 27(d)--Schedule of Reportable Transactions
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Purchase Selling Cost of Current
Description of Assets Price Price Assets Value Net Gain
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CATEGORY (i)--SINGLE TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS
* KeyBank:
Victory Stock Index Fund $ 716,615 $ 716,615 $ 716,615
EB Managed Guaranteed Investment Contract
Fund $ 505,000 426,598 505,000 $ 78,402
EB Money Market Fund 716,615 716,615 716,615
715,602 715,602 715,602
505,000 505,000 505,000
716,615 716,615 716,615
624,657 624,657 624,657
CATEGORY (iii)--SERIES OF TRANSACTIONS IN
EXCESS OF 5% OF PLAN ASSETS
* KeyBank:
Victory Stock Index Fund 160,000 121,633 160,000 38,367
2,059,349 2,059,349 2,059,349
EB Managed Guaranteed Investment Contract
Fund 912,201 774,263 912,201 137,938
793,907 793,907 793,907
EB Money Market Fund 4,618,412 4,618,412 4,618,412
4,525,354 4,525,354 4,525,354
</TABLE>
There were no category (ii) or (iv) reportable transactions during the year
ended December 31, 1998.
* Indicates a party-in-interest to the Plan
11
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-35697) pertaining to the Cutler-Hammer de Puerto Rico Company
Retirement Savings Plan of our report dated June 11, 1999, with respect to the
financial statements and schedules of the Cutler-Hammer de Puerto Rico Company
Retirement Savings Plan included in this Annual Report (Form 11-K) for the year
ended December 31, 1998.
/s/ Ernst & Young LLP
Cleveland, Ohio
June 23, 1999
12
