<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 31, 1999
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: June 28, 2000 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 AND SUPPLEMENTAL SCHEDULES
Aeroquip-Vickers Savings and Profit-Sharing Plan
December 31, 1999 and 1998 and Year Ended December 31, 1999
with Report of Independent Auditors
<PAGE> 3
Aeroquip Vickers Savings and Profit-Sharing Plan
Financial Statements and Supplemental Schedule
December 31, 1999 and 1998 and Year Ended December 31, 1999
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors...........................................................................1
AUDITED FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits..........................................................2
Statement of Changes in Net Assets Available for Benefits................................................3
Notes to Financial Statements............................................................................4
SUPPLEMENTAL SCHEDULES
Schedule H, Line 4(i)--Schedule of Assets Held for Investment
Purposes at End of Year..............................................................................11
Schedule H, Line 4(j)--Schedule of Reportable Transactions..............................................13
</TABLE>
<PAGE> 4
Report of Independent Auditors
Administrative Committee
Aeroquip-Vickers
Savings and Profit-Sharing Plan
We have audited the accompanying statements of net assets available for benefits
of the Aeroquip-Vickers Savings and Profit-Sharing Plan as of December 31, 1999
and 1998, and the related statement of changes in net assets available for
benefits for the year ended December 31, 1999. 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 auditing standards generally accepted
in the United States. 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, 1999 and 1998, and the changes in its net assets available for
benefits for the year ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
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 at end of year as of December 31, 1999 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 supplemental schedules 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.
Cleveland, Ohio /s/ Ernst & Young LLP
June 9, 2000
1
<PAGE> 5
Aeroquip-Vickers Savings and Profit-Sharing Plan
Statements of Net Assets Available for Benefits
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
--------------------------------------------
<S> <C> <C>
ASSETS
Contributions receivable from employer $ 18,204,426 $ 23,623,629
Contributions receivable from participants 138,383 -
Fixed income fund units receivable (payable), net 2,043,703 (25,924)
Investments:
Investment Contracts 218,331,970 234,317,290
Vanguard Mutual Funds 590,607,034 456,876,257
Eaton Common Shares Fund 11,745,772 -
Aeroquip-Vickers Stock Fund - 47,267,654
Cincinnati Milacron Stock Fund 626,602 858,168
Loans receivable from participants 20,502,635 19,541,011
--------------------------------------------
841,814,013 758,860,380
--------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 862,200,525 $ 782,458,085
============================================
</TABLE>
See accompanying notes.
2
<PAGE> 6
Aeroquip-Vickers Savings and Profit-Sharing Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 1999
<TABLE>
<CAPTION>
ADDITIONS
<S> <C>
Contributions by participants $ 21,398,943
Contributions by employer 24,376,645
Investment income:
Interest 20,089,419
Dividends 32,469,069
Net appreciation in fair value of investments 76,311,297
----------------------
128,869,785
Transfer from M.C. Aerospace Corporation Tax
Deferred Savings Plan 1,611,057
----------------------
176,256,430
DEDUCTIONS
Distributions to participants 96,436,048
Investment management fees 77,942
----------------------
96,513,990
----------------------
Net increase 79,742,440
Net assets available for benefits at beginning of year 782,458,085
----------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 862,200,525
======================
</TABLE>
See accompanying notes.
3
<PAGE> 7
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements
December 31, 1999 and 1998 and
Year Ended December 31, 1999
A. 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. Effective
January 1, 2000 covered employees are immediately eligible for participation in
the Plan. 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) subject
to an annual limit imposed by the Internal Revenue Service. Each participant
individually directs his or her contributions and the Company's contributions
into the investment funds offered by the Plan (in multiples of 1 percent),
except for 25 percent of the Company's profit-sharing contribution.
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 of the Company. These
contributions are paid to the Plan by the Company during the first quarter of
the following year.
The Company matches 50% to 100% of participant contributions not exceeding 1% to
5% of the total compensation of the participant, depending on the location and
contribution level of the participant.
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.
4
<PAGE> 8
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements--Continued
A. DESCRIPTION OF THE PLAN--CONTINUED
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.
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. 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.
5
<PAGE> 9
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements--Continued
A. DESCRIPTION OF THE PLAN--CONTINUED
The Aeroquip-Vickers Stock Fund was invested in Aeroquip-Vickers Common Stock.
Cash dividends paid on shares held by the Trust were used to purchase additional
shares for participant accounts. For each participant's profit-sharing
allocation, 25% was automatically invested in the Aeroquip-Vickers Stock Fund
until distribution to the participant or until the participant reached age 55.
Participants could also elect to have additional amounts over the Company's 25%
profit-sharing contribution invested in the Aeroquip-Vickers Stock Fund.
Aeroquip-Vickers common stock was acquired in open market purchases at fair
market value.
On April 9, 1999, the Eaton Corporation ("Eaton") completed the acquisition of
the Company whereby Eaton acquired all of the outstanding shares of the Company
for $58 per share in cash. All participants with 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.
The Eaton Common Shares Fund is invested in Eaton Corporation Common Stock. Cash
dividends paid on shares held by the Trust are used to purchase additional
shares for participant accounts. For each participant's 1999 profit-sharing
contribution, 25% will be automatically invested in the Eaton Common Shares Fund
until distribution to the participant or until the participant reaches age 55.
Participants can also elect to have additional amounts over the Company's 25%
profit-sharing contribution invested in the Eaton Common Shares Fund.
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 or direct payment
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.
Certain administrative costs are paid by the Plan Sponsor.
6
<PAGE> 10
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements--Continued
A. DESCRIPTION OF THE PLAN--CONTINUED
The Company reserves the right to amend, modify or terminate the Plan at any
time.
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.
B. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accounting records of the Plan are maintained on the accrual basis of
accounting.
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 participant loans receivable are valued at
their outstanding balances, which approximate fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
Investment contracts consist of fully benefit-responsive insurance company and
bank investment contracts. These investment contracts are stated at contract
value. These contracts pay a negotiated fixed or variable interest rate for a
period of one to five years. At December 31, 1999 and 1998, the investment
contracts had a weighted average crediting interest rate of 6.25% and 7.97%,
respectively. The average yield on these contracts was 7.01% and 7.35% for the
years ended December 31, 1999 and 1998, respectively. The contract value of
these contracts approximates fair value.
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.
7
<PAGE> 11
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements--Continued
B. SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect the
amounts reported in the accompanying financial statements and notes. Actual
results could differ from these estimates.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the current year
presentation.
C. INVESTMENTS
During 1999, the Plan's investments (including investments purchased, sold as
well as held during the year) appreciated in fair value as determined by quoted
market prices as follows:
<TABLE>
<CAPTION>
Net
Appreciation in
Fair Value of
Investments
---------------------
<S> <C>
Common stock $ 49,192,574
Registered investment companies 27,118,723
---------------------
$ 76,311,297
=====================
</TABLE>
8
<PAGE> 12
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements--Continued
C. INVESTMENTS--CONTINUED
Investments that represent 5% or more of fair value of the Plan's net assets are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-------------------------------------------
<S> <C> <C> <C>
Vanguard 500 Index Fund $ 173,282,460 $ 127,189,820
Vanguard Morgan Growth Fund 74,220,860 48,514,594
Vanguard STAR Fund 104,110,513 103,574,121
Vanguard Windsor II Fund 80,286,198 98,226,344
Vanguard Prime Money Market 61,818,109 -
Aeroquip-Vickers Common Stock* - 47,267,654
</TABLE>
* Nonparticipant-directed
D. NONPARTICIPANT-DIRECTED INVESTMENTS
Information regarding the net assets and the significant components of the
changes in net assets relating to nonparticipant-directed investments is as
follows:
Aeroquip-Vickers Stock Fund (Nonparticipant-directed portion):
DECEMBER 31,
1998
---------------------
Net assets:
Contribution receivable $ 5,946,544
Aeroquip-Vickers Common Stock 23,246,637
---------------------
$ 29,193,181
=====================
Changes in net assets:
Dividends $ 183,578
Net appreciation 17,098,322
Benefits paid to participants (1,020,428)
Transfers to participant-directed investments (45,454,653)
---------------------
$ (29,193,181)
=====================
9
<PAGE> 13
Aeroquip-Vickers Savings and Profit-Sharing Plan
Notes to Financial Statements--Continued
D. NONPARTICIPANT-DIRECTED INVESTMENTS--CONTINUED
Eaton Common Shares Fund (Nonparticipant-directed portion):
The portion of the contribution receivable at December 31, 1999 which is
designated to be nonparticipant-directed (see Note A) is $4,538,498.
E. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated July 22, 1997, stating that the Plan is qualified under section 401(a) of
the Internal Revenue Code of 1986 (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 Sponsor has
indicated that it will take the necessary steps, if any, to maintain the Plan's
qualified status.
10
<PAGE> 14
Aeroquip-Vickers Savings and Profit-Sharing Plan
EIN 34-4288310 Plan 15
Schedule H, Line 4(i)--Schedule of Assets Held for
Investment Purposes at End of Year
December 31, 1999
<TABLE>
<CAPTION>
Current
Identity of Issue Description of Investment Value
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*Vanguard 500 Index Fund Registered Investment Company;
1,280,444 shares $ 173,282,460
*Vanguard International Growth Fund Registered Investment Company;
1,388,746 shares 31,232,893
*Vanguard LifeStrategy Conservative Growth Fund Registered Investment Company;
515,577 shares 7,785,216
*Vanguard LifeStrategy Growth Fund Registered Investment Company;
530,356 shares 11,354,931
*Vanguard LT Corporate Fund Registered Investment Company;
982,295 shares 7,966,415
*Vanguard Morgan Growth Fund Registered Investment Company;
3,238,257 shares 74,220,860
*Vanguard STAR Fund Registered Investment Company;
5,717,217 shares 104,110,513
*Vanguard Treasury Money Market Registered Investment Company;
38,549,439 shares 38,549,439
*Vanguard Windsor II Fund Registered Investment Company;
3,215,306 shares 80,286,198
*Vanguard Prime Money Market Fund Registered Investment Company;
61,819,109 shares 61,818,109
*Eaton Corporation Common Stock Company Stock;
161,732 shares 11,745,772
*Cincinnati Milacron Stock Company Stock;
40,755 shares 626,602
*Participant loans Interest rates ranging from
6% - 10% 20,502,635
AIG 18293 Unallocated Insurance Contract;
maturity date 1/31/02, 6.37% 8,485,933
AIG 995 Unallocated Insurance Contract;
maturity date 3/31/03, 6.21% 8,857,686
AIG Financial 205838 Unallocated Insurance Contract;
duration 4.95 years, 5.88% 21,124,662
Allstate 6080 Unallocated Insurance Contract;
maturity date 2/14/03, 6.10% 7,178,245
Allstate GA-6139 Unallocated Insurance Contract;
maturity date 10/15/03, 5.64% 10,587,847
</TABLE>
11
<PAGE> 15
Aeroquip-Vickers Savings and Profit-Sharing Plan
EIN 34-4288310 Plan 15
Schedule H, Line 4(i)--Schedule of Assets Held for
Investment Purposes at End of Year--Continued
<TABLE>
<CAPTION>
Current
Identity of Issue Description of Investment Value
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CDC 394-01 Unallocated Insurance Contract;
maturity date 2/22/04, 6.27% 8,052,152
CDC 394-02 Unallocated Insurance Contract;
maturity date 1/25/04, 5.66% 20,203,149
CDC 394-03 Unallocated Insurance Contract;
maturity date 5/25/04, 5.88% 9,151,426
Deutsche Bank TRI1 Unallocated Insurance Contract;
maturity date 6/30/00, 6.45% 8,996,105
John Hancock 8693 Unallocated Insurance Contract;
maturity date 9/30/00, 6.37% 10,158,589
John Hancock 8833 Unallocated Insurance Contract;
maturity date 12/29/00, 6.75% 9,074,722
Life of Virginia GS-3099 Unallocated Insurance Contract;
maturity date 7/31/01, 5.99% 5,124,243
Metropolitan Life 24762 Unallocated Insurance Contract;
maturity date 3/31/00, 6.77% 5,994,742
Metropolitan Life 24790 Unallocated Insurance Contract;
maturity date 4/30/01, 6.74% 17,471,499
New York Life 30507 Unallocated Insurance Contract;
maturity date 12/31/01, 6.65% 15,686,803
Principal Life 4-18623-02 Unallocated Insurance Contract;
maturity date 3/31/02, 6.85% 6,100,764
Principal Life 4-18623-03 Unallocated Insurance Contract;
maturity date 2/28/01, 6.83% 14,176,279
Rabobank TRI119601 Unallocated Insurance Contract;
maturity date 9/30/01, 6.47% 6,070,896
Security Life 0120 Unallocated Insurance Contract;
maturity date 9/30/02, 5.74% 19,955,696
UBS 2303 Unallocated Insurance Contract;
maturity date 6/30/02, 6.78% 5,880,532
-------------------
TOTAL ASSETS HELD FOR INVESTMENT PURPOSES $ 841,814,013
===================
</TABLE>
* Party-in-interest to the Plan.
12
<PAGE> 16
Aeroquip-Vickers Savings and Profit-Sharing Plan
EIN 34-4288310 Plan 15
Schedule H, Line 4(j)--Schedule of Reportable Transactions
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Current Value
of Asset
Identity of Description of Purchase Selling Cost of on Transaction Net
Issue Asset Price Price Asset Date Gain
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CATEGORY (i)--SINGLE TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS
Vanguard Aeroquip-Vickers
Common Stock* $ 40,547,286 $ 25,581,403 $ 40,547,286 $ 14,965,883
CATEGORY (iii)--SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS
Vanguard Aeroquip- Vickers $ 6,130,122 6,130,122 6,130,122
Common Stock* 46,475,081 29,418,660 46,475,081 17,056,421
</TABLE>
* Party-in-interest to the Plan.
There were no category (ii) or (iv) reportable transactions during 1999.
