<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, 1999
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 SHARE PURCHASE AND INVESTMENT 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)
EATON CORPORATION SHARE
PURCHASE AND INVESTMENT PLAN
Date: June 27, 2000 By: Eaton Corporation Pension
Administration Committee
By: /s/ S. J. Cook
-------------------------------
(Signature)
S. J. Cook
Vice President-Human Resources
Eaton Corporation
<PAGE> 2
AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
Eaton Corporation Share Purchase and Investment Plan
December 30, 1999 and 1998 and Year Ended December 30, 1999
<PAGE> 3
Report of Independent Auditors
Corporate Compensation and Organization Committee of Eaton Corporation
Eaton Corporation Share Purchase and Investment Plan
We have audited the accompanying statements of net assets available for benefits
of the Eaton Corporation Share Purchase and Investment Plan as of December 30,
1999 and 1998, and the related statement of changes in net assets available for
benefits for the year ended December 30, 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 30, 1999 and 1998, and the changes in its net assets available for
benefits for the year ended December 30, 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 as of December 30, 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
<PAGE> 4
Eaton Corporation Share Purchase and Investment Plan
Statement of Net Assets Available for Benefits
<TABLE>
<CAPTION>
DECEMBER 30
1999 1998
--------------------------------------------
<S> <C> <C>
ASSETS
Investments:
At fair value:
Eaton Corporation Common Shares $ 540,182,986 $ 575,017,393
Mutual funds 444,513,321 371,687,554
U.S. Government securities 64,258,014 53,871,768
Corporate debt instruments 52,529,896 84,241,102
Participant notes receivable 29,615,919 25,448,042
Short-term investments 37,967,724 30,229,635
At contract value:
Guaranteed investment contracts 449,619 1,743,424
--------------------------------------------
Total investments 1,169,517,479 1,142,238,918
Receivables:
Interest and dividends 1,849,505 1,470,913
Accrued sales of investments 869,881 845,601
--------------------------------------------
Total receivables 2,719,386 2,316,514
--------------------------------------------
Total assets 1,172,236,865 1,144,555,432
LIABILITIES
Accrued purchases of investments 4,034,862 1,256,505
Notes payable - 9,556,621
Other payables 1,459 31,256
--------------------------------------------
Total liabilities 4,036,321 10,844,382
--------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 1,168,200,544 $ 1,133,711,050
============================================
</TABLE>
See notes to financial statements.
2
<PAGE> 5
Eaton Corporation Share Purchase and Investment Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 30, 1999
<TABLE>
<S> <C>
Additions:
Investment income:
Net appreciation in fair value of investments $ 79,787,472
Dividends--shares allocated to participants 19,543,447
Dividends--unallocated shares 190,202
Interest 12,077,475
-----------------------
111,598,596
Contributions:
Employer--allocated to participants 12,477,169
Employee 74,356,981
Rollover 4,995,174
-----------------------
91,829,324
-----------------------
Total additions 203,427,920
Deductions:
Distributions to participants 176,222,247
Interest expense 206,636
-----------------------
Total deductions 176,428,883
-----------------------
Net increase 26,999,037
Net assets available for benefits
at beginning of year 1,133,711,050
Net transfers from other plans 7,490,457
-----------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 1,168,200,544
=======================
</TABLE>
See notes to financial statements.
3
<PAGE> 6
Eaton Corporation Share Purchase and Investment Plan
Notes to Financial Statements
December 30, 1999 and 1998 and
Year Ended December 30, 1999
A. SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Eaton Corporation Share Purchase and Investment
Plan (Plan) are prepared under the accrual method of accounting.
Investments are stated at fair value as measured by quoted prices in active
markets, except for guaranteed investment contracts, which are recorded at
contract value, and the Fidelity Contra Fund, which is stated at fair value as
determined by the trustee. Contract value, which approximates fair value,
represents contributions made under the contracts plus interest at the rates
specified by the contracts less funds used to pay expenses of the contracts.
Participant notes 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 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.
Certain amounts in the prior year financial statements have been reclassified to
conform to the current year presentation.
B. DESCRIPTION OF PLAN
The Plan generally provides that an Eaton employee who is in the regular service
of a class in a division or group to which Eaton Corporation (Eaton, the
"Company", or the "Plan Sponsor") has extended eligibility for membership in the
Plan (other than a temporary employee who is hired for a specific, limited
period of time or for the performance of a specific, limited assignment or
employees covered by a collective bargaining agreement that does not specify
coverage under the Plan) will be eligible to participate on any date established
in accordance with administrative procedures which follows the date an employee
first incurs an hour of service.
4
<PAGE> 7
Eaton Corporation Share Purchase and Investment Plan
Notes to Financial Statements--Continued
B. DESCRIPTION OF PLAN--CONTINUED
Employees may make a combination of before-tax and after-tax contributions
ranging from 1 to 17% of base pay. Employee contributions up to 6% of eligible
compensation are eligible for employer match. Participants may change their
contributions monthly and accounts are valued daily. Eaton matches regular
employee contributions as determined under a formula. This formula compares
Eaton's earnings per share for the most recently reported calendar quarter with
the average of Eaton's per share earnings for the previous two calendar years.
If the most recently reported calendar quarter's earnings per share are
identical to the two calendar year average, the Company's matching contribution
will be 50% for each dollar contributed by employees. Company matching
contributions will increase or decrease depending on whether the most recently
reported calendar quarter's earnings per share are greater than or less than the
two calendar year average, respectively. For each 2% that the most recently
reported calendar quarter's earnings per share is greater than or less than the
two calendar year average, 1% will be added or subtracted respectively from the
standard Company matching contribution of 50%. Company matching contributions
will not be less than $.25, or more than $1.00 for each dollar of regular
employee contributions, except under special circumstances as defined in the
Plan document. There will be an additional $.10 match with ESOP shares per
dollar of before-tax and after-tax contributions, up to 17% of eligible
compensation, to match contributions initially invested in the Eaton Common
Shares Fund. This match is reduced to $.05 for certain highly compensated
employees.
The Plan document requires that quarterly Company contributions and dividend
payments allocated to employees' accounts must equal or exceed the quarterly
principal payments on the notes payable (see Note E). In the event that the
quarterly principal payments exceed the allocated Company matching contributions
plus dividends for the quarter, a supplemental contribution equal to the
difference (none in 1999) is required to be allocated to the participants'
accounts. The allocation is based upon the percentage of each employee's
quarterly contribution in relation to total quarterly employee contributions.
Each participant's account is credited with an allocation of the Plan's earnings
based on participant account balances, as defined.
5
<PAGE> 8
Eaton Corporation Share Purchase and Investment Plan
Notes to Financial Statements--Continued
B. DESCRIPTION OF PLAN--CONTINUED
Eligible employees may borrow from their 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. The loans are secured by the balance in the participant's account and
bear interest at a published rate, as defined. Principal and interest is paid
ratably through payroll deductions.
Company contributions are provisionally allocated during the year and become
non-forfeitable on the last day of each Plan year or upon other events as
indicated in the Plan document.
All Company matching contributions are invested in the Eaton Common Shares Fund.
Employee contributions may be invested in any of the fund options available
under the Plan.
Key Trust Company of Ohio, N.A. is the Trustee of the Plan.
All costs and expenses incurred in administering the Plan are paid by the Plan
unless otherwise determined by Eaton.
Eaton 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 Company's Human Resources Department upon request.
6
<PAGE> 9
Eaton Corporation Share Purchase and Investment Plan
Notes to Financial Statements--Continued
C. CONTRIBUTIONS
Company matching contributions were made at the following rates per dollar of
regular employee contribution:
Period Rate
---------------------------------------------- --------------
1 month ended December 30, 1999 1.00
3 months ended November 30, 1999 .84
3 months ended August 31, 1999 .25
3 months ended May 31, 1999 .25
2 months ended February 28, 1999 .25
D. INVESTMENTS
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 30
1999 1998
--------------------------------------------
<S> <C> <C>
Fidelity Contra Fund $ 145,901,976 $ 97,255,100
Vanguard Windsor Fund 105,453,648 129,109,418
Vanguard Institutional Index Fund 121,945,681 82,934,661
Eaton Common Shares 540,182,986* 575,017,393*
</TABLE>
*Includes $311,818,762 and $345,494,106 classified as nonparticipant-directed at
December 30, 1999 and 1998, respectively.
Participants may reallocate their accumulated contributions daily among the
various funds consistent with the ratios specified in the Plan.
7
<PAGE> 10
Eaton Corporation Share Purchase and Investment Plan
Notes to Financial Statements--Continued
D. INVESTMENT PROGRAMS--CONTINUED
During 1999, the Plan's investments (including investments bought, sold, and
held during the year) appreciated (depreciated) in fair value as follows:
<TABLE>
<S> <C>
Eaton Common Shares $ 21,440,582
Mutual funds 61,776,777
Government securities (1,925,802)
Corporate debt instruments (1,504,085)
----------------------
$ 79,787,472
======================
</TABLE>
Information about the net assets and the significant components of the changes
in net assets relating to the non-participant directed investments is as
follows:
<TABLE>
<CAPTION>
DECEMBER 30
1999 1998
---------------------------------------------
<S> <C> <C>
Net assets:
Eaton Corporation Common Shares $ 311,818,762 $ 345,494,106
Key Trust EB Money Market Fund 3,960,792 7,332,294
Receivables 16,915 448,144
Accrued purchases (1,461,014) -
Notes payable - (9,556,621)
---------------------------------------------
$ 314,335,455 $ 343,717,923
=============================================
YEAR ENDED
DECEMBER 30,
1999
----------------------
Changes in net assets:
Contributions $ 13,505,582
Interest and dividends 8,169,703
Net appreciation in fair value of investments
11,409,067
Distributions to participants (57,942,613)
Interest expense (206,636)
Net transfers to participant
directed funds (4,317,571)
----------------------
NET DEDUCTIONS $ (29,382,468)
======================
</TABLE>
8
<PAGE> 11
Eaton Corporation Share Purchase and Investment Plan
Notes to Financial Statements--Continued
E. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
An Employee Stock Ownership Plan (ESOP), established to prefund a portion of
anticipated Company contributions to the Plan, is contained within the Eaton
Common Shares Fund. The ESOP was funded by proceeds from bank notes.
The Plan is obligated to pay all principal and interest on the notes and all
other monetary obligations using Company contributions made to the Plan for that
purpose and dividends on the unallocated Eaton Common Shares acquired with the
bank note proceeds.
At December 30, 1998, the ESOP notes payable to banks and insurance companies
bore interest at a fixed rate of 7.2% as to $2.3 million of notes payable, a
fixed interest rate of 7.7% per annum as to $5 million of notes payable, and a
floating rate (4.3%) based on LIBOR as to $2.2 million of notes payable. The
Plan entered into interest rate swaps that effectively converted the $5 million
of notes payable to a combination of new fixed rates (6.85% for $3.0 million and
7.1% for $1.4 million) and a floating rate (5.4% for $.6 million) based on
LIBOR. The Plan also entered into an interest rate swap which effectively
converts the $2.3 million of fixed rate notes payable to a floating rate (4.5%)
based on LIBOR. The interest rate differential to be received or paid was
determined quarterly and recognized as an adjustment to interest expense. The
notes payable were paid in full by December 30, 1999.
Unallocated Eaton Common Shares acquired by the ESOP are held in a suspense
account and are pledged as security for the notes. These Common Shares are
released from the suspense account and allocated to the participants' accounts
based on the market value at the time of allocation on a monthly basis in an
amount equal to the Company contributions for the period. There were no
unallocated Eaton Common Shares at December 30, 1999 ($14,950,465 at December
30, 1998).
9
<PAGE> 12
Eaton Corporation Share Purchase and Investment Plan
Notes to Financial Statements--Continued
F. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated April 2, 1996, 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.
G. NET TRANSFERS TO THE PLAN
Effective January 1, 1999, all participants of the GT Products 401(k) Plan
became eligible for the Plan. Effective September 1, 1999, the GT Products
401(k) Plan was merged with the Plan and total assets of approximately $9.2
million were transferred to the Plan. During the fourth quarter of 1999, assets
of approximately $1.8 million were transferred from the Plan in connection with
Eaton's sale of the Engineered Fasteners Division.
H. 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.
10
<PAGE> 13
Eaton Corporation Share Purchase and Investment Plan
EIN 34-0196300 Plan Number 055
Form 5500 Line 27(a)--Schedule of Assets Held for Investment Purposes
December 30, 1999
<TABLE>
<CAPTION>
Description of Investment
Including Maturity Date,
Identity of Issue, Borrower Rate of Interest, Collateral,
or Similar Party Par or Maturity Value Cost Current Value
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Guaranteed Investment Contracts:
New York Life Insurance Co. 6.25% due 12/31/99 $ 449,619 $ 449,619
-------------------------------------------
449,619 449,619
Corporate Debt Instruments:
American General Finance Corp. 5.875% due 7/01/00 1,006,450 996,480
AT&T Corp. 6.50% due 9/15/02 996,780 993,750
Associates Corp. 6.00% due 12/01/02 4,997,650 4,871,600
Bank One Corp. 6.40% due 8/01/02 2,297,516 2,263,752
Capital Equipment 6.28% due 6/15/00 1,088,866 1,100,212
Capital Auto 6.06% due 6/15/02 2,099,672 2,095,078
Citigroup Inc. 5.80% due 3/15/04 6,393,526 6,114,820
E.I. Dupont 6.50% due 9/01/02 1,993,600 1,987,220
Electronic Data Systems 6.85% due 10/15/04 249,748 247,128
Fingerhut Master Trust 6.23% due 2/15/07 4,998,576 4,912,500
Ford Motor Credit Corp. 6.125% due 4/28/03 3,992,360 3,888,480
General Electric 6.33% due 9/17/01 565,000 561,808
General Electric 6.52% due 10/08/02 435,000 430,815
General Electric 5.50% due 11/01/01 2,486,413 2,449,514
General Motors 5.75% due 11/10/03 1,264,800 1,192,875
McKesson Corp. 6.60% due 3/01/00 1,999,400 2,000,760
Merrill Lynch & Co. Inc. 6.00% due 1/15/01 642,850 645,151
Morgan Stanley Dean Witter 7.125% due 1/15/03 499,890 499,790
Nationsbank Corp. 5.75% due 3/15/01 4,983,200 4,939,200
Norwest Auto Trust 6.10% due 3/15/01 2,809,836 2,810,578
Premier Auto 6.75% due 11/06/00 1,028,997 1,032,377
Premier Auto 6.35% due 4/06/02 349,560 349,888
Premier Auto 5.07% due 7/08/02 1,999,992 1,974,360
Salomon Smith Barney 5.875% due 2/01/01 500,385 495,285
TCI Communications Inc. 6.375% due 5/01/03 495,635 491,880
Toyota Auto 6.45% due 4/15/02 375,149 374,782
USAA Auto 6.00% due 5/15/04 1,113,709 1,108,638
WalMart Stores 6.55% due 8/10/04 1,298,037 1,280,552
WorldCom 6.125% due 8/15/01 423,453 420,623
-------------------------------------------
53,386,050 52,529,896
</TABLE>
11
<PAGE> 14
Eaton Corporation Share Purchase and Investment Plan
Form 5500 Line 27(a)--Schedule of Assets Held
for Investment Purposes--Continued
<TABLE>
<CAPTION>
Description of Investment
Including Maturity Date,
Identity of Issue, Borrower Rate of Interest, Collateral,
or Similar Party Par or Maturity Value Cost Current Value
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Securities:
U.S. Treasury Notes 5.25% due 1/31/01 9,325,156 9,173,410
U.S. Treasury Notes 5.75% due 4/30/03 3,989,688 3,934,360
U.S. Treasury Notes 5.25% due 8/15/03 1,510,664 1,449,135
U.S. Treasury Notes 4.75% due 2/15/04 1,043,930 992,575
U.S. Treasury Notes 4.875% due 3/31/01 1,979,375 1,970,320
U.S. Treasury Notes 6.375% due 8/15/02 7,582,124 7,457,566
U.S. Treasury Notes 5.625% due 5/15/01 3,396,148 3,376,608
U.S. Treasury Notes 4.625% due 11/30/00 8,187,070 8,132,063
Federal Home Loan Banks 6.00% due 8/15/02 993,620 986,410
Federal Home Loan Banks 5.28% due 12/10/03 5,000,000 4,738,300
Federal Home Loan Banks 4.99% due 12/24/01 2,996,719 2,910,480
Fannie Mae 5.25% due 12/20/01 3,447,982 3,373,497
Fannie Mae 6.50% due 8/15/04 997,572 989,530
Fannie Mae 5.10% due 9/25/00 3,999,320 3,967,480
Fannie Mae 6.20% due 5/22/03 5,017,188 4,875,800
Fannie Mae 4.84% due 11/27/00 4,991,406 4,935,950
Fannie Mae 5.12% due 5/12/00 1,000,000 994,530
-------------------------------------------
65,457,962 64,258,014
Interest in Registered Investment
Companies:
Oppenheimer Value Equity Fund 1,015,614 shares 10,590,816 10,833,550
Vanguard Windsor Fund 7,002,234 shares 106,573,351 105,453,648
Vanguard Wellesley Fund 1,490,358 shares 31,253,119 28,137,961
Fidelity Contra Fund 2,446,378 shares 119,828,216 145,901,976
Templeton Foreign Fund 2,881,189 shares 28,357,908 32,240,505
Vanguard Institutional Index Fund 912,904 shares 99,323,003 121,945,681
-------------------------------------------
395,926,413 444,513,321
</TABLE>
12
<PAGE> 15
Eaton Corporation Share Purchase and Investment Plan
Form 5500 Line 27(a)--Schedule of Assets Held
for Investment Purposes--Continued
<TABLE>
<CAPTION>
Description of Investment
Including Maturity Date,
Identity of Issue, Borrower Rate of Interest, Collateral,
or Similar Party Par or Maturity Value Cost Current Value
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Key Trust Company of Ohio, N.A.:
Employee Benefits Money Market Fund*
37,967,725 units 37,967,725 37,967,724
Common Stock:
Eaton Corporation 7,568,238 shares 353,921,325 540,182,986
Participant notes receivable* 8.75-9.50%, variable maturities 29,615,919
------------------------
TOTAL INVESTMENTS $ 1,169,517,479
========================
</TABLE>
*Indicates party-in-interest to the Plan.
13
<PAGE> 16
Eaton Corporation Share Purchase and Investment Plan
EIN 34-0196300 Plan Number 055
Form 5500 Line 27(d)--Schedule of Reportable Transactions
Year Ended December 30, 1999
<TABLE>
<CAPTION>
Identity of Party Description Purchase
Involved of Assets Price Selling Price Cost of Asset
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CATEGORY (iii)--SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS
Key Trust Company of Ohio, N.A.* Employee Benefits $ 410,430,310 $410,430,310
Money Market Fund $399,888,986 399,888,986
Fidelity ContraFund Mutual Fund 66,699,440 66,699,440
16,969,494 13,089,674
Eaton Corporation* Eaton Corporation 90,388,592 90,388,592
Common Stock 121,364,650 71,870,750
</TABLE>
<TABLE>
<CAPTION>
Current Value
Identity of Party of Asset on Net Gain
Involved Transaction Date or (Loss)
--------------------------------------------------------------------------------------
<S> <C> <C>
CATEGORY (iii)--SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS
Key Trust Company of Ohio, N.A.*
$410,430,310
399,888,986 $ -
Fidelity ContraFund 66,699,440
16,969,494 3,879,820
Eaton Corporation* 90,388,592
121,364,650 49,493,900
</TABLE>
There were no category (i), (ii) or (iv) reportable transactions during the year
ended December 30, 1999.
* Indicates party-in-interest to the Plan.
14
