<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 401(k) 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
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 401(k)
SAVINGS 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 401(k) Savings Plan and Trust
December 31, 1999 and 1998 and Year Ended December 31, 1999
<PAGE> 3
Report of Independent Auditors
Corporate Compensation and Organization
Committee of Eaton Corporation
Eaton Corporation 401(k) Savings Plan and Trust
We have audited the accompanying statements of net assets available for benefits
of the Eaton Corporation 401(k) Savings Plan and Trust 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> 4
Eaton Corporation 401(k) Savings Plan and Trust
Statements of Net Assets Available for Benefits
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
------------------------------------
<S> <C> <C>
ASSETS
Investments:
Mututal funds $ 20,362,840 $ 14,122,968
Common/collective trust fund 7,077,995 8,762,812
EB money market fund 1,474,910 893,575
Eaton Corporation Common Shares 4,836,680 2,916,728
Participant loans receivable 912,744 800,793
--------------------------------
Total investments 34,665,169 27,496,876
Receivables:
Interest 15,802 3,965
Employee contributions 68,474 40,801
Other - 41,817
--------------------------------
Total receivables 84,276 86,583
--------------------------------
Total assets 34,749,445 27,583,459
LIABILITIES
Other payable - 10,067
--------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 34,749,445 $ 27,573,392
================================
</TABLE>
See notes to financial statements.
2
<PAGE> 5
Eaton Corporation 401(k) Savings Plan and Trust
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 1999
ADDITIONS
Investment income:
Interest and dividends $ 1,569,661
Net appreciation in fair value of investments 1,643,401
---------------
3,213,062
Contributions:
Employee 4,640,274
Employer 418,493
---------------
5,058,767
Net transfers from other plans 2,097,612
---------------
Total additions 10,369,441
DEDUCTIONS
Distributions to participants 3,193,388
---------------
Net increase 7,176,053
Net assets available for benefits:
Beginning of year 27,573,392
---------------
END OF YEAR $ 34,749,445
===============
See notes to financial statements.
3
<PAGE> 6
Eaton Corporation 401(k) Savings Plan and Trust
Notes to Financial Statements
December 31, 1999 and 1998 and
Year Ended December 31, 1999
A. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared under the accrual basis of
accounting.
Investments are stated at fair value as measured by quoted prices in active
markets except for the Prism Money Market Fund which is 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 the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from these estimates.
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.
B. DESCRIPTION OF THE PLAN
Effective July 1, 1996, Eaton Corporation (the "Company" or "Plan Sponsor")
established a 401(k) profit sharing plan and trust to be known as the Eaton
Corporation 401(k) Savings Plan and Trust (the "Plan").
On May 1, 1998, the Company amended the Plan and restated certain articles
therein to qualify the Plan as a profit-sharing plan under Section 401(a) of the
Internal Revenue Code (the "Code"), and include a cash or deferred arrangement
that is intended to qualify under Section 401(k) of the Code.
The Plan provides that all union employees that belong to IAM Local 78 and IAM
Local 1061, Milwaukee, Wisconsin; USWA Local 7509, Shelbyville, Tennessee; UAW
Local 164, Auburn, Indiana; Metal Processors Union IUAP and NW AFL-CIO Local 16,
Rochelle, Illinois; UAW Local 220, Marshall, Michigan; IAM and Aerospace
Workers, Local 77, Eden Prairie, Minnesota; Beaver Salaried Employees
Association and IBEW, AFL-CIO, Local 201, Beaver, Pennsylvania; and IBEW,
AFL-CIO, Local 1833, Horseheads, New York; IAM Local 1165, Lincoln, IL; and UAW
Local 1609, Winamac, Indiana, will be eligible for membership in the Plan on the
date at which the employee has completed the specified probationary period as
stated in the applicable collective bargaining agreement.
4
<PAGE> 7
Eaton Corporation 401(k) Savings Plan and Trust
Notes to Financial Statements--Continued
B. DESCRIPTION OF THE PLAN--CONTINUED
Eligible employees may elect to make before-tax contributions from 1 to 17
percent of their compensation. Contributions are allocated by the employee among
the investment funds offered by the Plan.
Each participant's account is credited with the participant's contributions and
allocations of the Plan's earnings and is charged with an allocation of
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 his
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 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 are paid ratably through monthly payroll deductions.
For certain locations, eligible employees receive an employer match of 50% up to
6% of their compensation. Eligible employees are 100% vested provided the
participants are employees on the last day of the plan year in which the
matching contributions are made.
All administrative and transaction costs, management fees and expenses of the
Plan are paid by the trustee from the trust unless such costs, fees and expenses
are paid by the Company. The Company elected to pay certain administrative costs
during 1999 on behalf of the Plan.
The Company may amend, modify, suspend or terminate the Plan at any time. 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.
5
<PAGE> 8
Eaton Corporation 401(k) Savings Plan and Trust
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.
During 1999, the Plan's investments (including investments purchased, sold as
well as held during the year) appreciated (depreciated) in fair value as
determined by quoted market prices as follows:
Common/collective trust fund $ 160,493
Shares of registered investment companies 1,675,645
Common stock (192,737)
---------------
$ 1,643,401
===============
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 31
1999 1998
------------------ ------------------
<S> <C> <C>
Net assets:
Eaton Corporation Common Shares $4,836,680 $ 2,916,728
Key Trust EB Money Market Fund 188,601 58,387
Receivables 8,912 44,898
Accrued purchases (35,422) (10,067)
------------------ ------------------
$4,998,771 $ 3,009,946
================== ==================
</TABLE>
6
<PAGE> 9
Eaton Corporation 401(k) Savings Plan and Trust
Notes to Financial Statements--Continued
C. INVESTMENTS--CONTINUED
YEAR ENDED
DECEMBER 31,
1999
--------------------
Changes in net assets:
Contributions $ 862,905
Interest and dividends 105,443
Net depreciation in fair value of
investments (192,737)
Distributions to participants (374,213)
Net transfers from participant
directed funds 1,087,278
Net transfers from other plans 500,149
--------------------
NET INCREASE $ 1,988,825
====================
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
1999 1998
--------------------------------
Key Bank Prism Reserve Fund $ 7,077,995 $ 8,762,812
American Balanced Fund 2,906,398 2,540,203
Fidelity Contra Fund 3,700,363 1,208,192
Vanguard Institutional Index Fund 11,210,570 9,089,599
Eaton Corporation Common Shares* 4,836,680 2,975,115
* Nonparticipant-directed
7
<PAGE> 10
Eaton Corporation 401(k) Savings Plan and Trust
Notes to Financial Statements--Continued
D. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated November 14, 1997, stating that the Plan is qualified under Section 401(a)
of 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 investment funds
of the trustee and the payment of administrative expenses by the Company. Such
transactions are exempt from being prohibited transactions.
During 1999 and 1998, the Plan received $105,443 and $20,085, respectively, in
common stock dividends from the Company.
F. PLAN MERGER/DIVESTITURE
During 1999, the Company authorized the merger of the Lincoln Plant Share
Purchase and Investment Plan and Trust, the Engineered Fasteners Division Hourly
Employees 401(k) Plan (Engineered Fasteners Plan) and the Eaton Winamac Hourly
Investment Plan and Trust to the Plan. Total assets transferred into the Plan
from these plans during 1999 were $3.7 million.
The Company sold its Engineered Fasteners Division to Trans Technology
Corporation in 1999. Accordingly, assets of the Engineered Fasteners Plan of
$1.6 million were transferred to a defined contribution plan sponsored by Trans
Technology Corporation.
8
<PAGE> 11
Eaton Corporation 401(k) Savings Plan and Trust
EIN: 34-0196300 Plan No.: 162
Schedule H, Line 4(i)--Schedule of Assets Held for
Investment Purposes at End of Year
December 31, 1999
<TABLE>
<CAPTION>
Description of Current
Identity of Issue Investment Cost Value
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* Key Bank:
Prism Reserve Fund 43,585 shares $ 7,077,995
Employee Benefits Money Market Fund 1,474,910 units 1,474,910
American Balanced Fund 201,553 shares 2,906,398
Vanguard Windsor Fund 109,992 shares 1,668,583
Vanguard Institutional Index Fund 83,655 shares 11,210,570
Fidelity Contra Fund 61,652 shares 3,700,363
Templeton Foreign Fund 78,157 shares 876,926
* Eaton Corporation Common Shares 66,598 shares $ 5,423,990 4,836,680
* Participant loans receivable 9.5%; variable
maturities 912,744
-------------
$ 34,665,169
=============
</TABLE>
*Indicates a party-in-interest to the Plan.
9
<PAGE> 12
Eaton Corporation 401(k) Savings Plan and Trust
EIN: 34-0196300 Plan No.: 162
Schedule H, Line 4(j)--Schedule of Reportable Transactions
Year Ended December 31, 1999
<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>
*Eaton Corporation
Common Shares $ 7,175,522 $ 7,175,522 $ 7,175,522
$ 5,567,273 4,875,306 5,567,273 $ 691,967
</TABLE>
There were no category (i), (ii), or (iv) reportable transactions for the year
ended December 31, 1999.
* Indicates a party-in-interest to the Plan.
10
