-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BEv3wbczwHkTfIaeheRDBEc1ym/9KL5z5QXM/idu02r/RDCqOC1k3aIkG+Mmf/vr eN1FUavFqaXCa0S/4LNEpw== 0000031277-99-000016.txt : 19990623 0000031277-99-000016.hdr.sgml : 19990623 ACCESSION NUMBER: 0000031277-99-000016 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990621 ITEM INFORMATION: FILED AS OF DATE: 19990621 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EATON CORP CENTRAL INDEX KEY: 0000031277 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP) [3600] IRS NUMBER: 340196300 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-01396 FILM NUMBER: 99649381 BUSINESS ADDRESS: STREET 1: EATON CTR STREET 2: 1111 SUPERIOR AVE CITY: CLEVELAND STATE: OH ZIP: 44114-2584 BUSINESS PHONE: 2165235000 MAIL ADDRESS: STREET 1: 1111 SUPERIOR AVENUE CITY: CLEVELAND STATE: OH ZIP: 44114 FORMER COMPANY: FORMER CONFORMED NAME: EATON YALE & TOWNE INC DATE OF NAME CHANGE: 19710822 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 22, 1999 EATON CORPORATION - -------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 1-1396 34-0196300 - ----------------- ------------ ------------------- (State or other (Commission (I.R.S. Employer jurisdiction of File Number) Identification No.) incorporation) Eaton Center Cleveland, Ohio 44114 - ---------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) (216) 523-5000 ----------------------------- Registrant's telephone number, including area code Page 2 Item 2. Acquisition or Disposition of Assets ------------------------------------ On April 9, 1999, Eaton Corporation (Eaton) completed the acquisition of all of the outstanding common stock of Aeroquip- Vickers, Inc. for approximately $1.6 billion. Aeroquip-Vickers, which had 1998 sales of $2.1 billion, includes two principal subsidiaires: Aeroquip Corporation and Vickers, Inc. Funds for the purchase were primarily obtained through the issuance of commercial paper. The acquisition was accounted for by the purchase method of accounting. Aeroquip is a global leader in the manufacture of products that include all pressure ranges of hose, fittings, adapters, couplings and other fluid connectors, plus precision molded and extruded plastic products. Vickers is a leading worldwide producer of hydraulic pumps, motors and cylinders; electronic and hydraulic controls; electric motors and drives; filtration products; and fluid- evaluation products and services. Item 7. Financial Statements and Exhibits --------------------------------- Included in this report are 1) unaudited historical financial state- ments of Aeroquip-Vickers, Inc. for the three month periods ended March 31, 1999 and 1998 and 2) unaudited pro forma condensed financial statements reflecting Eaton's acquisition of Aeroquip-Vickers as of March 31, 1999 and December 31, 1998. Page 3 1) FINANCIAL STATEMENTS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1999 AND 1998 FOR AEROQUIP-VICKERS, INC. Aeroquip-Vickers, Inc. Statement of Financial Position
March 31, December 31, (Millions) 1999 1998 ---- ---- ASSETS Current assets Cash & cash equivalents $ 25 $ 18 Receivables 347 342 Inventories In-process & finished products 222 232 Raw materials & manufacturing supplies 72 70 ------ ------ 294 302 Other current assets 51 52 ------ ------ 717 714 Plants & properties 1,112 1,119 Less accumulated depreciation 569 571 ------ ------ 543 548 Goodwill 122 125 Other assets 73 72 ------ ------ $1,455 $1,459 ====== ====== LIABILITIES & SHAREHOLDERS' EQUITY Current liabilities Notes payable & current maturities of long-term debt $ 134 $ 103 Accounts payable 101 113 Income taxes 30 27 Other current liabilities 185 198 ------ ------ 450 441 Long-term debt 278 278 Postretirement benefits other than pensions 122 122 Other liabilities 47 49 Shareholders' Equity Common stock 138 138 Additional paid-in capital 49 48 Retained earnings 425 419 Accumulated other comprehensive income (loss)-currency translation adjustments (54) (36) ------ ------ 558 569 ------ ------ $1,455 $1,459 ====== ====== The Notes to Financial Statements are an integral part of this statement.
Page 4 Aeroquip-Vickers, Inc. Condensed Statement of Income
Three Months Ended March 31 ------------------- (Millions except for per share data) 1999 1998 ---- ---- Net sales $ 538 $ 547 Cost of products sold 418 403 ------ ------ Manufacturing income 120 144 Selling & general administrative expenses 72 68 Engineering, research & development expenses 18 18 ------ ------ Operating income 30 58 Interest expense (7) (7) Other expenses - net (5) (5) ------ ------ Income before income taxes and cumulative effect of accounting change 18 46 Income taxes 6 15 ------ ------ Income before cumulative effect of accounting change 12 31 Cumulative effect of accounting change, net of income tax benefit of $1.5 - (3) ------ ------ Net income $ 12 $ 28 ====== ====== Basic income per share Before cumulative effect of accounting change $ .43 $ 1.11 Cumulative effect of accounting change - (.12) ------ ------ $ .43 $ .99 ====== ====== Dilutive income per share Before cumulative effect of accounting change $ .43 $ 1.10 Cumulative effect of accounting change - (.12) ------ ------ $ .43 $ .98 ====== ====== The Notes to Financial Statements are an integral part of this statement.
Page 5 Aeroquip-Vickers, Inc. Condensed Statement of Cash Flows
Three Months Ended March 31 ------------------ (Millions) 1999 1998 ---- ---- Net cash provided by operating activities Net income $ 12 $ 28 Adjustments to reconcile to net cash provided by operating activities Cumulative effect of accounting change, net of income tax benefit 3 Depreciation 20 16 Amortization 2 2 Changes in certain components of working capital other than debt (27) (39) Other (3) ------ ------ 4 10 Net cash used in investing activities Capital expenditures (26) (32) Businesses acquired (13) Other 1 ------ ------ (25) (45) Net cash provided by financing activities Net increase in short- and long-term debt 33 47 Cash dividends (6) (6) Stock issuance under stock plans 2 3 ------ ------ 29 44 Effect of exchange rate changes on cash (1) ------ ------ Increase in cash & cash equivalents 7 9 Cash & cash equivalents at beginning of year 18 19 ------ ------ Cash & cash equivalents at end of period $ 25 $ 28 ====== ====== The Notes to Financial Statements are an integral part of this Statement.
Page 6 Aeroquip-Vickers, Inc. Notes to Financial Statements Basis of Presentation - --------------------- The accompanying financial statements for the interim periods are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the results for the interim periods included herein have been made. Operating results for the three months ended March 31, 1999, are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. It is suggested that these financial statements be read in conjunction with the audited 1998 financial statements and notes thereto included in Aeroquip-Vickers, Inc.'s (A-V) most recent annual report on Form 10-K. Change in Control - ----------------- On April 8, 1999, shareholders of A-V approved the sale of A-V to Eaton Corporation for $58 per share in cash, pursuant to an Agreement and Plan of Merger announced on February 1, 1999. The transaction was completed on April 9, 1999. Cumulative Effect of Change in Accounting - ----------------------------------------- In the fourth quarter of 1998, A-V adopted SOP 98-5, "Reporting on the Costs of Start-Up Activities," issued by the American Institute of Certified Public Accountants, and recognized the cumulative effect of an accounting change amounting to $5 million ($3 million aftertax, or $.12 per share), retroactive to the first quarter of 1998. Comprehensive Income - -------------------- Following are details of comprehensive income for the three-month periods ended March 31, 1999 and 1998 (in millions): Three Months Ended March 31 ------------------ 1999 1998 ---- ---- Net income $12 $28 Other comprehensive income (loss) - currency translation adjustments during the period (18) 1 --- --- Comprehensive income (loss) $(6) $29 === === Page 7 Business Segments - ----------------- The following information (in millions) relates to business segments. Total assets are not materially different from amounts reported at December 31, 1998, and there were no changes in the basis of segmentation or in the basis for measurement of segment profit or loss since December 31, 1998. Three Months Ended March 31 ------------------ 1999 1998 ---- ---- Net sales Aeroquip $287 $266 Vickers 251 281 ---- ---- $538 $547 ==== ==== Segment income Aeroquip $ 33 $ 32 Vickers 4 33 Corporate (7) (7) ---- ---- 30 58 Interest expense 7 7 Other expenses - net 5 5 ---- ---- Income before income taxes and cumulative effect of accounting change $ 18 $ 46 ==== ==== Redemption of Debt - ------------------ In December 1997, A-V called its 9.55% senior sinking fund debentures in the principal amount of $42 million for redemption on February 3, 1998. The pretax loss from redemption of the 9.55% senior sinking fund debentures, amounting to approximately $2.5 million, was recognized in Other expenses-net in the first quarter of 1998. Page 8 Income per Share - ---------------- Following is a reconciliation of income and average shares for purposes of calculating basic and diluted income per share (in millions except for per share data): Three Months Ended March 31 ------------------ 1999 1998 ---- ---- Income before cumulative effect of accounting change $ 12 $ 31 Cumulative effect of accounting change - (3) --- --- Net income $ 12 $ 28 ==== ==== Average common shares outstanding for purposes of computing basic income per share 27.6 28.1 Dilutive stock options .1 .2 ---- ---- Average common shares outstanding for purposes of computing diluted income per share 27.7 28.3 ==== ==== Basic Income per Share - ---------------------- Before cumulative effect of accounting change $ .43 $1.11 Cumulative effect of accounting change - (.12) ---- ---- $ .43 $ .99 ==== ==== Diluted Income per Share - ------------------------ Before cumulative effect of accounting change $ .43 $1.10 Cumulative effect of accounting change - (.12) ---- ---- $ .43 $ .98 ==== ==== Page 9 2) EATON CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS The following unaudited pro forma combined condensed financial statements have been prepared by Eaton's management. These financial statements reflect Eaton's acquisition of Aeroquip- Vickers, Inc. (A-V), and combine, for the indicated dates or periods, the historical consolidated financial statements of Eaton and A-V, using the purchase method of accounting. The unaudited pro forma combined condensed balance sheet reflects adjustments as if the acquisition had occurred on March 31, 1999. The unaudited pro forma combined statements of income reflect adjustments as if the acquisition had occurred at the beginning of the period presented. The pro forma financial statements include preliminary estimates and assumptions which Eaton's management believes are reasonable. However, the pro forma results do not include any anticipated cost savings or other effects of the planned integration of Eaton and A-V. Therefore, the pro forma results are not necessarily indicative of the results which would have occurred if the business combination had been in effect on the dates indicated, or which may result in the future. The pro forma financial statements have been prepared using the following facts and assumptions: - - Eaton acquires the common stock and common stock equivalents of A-V in exchange for a total cash payment of $1.623 billion. - - Eaton borrows $1.623 billion to finance the acquisition. - - The assets acquired and liabilities assumed of A-V are recorded at estimated fair values as determined by Eaton's management based on information currently available and on current tentative assumptions as to the future operations of A-V. Eaton will be obtaining independent appraisals of the fair values of the acquired property, plant and equipment, and identified intangible assets, and their remaining useful lives. Eaton will also be reviewing and determining the fair values of the other assets acquired and liabilities assumed. Accordingly, the allocation of the purchase price to the acquired assets and liabilities of A-V is subject to revision as a result of the final determination of appraised and other fair values. As a result of the acquisition of A-V, Eaton will incur integration costs to 1) exit and consolidate activities at A-V and Eaton locations, 2) involuntarily terminate and relocate employees of A-V and Eaton and 3) integrate operating locations and other activities of A-V and Eaton. Generally accepted accounting principles require that the A-V integration costs be reflected as assumed liabilities in the allocation of the purchase price of A-V to the net assets of A-V acquired. Eaton integration costs are recorded as expense as incurred subsequent to the acquisition date. As a result, Eaton integration costs are not reflected in the pro forma financial statements. Page 10 The unaudited pro forma combined condensed balance sheet includes adjustments to record 1) a current liability of $19 million for the estimated transaction costs related to the acquisition of A-V and 2) assumed liabilities of $64 million for estimated A-V integration costs based on Eaton's preliminary integration plan ($30 million as a current liability and $34 million as a long-term liability). As noted in public statements regarding the acquisition of A-V, Eaton has put in place a series of integration teams who are charged with formalizing the integration plans and restructuring opportunities for each of the A-V businesses. As Eaton is approaching this effort with the intent of minimizing disruption of the ongoing businesses and the external parties with whom they regularly interface, Eaton is determined to fully understand the major issues before proceeding with definitive action. Accordingly, at this juncture, the preliminary integration plan cannot yet be discussed with a great deal of specificity. In general terms, Eaton is focusing on three key areas of integration: 1) manufacturing process and supply chain rationalization, including plant closings, 2) elimination of redundant administrative overhead and support activities, including the consolidation of administrative functions currently performed at A-V's world headquarters in Maumee, Ohio, and 3) restructuring and repositioning of the sales/marketing and research and development organizations to eliminate redundancies in these activities. Based on the preliminary integration plan, it is expected that A-V integration costs will approximate $33 million for employee severance and relocation, $28 million for manufacturing relocation and plant closings, and $3 million of other related costs. It is expected that a large portion of the actions currently being planned will be implemented within the next one to two years. All aspects of Eaton's preliminary integration plan will be re- assessed as plans are finalized. As a result, the estimated assumed liabilities of $64 million for A-V integration costs will be adjusted accordingly. Major unresolved issues in the evaluation of the integration plan include capacity of existing and acquired facilities to accommodate new manufacturing and administrative processes and also the appropriate positioning of the sales/marketing and research and development organizations to best serve customer needs. Adjustments of the $64 million of assumed liabilities related to estimated A-V integration costs will be included in the allocation of the aggregate purchase price of A-V, if the adjustment is determined within the purchase price allocation period (normally no longer than one year after the date of the acquisition). Adjustments of these estimated liabilities that are determined after the end of the purchase price allocation period will be 1) recorded as a reduction of net income, if the ultimate amount of the liability exceeds the estimate, or 2) recorded as a reduction of the excess of the purchase price of A-V over the net assets of A-V acquired, if the ultimate amount of the liability is below the estimate. Page 11 The pro forma results do not reflect the planned sale of Eaton's Engineered Fasteners and Fluid Power Divisions announced on March 25, 1999. For 1998, Engineered Fasteners and Fluid Power reported net sales of $94 million and $189 million, respectively, and total assets at February 28, 1999 of $40 million and $94 million, respectively. The pro forma results also do not reflect the planned sale of Vickers Electronic Systems (VES) announced on May 20, 1999. VES, which had 1998 sales of $130 million, is a business that was acquired in the acquisition of A-V. Proceeds from the sales of these businesses will be used to reduce the number of Common Shares that Eaton plans to sell in the future to refinance the $1.623 billion cost of the acquisition of A-V. Sale of the Engineered Fasteners business will be handled by the investment banking firm of Bowles Hollowell Conner, a division of First Union Capital Markets Corp., while the Fluid Power transaction will be handled by Goldman, Sachs & Co. Although Eaton intends to complete the sales of these businesses in 1999, no buyer has yet been identified, and, as a result, Eaton will not speculate on the sales price it might receive for the businesses. The pro forma results for 1998 do not reflect a $3 million aftertax expense recorded by A-V in 1998 for the cumulative effect of an accounting change to charge to income previously deferred start-up costs for new facilities. The pro forma financial statements should be read in conjunction with the 1998 historical consolidated financial statements, and related notes, of Eaton, incorporated by reference from its Amended 1998 Form 10-K filed on May 11, 1999, and for the first quarter of 1999 incorporated by reference from its Form 10-Q filed on May 17, 1999. The pro forma financial statements should also be read in conjunction with the 1998 historical consolidated financial statements and schedule, and related notes, of A-V, incorporated by reference from Eaton's Amended Form 8-K filed on May 11, 1999, and for the first quarter of 1999 included in this Form 8-K. Page 12 Unaudited Pro Forma Combined Condensed Balance Sheet March 31, 1999
(Millions of dollars) Historical Pro ---------------- forma Pro Aeroquip adjust- forma Eaton -Vickers ments combined ----- -------- ------ -------- ASSETS Current assets Cash $ 20 $ 25 $ 45 Short-term investments 20 20 Accounts receivable 1,018 347 1,365 Inventories 714 294 $ 28 2a 1,036 Deferred income taxes & other current assets 290 51 12 2b 2 2l 355 ----- ----- ----- ----- 2,062 717 42 2,821 Property, plant & equipment 1,781 543 82 2c 2,406 Identified intangible assets 205 289 2d 494 Excess of cost over net assets of businesses acquired 1,015 122 (122)2e 976 2n 1,991 Deferred income taxes & other assets 601 73 (5)2f 669 ----- ----- ----- ----- $5,664 $1,455 $1,262 $8,381 ===== ===== ===== ===== LIABILITIES & SHAREHOLDERS' EQUITY Current liabilities Short-term debt & current portion of long-term debt $ 398 $ 134 $ 923 (1) $1,455 Accounts payable & other current liabilities 1,181 316 49 2g (4)2h 1,542 ----- ----- ----- ----- 1,579 450 968 2,997 Long-term debt 1,188 278 700 (1) 22 2i 2,188 Postretirement benefits other than pensions 561 122 (19)2j 664 Deferred income taxes & other liabilities 318 47 34 2k 115 2l 514 Shareholders' equity A-V 558 (558)2m 0 Eaton 2,018 2,018 ----- ----- ----- ----- $5,664 $1,455 $1,262 $8,381 ===== ===== ===== ===== See accompanying notes.
Page 13 NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET The pro forma adjustments to give effect to Eaton's acquisition of A-V, and the estimated purchase price allocation at March 31, 1999, are as follows: 1) The borrowing by Eaton of $1.623 billion to finance the acquisition price. Of these borrowings, $700 million are classified on the balance sheet as long-term debt because Eaton has issued $200 million of notes payable due in 2000 and intends, and has the ability under a new $500 million five-year revolving credit agreement entered into during April 1999, to refinance this amount of debt on a long- term basis. 2) The allocation of the aggregate purchase price of A-V, and the recognition of the excess of the purchase price over the estimated fair value of net assets of A-V acquired, is as follows (in millions): Adjustments ----------- 2a Adjust acquired inventories to estimated fair value $ 28 2b Adjust acquired pension assets for certain overfunded pension plans to estimated fair value 12 2c Adjust acquired property, plant and equipment to estimated fair value 82 2d Record acquired identified intangible assets at estimated fair value 289 2e Eliminate the excess of cost over net assets acquired related to A-V's acquisitions of businesses in prior years (122) 2f Eliminate deferred financing costs of A-V (5) 2g Record estimated current liabilities of $30 million related to post-acquisition integration of A-V's locations, employees, and other costs, and $19 million of transaction costs related to the acquisition (49) 2h Adjust acquired pension liability for certain underfunded pension plans to estimated fair value 4 2i Adjust acquired long-term debt to reflect Eaton's current interest rates (22) 2j Adjust acquired liability for post- retirement benefits other than pensions to estimated fair value 19 2k Record estimated long-term liabilities related to post-acquisition integration of A-V's locations, employees, and other costs (34) 2l Record deferred income taxes for the above adjustments, except for adjustment 2e which is nontaxable, assuming a 35% income tax rate (113) 2m Eliminate shareholders' equity of A-V prior to pro forma adjustments 558 2n Record preliminary estimate of excess of cost over net assets of A-V acquired 976 ----- Purchase price $1,623 ===== Page 14 Unaudited Pro Forma Combined Statement of Income Three Months Ended March 31, 1999
(Millions of dollars except for per share amounts) Historical Pro ---------------- forma Pro Aeroquip adjust- forma Eaton -Vickers ments combined ----- -------- ----- -------- Net sales $1,661 $ 538 $2,199 Costs & expenses Cost of products sold 1,172 418 $ 8 1a 2 1c (2)1e 3 1f 6 1g 1,607 Selling & administrative 275 72 347 Research & development 71 18 (8)1a 81 ----- ----- ----- ----- 1,518 508 9 2,035 ----- ----- ----- ----- Income from operations 143 30 (9) 164 Other income (expense) Interest expense - net (21) (7) (25)1h (53) Other - net 1 (5) (4) ----- ----- ----- ----- (20) (12) (25) (57) ----- ----- ----- ----- Income before income taxes 123 18 (34) 107 Income taxes 39 6 (11)1j 34 ----- ----- ----- ----- Net income $ 84 $ 12 $ (23) $ 73 ===== ===== ===== ===== Net income per Common Share (1k) - Assuming dilution $ 1.17 $ 1.01 Basic 1.18 1.03 Average number of Common Shares outstanding (in millions) - Assuming dilution 72.2 72.2 Basic 71.2 71.2 See accompanying notes.
Page 15 Unaudited Pro Forma Combined Statement of Income Year Ended December 31, 1998
(Millions of dollars except for per share amounts) Historical Pro ---------------- forma Pro Aeroquip adjust- forma Eaton -Vickers ments combined ----- -------- ----- -------- Net sales $6,625 $2,150 $8,775 Costs & expenses Cost of products sold 4,759 1,620 $ 32 1a 1 1b 8 1c (2)1d (5)1e 12 1f 24 1g 6,449 Selling & administrative 1,050 272 1,322 Research & development 334 72 (32)1a 374 ----- ----- ----- ----- 6,143 1,964 38 8,145 ----- ----- ----- ----- Income from operations 482 186 (38) 630 Other income (expense) Interest expense-net (88) (27) (99)1h 1 1i (213) Gain on sale of businesses 43 43 Other-net 48 (12) 36 ----- ----- ----- ----- 3 (39) (98) (134) ----- ----- ----- ----- Income before income taxes 485 147 (136) 496 Income taxes 136 47 (41)1j 142 ----- ----- ----- ----- Net income $ 349 $ 100 $ (95) $ 354 ===== ===== ===== ===== Net income per Common Share (1k) - Assuming dilution $ 4.80 $ 4.87 Basic 4.89 4.96 Average number of Common Shares outstanding (in millions) - Assuming dilution 72.7 72.7 Basic 71.4 71.4 See accompanying notes.
Page 16 NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME The pro forma adjustments to give effect to Eaton's acquisition of A-V, and the estimated purchase price allocation for the three month period ended March 31, 1999 and the year ended December 31, 1998, are as follows: 1a Reclassify engineering expenses of A-V to cost of products sold to be consistent with Eaton's accounting policy 1b Adjust expense for acquired pensions and postretirement benefits other than pensions of A-V to reflect Eaton's current actuarial assumptions 1c Depreciate the write-up of acquired property, plant and equipment to estimated fair value over 10 years 1d Eliminate amortization of certain costs, principally start-up activities, deferred by A-V 1e Eliminate amortization of the excess of cost over net assets acquired related to A-V's acquisitions of businesses in prior years 1f Amortize the estimated fair value of acquired identified intangible assets over 25 years 1g Amortize the excess of the purchase price of A-V over the estimated fair value of net assets acquired over 40 years 1h Record additional interest expense related to $1.623 billion increase in debt to fund the acquisition (assumed interest rate 6.1%) 1i Amortize adjustment of acquired long-term debt to reflect Eaton's current interest rates 1j Record the income tax effect of the above adjustments, except for adjustments 1e and 1g which are nontaxable, assuming a 35% income tax rate 1k Pro forma net income per Common Share is computed by dividing net income by the average number of Common Shares outstanding. Page 17 Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Eaton Corporation ----------------- /s/ Billie K. Rawot ----------------------------- Billie K. Rawot Vice President and Controller Principal Accounting Officer Date: June 18, 1999 -----END PRIVACY-ENHANCED MESSAGE-----