Eaton corporation Electrical De Puerto Rico 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
Annual Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
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Annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934 (Fee required) |
For the fiscal year ended December 31, 2005
Or
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Transition report pursuant to Section 15(d) of the Securities Exchange Act of 1934 (No fee
required) |
For the transition period from to
Commission file number
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A. |
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Full title of the plan and the address of the plan, if different from that of
the issuer named below: |
Eaton Electrical de Puerto Rico, Inc.
Retirement Savings Plan
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B. |
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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.
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(Name of Plan) |
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EATON ELECTRICAL DE PUERTO RICO, INC.
RETIREMENT SAVINGS PLAN |
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| Date: June 29, 2006 |
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By: Eaton Corporation Pension Administration Committee |
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By:
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/s/ B.K. Rawot |
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B. K. Rawot
Vice President and Controller
Eaton Corporation |
Audited Financial Statements and
Supplemental Schedule
Eaton Electrical de Puerto Rico, Inc. Retirement Savings Plan
December 31, 2005 and 2004, and Year Ended December 31, 2005
With Report of Independent Registered Accounting Firm
Eaton Electrical de Puerto Rico, Inc.
Retirement Savings Plan
Financial Statements and Supplemental Schedule
December 31, 2005 and 2004, and
Year Ended December 31, 2005
Contents
Report of Independent Registered Public Accounting Firm
The Pension Administration Committee and the
Pension Investment Committee — Eaton Corporation
We have audited the accompanying Statement of Net Assets Available for Benefits
of the Eaton Electrical de Puerto Rico Retirement Savings Plan as of December
31, 2005 and the related Statement of Changes in Net Assets Available for
Benefits for the year ended December 31, 2005. 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 audit. The financial
statement of Eaton Electrical de Puerto Rico, Inc. Retirement Savings Plan as
of December 31, 2004 was audited by other auditors, their report dated June 29,
2005, expressed an unqualified opinion on that financial statement.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (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
audit provides a reasonable basis for our opinion.
In our opinion, the 2005 financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of Eaton
Corporation Eaton Electrical de Puerto Rico Retirement Savings Plan at December
31, 2005 and the changes in its net assets available for benefits for the year
ended December 31, 2005, in conformity with accounting principles generally
accepted in the United States of America.
Our audit was performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2005, is presented for the purposes of
additional analysis and is not a required part of the financial statements but
is 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. The supplemental schedule is the responsibility of the
Plan’s management. The supplemental information has been subjected to the
auditing procedures applied in our audit of the financial statements and, in
our opinion, is fairly stated in all material respects in relation to the
financial statements taken as a whole.
MEADEN & MOORE, LTD
Cleveland, Ohio
June 15, 2006
1
Report of Independent Registered Public Accounting Firm
The Pension Administration Committee and the
Pension Investment Committee—Eaton Corporation
We have audited the accompanying statement of net assets available for benefits of the Eaton
Electrical de Puerto Rico, Inc. Retirement Savings Plan (formerly Cutler-Hammer de Puerto Rico,
Inc. Retirement Savings Plan) as of December 31, 2004. This financial statement is the
responsibility of the Plan’s management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with auditing standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of material misstatement.
We were not engaged to perform an audit of the Plan’s internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purposes of
expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in all material
respects, the net assets available for benefits of the Plan at December 31, 2004, in conformity
with U.S. generally accepted accounting principles.
ERNST & YOUNG LLP
Cleveland, Ohio
June 29, 2005
2
Eaton Electrical de Puerto Rico, Inc.
Retirement Savings Plan
Statements of Net Assets Available for Benefits
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December 31 |
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2005 |
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2004 |
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Assets |
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Investments, at fair value: |
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Common/collective trust funds |
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19,206,304 |
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17,580,055 |
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Mutual funds |
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5,673,582 |
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4,906,496 |
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Common stock |
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3,712,358 |
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3,518,288 |
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Money market funds |
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68 |
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833 |
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Total investments |
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28,592,312 |
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26,005,672 |
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Receivables: |
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Contributions: |
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Participants |
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246,139 |
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233,562 |
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Employer |
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101,956 |
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99,896 |
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Interest |
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101 |
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5,256 |
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Net pending purchases |
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— |
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(5,211 |
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Total receivables |
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348,196 |
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333,503 |
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Net assets available for benefits |
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$ |
28,940,508 |
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$ |
26,339,175 |
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See notes to financial statements.
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Eaton Electrical de Puerto Rico, Inc.
Retirement Savings Plan
Statements of Changes in Net Assets Available for Benefits
Year Ended December 31, 2005
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Additions |
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Net appreciation in fair value of investments |
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780,099 |
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Interest and dividends |
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147,903 |
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Contributions: |
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Participants |
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2,630,266 |
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Employer, net of forfeitures of $59,730 |
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1,022,583 |
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Total contributions |
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3,652,849 |
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Total additions |
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4,580,851 |
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Deductions |
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Benefits paid to participants |
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1,979,518 |
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Net increase |
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2,601,333 |
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Net assets available for benefits at beginning of year |
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26,339,175 |
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Net assets available for benefits at end of year |
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28,940,508 |
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See notes to financial statements.
4
Eaton Electrical de Puerto Rico, Inc.
Retirement Savings Plan
Notes to Financial Statements
December 31, 2005 and 2004, and
Year Ended December 31, 2005
1. Significant Accounting Policies
Basis of Accounting
The financial statements of the Eaton Electrical de Puerto Rico, Inc. Retirement Savings Plan (the
Plan) are prepared under the accrual method of accounting.
Investment Valuation and Income Recognition
Investments are stated at fair value as measured by quoted prices in active markets except for the
common/collective trust fund and the money market fund, which are stated at fair value as
determined by the trustee.
Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the
ex-dividend date.
Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates that affect the amounts reported in the financial
statements and accompanying notes. Actual results are not expected to differ from these estimates.
2. Description of Plan
Effective February 1, 1994, Eaton Electrical de Puerto Rico, Inc. (the Company or the Plan
Sponsor), which was formerly known as Cutler-Hammer de Puerto Rico, Inc., a wholly owned subsidiary
of Eaton Corporation, established the Plan. The Plan provides that all full-time employees not
covered under a collective bargaining agreement of the Company are eligible to participate in the
Plan immediately upon employment.
Eligible employees may elect to make before-tax contributions to the Plan up to a maximum of 10% of
their compensation. The Company has agreed to make a voluntarily matching contribution of 50% of
the employee contributions not to exceed 3% of the total compensation of the employee.
5
Eaton Electrical de Puerto Rico, Inc.
Retirement Savings Plan
Notes to Financial Statements (continued)
2. Description of Plan (continued)
Employee contributions may be invested in any of the fund options available under the Plan.
Participants may reallocate their accumulated contributions quarterly among the various funds
consistent with the percentages elected by the employee.
Substantially all administrative, management fees and other expenses of the Plan are paid by the
Company. Certain transaction costs are paid by the participants.
Each participant’s account is credited with the participant’s contributions and allocations of
Company contributions, Plan earnings and transaction costs. Allocations are based on participant
earnings or account balances, as defined. The benefit to which a participant is entitled is the
benefit that can be provided from the participant’s account. On termination of service, a
participant is eligible to receive a lump-sum amount equal to the vested value of his or her
account.
Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in
the Company contribution portion of their accounts plus actual earnings thereon is based on years
of continuous service. Participants are 100% vested after three years of credited service or upon
the death of the participant. Forfeitures of nonvested amounts shall be used to reduce future
Company contributions. As of December 31, 2005, forfeitures held in a suspense account totaled
$17,633 and will be used to reduce future company contributions.
The Company may amend, modify, suspend or terminate the Plan, provided that no assets held by the
Plan or income thereon received for the purposes of the Plan shall be used for, or diverted to,
purposes other than for the exclusive benefit of participating employees or their beneficiaries.
Information about the Plan is contained in the Plan Document, which is available from the Human
Resources Department upon request.
3. Investments
The Trustee of the Plan holds the Plan’s investment assets and executes investment transactions.
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Eaton Electrical de Puerto Rico, Inc.
Retirement Savings Plan
Notes to Financial Statements (continued)
3. Investments (continued)
The fair value of individual investments that represent 5% or more of the Plan’s net assets
available for benefits are as follows:
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December 31 |
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2005 |
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2004 |
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KeyBank EB Managed Guaranteed Investment Contract Fund |
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$ |
19,206,304 |
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$ |
17,580,055 |
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Victory Stock Index Fund |
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4,385,469 |
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3,880,833 |
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Eaton Corporation Common Shares |
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3,712,358 |
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3,518,288 |
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During 2005, the Plan’s investments (including investments purchased, sold as well as held during
the year) appreciated in fair value as follows:
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Common/collective trust funds |
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$ |
804,575 |
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Common stock |
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(221,652 |
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Mutual funds |
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197,176 |
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$ |
780,099 |
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4. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements
to the Form 5500:
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December 31 |
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2005 |
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2004 |
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Net assets available for benefits per the financial statements |
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$ |
28,940,508 |
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$ |
26,339,175 |
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Amounts allocated to withdrawing participants |
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(615,178 |
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(311,479 |
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Net assets available for benefits per Form 5500 |
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$ |
28,325,330 |
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$ |
26,027,696 |
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Eaton Electrical de Puerto Rico, Inc.
Retirement Savings Plan
Notes to Financial Statements (continued)
4. Reconciliation of Financial Statements to Form 5500 (continued)
The following is a reconciliation of benefits paid to participants per the financial statements to
the Form 5500:
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Year Ended |
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December 31, |
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2005 |
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Benefits paid to participants per the financial statements |
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$ |
1,979,518 |
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Add amounts allocated to withdrawing participants
at December 31, 2005 |
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615,178 |
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Deduct amounts allocated to withdrawing participants
at December 31, 2004 |
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(311,479 |
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Benefits paid to participants per Form 5500 |
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$ |
2,283,217 |
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Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit claims that
have been processed and approved for payment prior to the end of the Plan year but not yet paid.
5. Income Tax Status
The Plan has received a determination letter from the Puerto Rico Treasury Department dated August
24, 1999, stating that the Plan meets the requirements for qualification under Puerto Rico income
tax laws and that the related trust is exempt from income taxes. Subsequent to this determination
the Plan was amended. Once qualified, the Plan is required to operate in conformity with the income
tax laws of Puerto Rico to maintain its qualification. The Plan administrator believes the Plan is
being operated in compliance with the applicable requirements of the income tax laws of Puerto Rico
and, therefore, believes that the Plan, as amended, is qualified and the related trust is tax
exempt.
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Eaton Electrical de Puerto Rico, Inc.
Retirement Savings Plan
Notes to Financial Statements (continued)
6. Transactions With Parties in Interest
Party-in-interest transactions include the investment in the common stock of Eaton Corporation, 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 2005, the Plan received $65,998 in common stock dividends from Eaton Corporation.
7. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various
risks such as interest rate, market and credit risks. Due to the level of risk associated with
certain investment securities, it is at least reasonably possible that changes in the values of
investment securities will occur in the near term and that such changes could materially affect
participants’ account balances and the amounts reported in the statements of net assets available
for benefits.
8. Recently issued accounting pronouncements
In December 2005, the FASB issued FASB Staff Position AAG-INV-A. The new pronouncement requires
fully benefit-responsive investment contracts be valued at fair value instead of contract value.
The pronouncement will be effective for the year ended December 31, 2006. The effect of this
pronouncement on these financial statements has not been determined.
9
Supplemental Schedule
Eaton Electrical de Puerto Rico, Inc.
Retirement Savings Plan
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| EIN #34-1756466
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Plan #002 |
Schedule H, Line 4i — Schedule of Assets
(Held at End of Year)
December 31, 2005
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Description of |
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Current |
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Investment |
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Value |
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Common Stock |
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Eaton Corporation Common Shares* |
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55,334 shares |
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$ |
3,712,358 |
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Mutual Funds |
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Victory Stock Index Fund* |
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237,566 units |
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4,385,469 |
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Vanguard Developed Markets Index
Open—End Fund |
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55,321 units |
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544,414 |
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Vanguard Balanced Index Fund
Open—End Fund |
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37,522 units |
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743,699 |
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5,673,582 |
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Common/Collective Trust Funds |
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Key Bank EB Managed Guaranteed Investment*
Contract Fund |
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993,374 units |
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19,206,304 |
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Money Market Fund |
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Key Bank EB Money Market Fund* |
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67 units |
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68 |
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$ |
28,592,312 |
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| * |
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Indicates a party in interest to the Plan. |
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