Document aJEqnmd2mnKbX0bM0Bva6RGqB

In re: All Asbestos Litigation Filed by Simmons Cooper, Circuit Court, Third Judicial District, Madison Cty., IL; 11/17/05. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31,1959 ACCOUNTANTS' REPORT 10 EATON MANUFACTURING COMPANY AND CONSOLIDATED SUBSIDIARIES Note A--The number of shares of capital stock authorized to be issued by the Company was changed from 3,000,000 to 10,000,000 shares and each share with a par value of 82.00 was changed into two shares with a par value of 81.00 by adoption of amended articles of incorporation which became effective at the close of business on September 30,1059. Dividends per shore are shown after giving effect to the above change. The amount shown for dividends for 1958 includes 8939,536 paid by Fuller Manufacturing Company. Note B -- Under the Company's Restricted Stock Option Plan 260,624 shares of unissued capital stock were reserved at December 31, 1959. The following information relates to shares subject to options (after giving effect to the change explained in Note A): Humber Options of Shares Option Price Total Outstanding at beginning of year .... Granted during year..................................... Exercised during year................................. Outstanding at end of year......................... 186,400 47,900 36,976 197,324 821.29 833.02 or 836.76 821.29 821.29 to 836.76 83,968,456 1,724,152 787,219 84,905,389 Shares available for the granting of options aggregated 111,200 at the beginning of the year and 63,300 at the end of the year. At December 31, 1959, options for 13,536 shares were exercisable. Note C--The increase in capital in excess of par value during 1959 is accounted for as follows: Excess of proceeds from sale over par value of capital stock issued under Restricted Stock Option Plan...........................................................................................................................5 750,243 Excess of quoted market value over par value of 81,670 shares of old 82.00 par value capital stock issued in connection with acquisition of net assets of The Cleveland Worm and Gear Company.................................................................................................. 4,900,200 TOTAL..................................................................... ............................ 85,650,443 Note D-The estimated unfunded past service cost under the companies' pension plans amounted to approximately $17,000,000 at December 31,1959. The annual cost of the plans, at the current rate of operations, and including amorti zation of past service costs will amount to approximately 83,600,000. Note E--Net assets located in Canada have been included on a dollar-for-dollar basis at December 31, 1959. Board of Directors Eaton Manufacturing Company Cleveland, Ohio We have examined the financial statements of Eaton Manufacturing Company and consolidated subsidiaries for the year ended December 31,1959. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying statement of financial position and statements of income and earnings retained for use in the business present fairly the financial position of Eaton Manufacturing Company and consolidated subsidiaries at December 31,1959, and the results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Cleveland, Ohio January 25, 1960 ERNST St ERNST Certified Public Accountants EAB 064599 In re: All Asbestos Litigation Filed by Simmons Cooper, Circuit Court, Third Judicial District, Madison Cty., IL; 11/17/05.