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Securities and Exchange Commission
Washington, D. C. 20549
Form 11-K
Annual Report
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
Commission File No. 1-10697
NON-QUALIFIED STOCK PURCHASE PLAN
OF COMMERCIAL INTERTECH CORP.
COMMERCIAL INTERTECH CORP.
1775 Logan Avenue
Youngstown, Ohio 44505
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Audited Financial Statements
NON-QUALIFIED STOCK PURCHASE PLAN
OF COMMERCIAL INTERTECH CORP.
Years Ended December 31, 1997, 1996, and 1995
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Non-Qualified Stock Purchase Plan of Commercial Intertech Corp.
Audited Financial Statements
Years Ended December 31, 1997, 1996, and 1995
CONTENTS
<TABLE>
<CAPTION>
REQUIRED INFORMATION
<S> <C>
Report of Independent Auditors .......................................... 1
Statements of Net Assets--December 31, 1997 and 1996 .................... 2
Statements of Changes in Net Assets--Years Ended December 31, 1997,
1996, and 1995 ...................................................... 3
Notes to Financial Statements ........................................... 4
EXHIBITS
Consent of Independent Auditors ......................................... 8
</TABLE>
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Report of Independent Auditors
Administrative Committee
Non-Qualified Stock Purchase Plan
of Commercial Intertech Corp.
We have audited the accompanying statements of net assets of the Non-Qualified
Stock Purchase Plan of Commercial Intertech Corp. as of December 31, 1997 and
1996, and the related statements of changes in net assets for each of the three
years in the period ended December 31, 1997. 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 generally accepted auditing
standards. 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 of the Non-Qualified Stock Purchase Plan
of Commercial Intertech Corp. at December 31, 1997 and 1996, and the changes in
its net assets for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The Fund Information in the statements of net
assets and the statements of changes in net assets is presented for purposes of
additional analysis rather than to present the net assets and changes in net
assets of each fund. The Fund Information has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly presented in all material respects in relation to the
financial statements taken as a whole.
Ernst & Young LLP
Cleveland, Ohio
March 17, 1998
1
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<TABLE>
<CAPTION>
Non-Qualified Stock Purchase Plan of Commercial Intertech Corp.
Statements of Net Assets
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------------------------------- ----------------------------------------------
COMMERCIAL COMMERCIAL
INTERTECH INTERTECH
CORP. CORP.
MONEY COMMON MONEY COMMON
MARKET STOCK MARKET STOCK
FUND FUND TOTAL FUND FUND TOTAL
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $ 4,579 $ 4,579 $ 5,215 $ 5,215
Accrued interest receivable $ 314 314 $ 231 231
-----------------------------------------------------------------------------------------
314 4,579 4,893 231 5,215 5,446
Investments:
Money Market Fund 50,316 50,316 58,836 58,836
Investment in CIC stock 71,006 71,006 45,344 45,344
Investment in CUNO stock 29,869 29,869
-----------------------------------------------------------------------------------------
50,316 71,006 121,322 58,836 75,213 134,049
-----------------------------------------------------------------------------------------
50,630 75,585 126,215 59,067 80,428 139,495
LIABILITIES
Distributions payable to participants (50,630) (75,405) (126,035) (59,067) (80,054) (139,121)
Payable to the Company (180) (180) (230) (230)
Federal withholdings payable (144) (144)
------------------------------------------------------------------------------------------
(50,630) (75,585) (126,215) (59,067) (80,428) (139,495)
------------------------------------------------------------------------------------------
NET ASSETS $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
==========================================================================================
See notes to financial statements.
</TABLE>
2
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Non-Qualified Stock Purchase Plan of Commercial Intertech Corp.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
-----------------------------------------------------------------------------------------------------------
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------------- ------------------------------------- -------------------------------------
COMMERCIAL COMMERCIAL COMMERCIAL
INTERTECH INTERTECH INTERTECH
CORP. CORP. CORP.
MONEY COMMON MONEY COMMON MONEY COMMON
MARKET STOCK MARKET STOCK MARKET STOCK
FUND FUND TOTAL FUND FUND TOTAL FUND FUND TOTAL
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contributions:
Company $ 16,360 $ 17,446 $ 33,806 $ 19,160 $ 20,437 $ 39,597 $ 21,295 $ 22,084 $ 43,379
Employee 32,720 35,421 68,141 38,320 41,458 79,778 42,115 44,760 86,875
-----------------------------------------------------------------------------------------------------------
49,080 52,867 101,947 57,480 61,895 119,375 63,410 66,844 130,254
Net investment income:
Interest and
dividends 1,550 1,014 2,564 1,587 823 2,410 2,568 843 3,411
Other expenses (124) (124) (2,496) (2,496)
-----------------------------------------------------------------------------------------------------------
1,550 1,014 2,564 1,587 699 2,286 2,568 (1,653) 915
Realized gain (loss)
on distribution 17,229 17,229 (272) (272) 51,561 51,561
Realized gain on
sales of assets 21 21 951 951
Unrealized appreciation
(depreciation) in
aggregate current
value of investments 3,955 3,955 20,330 20,330 (28,002) (28,002)
Decrease (increase) in
Company payable 50 50 (36) (36) 9,309 9,309
Transfers to Company (9,897) (9,897)
-----------------------------------------------------------------------------------------------------------
Net assets available
for distribution 50,630 75,136 125,766 59,067 82,616 141,683 65,978 89,113 155,091
Distributions payable
to participants 50,630 75,136 125,766 59,067 82,616 141,683 65,978 89,113 155,091
-----------------------------------------------------------------------------------------------------------
Net change in net assets 0 0 0 0 0 0 0 0 0
Net assets at
beginning of year 0 0 0 0 0 0 0 0 0
-----------------------------------------------------------------------------------------------------------
NET ASSETS AT
END OF YEAR $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
===========================================================================================================
See notes to financial statements.
</TABLE>
3
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Non-Qualified Stock Purchase Plan of Commercial Intertech Corp.
Notes to Financial Statements
Years Ended December 31, 1997, 1996, and 1995
A. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accounting records of the Non-Qualified Stock Purchase Plan of Commercial
Intertech Corp. (the "Plan") are maintained on the accrual basis.
VALUATION OF INVESTMENTS
Investments are stated at the closing sale price on the last business day of the
year. Investments consist of common shares of Commercial Intertech Corp. (the
"Company" or "CIC"), common shares of CUNO Incorporated (at December 31, 1996),
and Money Market Fund shares. Generally, purchases of Company shares are made on
the open market; however, purchases may also be made directly from the Company's
treasury. Historical cost is computed based on average cost for purposes of
computing unrealized appreciation (depreciation) in the aggregate current value
of investments, realized gain (loss) on distribution, and realized gain (loss)
on sales of common stock.
PLAN DISTRIBUTIONS
Distributions payable to participants represent the value of participants'
accounts in the Money Market Fund and the number of shares of stock allocated to
participants' accounts times the year end market price per share for the
Commercial Intertech Corp. Common Stock Fund ("Stock Fund"). Realized
gains/losses on distributions are calculated based on historical costs.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires the administrator to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
4
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Non-Qualified Stock Purchase Plan of Commercial Intertech Corp.
Notes to Financial Statements-Continued
B. DESCRIPTION OF THE PLAN
The Plan provides investment opportunities for eligible employees, including the
opportunity to acquire stock of the Company. Eligible employees include all
employees of Commercial Intertech Corp. and its domestic subsidiaries with a
base salary in excess of $160,000, as adjusted in accordance with Section
401(a)(17) of the Internal Revenue Code. Eligible employees also include
employees, as designated by the Compensation Committee of the Board of
Directors, of foreign subsidiaries of the Company. Participants may elect to
contribute up to 15% of their eligible compensation. The Company will make a
contribution to each participant's account equal to 50% of the participant's
contributions, up to a maximum of 3% of the participant's eligible compensation.
Eligible compensation, for employees of the Company and its domestic
subsidiaries, is defined as base wage or salary in excess of $160,000, as
adjusted in accordance with Section 401(a)(17) of the Internal Revenue Code. For
employees of foreign subsidiaries of the Company, eligible compensation consists
of base wage or salary.
Participants that are employees of the Company and its domestic subsidiaries may
elect to contribute to either the Stock Fund or the Money Market Fund.
Participants that are employees of foreign subsidiaries of the Company may
contribute to the Stock Fund only. Employee and Company contributions are
allocated directly to each participant's account and vest immediately. For the
Stock Fund, the monthly allocation of shares to a participant's account is based
on the proportion that the participant's contributions and employer
contributions for that participant bears to such contributions of all
participants who participate in the Stock Fund. Investment income is allocated
proportionally to each participant's account.
At the beginning of each Plan year, participants may change deduction
percentages or investment funds, suspend contributions, or withdraw from the
Plan.
Distributions are made after the end of each Plan year. Money Market Fund
participants receive the full value of their accounts as of the Plan year end.
Stock Fund distributions are made in whole shares of stock, while fractional
shares less than one-half are forfeited and used as a credit toward future
Company contributions. Distribution of a participant's account is required as
soon as practical after the end of the month in which the participant terminates
employment for any reason, including death, disability, retirement, discharge or
otherwise.
5
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Non-Qualified Stock Purchase Plan of Commercial Intertech Corp.
Notes to Financial Statements-Continued
B. DESCRIPTION OF THE PLAN--CONTINUED
In 1997, 6 employees participated in the Money Market Fund and 8 employees
participated in the Stock Fund. In 1996, 6 employees participated in the Money
Market Fund and 9 employees participated in the Stock Fund. In 1995, 7 employees
participated in the Money Market Fund and 10 employees participated in the Stock
Fund.
The Plan is administered by a committee appointed by the Compensation Committee
of the Board of Directors of the Company. The Company has the sole right to
appoint the Trustee, and to terminate the Plan at any time, subject to Plan
provisions. Administrative expenses that are not paid by the Company, in its
sole discretion, will be paid by the Plan.
The foregoing description of the Plan provides only general information.
Additional information may be obtained from the Plan administrative committee.
C. INCOME TAX STATUS
The Plan maintains its assets in a trust which is not a qualified trust under
Section 401(a) of the Internal Revenue Code. As such, the trust is a taxable
trust under Subchapter J of the Internal Revenue Code and is taxable on
undistributed earnings. Participants are taxed on matching Company contributions
and earnings distributed by the trust.
Since the trust distributed or intends to distribute all earnings for 1997,
1996, and 1995, it has no federal income tax liability for such years.
D. TRANSACTIONS WITH PARTIES-IN-INTEREST
The Plan purchased shares of common stock of Commercial Intertech Corp. during
the years ended December 31, 1997, 1996, and 1995. The Plan received dividends
of $1,014, $823 and $843 on this stock during 1997, 1996, and 1995,
respectively.
On September 10, 1996, the Company spun off CUNO Incorporated, a wholly-owned
subsidiary, as an independent publicly held company. The spin-off was in the
form of a one-for-one share dividend to shareholders of Company common stock as
of August 9, 1996. As a result of the share dividend, Plan participants received
a total of 2,008 common shares of CUNO Incorporated.
Based on the average market value of the respective stocks at the time of the
spin-off, 56% of the cost basis of the 2,008 shares of Company common stock held
in the Plan at that time was allocated to the 2,008 shares of CUNO Incorporated
common stock. The remaining 44% became the adjusted cost basis of the 2,008
shares of Company common stock.
6
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Non-Qualified Stock Purchase Plan of Commercial Intertech Corp.
Notes to Financial Statements-Continued
E. INVESTMENTS
<TABLE>
<CAPTION>
Sales and Distributions of
Investments
During the Year Ended
Identity of Issue --------------------------------
Borrower, Lessor Description of Current Aggregate Market Realized
or Similar Party Investment Cost Value Cost Value Gain (Loss)
- --------------------------------------------------------------------------------------------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1997
Commercial Intertech Corp.
Common Stock Fund:
*Commercial Intertech Corp. ** 3,422 common shares
*$20.750 per share $ 49,371 $ 71,006 $ 38,835 $ 47,534 $ 8,699
CUNO Incorporated 23,816 32,367 8,551
Money Market Fund:
Federated Investors Inc.
trust for U.S. Treasury
Obligations ** 50,316 shares 50,316 50,316 59,067 59,067 0
-------------------
$ 99,687 $ 121,322
===================
DECEMBER 31, 1996
Commercial Intertech Corp.
Common Stock Fund:
*Commercial Intertech Corp. **3,328 common shares
$13.625 per share $ 33,728 $ 45,344 $ 64,749 $ 64,477 $ (272)
CUNO Incorporated **2,008 common shares
$14.875 per share 23,816 29,869 None None None
Money Market Fund:
Federated Investors Inc.
trust for U.S. Treasury
Obligations **58,836 shares 58,836 58,836 65,978 65,978 0
-------------------
$ 116,380 $ 134,049
===================
* Party-in-interest.
** Individual investment that comprises five percent or more of the Plan's assets. The fair value of the Plan's
investment in Commercial Intertech Corp. common stock (including shares bought and distributed, as well as held
during the year), appreciated $10,020 and $14,277 in 1997 and 1996 respectively, and depreciated $28,002 in 1995.
The fair value of the Plan's investment in CUNO Incorporated common stock decreased $6,065 as a result of
distribution in 1997 and appreciated $6,053 in 1996.
</TABLE>
7
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EXHIBIT I
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-25795) pertaining to the Non-Qualified Stock Purchase Plan of
Commercial Intertech Corp. and in the related Prospectus of our report dated
March 17, 1998, with respect to the financial statements of the Non-Qualified
Stock Purchase Plan of Commercial Intertech Corp. included in this Annual Report
(Form 11-K) for the year ended December 31, 1997.
Ernst & Young LLP
Cleveland, Ohio
March 17, 1998
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the plan) have duly caused this annual
report to be signed by the undersigned thereunto duly authorized.
Date: March 23, 1998 Non-Qualified Stock Purchase Plan
of Commercial Intertech Corp.
By: James M. Donchess
------------------------------
James M. Donchess
Corporate Attorney, Benefits
