FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission File No. 1-924
TRINOVA CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 34-4288310
(State of Incorporation) (I.R.S. Employer
Identification No.)
3000 Strayer, Maumee, Ohio 43537-0050
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (419) 867-2200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Shares, $5.00 Par Value Frankfurt Stock Exchange
Chicago Stock Exchange
New York Stock Exchange
Pacific Stock Exchange
The Stock Exchange (London)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
[Cover page continued]
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The aggregate market value of the Common Shares held by non-affiliates of the
registrant as of February 18, 1997, was $1,060,722,404.
The number of Common Shares, $5 Par Value, outstanding as of February 18,
1997, was 28,021,191.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1996 Annual Report to Security Holders are filed as Exhibit
(13) filed hereto and are incorporated by reference into Parts I, II and IV.
Portions of the proxy statement for the annual meeting of security holders to
be held on April 17, 1997, are incorporated by reference into Part III.
This document, including exhibits, contains 68 pages.
The cover page consists of 2 pages.
The Exhibit Index is located at page 21.
[End of cover page]
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PART I
ITEM 1. Business.
(a) TRINOVA Corporation ("TRINOVA") is a world leader in the manufacture and
distribution of engineered components and systems for industry, sold through
its operating companies, Aeroquip Corporation ("Aeroquip") and Vickers,
Incorporated ("Vickers"), to the industrial, automotive, and aerospace
markets.
The Board of Directors of TRINOVA has voted, subject to approval by
the shareholders of the Company, to change the name of the Company to
"Aeroquip-Vickers, Inc." The proposal will be submitted to the shareholders
of the Company for approval at the annual meeting to be held on April 17,
1997.
On February 20, 1997, TRINOVA announced that it plans to exit its
interior automotive plastics business, and will record a special charge in
1997 related to exiting these businesses. The pretax charge is not to exceed
$30 million, approximately $18.5 million net of tax or 61 cents per share. A
significant portion of this charge is related to exiting businesses in
Germany. On March 10, 1997, TRINOVA announced that a definitive agreement has
been signed to sell facilities in Chesterfield and Port Huron, Michigan and
Chihuahua, Mexico to Key Plastics Inc. The three facilities had sales in 1996
of approximately $30 million. Buyers are being sought for the other
facilities which had combined 1996 sales volume of approximately $100 million.
In 1996, TRINOVA increased its quarterly dividend to $.20 per share,
or $.80 per share for the year, from $.18 per share in 1995, or $.72 per share
for the year. The $.20 quarterly rate was maintained in January 1997.
In October 1995, TRINOVA announced that it may purchase up to
2 million of its outstanding common shares pursuant to a previously authorized
stock repurchase program. Under this authorization, common shares may be
purchased from time to time in the open market and through privately
negotiated transactions. Common shares purchased will be for the treasury and
will be available for general corporate purposes. Through December 31, 1996,
TRINOVA has purchased 1,208,300 of its common shares at a cost of $37.7
million under the current authorization. TRINOVA expects to make further
purchases in 1997, but is not committed to purchase a specific number of
shares.
In 1996, TRINOVA filed a shelf registration statement with the
Securities and Exchange Commission and issued thereunder $100 million of
30-year debentures with a coupon rate of 7.875%. Proceeds were used to retire
debt with shorter maturities, including $75 million that was classified as
long-term debt at December 31, 1995 under provisions of the revolving credit
agreement in effect at that date. At December 31, 1996, additional debt
securities in amounts up to $150 million can be issued under existing shelf
registrations.
In May 1996, TRINOVA sold its injection molding plastics products
facility in Bassett, Virginia, and during 1996 closed its Henderson, Kentucky,
and Grand Blanc, Michigan facilities. TRINOVA announced in the 1996 fourth
quarter that it will close one of its automotive plastics products plants in
the 1997 first quarter.
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In June 1996, TRINOVA acquired all of the outstanding shares of Summa
Manufacturing Corporation for approximately $7.4 million. Summa is a leading
manufacturer of aftermarket vane pumps and replacement parts for mobile and
industrial applications.
In December 1996, TRINOVA acquired certain assets and liabilities of
the Electrical Engineering & Manufacturing Company (EEMCO), a division of
DATRON, Inc., for approximately $35.9 million. EEMCO designs and manufactures
linear and rotary actuators, specialty motors and generators, flight control
systems, electronic controls, and fully integrated actuation systems for
commercial and military aerospace applications.
In 1996, TRINOVA sold its 35% interest in Yokohama Aeroquip K.K.,
based in Japan, and its 49% interest in Aeroquip Mexicana S.A., based in
Mexico. Proceeds from the two transactions amounted to $37.3 million,
resulting in a net combined pretax gain of $17.3 million ($5 million net, or
$.16 per share). The combined pretax gain included net translation gains of
$6.4 million previously deferred in the currency translation component of
equity. Yokohama Aeroquip K.K. manufactured and sold fittings, couplings, and
hose and tube assemblies for industrial and automotive markets. Aeroquip
Mexicana S.A. manufactured and sold rubber hydraulic hose and fittings in
Mexico, primarily for industrial markets.
(b) "Note 12 - Business Segments" on pages 54-55 of Exhibit (13) filed
hereunder is incorporated herein by reference.
(c) A description of the business done and intended to be done by TRINOVA and
its subsidiaries in each industry segment follows.
(1) INDUSTRIAL: Aeroquip manufactures and sells hose and hose
assemblies; hose fittings and adapters; tube fittings and adapters; couplings;
refrigeration/air conditioning connectors; and molded, extruded and co-
extruded plastic products.
Vickers manufactures and sells hydraulic, electrohydraulic, pneumatic
and electronic control devices; piston and vane pumps and motors; open
architecture machine controls; hydraulic and pneumatic cylinders; hydraulic
power packages; electric motors and drives; hydraulic and lubrication
filtration; and fluid-evaluation products and services.
Principal markets for these products include construction, mining,
logging and farm equipment; machine tool; process industries; electrical
machinery; air conditioning/refrigeration; appliances and communications
equipment; electronics; lift truck; material handling; plant maintenance; and
housing and commercial construction. Sales are dispersed geographically
across a broad customer base. Products are sold directly to original
equipment manufacturers ("OEMs") and through a worldwide network of
distributors serving aftermarket and small- and medium-sized OEM customers.
The industrial business is highly competitive in terms of price,
quality and service. TRINOVA believes that Aeroquip has significant market
position worldwide for industrial hose, fittings, couplings and adapters.
TRINOVA also believes that Vickers has significant market position worldwide
for hydraulic and electrohydraulic controls; piston and vane pumps and motors;
hydraulic power packages; and electronic controls, drives and motors. TRINOVA
serves many customers in the highly diverse and fragmented industrial markets.
Due to the diversity of TRINOVA's products, there are a large number of
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competitors scattered across a wide variety of market segments, with no single
competitor competing in each of TRINOVA's product lines.
The order backlog for the industrial business was $184.9 million as of
December 31, 1996, compared to $201.5 million as of December 31, 1995.
Substantially all of the December 31, 1996, backlog is expected to be filled
in 1997.
(2) AUTOMOTIVE: Aeroquip manufactures and sells air conditioning,
power steering, and oil and transmission cooler hose and hose assemblies;
bodyside moldings; decorative bumper strips; roof moldings; spoilers; rocker
panel claddings; engine components; louvers and trim plates; interior trim;
garnish moldings; interior engine covers; instrument clusters; radio bezels;
and display products.
The automotive operations of Aeroquip serve worldwide automobile,
light truck, sport utility and van manufacturers. Products are primarily sold
directly to manufacturers. Approximately 62.7% of worldwide sales of
TRINOVA's automotive business are made to three major U.S. and one major
European automobile manufacturers.
The automotive industry is highly competitive in terms of price,
quality and service. Aeroquip is a preferred supplier to the major U.S. and
European automobile manufacturers. Competition for products in the automotive
industry is very fragmented. TRINOVA is currently seeking opportunities to
exit elements of its automotive segment relating to certain plastics
operations which have produced losses or relatively low operating margins in
recent periods. The operations under review accounted for approximately 25%
of automotive sales in 1996.
(3) AEROSPACE: Aeroquip manufactures and sells hose, fittings,
couplings, swivels, V-band couplings, fuel-handling products, high-pressure
tube fittings, clamps, marine bearings and noise-reduction products.
Vickers manufactures and sells fixed- and variable-displacement pumps;
fuel pumps; hydraulic motors and motor packages; electric motorpumps and
generator packages; valves and valve packages; electrohydraulic and
electromechanical actuators; sensors and monitoring devices; and electronic
controllers.
The aerospace operations of Aeroquip and Vickers serve worldwide
commercial aerospace and defense markets including commercial aircraft, air
defense, cargo handling, combat and support vehicles, commuter aircraft,
engines, marine, military aircraft, military weaponry, missiles and naval
machinery. Products are sold directly to OEM businesses, commercial airlines
and the government and through a distributor network. Approximately 14% of
TRINOVA's aerospace business sales are made to two major U.S. airframe
manufacturers.
The aerospace business is highly competitive in terms of price,
quality and service. TRINOVA believes that Aeroquip has significant market
position worldwide for aerospace hose, fittings and quick-disconnect
couplings. TRINOVA also believes that Vickers has significant market position
worldwide for aerospace fixed- and variable-displacement hydraulic pumps,
hydraulic motors and motor packages, and aerospace sensors and monitoring
devices.
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TRINOVA serves a large number of customers in the aerospace and
defense market. Due to the diversity of TRINOVA's products, there are a large
number of competitors scattered across a wide variety of market segments, with
no single competitor competing in each of TRINOVA's product lines.
The order backlog for the aerospace business was $341 million as of
December 31, 1996, compared to $266.4 million as of December 31, 1995.
Approximately 13.3% of the December 31, 1996, backlog is not expected to be
filled in 1997 because certain contracts require deliveries after 1997.
Approximately 35.8% of the December 31, 1996, backlog represents direct
government contracts or subcontracts on government programs, which are subject
to termination for convenience by the Government.
(4) OTHER INFORMATION: TRINOVA and its subsidiaries are generally
not dependent upon any one source for raw materials or purchased components
essential to their businesses, and it is believed that such raw materials and
components will be available in adequate quantities to meet anticipated
production schedules.
Patents owned by TRINOVA are considered important to the conduct of
its present businesses. TRINOVA is licensed under a number of patents, none
of which are considered material to its businesses. TRINOVA is the owner of a
number of U.S. and non-U.S. trademark registrations.
TRINOVA devotes engineering, research and development efforts to new
products and improvement of existing products and production processes.
During 1996, 1995 and 1994, TRINOVA spent a total of $74.9 million, $63
million and $55.5 million, respectively, on these efforts.
TRINOVA employed 15,162 persons at December 31, 1996.
(d) "Note 13 - Non-U.S. Operations" on page 56 of Exhibit (13) filed
hereunder is incorporated herein by reference. TRINOVA believes the risk
attendant to non-U.S. operations, which are primarily in developed countries,
is not significantly greater than that attendant to its U.S. operations.
ITEM 2. Properties.
A description of TRINOVA's principal properties follows. Except as
otherwise indicated, all properties are owned by TRINOVA or its subsidiaries.
TRINOVA's executive offices (leased) are located in Maumee, Ohio.
INDUSTRIAL: Aeroquip Corporation has executive and administrative offices in
Maumee, Ohio (leased); technical centers in Ann Arbor, Michigan (leased) and
Maumee, Ohio (leased); and manufacturing facilities throughout the United
States and abroad, including plants in Mountain Home, Arkansas; Fitzgerald,
Georgia; New Haven, Indiana; Williamsport, Maryland; Forest City and Norwood,
North Carolina; Van Wert, Ohio; Gainesboro, Tennessee; Wausau, Wisconsin;
Guaratingueta and Sao Paulo, Brazil; Chambray-Les-Tours, France; Baden-Baden
and Hann-Muenden, Germany; Livorno, Italy; and Cardiff, United Kingdom.
Aeroquip also owns or leases warehouse, assembly and distribution facilities
and sales offices in the United States and abroad.
Vickers, Incorporated has executive and administrative offices in
Maumee, Ohio (leased); a technical center in Rochester Hills (leased),
Michigan; and manufacturing facilities throughout the United States and
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abroad, including plants in Decatur, Alabama; Searcy, Arkansas; Carol Stream
and Petersburg (leased), Illinois; Jackson, Michigan; South Lebanon, Ohio;
Omaha, Nebraska; White City, Oregon; Memphis, Tennessee; Sao Paulo, Brazil;
Wehrheim, Germany; Casella and Vignate (leased), Italy; and Bedford (leased),
Havant and Telford (leased), United Kingdom. Vickers also owns or leases
warehouse, assembly and distribution facilities and sales offices in the
United States and abroad.
AUTOMOTIVE: Aeroquip has executive and administrative offices in Maumee, Ohio
(leased); technical and administrative offices in Mt. Clemens, Michigan
(leased); and manufacturing facilities throughout the United States and
abroad, including plants in Atlanta, Georgia; Kendallville, Indiana; Clinton
Township (leased), Mt. Clemens, Port Huron and Spring Arbor, Michigan;
Mooresville, North Carolina; Fremont, Ohio; Livingston, Tennessee; Baden-
Baden, Beienheim (leased) and Frankfurt (leased), Germany; Chihuahua, Mexico;
Alcala de Henares, Spain; and Brierley Hill, United Kingdom. Aeroquip also
owns or leases warehouse, assembly and distribution facilities and sales
offices in the United States and abroad.
AEROSPACE: Aeroquip Corporation has executive and administrative offices in
Maumee, Ohio (leased); and manufacturing facilities throughout the United
States and abroad, including plants in Toccoa, Georgia; Jackson, Michigan
(leased); Middlesex, North Carolina; Pau, France (leased); and Lakeside,
United Kingdom (leased). Aeroquip also owns or leases warehouse, assembly and
distribution facilities and sales offices in the United States and abroad.
Vickers, Incorporated has executive and administrative offices in
Maumee, Ohio (leased); and manufacturing facilities throughout the United
States and abroad, including plants in Los Angeles, California; Grand Rapids,
Michigan; Jackson, Mississippi; Hi-Nella, New Jersey; Glenolden, Pennsylvania;
Wehrheim, Germany; and Bedhampton, United Kingdom. Vickers also owns or
leases warehouse, assembly and distribution facilities and sales offices in
the United States and abroad.
ITEM 3. Legal Proceedings.
As previously reported, on March 26, 1992, the United States
Environmental Protection Agency ("USEPA") issued an Administrative Order ("106
Order") under Section 106 of the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA") to TRINOVA's subsidiary, Aeroquip
Corporation ("Aeroquip"), and five other Potentially Responsible Parties
("PRPs") relative to the San Fernando Valley Burbank Operable Unit ("BOU"),
involving groundwater contamination. (Reference is made to Part I, Item 3, of
TRINOVA's Annual Report on Form 10-K for the year ended December 31, 1994.)
The 106 Order requires the six PRPs to design and construct a water blending
facility at a cost now estimated to be approximately $5.7 million. TRINOVA's
portion of any such cost is estimated to be 18.33% based on a cost-sharing
agreement among the six PRPs which was executed by TRINOVA on July 6, 1992.
Also related to the BOU, on May 15, 1994, USEPA issued to Lockheed
Corporation ("Lockheed"), Aeroquip and other PRPs a Special Notice of
Liability under CERCLA for the remaining 18 years of operation and maintenance
(O&M) costs associated with the blending facility, as well as a water
treatment facility constructed by Lockheed under its BOU Consent Decree with
USEPA. The Special Notice of Liability also covers USEPA's past response
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costs. On April 26, 1994, Lockheed filed an action against Aeroquip and 105
other PRPs seeking contribution toward costs Lockheed incurred to construct
the water treatment facility and related matters. In November 1995, a
settlement agreement was entered into among Lockheed and most of the members
of a joint defense group (the "Joint Defense Group"), including Aeroquip,
which resolved this contribution action. The settlement requires the payment
of $16 million by the Joint Defense Group. Aeroquip's portion of this amount
is approximately $104,000. This amount reflects a credit to Aeroquip for its
prior expenditures on the blending facility. The settlement is also intended
to resolve Aeroquip's potential liability for the interim remedy at the
Glendale Superfund site (see below), Aeroquip's potential liability for a
toxic suit brought against Lockheed, and the claims by other Joint Defense
Group members against Aeroquip. USEPA and some of the Burbank PRPs are
negotiating a Second Consent Decree which will provide the settling parties
with protection against liability for certain matters related to the interim
remedy now underway. Under the proposed Second Consent Decree all work will
be carried out by the City of Burbank, and Lockheed will fund the Operation &
Maintenance costs. Aeroquip and five other PRPs will be responsible for any
future design defects in the blending facility and for possible other costs
should USEPA decide to reopen the Consent Decree based on changed
circumstances or new information.
As previously reported, on November 13, 1992, the USEPA, Region IX,
issued a General Notice of Liability letter to TRINOVA's subsidiary, Sterer
Engineering and Manufacturing Company, now known as the Fluid Control and
Actuation Division of Vickers, Incorporated ("Vickers"). (Reference is made
to Part I, Item 3, of TRINOVA's Annual Report on Form 10-K for the year ended
December 31, 1994.) The letter notified Vickers of potential liability, as
defined by Section 107(a) of CERCLA, that it may incur with respect to the San
Fernando Valley Glendale South Operable Unit, involving groundwater
contamination. The USEPA issued its Record of Decision ("ROD") on June 18,
1993. Twenty-seven PRPs (the "PRP Group"), including Vickers, entered into an
Administrative Order on Consent with the USEPA on March 21, 1994, to conduct
the Remedial Design ("RD") of the interim remedy. The estimated cost of the
RD is $4.7 million. Vickers' portion of the RD costs is estimated to be 2.95%
based on an interim allocation agreement among the PRPs. The interim remedy
for the Glendale Operable Units (including the North Operable Unit and the
South Operable Unit) is projected to cost in the range of $46-58 million. The
PRP Group has entered into an agreement to carry out an allocation of the
costs for the Glendale Operable Units interim remedy. The allocation process
must accommodate two separate allocations--first, the division of response
costs for the Glendale Operable Units between the Glendale PRPs and Lockheed
Corporation on behalf of all Burbank PRPs (see above) and, second, the
internal division of response costs among the Glendale PRPs. Allocation of
costs between Lockheed and other PRPs remains unsettled. As a result, on
November 26, 1996, the USEPA issued a Unilateral Administrative Order under
Section 106 of the Comprehensive Environmental Response, Compensation and
Liability Act to all PRPs, including Vickers, requiring the PRPs to conduct
the pre-construction phase of the interim remedy. ITT has agreed to conduct
this Section 106 work, reserving its rights against all PRPs for contribution.
While Vickers' allocated share of the remediation costs cannot be currently
estimated, the range of anticipated costs is between $600,000 and
$1.8 million.
As previously reported, on July 31, 1992, the Maine Department of
Environmental Protection issued an Administrative Enforcement Order to TRINOVA
and its wholly owned subsidiaries, Aeroquip Corporation and Sterling
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Engineered Products Inc. ("Sterling"), as well as one other party, Pioneer
Plastics Corporation ("Pioneer Plastics"), (collectively the "respondents"),
pursuant to Title 38, section 1304(12) of the Maine Revised Statutes.
(Reference is made to Part I, Item 3, of TRINOVA's Annual Report on Form 10-K
for the year ended December 31, 1994.) The Order, which was issued without a
prior hearing, required the respondents to conduct a complete Phase II
environmental assessment of alleged soil and groundwater contamination at a
manufacturing site in Auburn, Maine, which was formerly owned by Sterling and
is now owned by Pioneer Plastics. The Order further required the respondents
to remediate any environmental contamination identified in the Phase II
assessment. On May 5, 1993, a Compliance Order on Consent ("COC") was
entered into by the State of Maine, Sterling and Pioneer Plastics. The COC
replaces and revokes the Order issued July 31, 1992. The COC requires
Sterling to conduct a site investigation and to develop and implement a
remedial work plan. The cost to Sterling to conduct the COC site
investigation, develop the remedial work plan and complete a feasibility study
(the "Feasibility Study") is estimated to be approximately $1,650,000.
Sterling's remediation costs are undetermined at this time because the
Feasibility Study has not been completed.
TRINOVA and certain subsidiaries are defendants in various lawsuits.
While the ultimate outcome of these lawsuits and the above environmental
matters cannot now be predicted, management is of the opinion, based on the
facts now known to it, that the liability, if any, in these lawsuits (to the
extent not provided for by insurance or otherwise) and the above environmental
matters will not have a material adverse effect upon TRINOVA's consolidated
financial position.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, positions and recent business experience of the
executive officers of TRINOVA as of February 18, 1997, are listed below.
Officers of TRINOVA are elected annually in April by the Board of Directors at
the organization meeting immediately following the annual meeting of
shareholders.
NAME AND POSITION AGE BUSINESS EXPERIENCE
Darryl F. Allen, 53 Chairman of the Board, President
Chairman of the Board, and Chief Executive Officer of
President and Chief TRINOVA since 1991. President and
Executive Officer Chief Executive Officer of
TRINOVA from 1986 to 1991.
William R. Ammann, 55 Vice President-Administration and
Vice President-Administration Treasurer of TRINOVA since 1992.
and Treasurer Vice President - Administration of
TRINOVA from 1983 to 1992.
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James E. Kline, 55 Vice President & General Counsel
Vice President and of TRINOVA since 1989.
General Counsel
James M. Oathout, 52 Corporate Secretary and Senior
Corporate Secretary and Attorney of TRINOVA since March
Senior Attorney 1995. Secretary and Associate
General Counsel of TRINOVA from
1988 to March 1995.
Gregory R. Papp, 50 Corporate Controller of TRINOVA
Corporate Controller since 1993. Vice President and
Controller of Aeroquip Corporation
from July 1991 to 1993. Vice
President Planning and Control -
Automotive Products Group of
Aeroquip Corporation from January
1991 to July 1991.
David M. Risley, 52 Vice President - Finance and Chief
Vice President - Finance Financial Officer of TRINOVA since
and Chief Financial Officer 1992. Group Vice President -
Administration and Control of
Aeroquip Corporation from 1991
to 1992. Vice President and
Controller of Aeroquip Corporation
from 1990 to 1991.
Howard M. Selland, 53 Executive Vice President of
Executive Vice President of TRINOVA and President of Aeroquip
TRINOVA and President of Corporation since 1989.
Aeroquip Corporation
Philip G. Simonds, 56 Vice President-Taxation of TRINOVA
Vice President-Taxation since 1983.
John H. Weber, 41 Executive Vice President of
Executive Vice President of TRINOVA since August 1996 and
TRINOVA and President of President of Vickers, Incorporated
Vickers, Incorporated since August 1996. Executive Vice
President of Vickers, Incorporated
from January 1996 to August 1996.
Group Vice President - Industrial
of Vickers, Incorporated from 1994
to August 1996. General Manager -
Industrial Motors of General
Electric Company from 1992 to 1994.
General Manager - International
Business Development of GE
International (London) from 1991
to 1992.
There are no family relationships among the persons named above.
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PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
"Stock Exchanges," "Stock Ownership," "Dividend Information,"
"Quarterly Common Stock Information" and "Dividend Payments per Share of
Common Stock" on page 58 of Exhibit (13) filed hereunder are incorporated
herein by reference.
ITEM 6. Selected Financial Data.
"5-Year Summary of Selected Financial Data" on page 26 of Exhibit (13)
filed hereunder is incorporated herein by reference.
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation.
"Financial Review and Analysis of Operations" on pages 27-33 of
Exhibit (13) filed hereunder are incorporated herein by reference.
ITEM 8. Financial Statements and Supplementary Data.
"Quarterly Results of Operations (Unaudited)" and the consolidated
financial statements of the registrant and its subsidiaries on pages 34-57 of
Exhibit (13) filed hereunder are incorporated herein by reference.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
ITEM 10. Directors and Officers of the Registrant.
"Election of Directors" on pages 1-3 of the proxy statement for the
annual meeting to be held on April 17, 1997, are incorporated herein by
reference. Information regarding executive officers is set forth in Part I of
this report under the caption "Executive Officers of the Registrant."
ITEM 11. Executive Compensation.
"Compensation of Directors" and "Executive Compensation" (excluding
material under the captions "TRINOVA Stock Performance Graph" and "Board
Compensation Committee Report on Executive Compensation") on pages 3 and 5-7,
respectively, of the proxy statement for the annual meeting to be held on
April 17, 1997, are incorporated herein by reference.
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ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
"Security Ownership" on page 4 of the proxy statement for the annual
meeting to be held on April 17, 1997, is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions.
None.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as a part of this report.
(1) The following consolidated financial statements of TRINOVA and
its subsidiaries, included on pages 35-57 of Exhibit (13) filed hereunder are
incorporated by reference in Item 8.
Report of Ernst & Young LLP, Independent Auditors
Statement of Income - Years ended December 31, 1996, 1995 and 1994
Statement of Financial Position - December 31, 1996 and 1995
Statement of Cash Flows - Years ended December 31, 1996, 1995 and 1994
Statement of Shareholders' Equity - Years ended December 31, 1996, 1995
and 1994
Notes to Financial Statements - December 31, 1996
(2) The following consolidated financial statement schedule of
TRINOVA and its subsidiaries is filed under Item 14(d):
SCHEDULE PAGE(S)
Schedule II - Valuation and qualifying accounts 18-20
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are either not required
under the related instructions or are inapplicable, and therefore have been
omitted.
(3) The following exhibits are incorporated by reference hereunder,
and those exhibits marked with an asterisk (*) are management contracts or
compensatory plans or arrangements required to be filed as exhibits pursuant
to Item 14(c) of this report:
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EXHIBIT
NUMBER
(3)-1 Amended Code of Regulations (amended April 21, 1988), filed as
Exhibit (3) to Form SE filed on March 18, 1993
(3)-2 Amended Articles of Incorporation (amended January 26, 1989),
filed as Exhibit (3) to Form 10-K filed on March 18, 1994
(4)-1 First Supplemental Indenture, dated as of May 4, 1992, between
TRINOVA Corporation and NBD Bank, with respect to the issuance
of $75,000,000 aggregate principal amount of TRINOVA Corporation
7.95% Notes Due 1997, filed as Exhibit (4)-1 to Form SE filed on
May 6, 1992
(4)-2 7.95% Notes Due 1997, issued pursuant to the Indenture, dated as
of January 28, 1988, between TRINOVA Corporation and NBD Bank
(formerly National Bank of Detroit), as supplemented by the
First Supplemental Indenture, dated as of May 4, 1992, between
TRINOVA Corporation and NBD Bank, filed as Exhibit (4)-2 to Form
SE filed on May 6, 1992
(4)-3 Officers' Certificate of TRINOVA Corporation, dated May 4, 1992,
pursuant to Section 2.01 of the Indenture, dated as of January
28, 1988, between TRINOVA Corporation and NBD Bank (formerly
National Bank of Detroit), as supplemented by the First
Supplemental Indenture, dated as of May 4, 1992, between TRINOVA
Corporation and NBD Bank, filed as Exhibit (4)-3 to Form SE
filed on May 6, 1992
(4)-4 Rights Agreement, dated January 26, 1989, between TRINOVA
Corporation and First Chicago Trust Company of New York filed as
Exhibit (2) to Form 8-A filed on January 27, 1989, as amended by
the First Amendment to Rights Agreement filed as Exhibit (5) to
Form 8 filed on July 1, 1992
(4)-5 Form of Share Certificate for Common Shares, $5 par value, of
TRINOVA Corporation, filed as Exhibit (4)-2 to Form SE filed on
July 1, 1992
(4)-6 Fiscal Agency Agreement, dated as of October 26, 1987, between
TRINOVA Corporation, as Issuer, and Bankers Trust Company, as
Fiscal Agent, with respect to $100,000,000 aggregate principal
amount of TRINOVA Corporation 6% Convertible Subordinated
Debentures Due 2002, filed as Exhibit (4)-1 to Form SE filed on
March 18, 1993
(4)-7 Indenture, dated as of January 28, 1988, between TRINOVA
Corporation and NBD Bank (formerly National Bank of Detroit),
with respect to the issuance of $50,000,000 aggregate principal
amount of TRINOVA Corporation 9.55% Senior Sinking Fund
Debentures Due 2018, and the issuance of $75,000,000 aggregate
principal amount of TRINOVA Corporation 7.95% Notes Due 1997,
filed as Exhibit (4)-2 to Form SE filed on March 18, 1993
(4)-8 Form of 7.875% Debentures due June 1, 2026, filed as Exhibit
(4)-1 to Form 8-K filed on June 3, 1996
<PAGE>
-14-
(4)-9 Indenture, dated as of May 1, 1996, between TRINOVA Corporation
and NBD Bank, Trustee, with respect to the issuance of
$100,000,000 aggregate principal amount of 7.875% Debentures due
June 1, 2026, filed as Exhibit (4)-2 to Form 8-K filed on
June 3, 1996
*(10)-1 TRINOVA Corporation 1982 Stock Option Plan, filed as Exhibit
(10)-1 to Form SE filed on March 18, 1993
*(10)-2 TRINOVA Corporation 1984 Incentive Compensation Plan, filed as
Exhibit (10)-2 to Form SE filed on March 18, 1993
*(10)-3 TRINOVA Corporation 1987 Stock Option Plan, filed as Exhibit
(10)-3 to Form SE filed on March 18, 1993
*(10)-4 Change in Control Agreement for Officers, filed as Exhibit (10)-
4 to Form SE filed on March 18, 1993 (the Agreements executed by
the Company and various executive officers of the Company are
identical in all respects to the form of Agreement filed as an
Exhibit to Form SE except as to differences in the identity of
the officers and the dates of execution, and as to other
variations directly necessitated by said differences)
*(10)-5 Change in Control Agreement for Non-officers, filed as Exhibit
(10)-5 to Form SE filed on March 18, 1993 (the Agreements
executed by the Company and various non-officer employees of the
Company are identical in all respects to the form of Agreement
filed as an Exhibit to Form SE except as to differences in the
identity of the employees and the dates of execution, and as to
other variations directly necessitated by said differences)
*(10)-6 TRINOVA Corporation 1994 Stock Incentive Plan, filed as Appendix
A to the proxy statement for the annual meeting held on April
21, 1994
*(10)-7 TRINOVA Corporation 1989 Non-Employee Directors' Equity Plan,
filed as Exhibit (10)-12 to Form 10-K filed on March 18, 1994
*(10)-8 TRINOVA Corporation Plan for Optional Deferment of Directors'
Fees (amended and restated effective April 1, 1995), filed as
Exhibit (10)-8 to Form 10-K filed March 20, 1995
*(10)-9 TRINOVA Corporation Directors' Retirement Plan (amended and
restated effective January 1, 1990), filed as Exhibit (10)-9 to
Form 10-K filed March 20, 1995
*(10)-10 TRINOVA Corporation Voluntary Deferred Compensation Plan
(effective April 1, 1995), filed as Exhibit (10)-11 to Form 10-K
filed March 20, 1995
*(10)-11 TRINOVA Corporation Supplemental Benefit Plan (amended and
restated effective January 1, 1995), filed as Exhibit (10)-10 to
Form 10-Q filed August 10, 1995
(99(i))-1 TRINOVA Corporation Directors' Charitable Award Program, filed
as Exhibit (99(i))-2 to Form 10-K filed on March 18, 1994
<PAGE>
-15-
(99(i))-2 Credit Agreement, dated as of September 27, 1996, among TRINOVA
Corporation (borrower) and The Bank of Tokyo - Mitsubishi Trust
Company; Citibank, N.A.; Desdner Bank AG, New York and Grand
Cayman branches; The First National Bank of Chicago; Morgan
Guaranty Trust Company of New York; The Chase Manhattan Bank;
and Union Bank of Switzerland, Chicago branch (banks) and
Citibank, N.A. (administrative agent), filed as
Exhibit (99(i))-2 to Form 10-Q filed November 14, 1996
The following exhibits are filed hereunder:
(11) Statement re: Computation of Per Share Earnings
(12) Statement re: Computation of Ratios
(13) Portions of the 1996 Annual Report to Security Holders (to the
extent incorporated by reference hereunder)
(21) Subsidiaries of the Registrant
(23) Consent of Independent Auditors
(24) Powers of Attorney
(27) Financial Data Schedule
(b) TRINOVA did not file any reports on Form 8-K during the fourth
quarter of 1996.
(c) The exhibits which are listed under Item 14(a)(3) are filed or
incorporated by reference hereunder.
(d) The financial statement schedule which is listed under Item 14(a)(2)
is filed hereunder.
<PAGE>
-16-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
TRINOVA CORPORATION (Registrant)
By: /S/ DARRYL F. ALLEN
Darryl F. Allen
Director, Chairman of the Board,
President and Chief Executive Officer
Date: March 13, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/S/ DARRYL F. ALLEN
Darryl F. Allen 3/13/97
Director, Chairman of the (Date)
Board, President and Chief
Executive Officer
(Principal Executive Officer)
/S/ DAVID M. RISLEY
David M. Risley 3/13/97
Vice President - Finance (Date)
and Chief Financial Officer
(Principal Financial Officer)
/S/ GREGORY R. PAPP
Gregory R. Papp 3/13/97
Corporate Controller
(Principal Accounting Officer)
PURDY CRAWFORD*
Purdy Crawford* 3/13/97
Director (Date)
<PAGE>
-17-
JOSEPH C. FARRELL*
Joseph C. Farrell* 3/13/97
Director (Date)
DAVID R. GOODE*
David R. Goode* 3/13/97
Director (Date)
PAUL A. ORMOND*
Paul A. Ormond* 3/13/97
Director (Date)
JOHN P. REILLY*
John P. Reilly* 3/13/97
Director (Date)
ROBERT H. SPILMAN*
Robert H. Spilman* 3/13/97
Director (Date)
WILLIAM R. TIMKEN, JR.*
William R. Timken, Jr.* 3/13/97
Director (Date)
*By James E. Kline, Attorney-in-fact
/S/ JAMES E. KLINE
James E. Kline 3/13/97
Vice President and General Counsel (Date)
<PAGE>
-18-
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
TRINOVA CORPORATION
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- -----------------------------------------------------------------------------------------------------------------------
ADDITIONS
Balance at (1) (2) Balance
DESCRIPTION Beginning Charged to Costs Charged to Other Deductions at End of
of Period and Expenses Accounts-Describe Describe Period
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(In Thousands)
YEAR ENDED DECEMBER 31, 1996
Deducted from asset accounts:
Allowance for doubtful accounts $ 13,241 $ 3,899 $ - $ (1,108)-A $ 16,032
Deferred tax valuation allowance 15,953 (3,853) - 489 -B 12,589
<FN>
Note A - Doubtful accounts charged off
Note B - Currency translation adjustments
</FN>
</TABLE>
<PAGE>
-19-
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
TRINOVA CORPORATION
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- -----------------------------------------------------------------------------------------------------------------------
ADDITIONS
Balance at (1) (2) Balance
DESCRIPTION Beginning Charged to Costs Charged to Other Deductions at End of
of Period and Expenses Accounts-Describe Describe Period
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(In Thousands)
YEAR ENDED DECEMBER 31, 1995
Deducted from asset accounts:
Allowance for doubtful accounts $ 15,179 $ 518 $ - $ (2,456)-A $ 13,241
Deferred tax valuation allowance 29,533 (16,142) - 2,562 -B 15,953
<FN>
Note A - Doubtful accounts charged off
Note B - Currency translation adjustments
</FN>
</TABLE>
<PAGE>
-20-
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
TRINOVA CORPORATION
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- -----------------------------------------------------------------------------------------------------------------------
ADDITIONS
Balance at (1) (2) Balance
DESCRIPTION Beginning Charged to Costs Charged to Other Deductions at End of
of Period and Expenses Accounts-Describe Describe Period
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(In Thousands)
YEAR ENDED DECEMBER 31, 1994
Deducted from asset accounts:
Allowance for doubtful accounts $ 13,537 $ 2,384 $ - $ (742)-A $ 15,179
Deferred tax valuation allowance 29,962 (2,082) - 1,653 -B 29,533
<FN>
Note A - Doubtful accounts charged off
Note B - Currency translation adjustments
</FN>
</TABLE>
-21-
EXHIBIT INDEX
EXHIBIT PAGE(S)
(3)-1 Amended Code of Regulations (amended April 21, Incorporated
1988), filed as Exhibit (3) to Form SE filed by Reference
on March 18, 1993
(3)-2 Amended Articles of Incorporation (amended Incorporated
January 26, 1989), filed as Exhibit (3) to by Reference
Form 10-K filed on March 18, 1994
(4)-1 First Supplemental Indenture, dated as of May 4, Incorporated
1992, between TRINOVA Corporation and NBD Bank, by Reference
with respect to the issuance of $75,000,000
aggregate principal amount of TRINOVA Corporation
7.95% Notes Due 1997, filed as Exhibit (4)-1 to
Form SE filed on May 6, 1992
(4)-2 7.95% Notes Due 1997, issued pursuant to the Incorporated
Indenture, dated as of January 28, 1988, between by Reference
TRINOVA Corporation and NBD Bank (formerly
National Bank of Detroit), as supplemented by the
First Supplemental Indenture, dated as of May 4,
1992, between TRINOVA Corporation and NBD Bank,
filed as Exhibit (4)-2 to Form SE filed on
May 6, 1992
(4)-3 Officers' Certificate of TRINOVA Corporation, Incorporated
dated May 4, 1992, pursuant to Section 2.01 of by Reference
the Indenture, dated as of January 28, 1988,
between TRINOVA Corporation and NBD Bank
(formerly National Bank of Detroit), as
supplemented by the First Supplemental Indenture,
dated as of May 4, 1992, between TRINOVA
Corporation and NBD Bank, filed as Exhibit
(4)-3 to Form SE filed on May 6, 1992
(4)-4 Rights Agreement, dated January 26, 1989, between Incorporated
TRINOVA Corporation and First Chicago Trust by Reference
Company of New York filed as Exhibit (2) to Form
8-A filed on January 27, 1989, as amended by the
First Amendment to Rights Agreement filed as
Exhibit (5) to Form 8 filed on July 1, 1992
(4)-5 Form of Share Certificate for Common Shares, $5 Incorporated
par value, of TRINOVA Corporation, filed as by Reference
Exhibit (4)-2 to Form SE filed on July 1, 1992
(4)-6 Fiscal Agency Agreement, dated as of October 26, Incorporated
1987, between TRINOVA Corporation, as Issuer, by Reference
and Bankers Trust Company, as Fiscal Agent,
with respect to $100,000,000 aggregate principal
amount of TRINOVA Corporation 6% Convertible
Subordinated Debentures Due 2002, filed as
Exhibit (4)-1 to Form SE filed on March 18, 1993
<PAGE>
-22-
(4)-7 Indenture, dated as of January 28, 1988, between Incorporated
TRINOVA Corporation and NBD Bank (formerly by Reference
National Bank of Detroit), with respect to the
issuance of $50,000,000 aggregate principal
amount of TRINOVA Corporation 9.55% Senior Sinking
Fund Debentures Due 2018, and the issuance of
$75,000,000 aggregate principal amount of TRINOVA
Corporation 7.95% Notes Due 1997, filed as Exhibit
(4)-2 to Form SE filed on March 18, 1993
(4)-8 Form of 7.875% Debentures due June 1, 2026, filed Incorporated
as Exhibit (4)-1 to Form 8-K filed on June 3, 1996 by Reference
(4)-9 Indenture, dated as of May 1, 1996, between TRINOVA Incorporated
Corporation and NBD Bank, Trustee, with respect to by Reference
the issuance of $100,000,000 aggregate principal
amount of 7.875% Debentures due June 1, 2026, filed
as Exhibit (4)-2 to Form 8-K filed on June 3, 1996
(10)-1 TRINOVA Corporation 1982 Stock Option Plan, Incorporated
filed as Exhibit (10)-1 to Form SE filed on by Reference
March 18, 1993
(10)-2 TRINOVA Corporation 1984 Incentive Compensation Incorporated
Plan, filed as Exhibit (10)-2 to Form SE filed by Reference
on March 18, 1993
(10)-3 TRINOVA Corporation 1987 Stock Option Plan, Incorporated
filed as Exhibit (10)-3 to Form SE filed on by Reference
March 18, 1993
(10)-4 Change in Control Agreement for Officers, Incorporated
filed as Exhibit (10)-4 to Form SE filed on by Reference
March 18, 1993 (the Agreements executed by the
Company and various executive officers of the
Company are identical in all respects to the
form of Agreement filed as an Exhibit to Form SE
except as to differences in the identity of the
officers and the dates of execution, and as to
other variations directly necessitated by said
differences)
(10)-5 Change in Control Agreement for Non-officers, Incorporated
filed as Exhibit (10)-5 to Form SE filed on by Reference
March 18, 1993 (the Agreements executed by the
Company and various non-officer employees of
the Company are identical in all respects to
the form of Agreement filed as an Exhibit to
Form SE except as to differences in the identity
of the employees and the dates of execution, and
as to other variations directly necessitated by
said differences)
(10)-6 TRINOVA Corporation 1994 Stock Incentive Plan, Incorporated
filed as Appendix A to the proxy statement for by Reference
the annual meeting held on April 21, 1994
<PAGE>
-23-
(10)-7 TRINOVA Corporation 1989 Non-Employee Directors' Incorporated
Equity Plan, filed as Exhibit (10)-12 to by Reference
Form 10-K filed on March 18, 1994
(10)-8 TRINOVA Corporation Plan for Optional Deferment of Incorporated
Directors' Fees (amended and restated effective by Reference
April 1, 1995), filed as Exhibit (10)-8 to
Form 10-K filed on March 20, 1995
(10)-9 TRINOVA Corporation Directors' Retirement Plan Incorporated
(amended and restated effective January 1, 1990), by Reference
filed as Exhibit (10)-9 to Form 10-K filed on
March 20, 1995
(10)-10 TRINOVA Corporation Voluntary Deferred Compensation Incorporated
Plan (effective April 1, 1995), filed as Exhibit by Reference
(10)-11 to Form 10-K filed on March 20, 1995
(10)-11 TRINOVA Corporation Supplemental Benefit Plan Incorporated
(amended and restated effective January 1, 1995), by Reference
filed as Exhibit (10)-10 to Form 10-Q filed
August 10, 1995
(11) Statement re: Computation of Per Share Earnings 24
(12) Statement re: Computation of Ratios 25
(13) Portions of the 1996 Annual Report to Security 26-58
Holders (to the extent incorporated by reference
hereunder)
(21) Subsidiaries of the Registrant 59
(23) Consent of Independent Auditors 60
(24) Powers of Attorney 61-67
(27) Financial Data Schedule 68
(99(i))-1 TRINOVA Corporation Directors' Charitable Award Incorporated
Program, filed as Exhibit (99(i))-2 to Form 10-K by Reference
filed on March 18, 1994
(99(i))-2 Credit Agreement, dated as of September 27, 1996, Incorporated
among TRINOVA Corporation (borrower) and The Bank by Reference
of Tokyo - Mitsubishi Trust Company; Citibank, N.A.;
Desdner Bank AG, New York and Grand Cayman branches;
The First National Bank of Chicago; Morgan Guaranty
Trust Company of New York; The Chase Manhattan Bank;
and Union Bank of Switzerland, Chicago branch
(banks) and Citibank, N.A. (administrative agent),
filed as Exhibit (99(i))-2 to Form 10-Q filed
November 14, 1996
-24-
EXHIBIT (11)
<TABLE>
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
TRINOVA CORPORATION
(In thousands, except per share data)
<CAPTION>
Year Ended December 31
--------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Average shares outstanding 28,384 28,867 28,719
Assumed conversion of the 6 percent
convertible debentures 1,905 1,905 1,905
Net effect of dilutive stock options based
upon treasury stock method using average
market price 74 92 191
--------- --------- ---------
Average shares of common stock and
common stock equivalents outstanding 30,363 30,864 30,815
========= ========= =========
Net income $ 102,721 $ 94,896 $ 65,855
After-tax equivalent of interest
expense on the 6 percent convertible
debentures 3,720 3,720 3,720
--------- --------- ---------
Net income for purposes of
computing net income per share $ 106,441 $ 98,616 $ 69,575
========= ========= =========
NET INCOME PER SHARE $ 3.51 $ 3.20 $ 2.26
========= ========= =========
<FN>
Note - Net income per share is computed using the average number of common
shares outstanding, including common stock equivalents. The assumed
conversion of the Company's 6 percent convertible debentures was included in
average shares outstanding, increasing the average number of shares
outstanding by 1,904,762 shares. For purposes of computing net income per
share, net income was increased for the after-tax equivalent of interest
expense on the debentures.
</FN>
</TABLE>
-25-
EXHIBIT 12
<TABLE>
STATEMENT RE: COMPUTATION OF RATIOS
TRINOVA CORPORATION
(In thousands, except per share data)
<CAPTION>
Year Ended December 31
----------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
RATIO OF EARNINGS TO FIXED
CHARGES
Income before income taxes and
cumulative effect of accounting
change $153,421 $128,196 $101,255 $ 17,111 $ 24,042
Dividends received, net of equity
in earnings (loss) of
unconsolidated affiliates 9,961 (3,704) 1,213 1 (1,931)
Fixed charges 41,712 31,762 30,249 33,370 34,623
-------- -------- -------- -------- --------
Income before cumulative effect
of accounting change for
computation purposes $205,094 $156,254 $132,717 $ 50,482 $ 56,734
======== ======== ======== ======== ========
FIXED CHARGES
Interest expense, including interest
related to corporate owned life
insurance $ 34,963 $ 24,477 $ 22,582 $ 25,516 $ 26,313
Portion of rent expense representing
interest 6,288 6,903 7,303 7,490 7,987
Amortization of debt expense and
debt discount 461 382 364 364 323
-------- -------- -------- -------- --------
Total fixed charges $ 41,712 $ 31,762 $ 30,249 $ 33,370 $ 34,623
======== ======== ======== ======== ========
Ratio of Earnings to Fixed
Charges 4.9x 4.9x 4.4x 1.5x 1.6x
======== ======== ======== ======== ========
<FN>
For the purpose of computing the ratio of earnings to fixed charges,
"earnings" consist of income before income taxes and cumulative effect of
accounting change, plus fixed charges and dividends received, net of equity in
earnings (loss) of unconsolidated affiliates. Fixed charges consists of
interest expense, the portion of rent expense representing interest and
amortization of debt discount.
</FN>
</TABLE>
-26-
EXHIBIT (13)
PORTIONS OF THE 1996
ANNUAL REPORT TO SHAREHOLDERS
<TABLE>
5-Year Summary of Selected Financial Data
Years Ended December 31 (1996-1992)
(Dollars in millions, except per share data)
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net sales $2,032.9 $1,884.0 $1,794.7 $1,643.8 $1,695.5
Income before cumulative
effect adjustment 102.7a 94.9 65.9 10.5b 14.4
Net Income (Loss) 102.7 94.9 65.9 (59.7) 14.4
Income (loss) per share:
Before cumulative effect
adjustment 3.51a 3.20 2.26 .37b .51
Net income (loss) 3.51 3.20 2.26 (2.10) .51
Total assets 1,289.5 1,224.2 1,001.0 972.2 1,017.4
Long-term debt 257.7 302.4 234.9 246.2 239.1
Cash dividends per share
common share .80 .72 .68 .68 .68
<FN>
(a) Includes a combined net gain from sale of unconsolidated affiliates of $5
million, equal to $.16 per share, and a credit for settlement of claims
for prior years' research and development tax credits of $4 million, or
$.13 per share.
(b) Includes a special charge for severance and other personnel-related costs
amounting to $26 million pretax, $18.2 million net ($.64 per share), and
a provision for unsuccessfully contested prior years' value-added taxes
in Brazil amounting to $7 million pretax, $4.7 million net ($.17 per
share).
</FN>
</TABLE>
<PAGE>
-27-
FINANCIAL REVIEW AND ANALYSIS OF OPERATIONS
<TABLE>
Analysis of Operations
1996 Compared with 1995
The following data provide highlights for the year 1996 compared with the year
1995.
<CAPTION>
Percent
(dollars in thousands, Year Ended December 31 Increase
except per share data) 1996 1995 (Decrease)
<S> <C> <C> <C>
CONSOLIDATED
Net sales $2,032,915 $1,884,013 7.9%
Manufacturing income 512,179 476,343 7.5
Manufacturing margin 25.2% 25.3%
Operating income 176,575 159,209 10.9
Operating margin 8.7% 8.5%
Net income 102,721 94,896 8.2
Net income per share 3.51 3.20 9.7
Number of employees 15,162 15,299 (.9)
INDUSTRIAL
Net sales 1,138,501 1,051,106 8.3
Operating income 105,703 121,962 (13.3)
Operating margin 9.3% 11.6%
Order intake 1,135,852 1,061,553 7.0
Order backlog at December 31 184,865 201,460 (8.2)
AUTOMOTIVE
Net sales 503,781 494,016 2.0
Operating income 35,082 24,107 45.5
Operating margin 7.0% 4.9%
AEROSPACE
Net sales 390,633 338,891 15.3
Operating income 59,637 38,631 54.4
Operating margin 15.3% 11.4%
Order intake 431,460 327,827 31.6
Order backlog at December 31 340,957 266,423 28.0
</TABLE>
Consolidated sales in 1996 of $2.03 billion were a record for the Company and
were $148.9 million, or 7.9%, greater than in 1995. Sales for the industrial,
automotive and aerospace segments increased 8.3%, 2.0% and 15.3%,
respectively. Businesses acquired in the 1995 fourth quarter and during 1996
generated 1996 sales of nearly $119 million, principally in the industrial
segment. Including the results of these acquisitions, U.S. sales increased
$116 million, or 9.9%, and non-U.S. sales increased $32.9 million, or 4.6%.
Changes in currency exchange rates reduced non-U.S. sales by nearly $17
million.
<PAGE>
-28-
Industrial segment sales for 1996 of $1.14 billion were also a record and were
$87.4 million, or 8.3%, greater than in 1995. Industrial segment sales for
1996 included full-year sales for the Electronic Systems Division, now Vickers
Electronic Systems (VES), acquired from Cincinnati Milacron Inc. in December
1995, and for Summa Manufacturing Company since its acquisition in June 1996.
U.S. industrial sales increased $88 million, or 13.1%, over 1995. Industrial
operations in Asia-Pacific continued to expand, contributing to a 1996 sales
increase of nearly 8% over 1995. Sales in Europe were flat compared with
1995, and sales in Brazil declined 19.3%. Order intake in 1996 was also a
record for the industrial segment, increasing 7% over 1995. Order backlog at
December 31, 1996, was $184.9 million.
Automotive segment sales for 1996 of $503.8 million increased $9.8 million, or
2%, over 1995. U.S. automotive sales were $16.8 million, or 7.6%, lower than
in 1995, principally the result of concluding a number of automotive platform
programs with U.S. car manufacturers in the latter half of 1995. As a result,
following the closing of two automotive plastics plants in 1995, a third
plastics plant was closed in 1996, and another is scheduled for closing in the
1997 first quarter. European automotive sales increased $26.6 million, or
9.7%, despite the unfavorable effects of changes in currency exchange rates.
The increased European volume was driven by higher sales of air conditioning
and power steering connectors for use in autos and light trucks. During the
year, the Company announced that its automotive segment had won new fluid
connectors business that is expected to generate sales in Europe and the U.S.
totaling nearly $800 million over several years beginning with the 1997 model
year and continuing through the year 2002. Inasmuch as this announcement
constitutes a forward-looking statement, it is important to bear in mind that
the value of this new business is based on customers' anticipated production
of the new models, the expected level of consumer acceptance and the expected
increase in worldwide demand for automotive power steering and air
conditioning systems.
Aerospace segment sales for 1996 of $390.6 million represented a $51.7
million, or 15.3%, increase over 1995. U.S. sales increased 15.7% and
European sales increased 12.8%, reflecting continued strength across all
original equipment and aftermarket sectors. 1996 sales included full-year
sales for two small acquisitions that were completed in late 1995 and sales
since acquisition for the Electrical Engineering & Manufacturing Company
(EEMCO) that was acquired in early December 1996. EEMCO is a designer and
manufacturer of actuators, specialty motors and generators, flight control
systems, electronic controls and fully integrated actuation systems that will
expand the Company's base in commercial and defense applications. EEMCO also
provides overhaul and repair services for its products. Aerospace order
intake of $431.5 million represented a 31.6% increase over 1995 order intake,
and order backlog increased to $341 million, which was 28% higher than at
December 31, 1995.
During 1996, the Company announced that it is on schedule with its five-year
strategy that should enable its aerospace business to nearly double in size to
more than $600 million by the year 2000 while maintaining steady earnings
growth. Acquisitions are expected to play a key, but modest, role in this
growth. These projections assume, among other things, that existing aerospace
programs will continue, that the Company's current shipset value per program
will be maintained and that the Company's customers will meet their projected
build rates. Risk factors that could cause actual results to differ from
these forward-looking statements include delays in developing new airframe
programs, the Company's inability to qualify for new programs, loss of
<PAGE>
-29-
existing business, reduced military spending, development of competing
products, availability of acquisition candidates and depressed airline
spending.
Consolidated manufacturing income increased $35.8 million, or 7.5%, over 1995,
but manufacturing margin declined slightly from 25.3% to 25.2%. Manufacturing
income for the industrial segment was flat compared with the prior year, but
manufacturing margin declined due to the performance of the Brazilian
operations, lower profit margins for companies recently acquired and a shift
in product mix. Automotive manufacturing income increased 14.3%, and
manufacturing margin improved from the prior year due to the benefits
recognized from downsizing of facilities and from a favorable mix of product
sales. Higher sales volume and continued process improvements contributed to
a 25.5% increase in manufacturing income and a 2.6 percentage-point increase
in manufacturing margin for the aerospace segment over 1995.
Selling and general administrative and engineering, research and development
expenses were $18.5 million, or 5.8%, higher in 1996, but as a percent of
sales were slightly lower than in 1995. The increase in overhead expenses was
principally due to costs associated with companies recently acquired in the
industrial segment, but also represents expanding initiatives for new product
and business development.
Interest expense for 1996 was $6.6 million higher than in 1995. The increase
was attributable to higher average debt levels during 1996, principally the
result of acquisitions. In the 1996 second quarter, the Company sold its 35%
interest in Yokohama Aeroquip K.K., based in Japan, and its 49% interest in
Aeroquip Mexicana S.A., based in Mexico. The two transactions resulted in a
combined pretax gain of $17.3 million, which is reported in Other income
(expenses) - net in the Statement of Income. The combined pretax gain
included net translation gains of $6.4 million previously deferred in the
currency translation component of equity. The Company expects that the sales
of its interests in the two unconsolidated affiliates will stimulate growth in
its industrial markets in Mexico and the Asia-Pacific region. The Company is
now exploring opportunities in the Japanese market with the full Aeroquip
product line and has begun to expand its product line offering in Mexico and
Central America.
Net income for 1996 amounting to $102.7 million and earnings per share of
$3.51 were also records and compare with net income of $94.9 million, or $3.20
per share, in 1995. Net income for 1996 includes a net gain of $5 million, or
$.16 per share, from the sale of unconsolidated affiliates and a credit for
settlement of claims for prior years' research and development tax credits of
$4 million, or $.13 per share. Exclusive of these items, the effective income
tax rate for 1996 was 31.1%, compared with 26% in 1995. The 26% effective
income tax rate for 1995 reflects, among other things, the utilization of tax
loss carryforwards outside the U.S. for which deferred tax valuation
allowances had previously been provided.
<PAGE>
-30-
<TABLE>
1995 Compared with 1994
The following data provide highlights for the year 1995 compared with the year
1994.
<CAPTION>
Percent
(dollars in thousands, Year Ended December 31 Increase
except per share data) 1995 1994 (Decrease)
<S> <C> <C> <C>
CONSOLIDATED
Net sales $1,884,013 $1,794,695 5.0%
Manufacturing income 476,343 443,292 7.5
Manufacturing margin 25.3% 24.7%
Operating income 159,209 141,069 12.9
Operating margin 8.5% 7.9%
Net income 94,896 65,855 44.1
Net income per share 3.20 2.26 41.6
Number of employees 15,299 15,024 1.8
INDUSTRIAL
Net sales 1,051,106 963,446 9.1
Operating income 121,962 89,281 36.6
Operating margin 11.6% 9.3%
Order intake 1,061,553 1,018,137 4.3
Order backlog at December 31 201,460 185,022 8.9
AUTOMOTIVE
Net sales 494,016 514,273 (3.9)
Operating income 24,107 46,841 (48.5)
Operating margin 4.9% 9.1%
AEROSPACE
Net sales 338,891 316,976 6.9
Operating income 38,631 28,114 37.4
Operating margin 11.4% 8.9%
Order intake 327,827 312,251 5.0
Order backlog at December 31 266,423 267,019 (.2)
</TABLE>
Consolidated sales for 1995 increased $89.3 million, or 5%, over 1994. Sales
for the industrial and aerospace segments increased 9.1% and 6.9%,
respectively, over 1994, but automotive sales declined 3.9%. U.S. sales
increased $10.6 million, or nearly 1%, while non-U.S. sales increased $78.7
million, or 12.5%. Changes in currency exchange rates accounted for nearly
$44 million of the non-U.S. sales increase.
Industrial segment sales increased $87.7 million, or 9.1%, over 1994 sales.
U.S. industrial markets remained strong during the year, principally mobile
equipment and machine tools, which contributed to a $45.4 million, or 7.3%,
increase in sales over 1994. Industrial sectors in Europe and Asia-Pacific
also continued to strengthen, resulting in increased sales in those regions of
<PAGE>
-31-
16.4% and 11.6%, respectively, while sales in Brazil declined more than 8%,
principally in the second half of the year. Order intake increased 4.3% over
1994. Order backlog at December 31, 1995, was $201.5 million.
Automotive segment sales declined $20.3 million, or nearly 4%, from 1994
sales. U.S. automotive sales were $56 million, or 20%, lower in 1995,
principally due to reduced production schedules by auto manufacturers and the
conclusion of a number of automotive platform programs which were significant
to sales and earnings for the segment. This led to the closing of two of the
Company's automotive plastics plants during 1995. Automotive segment sales in
Europe improved in 1995, increasing $35.7 million. Nearly 70% of Europe's
sales increase was due to changes in currency exchange rates.
Aerospace segment sales increased $21.9 million, or 6.9%, over 1994 sales.
The increased sales were principally in the U.S., with only a modest increase
in European sales. 1995 sales reflected an uptick in commercial and defense
business to supply components against releases for new programs that had
previously been awarded. The sales increase also reflected expanded sales of
spare parts for both commercial and defense applications. 1995 order intake
increased $15.6 million, or 5%, over 1994. Order backlog at December 31,
1995, was $266.4 million.
Consolidated manufacturing income and margin for 1995 increased over 1994,
principally the result of process improvements giving rise to cost reductions
and higher sales in the industrial and aerospace segments. Manufacturing
income increased $33 million over 1994, and manufacturing margin improved to
25.3% in 1995 from 24.7% in 1994. Manufacturing income and margin for the
industrial segment improved in 1995, reflecting the benefit of both increased
sales and continuing initiatives to improve manufacturing and distribution
processes. Manufacturing income and margin for the automotive segment
declined from 1994 due principally to the effects of lower sales in the U.S.,
including the phase-out of certain high-margin contract programs, and
manufacturing inefficiencies in certain of the U.S. automotive plastics
operations. Higher sales, continued cost-containment efforts and improved
manufacturing processes in the aerospace segment generated 1995 manufacturing
income and margin exceeding that of 1994.
Selling and general administrative and engineering, research and development
expenses were $14.9 million higher in 1995 than in 1994, but, as a percent of
sales, were 16.8% in both 1995 and 1994. The higher costs included
expenditures to position the Company for growth in the U.S. and abroad, in
such areas as China and Japan. Higher costs were also related to initiatives
for new business development and improvement to manufacturing processes.
Interest expense for 1995 was $1.9 million lower than in 1994, reflecting the
effects of lower debt levels in 1995. Other income (expenses) - net were $6.9
million lower in 1995 due, in part, to lower exchange losses (principally in
Brazil), reduced costs related to the program for the sale of accounts
receivable that was terminated in the 1995 first quarter and higher income
from unconsolidated affiliates.
<PAGE>
-32-
Net income for 1995 amounted to $94.9 million, or $3.20 per share, compared
with $65.9 million, or $2.26 per share, in 1994. The effective income tax
rate for 1995 was 26%, compared with 35% in 1994. The lower effective income
tax rate in 1995 was attributable to several factors, including the effect of
higher earnings in lower-tax-rate countries, higher after-tax earnings of
investments in unconsolidated affiliates and greater utilization of tax loss
carryforwards outside the U.S. for which deferred tax valuation allowances had
previously been provided.
Liquidity, Working Capital and Capital Investment
Cash provided by operating activities during 1996 totaled $125.8 million,
compared with $116.8 million in 1995. Working capital requirements included
$44.8 million to finance a higher level of receivables. This increase
reflects, in part, the result of higher sales in 1996 and, since receivables
were not included in the 1995 purchase of VES, recognizes the increase in
receivable balances to normal operating levels for that business. Income tax
payments during 1996 totaled $54.6 million. Dividends received from
affiliates, principally Aeroquip Yokohama K.K., amounted to $9.8 million, and
inventory reductions during 1996 provided cash of $10.7 million. In 1995, the
Company terminated its program for the sale of accounts receivable, resulting
in an increase in receivables of $50 million during 1995.
In 1996, the Company received cash totaling $40.3 million from the sales of
its interests in two unconsolidated affiliates operating as joint ventures in
Japan and Mexico, and an injection-molding plastics products facility in
Bassett, Virginia. The Company is also seeking opportunities to exit elements
of its automotive segment relating to certain plastics operations which have
produced losses or relatively low operating margins in recent periods. The
operations under review accounted for approximately 25% of automotive sales in
1996.
During 1996, the Company completed two business acquisitions. In December
1996, the Company purchased the net assets and business of the Electrical
Engineering & Manufacturing Company, a division of DATRON Inc. In June 1996,
the Company purchased all the issued and outstanding capital stock of Summa
Manufacturing Corporation. The aggregate purchase prices for these two
business acquisitions amounted to $43.3 million.
Capital expenditures totaled $90.6 million in 1996. An increase in capital
spending is projected for 1997 to support the Company's growth initiatives and
continued manufacturing process improvements. Quarterly dividend payments
were $.20 per share in 1996, or $.80 per share for the year. In January 1997,
the Company's Board of Directors approved a first-quarter 1997 dividend of
$.20 per share.
During 1996, the Company purchased 1,022,100 shares of its outstanding common
stock at a cost of $32.2 million. Purchases over a two-year period ended
December 31, 1996, totaled 1,208,300 shares for a cost of $37.7 million under
a 1991 Board of Directors authorization to purchase outstanding shares of the
Company's common stock for an aggregate purchase price not to exceed $60
million. The Company expects to make further common stock purchases in 1997,
but is not committed to purchase a specific number of shares.
In 1996, the Company filed a shelf registration statement with the Securities
and Exchange Commission and issued thereunder $100 million of 30-year
<PAGE>
-33-
debentures with a coupon rate of 7.875%. Proceeds were used to retire debt
with shorter maturities, including $75 million that was classified as long-
term debt at December 31, 1995, under provisions of the revolving credit
agreement in effect at that date. At December 31, 1996, additional debt
securities in amounts up to $150 million can be issued under existing shelf
registrations. The net increase in short- and long-term debt during 1996 was
$28.2 million. The debt-to-capitalization ratio (debt divided by debt plus
equity) was 45.1% at December 31, 1996, compared with 45.6% at December 31,
1995. The Company also maintains a revolving credit agreement with a
consortium of U.S. and non-U.S. banks expiring in 2001 under which the Company
may borrow up to $175 million. The agreement is intended to support the
Company's commercial paper borrowings and, to the extent not so utilized,
provide domestic borrowing capacity. The remaining borrowing capacity under
this agreement at December 31, 1996, was $147.3 million. In addition to this
agreement, the Company has uncommitted arrangements with various banks to
provide short-term financing as necessary. The Company expects that cash flow
from operating activities and available credit lines will be sufficient to
meet normal operating requirements including payment of debt maturing in the
near term.
The Company or certain of its subsidiaries have been named potentially
responsible parties (PRP) for site investigation and cleanup costs under the
Comprehensive Environmental Response, Compensation, and Liability Act
(Superfund) or similar regulations with respect to certain sites. In
addition, the Company has undertaken corrective and preventive environmental
projects of its own to achieve compliance with applicable environmental laws
at certain of its facilities. The Company believes that the costs arising out
of such PRP designations will not have a material adverse effect on the
Company's consolidated financial position.
<PAGE>
-34-
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
The following is a summary of the quarterly results of operations for the
years ended December 31, 1996 and 1995.
<CAPTION>
1996
--------------------------------------------------------
Three Months Ended
-------------------------------------------- Year Ended
Mar 31 Jun 30 Sep 30 Dec 31 Dec 31
------- ------- ------- ------- ----------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $ 512,113 $ 517,924 $ 492,983 $ 509,895 $2,032,915
Manufacturing income 126,257 133,909 122,854 129,159 512,179
Net income 24,415 33,060 20,757 24,489(b) 102,721(c)(d)
Net income per share .83 1.11 .72 .85(b) 3.51(c)(d)
Average shares outstanding(a) 30,707 30,528 30,258 29,928 30,363
</TABLE>
<TABLE>
<CAPTION>
1995
--------------------------------------------------------
Three Months Ended
-------------------------------------------- Year Ended
Mar 31 Jun 30 Sep 30 Dec 31 Dec 31
------- ------- ------- ------- ----------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $ 498,635 $ 501,617 $ 441,445 $ 442,316 $1,884,013
Manufacturing income 122,442 130,921 110,956 112,024 476,343
Net income 22,588 33,280 18,999 20,029 94,896
Net income per share .77 1.11 .64 .68 3.20
Average shares outstanding(a) 30,734 30,790 30,924 30,928 30,864
<FN>
(a) For purposes of computing net income per share, the assumed conversion of
the Company's 6% convertible debentures was included in average shares
outstanding, increasing the average number of shares outstanding by
1,904,762 shares, and net income was increased for the after-tax
equivalent of interest expense on the debentures.
(b) In the 1996 fourth quarter, the effective income tax rate for the year
was reduced. The cumulative year-to-date adjustment increased fourth
quarter net income by $1.9 million, or $.06 per share.
(c) The income tax provision for the 1996 first quarter and year includes a
credit for settlement of claims for prior years' research and development
credits of $4 million, or $.13 per share.
(d) The 1996 second quarter and year include a combined net gain from sale of
unconsolidated affiliates amounting to $5 million, or $.16 per share.
</FN>
</TABLE>
<PAGE>
-35-
REPORT OF ERNST & YOUNG LLP,
Independent Auditors
Shareholders and Board of Directors
TRINOVA Corporation
We have audited the accompanying statement of financial position of TRINOVA
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
statements of income, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company'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 consolidated financial position of TRINOVA
Corporation and subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Toledo, Ohio
January 22, 1997
<PAGE>
-36-
<TABLE>
STATEMENT OF INCOME
Years ended December 31, 1996, 1995 and 1994
(In thousands, except per share data)
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net sales $2,032,915 $1,884,013 $1,794,695
Cost of products sold 1,520,736 1,407,670 1,351,403
---------- ---------- ----------
MANUFACTURING INCOME 512,179 476,343 443,292
Selling and general administrative
expenses 260,712 254,141 246,758
Engineering, research and development
expenses 74,892 62,993 55,465
---------- ---------- ----------
OPERATING INCOME 176,575 159,209 141,069
Interest expense (25,813) (19,199) (21,060)
Other income (expenses) - net 2,659 (11,814) (18,754)
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 153,421 128,196 101,255
Income taxes 50,700 33,300 35,400
---------- ---------- ----------
NET INCOME $ 102,721 $ 94,896 $ 65,855
========== ========== ==========
NET INCOME PER SHARE $ 3.51 $ 3.20 $ 2.26
========== ========== ==========
Average number of common
shares outstanding 30,363 30,864 30,815
========== ========== ==========
<FN>
The Notes to Financial Statements are an integral part of this statement.
</FN>
</TABLE>
<PAGE>
-37-
<TABLE>
STATEMENT OF FINANCIAL POSITION
December 31, 1996 and 1995
(Dollars in thousands, except per share data)
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 23,934 $ 16,186
Receivables 342,712 292,146
Inventories 262,169 269,284
Other current assets 45,272 38,789
----------- -----------
TOTAL CURRENT ASSETS 674,087 616,405
Plants and properties 997,350 959,286
Less accumulated depreciation 559,867 533,925
----------- -----------
437,483 425,361
Other assets 177,917 182,385
----------- -----------
TOTAL ASSETS $ 1,289,487 $ 1,224,151
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 31,819 $ 33,229
Accounts payable 106,205 103,853
Income taxes 21,150 39,054
Other accrued liabilities 188,973 183,659
Current maturities of long-term debt 76,809 378
----------- -----------
TOTAL CURRENT LIABILITIES 424,956 360,173
Long-term debt 257,727 302,352
Postretirement benefits other than pensions 121,793 120,478
Other liabilities 38,595 40,276
SHAREHOLDERS' EQUITY
Common stock - par value $5 a share
Authorized - 100,000,000 shares
Outstanding - 27,912,077 and
28,825,187 shares, respectively
(after deducting 6,297,819 and
5,384,709 shares, respectively, in treasury) 139,559 144,125
Additional paid-in capital 20,675 17,933
Retained earnings 307,398 254,484
Currency translation adjustments (21,216) (15,670)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 446,416 400,872
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,289,487 $ 1,224,151
=========== ===========
<FN>
The Notes to Financial Statements are an integral part of this statement.
</FN>
</TABLE>
<PAGE>
-38-
<TABLE>
STATEMENT OF CASH FLOWS
Years ended December 31, 1996, 1995 and 1994
(In thousands)
<CAPTION>
1996 1995 1994
OPERATING ACTIVITIES -------- -------- --------
<S> <C> <C> <C>
Net income $ 102,721 $ 94,896 $ 65,855
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 68,684 63,697 60,784
Gain on sales of affiliates (17,300) -- --
Dividends received from affiliates 9,932 39 517
Deferred income taxes 11,997 (7,051) 17,436
Changes in certain assets and liabilities,
excluding effects from acquisitions and
dispositions
- -Receivables (44,783) (38,820) (41,384)
- -Inventories 10,656 (28,693) (3,570)
- -Accounts payable (75) 1,483 13,116
- -Income taxes (15,929) 15,216 10,631
- -Other assets, payables and accruals (5,991) 27,001 19,164
Restructuring payments - net 810 (7,104) (5,978)
Other 5,063 (3,879) 6,430
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 125,785 116,785 143,001
INVESTING ACTIVITIES
Capital expenditures (90,626) (93,955) (55,154)
Businesses acquired (42,540) (113,841) --
Sales of business and affiliates 40,261 -- --
Other 1,483 697 1,840
---------- ---------- ----------
NET CASH USED BY INVESTING ACTIVITIES (91,422) (207,099) (53,314)
FINANCING ACTIVITIES
Cash dividends (22,705) (20,800) (19,553)
Increase (decrease) in notes payable (1,444) 30,776 (57,862)
Long-term borrowings 107,145 75,886 317
Repayments of long-term borrowings (77,465) (9,041) (15,068)
Purchases of common stock (32,213) (5,473) --
Stock issuance under stock plans 3,287 6,087 12,304
Other (2,440) -- --
---------- ---------- ----------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES (25,835) 77,435 (79,862)
Effect of exchange rate changes on
cash and cash equivalents (780) 1,137 (2,431)
---------- ---------- ----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 7,748 (11,742) 7,394
Cash and cash equivalents at beginning of year 16,186 27,928 20,534
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 23,934 $ 16,186 $ 27,928
========== ========== ==========
<FN>
The Notes to Financial Statements are an integral part of this statement.
</FN>
</TABLE>
<PAGE>
-39-
<TABLE>
STATEMENT OF SHAREHOLDERS' EQUITY
Years ended December 31, 1996, 1995 and 1994
(Dollars in thousands, except per share data)
<CAPTION>
Additional Currency
Common Paid-In Retained Translation
Stock Capital Earnings Adjustments
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994 $ 142,029 $ 2,157 $ 138,628 $ (29,582)
Net income 65,855
Cash dividends paid ($.68 a share) (19,553)
Issuance of 390,029 shares, net of
shares exchanged, under stock plans 1,950 10,354
Translation adjustments - net 8,208
--------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1994 143,979 12,511 184,930 (21,374)
Net income 94,896
Cash dividends paid ($.72 a share) (20,800)
Issuance of 215,478 shares, net of
shares exchanged, under stock plans 1,077 5,422
Purchase of 186,200 treasury shares (931) (4,542)
Translation adjustments - net 5,704
--------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1995 144,125 17,933 254,484 (15,670)
Net income 102,721
Cash dividends paid ($.80 a share) (22,705)
Issuance of 108,990 shares, net of
shares exchanged, under stock plans 545 2,742
Purchase of 1,022,100 treasury shares (5,111) (27,102)
Translation adjustments - net (5,546)
--------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1996 $ 139,559 $ 20,675 $ 307,398 $ (21,216)
========= ========= ========= =========
<FN>
The Notes to Financial Statements are an integral part of this statement.
</FN>
</TABLE>
<PAGE>
-40-
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Dollars in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its subsidiaries. Affiliated companies in
which the Company's ownership is 20% to 50% are accounted for by the equity
method. All other minority investments are carried at cost. All significant
intercompany transactions, balances and profits are eliminated upon
consolidation.
Use of Estimates: The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make certain
estimates and exercise judgment affecting the reported amounts in the
statements of income, financial position and cash flows, including the
disclosures in the notes to financial statements. Actual results may differ
from those estimates.
Cash Equivalents: Marketable securities that are highly liquid and have
original maturities of three months or less are classified as cash
equivalents. The carrying amount approximates fair value.
Inventories: Inventories are stated at the lower of cost or market.
Inventory costs for U.S. operations are determined principally by the last-in,
first-out (LIFO) method. The remaining inventory costs are determined
primarily by the first-in, first-out (FIFO) method.
Plants and Properties: Plants and properties are carried at cost.
Depreciation is generally computed by the straight-line method over the
estimated useful lives of the respective assets. In general, depreciation is
provided at annual rates of 2.5% to 3% on buildings and 8% to 10% on
equipment.
Intangibles: Intangible assets are included in Other assets at cost less
accumulated amortization and consist principally of goodwill. Goodwill
represents the excess of cost over fair value of assets acquired, for which
the amortization periods are principally 30 to 40 years using the straight-
line method. Other intangibles include software and patents for which the
amortization periods range from five to 15 years on a straight-line basis.
The carrying amounts for goodwill and other intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that such
carrying amounts may not be recoverable.
Life Insurance: The Company's investment in corporate-owned life insurance is
recorded net of policy loans. Net life insurance expense, including interest
expense of $9,150, $5,278 and $1,522 on policy loans in 1996, 1995 and 1994,
respectively, is included in Other income (expenses) - net in the Statement of
Income.
Forward Exchange Contracts: The Company uses forward exchange contracts to
hedge certain firm commitments denominated in currencies other than the
functional currency of the originating location. Gains and losses on these
<PAGE>
-41-
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
contracts are included in income in the periods the exchange rates change,
offsetting the losses or gains on the underlying transactions. Forward
exchange contracts are written on a short-term basis, are not held for trading
purposes, and are not held for purposes of speculation. There were no forward
exchange contracts outstanding at December 31, 1996 or 1995.
Accounting Change: The Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," effective January 1, 1996. Adoption of
this standard had no effect on the Company's results of operations or
consolidated financial position.
Stock Options: The Company follows the intrinsic value method of accounting
for stock options under Accounting Principles Board Opinion No. 25. When
stock options are exercised, common stock is credited for the par value of
shares issued, and additional paid-in capital is credited with the
consideration received in excess of par value.
Net Income per Share: Net income per share is computed using the average
number of common shares outstanding, including common stock equivalents. The
assumed conversion of the Company's 6% convertible debentures was included in
average shares outstanding, increasing the average number of shares
outstanding by 1,904,762 shares. For purposes of computing net income per
share, net income was increased for the after-tax equivalent of interest
expense on the debentures.
NOTE 2 - ACQUISITIONS
On December 7, 1996, the Company acquired certain assets and liabilities and
the business of the Electrical Engineering & Manufacturing Company (EEMCO), a
division of DATRON Inc., for $35,917, including acquisition costs and issuance
of a promissory note in the amount of $5,038 to the seller. The promissory
note bears interest at the rate of 6.31%, is due December 10, 2004, and is
subject to certain prepayment requirements, rights of setoff and dispute
resolution in accordance with terms of the agreement. EEMCO is a designer and
manufacturer of linear and rotary actuators, specialty motors and generators,
flight control systems, electronic controls, and fully integrated actuation
systems for commercial and military aerospace applications. It also provides
overhaul and repair services for its products. The acquisition was accounted
for as a purchase, and operations, which were not significant to the
consolidated results, were included in the Statement of Income subsequent to
the acquisition date.
In June 1996, the Company acquired all of the issued and outstanding capital
stock of Summa Manufacturing Corporation (Summa) for $7,430. Summa is a
manufacturer of vane pumps and replacement parts for mobile and industrial
applications. The acquisition was accounted for as a purchase, and
operations, which were not significant to the consolidated results, were
included in the Statement of Income subsequent to the acquisition date.
<PAGE>
-42-
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - ACQUISITIONS (Continued)
Effective December 30, 1995, the Company acquired certain assets and
liabilities and the business of the Electronic Systems Division (ESD) from
Cincinnati Milacron Inc. for $105,267. ESD designs and manufactures computer
controls, software and drives used in machine tools and plastics processing
equipment. The acquisition was accounted for as a purchase. Operations for
ESD were included in the Statement of Income beginning January 1, 1996.
Also in December 1995, the Company acquired certain assets and liabilities and
the businesses of the Dynapower/Stratopower unit (manufacturer of hydraulic
pumps, motors, starters and hydrostatic transmissions) of General Signal
Corporation, and the magnetic chip detector product line from Muirhead Vactric
Components Ltd. for an aggregate purchase price of $7,767. These acquisitions
were accounted for as purchases, and operations of these businesses were not
significant to the Statement of Income for the year ended December 31, 1995.
The following table presents the adjusted allocations of the aggregate
purchase prices to the assets acquired and liabilities assumed. The
allocations for 1996 acquisitions are preliminary and subject to adjustment.
1996 1995
Acquisitions Acquisitions
------------ ------------
Working capital $ 7,589 $ 13,960
Plants and properties 1,931 19,350
Other assets including intangibles 34,850 81,438
Postretirement benefits other than pensions -- (810)
Other liabilities (1,023) (904)
-------- --------
$ 43,347 $113,034
======== ========
Had these acquisitions occurred as of the beginning of the respective periods,
the pro forma results of operations giving effect to the acquisitions would
not be materially different from the net sales, net income and net income per
share presented in the Statement of Income.
NOTE 3 - GAIN ON SALE OF UNCONSOLIDATED AFFILIATES
In 1996, the Company sold its 35% interest in Yokohama Aeroquip K.K., based in
Japan, and its 49% interest in Aeroquip Mexicana S.A., based in Mexico. The
two transactions resulted in a net combined pretax gain of $17,300 ($5,000
net, or $.16 per share). The combined pretax gain included net translation
gains of $6,387 previously deferred in the currency translation component of
equity.
<PAGE>
-43-
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - INVENTORIES
Inventory costs determined by the LIFO method accounted for approximately 54%
and 56% of the total inventories at December 31, 1996 and 1995, respectively.
If all inventories valued by the LIFO method had been valued at current costs,
these inventories would have been approximately $32,768 and $33,444 higher
than reported at December 31, 1996 and 1995, respectively.
NOTE 5 - DEBT
1996 1995
------ ------
6% convertible subordinated debentures,
due October 15, 2002 $100,000 $100,000
7.875% senior debentures, due June 1, 2026 100,000 --
7.95% notes, due May 1, 1997 75,000 75,000
9.55% senior sinking fund debentures,
due February 1, 2018 42,000 42,000
Borrowings supported by long-term
revolving credit agreement - interest
rates from 5.9% to 6.2% -- 75,000
Industrial revenue bonds - interest rates from
5.8% to 7.625% - due at various dates to 2013 7,333 7,363
Other 10,203 3,367
-------- --------
334,536 302,730
Less current maturities 76,809 378
-------- --------
$257,727 $302,352
======== ========
The 6% convertible subordinated debentures are convertible into common stock
at a conversion price of $52.50 per share. The debentures are subject to
redemption prior to October 15, 2002, at the option of the Company, in whole
or in part, at specified declining redemption prices plus accrued interest.
The 9.55% senior sinking fund debentures are subject to redemption prior to
February 1, 2018, at the option of the Company, in whole or in part, at
specified declining redemption prices plus accrued interest. An annual
mandatory sinking fund payment of $2,500 is required commencing February 1,
1999. The Company may increase its sinking fund payment in any year by an
additional amount of up to $5,000.
Under terms of a revolving credit agreement, negotiated in 1996 and expiring
August 31, 2001, with a consortium of U.S. and non-U.S. banks, the Company may
borrow up to $175,000. Borrowings under the credit line bear interest at
rates agreed to by the Company and lendors. This agreement is maintained to
support the Company's commercial paper borrowings and, to the extent not so
utilized, to provide domestic borrowings. The remaining borrowing capacity
under this agreement at December 31, 1996, was $147,300. Covenants of the
<PAGE>
-44-
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - DEBT (Continued)
revolving credit agreement and certain other debt instruments require the
Company to maintain certain financial ratios, including a limitation that the
Company's debt-to-capitalization ratio (exclusive of the effects of the change
in accounting for postretirement benefit obligations) not exceed a specified
amount. At December 31, 1996, under the most restrictive of these covenants,
retained earnings of $179,000 were available for the payment of cash
dividends.
During 1996, the Company filed a shelf registration statement with the
Securities and Exchange Commission and issued thereunder $100,000 of 30-year
debentures. Proceeds were used to retire debt with shorter maturities,
including $75,000 that was classified as long-term debt at December 31, 1995,
under provision of the revolving credit agreement in effect at that date. At
December 31, 1996, additional debt securities in amounts up to $150,000 can be
issued under existing shelf registrations.
At December 31, 1996, long-term debt amounting to $334,536, including current
maturities, had an estimated fair value of $339,677. Estimated fair value for
long-term debt, including current maturities, at December 31, 1995, was
$305,832. Fair value for notes payable at December 31, 1996 and 1995, was
approximately equal to the carrying amounts at those dates.
Maturities of long-term debt in 1997 and in the four succeeding years are
$76,809, $1,520, $3,383, $2,686 and $2,662. Interest paid on all debt during
1996, 1995 and 1994 amounted to $27,392, $19,250 and $25,146, respectively.
The weighted-average interest rate of outstanding notes payable was 5.7% and
6.3% at December 31, 1996 and 1995, respectively.
NOTE 6 - ENVIRONMENTAL
The Company or certain of its subsidiaries have been named potentially
responsible parties (PRP) for site investigation and cleanup costs under the
Comprehensive Environmental Response, Compensation, and Liability Act
(Superfund) or similar regulations with respect to certain sites. While the
ultimate outcome of the PRP designations and other environmental matters
cannot now be predicted, the Company believes that costs, in excess of amounts
provided, arising out of these matters will not have a material adverse effect
on the Company's consolidated financial position.
<PAGE>
-45-
NOTES TO FINANCIAL STATEMENTS
<TABLE>
NOTE 7 - INCOME TAXES
The components of income before income taxes consist of the following:
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
U.S. $ 73,644 $ 45,506 $ 45,562
Non-U.S. 79,777 82,690 55,693
-------- --------- ---------
$153,421 $128,196 $101,255
======== ========= =========
Income tax expense consists of the following:
1996 1995 1994
------ ------ ------
Current:
U.S. federal $ 21,920 $ 21,131 $ 4,537
State and local 2,676 1,810 954
Non-U.S. 14,107 17,410 12,473
-------- --------- ---------
38,703 40,351 17,964
Deferred:
U.S. federal 4,356 (6,787) 10,900
Non-U.S. 7,641 (264) 6,536
-------- --------- ---------
11,997 (7,051) 17,436
-------- --------- ---------
$ 50,700 $ 33,300 $ 35,400
======== ========= =========
</TABLE>
<PAGE>
-46-
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - INCOME TAXES (Continued)
<TABLE>
The effects of temporary differences and loss carryforwards giving rise to
deferred tax assets and liabilities are as follows:
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Gross Deferred Tax Assets
Postretirement benefits other than pensions $ 42,849 $ 42,021
Tax loss carryforwards 15,885 25,487
Employee benefit accruals 11,992 10,913
Other 2,320 6,853
--------- ---------
73,046 85,274
Gross Deferred Tax Liabilities
Depreciation (32,169) (35,828)
Other (6,226) (5,204)
--------- ---------
(38,395) (41,032)
Valuation allowances (12,589) (15,953)
--------- ---------
Net deferred tax assets $ 22,062 $ 28,289
========= =========
The components of deferred tax assets (liabilities) net of valuation
allowances are classified in the Statement of Financial Position as follows:
1996 1995
------ ------
Current assets, net of current liabilities $ 837 $ 1,326
Non-current assets 28,189 35,368
Non-current liabilities (6,964) (8,405)
--------- ---------
Net deferred tax assets $ 22,062 $ 28,289
========= =========
</TABLE>
Valuation allowances decreased $3,364, $13,580 and $429 in 1996, 1995 and
1994, respectively.
Reconciliation of the statutory U.S. federal income tax rate to the effective
income tax rate follows:
<PAGE>
-47-
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - INCOME TAXES (Continued)
1996 1995 1994
------ ------ ------
Statutory U.S. federal income tax rate 35.0% 35.0% 35.0%
Increase (decrease) resulting from:
State and local taxes, net of federal
benefit 1.1 1.0 .8
Basis differences on affiliates sold 4.1 - -
Research and development credit (2.6) - -
Taxes in excess of (less than) the
U.S. tax rate on non-U.S. earnings,
including utilization of net operating
loss carryforwards (3.2) (9.1) 2.3
Other (1.4) (.9) (3.1)
---- ---- -----
Effective income tax rate 33.0% 26.0% 35.0%
==== ==== =====
At December 31, 1996, the Company had non-U.S. net operating loss
carryforwards of $40,900 for income tax purposes. Loss carryforwards of
approximately $15,100 have no expiration dates and the remainder expire in
years through 1999. Non-U.S. net operating loss carryforwards amounting to
$27,900, $13,400 and $6,800 were utilized in 1996, 1995 and 1994,
respectively. Income tax expense for the years 1996, 1995 and 1994 was
reduced by $3,730, $5,440 and $2,860, respectively, due to utilization of
these operating loss carryforwards.
The Company does not provide deferred income taxes on undistributed earnings
of certain of its non-U.S. subsidiaries which have been reinvested
indefinitely. Undistributed earnings of non-U.S. subsidiaries for which U.S.
income taxes have not been provided approximated $90,900 at December 31, 1996.
Should these earnings be remitted, certain countries will impose withholding
taxes that will be available for use as credits against any U.S. federal
income tax liability, subject to certain limitations. It is not practical to
estimate the amount of tax that would be payable should the Company remit
these earnings.
Income taxes paid during 1996, 1995 and 1994 amounted to $54,633, $25,135 and
$7,333, respectively.
NOTE 8 - LEASES
The Company and its subsidiaries lease a variety of real property and
equipment. Rent expense under operating leases amounted to approximately
$18,863, $20,709 and $21,908 for 1996, 1995 and 1994, respectively. Future
minimum rental payments required under operating leases that have initial or
remaining noncancelable lease terms in excess of one year as of December 31,
1996, are as follows:
1997 $ 14,619
1998 11,025
1999 8,330
2000 6,863
2001 6,429
Thereafter 19,642
--------
$ 66,908
========
<PAGE>
-48-
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - RETIREMENT PLANS
The Company has trusteed defined-contribution plans as its primary retirement
vehicle covering most full-time U.S. employees and certain non-U.S. employees.
Annual expense for the major defined-contribution plans is based primarily
upon employee participation and earnings of the Company. The Company follows
the policy of funding retirement plan contributions accrued.
The Company also has trusteed defined-benefit plans covering a limited number
of full-time U.S. employees. The defined-benefit plans typically provide for
full vesting after five years of service, and benefits are principally based
on employee earnings and/or length of service. The Company's funding policy
for these plans is to make annual contributions at least sufficient to meet
minimum legal funding requirements. Various plans are also in effect for
subsidiaries operating outside the U.S., including trusteed or insured,
government-sponsored and unfunded plans.
<TABLE>
The following table sets forth the funded status and amounts recorded in the
Company's Statement of Financial Position for defined-benefit plans.
<CAPTION>
1996 1995
-------------------- --------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Actuarial present value
of benefit obligation:
Vested benefit obligation $110,300 $ 34,800 $107,900 $ 37,500
======== ======== ======== ========
Accumulated benefit obligation $111,600 $ 36,100 $108,800 $ 38,600
======== ======== ======== ========
Projected benefit obligation $117,700 $ 40,100 $114,800 $ 41,600
Plans' assets at fair value 139,000 15,200 131,700 16,100
-------- -------- -------- --------
Projected benefit obligation
(in excess of) less than
plans' assets 21,300 (24,900) 16,900 (25,500)
Unrecognized net gain (5,700) (6,900) (1,300) (7,000)
Unrecognized net (asset)
obligation less amortization (800) 1,600 (600) 1,800
Unrecognized prior service cost 3,300 1,800 3,200 2,100
Adjustment required to
recognize minimum liability - - - (800)
-------- -------- -------- --------
Net pension asset (liability)
recorded in the Statement
of Financial Position $ 18,100 $(28,400) $ 18,200 $(29,400)
======== ======== ======== ========
</TABLE>
<PAGE>
-49-
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - RETIREMENT PLANS (Continued)
<TABLE>
Components of net periodic pension cost for the defined-benefit plans and the
total contributions charged to pension expense for the defined-contribution
plans are summarized below.
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Defined-benefit plans:
Service cost - benefits earned $ 2,400 $ 2,300 $ 2,700
Interest cost 11,300 11,200 10,700
Actual return on plans' assets (13,500) (22,700) 2,500
Net amortization and deferral 1,000 10,900 (12,800)
-------- -------- --------
Net pension cost - defined-benefit plans 1,200 1,700 3,100
Defined-contribution plans 37,000 37,700 31,200
Other non-U.S. retirement plans 1,200 1,400 700
-------- -------- --------
Total pension expense $ 39,400 $ 40,800 $ 35,000
======== ======== ========
The defined-benefit plans' assets consist of equity securities, corporate and
government bonds, and real estate. Following are assumptions used in
determining the plans' net periodic pension cost and benefit obligations. The
measurement dates for these plans were principally September 30.
1996 1995 1994
------ ------ ------
Discount rates:
U.S. 7.5% 7.5% 8.25%
Non-U.S. 7.5 7.5 7.9
Rates of increase in future compensation:
U.S. 4.0 4.0 4.0
Non-U.S. 3.0-5.5 3.0-6.0 3.0-5.5
Long-term rate of return on assets 10.0 10.0 10.0
</TABLE>
<PAGE>
-50-
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company and its subsidiaries provide access to benefits under life
insurance and health care plans for most retired U.S. and certain retired non-
U.S. employees and eligible spouses (participants). Generally, benefits for
most covered retirees outside the U.S. are provided through government-
sponsored or retiree-funded programs. Benefits for U.S. retirees are
generally subject to participant contributions, deductibles, co-payment
provisions and certain other limitations. The Company has reserved the right
to amend or terminate these benefit plans at any time.
Most U.S. health care plans recognize that the Company, as the secondary
provider to Medicare, will contribute toward the cost of providing health care
benefits for participants who retire at age 65 or older and have at least 10
years of service at retirement. The amount of the Company's contribution for
participants retiring after January 1, 1995, except for one group for which
the date is January 1, 1997, is limited to an established amount.
Accordingly, as medical costs escalate, those participants who retire
subsequent to the above dates will share in the cost of the benefits by paying
the difference between the Company's average annual per-capita claims costs
and the established amount.
During a transition period, the Company will also contribute toward the cost
of health care for participants who retire prior to age 65, providing they had
met certain age and service-period requirements as of January 1, 1995. The
amount of the Company's contribution will not exceed the established amount.
Such participants will share in the cost of benefits by paying the difference
between the Company's average annual per-capita claims costs and the
established amount. Those participants retiring before reaching age 65 who do
not meet the age and service-period requirements will have the option to
purchase health care benefits at full cost until becoming eligible for a
Company contribution at age 65.
Components of postretirement benefit cost are as follows:
1996 1995 1994
Service cost - benefits earned $ 1,692 $ 1,426 $ 1,971
Interest cost 8,168 7,586 7,352
Net amortization and deferral (1,630) (1,664) (969)
--------- --------- ---------
Postretirement benefit cost $ 8,230 $ 7,348 $ 8,354
========= ========= =========
The Company's postretirement benefit plans are not funded. The status of the
plans at December 31, 1996 and 1995 (based on measurement of the accumulated
postretirement benefit obligation at September 30), is as follows:
<PAGE>
-51-
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (Continued)
1996 1995
Accumulated postretirement benefit obligation:
Retirees $ 74,273 $ 76,623
Plans' participants fully eligible
to receive benefits 14,280 13,183
Other active plan participants 22,594 22,917
--------- ---------
111,147 112,723
Unrecognized prior service cost 12,101 13,731
Unrecognized net losses (1,455) (5,976)
--------- ---------
Accrued postretirement benefits
other than pensions $ 121,793 $ 120,478
========= =========
<TABLE>
Following are assumptions used in determining the postretirement benefit cost
and the accumulated postretirement benefit obligation:
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 8.25%
Projected health care cost trend rates:
Under age 65 9.1 9.6 10.1
Over age 65 6.7 7.0 7.4
Ultimate 5.25 5.25 5.25
Year ultimate health care cost trend
rate is achieved 2008 2008 2008
</TABLE>
The projected health care cost trend rates listed above for under and over age
65 participants represent assumed increases in per capita cost of covered
health care benefits for 1997, 1996 and 1995, respectively. For future years,
the rates are assumed to decrease gradually and remain at the ultimate trend
rate thereafter. A one-percentage-point increase in the projected health care
cost trend rates would increase the 1996 postretirement benefit cost by $489
and the accumulated postretirement benefit obligation as of September 30,
1996, by $5,579.
<PAGE>
-52-
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - CAPITAL STOCK AND EMPLOYEE STOCK OPTIONS
The Company has rights outstanding as set forth in a Rights Agreement, whereby
holders of common stock have one right for each share of common stock
outstanding. When exercisable, each right entitles its holder to buy one one-
hundredth of a new preferred share for $125. The Company has 4,000,000 shares
of serial preferred stock authorized, of which no shares were outstanding at
December 31, 1996 or 1995. If a person or group acquires 20% or more of the
Company's outstanding common stock without complying with the Ohio Control
Share Acquisition Act, or engages in certain self-dealing transactions,
holders of rights will be entitled to purchase (a) common stock of the Company
at one-half the market price, or (b) shares of an acquiring company at one-
half the market price, depending upon the circumstances of the transaction.
The Company may redeem the rights at a price of $.01 per right at any time
prior to the rights becoming exercisable. The rights expire in 1999.
The Company's 1994 Stock Incentive Plan (the 1994 Plan) permits the issuance
of stock options, stock appreciation rights (SARs) and performance awards to
selected salaried employees as approved by the Organization and Compensation
Committee of the Board of Directors. The 1994 Plan replaced the Company's
1982 and 1987 Stock Option Plans (Option Plans). The number of shares of
common stock that may be issued or transferred under the 1994 Plan may not
exceed 1,419,900 shares, which include 419,900 shares that were available for
grant under the Option Plans as of the date the 1994 Plan was approved by the
Board of Directors.
Options may be granted to selected employees to purchase common stock at a
price not less than 100% of fair market value on the date of grant. The term
of each award will be determined by the Organization and Compensation
Committee. All options granted as of December 31, 1996, expire 10 years after
date of grant. Options granted prior to 1996 became exercisable one year
after date of grant, and options granted in 1996 become exercisable ratably
over a three-year period commencing one year following date of grant. Options
that expire, terminate or are canceled without exercise are available for the
grant of new awards. In instances where SARs or performance awards are
settled in cash, the shares covered by such settlements will remain available
for issuance under the 1994 Plan. No SARs were issued or outstanding at
December 31, 1996.
Performance awards may be granted to selected employees to receive future
payments contingent on continuous service with the Company and achievement of
pre-established goals. Such awards may be settled in cash, common shares
available under the 1994 Plan or a combination of both as determined by the
Organization and Compensation Committee. In January 1997, 1996 and 1995,
44,314, 40,977 and 17,049 shares, respectively, of common stock were
distributed to participants as performance awards under provisions of the
long-term incentive plan for the three-year periods ended December 31, 1996,
1995 and 1994, respectively.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (FAS 123), was issued in October 1995 and became effective
for financial statements issued in 1996. The Company has elected to continue
to account for its employee stock options in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
and related interpretations, as permitted by FAS 123. As a result, no
compensation expense for employee stock options has been recognized in
<PAGE>
-53-
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - CAPITAL STOCK AND EMPLOYEE STOCK OPTIONS (Continued)
the financial statements. However, pro forma information regarding net income
and net income per share is required by FAS 123, and has been determined for
disclosure purposes as if the Company had accounted for employee stock options
under the fair value method as prescribed by that statement. The fair values
of the Company's employee stock options were estimated as of the dates of
grant using the Black-Scholes option pricing model with the following
assumptions for 1996 and 1995, respectively: risk-free interest rates of
6.52% and 6.23%; expected dividend yields of 2.3% and 2.13%; expected stock
price volatility of .319 and .329; and a weighted-average expected option life
of six years. For purposes of pro forma disclosures, the estimated fair
values of employee stock options are amortized to expense over the options'
vesting periods. The estimated fair values per share of options granted
during 1996 and 1995 were $11.36 and $11.73, respectively. Pro forma net
income and net income per share for 1996 and 1995 are as follows:
1996 1995
---- ----
Net income As reported $102,721 $ 94,896
Pro forma 101,293 93,616
Net income per share As reported 3.51 3.20
Pro forma 3.46 3.15
Options outstanding at December 31, 1996, had a range of exercise prices from
$22.50 to $37.75 and a weighted-average remaining contractual life of seven
years.
At December 31, 1996, the Company had 3,746,086 shares of common stock
reserved for issuance in connection with stock options and performance awards
and for conversion of 6% convertible subordinated debentures.
The following table summarizes stock option activity for the years 1996 and
1995.
1996 1995
------------------- --------------------
Weighted- Weighted-
Average Average
Option Exercise Option Exercise
Shares Price Shares Price
-------- -------- -------- --------
Outstanding at January 1 1,164,980 $ 30.67 1,097,230 $ 29.29
Granted 349,000 33.02 312,500 33.75
Exercised (86,030) 29.18 (200,350) 27.72
Forfeited (4,500) 33.58 (9,000) 33.75
Canceled (17,500) 33.52 (35,400) 31.46
Outstanding at December 31 1,405,950 31.30 1,164,980 30.67
Exercisable at December 31 1,059,950 30.74 861,480 29.58
Available for future awards
at December 31 391,060 762,374
<PAGE>
-54-
NOTES TO FINANCIAL STATEMENTS
NOTE 12 - BUSINESS SEGMENTS
TRINOVA is Aeroquip and Vickers, worldwide manufacturers and distributors of
engineered components and systems to industrial, automotive and aerospace
markets.
The industrial business serves original equipment and aftermarket customers in
various worldwide markets (principally in the U.S., Europe, Asia and Brazil)
including construction, mining, logging and farm equipment; machine tool;
process industries; electrical machinery; air conditioning/refrigeration;
electronics; lift truck; material handling; plant maintenance; and housing and
commercial construction.
The automotive business serves worldwide automobile, light truck, sport
utility and van manufacturers (principally in the U.S. and Europe).
The aerospace business serves original equipment and aftermarket customers in
worldwide commercial aerospace and defense markets (principally in the U.S.
and Europe) including commercial aircraft, air defense, cargo handling, combat
and support vehicles, commuter aircraft, engines, marine, defense aircraft,
military weaponry, missiles and naval machinery.
Products include all pressure ranges of hose, fittings, adapters and
couplings; hydraulic pumps, motors and cylinders; electric motors and drives;
hydraulic and electronic controls; filters; fluid-evaluation products and
services; and a wide variety of custom-engineered molded and extruded
automotive and industrial plastic products.
Operating income is net sales less operating expenses. Operating expenses
include cost of products sold; selling and general administrative expenses;
and engineering, research and development expenses. Identifiable assets by
business segment include all assets directly identified with those operations.
Corporate assets consist of cash, receivables, properties, deferred income
taxes and deferred charges.
<PAGE>
-55-
NOTES TO FINANCIAL STATEMENTS
NOTE 12 - BUSINESS SEGMENTS (Continued)
<TABLE>
The following data relate to business segments:
<CAPTION>
Depreciation
Identi- and
Operating fiable Amortization Capital
Net Sales Income Assets Expense Expenditures
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1996
Industrial $1,138,501 $ 105,703 $ 765,734 $ 39,941 $ 58,221
Automotive 503,781 35,082 236,113 17,945 17,715
Aerospace 390,633 59,637 255,221 12,927 13,313
---------- ---------- ---------- ---------- ----------
$2,032,915 200,422 1,257,068 70,813 89,249
==========
Corporate (23,847) 30,226 2,660 1,377
Investments in
affiliates - 2,193 - -
---------- ---------- ---------- ----------
$ 176,575 $1,289,487 $ 73,473 $ 90,626
========== ========== ========== ==========
1995
Industrial $1,051,106 $ 121,962 $ 709,503 $ 31,151 $ 58,298
Automotive 494,016 24,107 235,665 19,042 21,848
Aerospace 338,891 38,631 200,315 12,029 12,198
---------- ---------- ---------- ---------- ----------
$1,884,013 184,700 1,145,483 62,222 92,344
==========
Corporate (25,491) 39,679 2,377 1,611
Investments in
affiliates - 38,989 - -
---------- ---------- ---------- ----------
$ 159,209 $1,224,151 $ 64,599 $ 93,955
========== ========== ========== ==========
1994
Industrial $ 963,446 $ 89,281 $ 517,383 $ 30,141 $ 25,682
Automotive 514,273 46,841 227,115 18,215 18,725
Aerospace 316,976 28,114 178,216 11,727 8,533
---------- ---------- ---------- ---------- ----------
$1,794,695 164,236 922,714 60,083 52,940
==========
Corporate (23,167) 41,488 1,988 2,214
Investments in
affiliates - 36,832 - -
---------- ---------- ---------- ----------
$ 141,069 $1,001,034 $ 62,071 $ 55,154
========== ========== ========== ==========
</TABLE>
<PAGE>
-56-
NOTES TO FINANCIAL STATEMENTS
NOTE 13 - NON-U.S. OPERATIONS
U.S. sales include export sales to unaffiliated non-U.S. customers of
$186,132, $150,212 and $133,769 in 1996, 1995 and 1994, respectively.
Currency exchange losses charged to Other income (expenses) - net amounted to
$2,846, $1,849 and $7,834 in 1996, 1995 and 1994, respectively.
The following summary of financial data pertains to the Company and its non-
U.S. operations. The geographic groupings of non-U.S. operations have been
based on similarities of business environments and geographic proximity.
<TABLE>
<CAPTION>
United Elimina- Consoli-
States Europe Other tions dated
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1996
Net sales $1,291,535 $ 626,411 $ 114,969 $ - $2,032,915
Operating income 123,703 51,432 1,440 - 176,575
Identifiable assets 923,037 346,301 212,363 194,407 1,287,294
Total assets 925,230 346,301 212,363 194,407 1,289,487
Total liabilities 802,054 59,786 13,075 31,844 843,071
1995
Net sales $1,175,509 $ 592,799 $ 115,705 $ - $1,884,013
Operating income 111,029 35,707 12,473 - 159,209
Identifiable assets 846,075 361,508 145,971 168,392 1,185,162
Total assets 885,064 361,508 145,971 168,392 1,224,151
Total liabilities 753,749 69,708 10,795 10,973 823,279
1994
Net sales $1,164,914 $ 518,785 $ 110,996 $ - $1,794,695
Operating income 102,066 24,738 14,265 - 141,069
Identifiable assets 655,172 325,400 146,259 162,629 964,202
Total assets 692,004 325,400 146,259 162,629 1,001,034
Total liabilities 594,116 89,236 5,503 7,867 680,988
</TABLE>
<PAGE>
-57-
NOTES TO FINANCIAL STATEMENTS
NOTE 14 - OTHER INFORMATION
1996 1995
---------- ----------
Receivables
Receivables $ 358,744 $ 305,387
Less allowance for doubtful accounts 16,032 13,241
--------- ---------
$ 342,712 $ 292,146
========= =========
Inventories
In-process and finished products $ 202,214 $ 215,365
Raw materials and manufacturing supplies 59,955 53,919
--------- ---------
$ 262,169 $ 269,284
========= =========
Other Current Assets
Deferred income taxes $ 837 $ 1,784
Prepaid expenses and other current assets 44,435 37,005
--------- ---------
$ 45,272 $ 38,789
========= =========
Plants and Properties - at Cost
Land and improvements $ 22,543 $ 22,877
Buildings 205,948 202,940
Machinery and equipment 718,289 686,789
Construction in progress 50,570 46,680
--------- ---------
$ 997,350 $ 959,286
========= =========
Other Assets
Goodwill, net of accumulated amortization of $9,509
and $7,142 in 1996 and 1995, respectively $ 110,005 $ 78,036
Investments in and advances to affiliates 2,193 38,989
Deferred income taxes 28,189 35,368
Receivables, deposits and other assets 37,530 29,992
--------- ---------
$ 177,917 $ 182,385
========= =========
Notes Payable
Commercial paper $ 27,657 $ -
Short-term notes payable to banks 4,162 33,229
--------- ---------
$ 31,819 $ 33,229
========= =========
Other Accrued Liabilities
Employees' compensation and amounts
withheld therefrom $ 111,561 $ 102,833
Taxes, other than income taxes 6,433 12,052
Other accrued liabilities 70,979 68,774
--------- ---------
$ 188,973 $ 183,659
========= =========
<PAGE>
-58-
INVESTOR INFORMATION
Stock Exchanges
TRINOVA's common stock is traded on the New York, Chicago and Pacific Stock
Exchanges, and on the London and Frankfurt Stock Exchanges. Our NYSE ticker
symbol is TNV.
TRINOVA's 6% convertible subordinated debentures are listed on the Luxembourg
Stock Exchange.
Stock Ownership
On December 31, 1996, there were 9,768 record holders of TRINOVA's common
stock. Although exact information is unavailable, TRINOVA estimates there are
approximately 7,000 additional beneficial owners, based upon the 1996 proxy
solicitation.
Dividend Information
Cash dividends have been paid without interruption on common stock since 1933.
The payment of dividends is subject to restrictions described in Note 5 of
Notes to Financial Statements.
Quarterly Common Stock Information
1996 1995
Quarter Ended High Low Close High Low Close
March 31 32.75 27.25 31.88 31.13 23.50 30.63
June 30 36.00 31.25 33.38 35.50 30.00 35.00
September 30 33.75 27.88 31.63 38.75 31.75 33.75
December 31 37.13 29.00 36.38 33.75 26.38 28.63
Dividend Payments per Share of Common Stock
1996 1995
March $ .20 $ .18
June .20 .18
September .20 .18
December .20 .18
$ .80 $ .72
-59-
EXHIBIT (21)
TRINOVA CORPORATION
SUBSIDIARIES OF THE REGISTRANT
The assets and business of all subsidiaries listed below are included in the
1996 consolidated financial statements of the Registrant. In addition to
those named, 5 U.S. and 20 non-U.S. consolidated subsidiaries and 3 affiliated
companies that are accounted for by the cost and/or equity methods are not
disclosed. The undisclosed subsidiaries and affiliated companies in the
aggregate do not constitute a significant subsidiary.
Incorporated or Percent of
Organized - Voting Securities
Company State or Country Owned
- ---------------------------------- ------------------ -----------------
TRINOVA Corporation Ohio Registrant
SUBSIDIARIES OF REGISTRANT
Aeroquip Corporation Michigan 100
Aeroquip International Inc. Delaware 100
Vickers, Incorporated Delaware 100
Vickers International Inc. Delaware 100
Aeroquip A.G. Switzerland 100
Aeroquip Iberica S.A. Spain 100
Aeroquip Inoac Co. Michigan 51
Aeroquip LTD Barbados 100
TRINOVA do Brasil, S/A Brazil 99.5
TRINOVA Canada Inc. Canada 100
TRINOVA GmbH Germany 100
TRINOVA Export Trading Company Virgin Islands 100
TRINOVA Limited United Kingdom 100
TRINOVA Pte. Ltd. Singapore 100
TRINOVA S.A. France 100
TRINOVA S.p.A. Italy 100
Vickers E.S.D. Inc. Delaware 100
Vickers Systems Limited Hong Kong 100
Vickers Systems Limited New Zealand 100
Vickers Systems Pty. Ltd. Australia 100
Vickers Systems Sdn. Bhd. Malaysia 100
-60-
EXHIBIT (23)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of TRINOVA Corporation of our report dated January 22, 1997, included in
Exhibit 13 to Form 10-K.
Our audits also included the financial statement schedule of TRINOVA
Corporation listed in Item 14(a)(2). This schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in Registration
Statement No. 333-1709 on Form S-3 and Post-Effective Amendment No. 2 to
Registration Statement No. 33-9127 on Form S-3 both dated March 14, 1996, and
in the related Prospectus dated March 20, 1996; Registration Statement No.
33-19555 on Form S-3 dated January 15, 1988, and in the related Prospectus;
Post-Effective Amendment No. 2 to Registration Statement No. 33-14682 on Form
S-8 dated April 28, 1989; Registration Statement No. 33-28638 on Form S-8
dated May 10, 1989; Registration Statement No. 33-54059 on Form S-8 dated
June 10, 1994; and Registration Statement No. 33-55399 on Form S-8 dated
September 8, 1994, of our report dated January 22, 1997, with respect to the
financial statements of TRINOVA Corporation incorporated herein by reference,
and our report included in the preceding paragraph with respect to the
financial statement schedule included in this Annual Report (Form 10-K) of
TRINOVA Corporation.
/S/ ERNST & YOUNG LLP
Toledo, Ohio
March 10, 1997
-61-
EXHIBIT (24)
DIRECTOR OF
TRINOVA CORPORATION
ANNUAL REPORT ON FORM 10-K
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of
TRINOVA Corporation, an Ohio corporation ("TRINOVA"), does hereby constitute
and appoint Darryl F. Allen, James E. Kline and William R. Ammann, and each of
them, a true and lawful attorney in his name, place and stead, in any and all
capacities, to sign his name to TRINOVA's Annual Report on Form 10-K for the
year ended December 31, 1996, and any and all amendments to such Form 10-K,
and to cause the same to be filed with the Securities and Exchange Commission,
granting unto said attorneys and each of them full power and authority to do
and perform any act and thing necessary and proper to be done in the premises,
as fully to all intents and purposes as the undersigned could do if personally
present, and the undersigned hereby ratifies and confirms all that said
attorneys or any one of them shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on this 23rd day of January, 1997.
/S/ PURDY CRAWFORD
Purdy Crawford
Director
cjk/wp
<PAGE>
-62-
DIRECTOR OF
TRINOVA CORPORATION
ANNUAL REPORT ON FORM 10-K
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of
TRINOVA Corporation, an Ohio corporation ("TRINOVA"), does hereby constitute
and appoint Darryl F. Allen, James E. Kline and William R. Ammann, and each of
them, a true and lawful attorney in his name, place and stead, in any and all
capacities, to sign his name to TRINOVA's Annual Report on Form 10-K for the
year ended December 31, 1996, and any and all amendments to such Form 10-K,
and to cause the same to be filed with the Securities and Exchange Commission,
granting unto said attorneys and each of them full power and authority to do
and perform any act and thing necessary and proper to be done in the premises,
as fully to all intents and purposes as the undersigned could do if personally
present, and the undersigned hereby ratifies and confirms all that said
attorneys or any one of them shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on this 23rd day of January, 1997.
/S/ JOSEPH C. FARRELL
Joseph C. Farrell
Director
cjk/wp
<PAGE>
-63-
DIRECTOR OF
TRINOVA CORPORATION
ANNUAL REPORT ON FORM 10-K
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of
TRINOVA Corporation, an Ohio corporation ("TRINOVA"), does hereby constitute
and appoint Darryl F. Allen, James E. Kline and William R. Ammann, and each of
them, a true and lawful attorney in his name, place and stead, in any and all
capacities, to sign his name to TRINOVA's Annual Report on Form 10-K for the
year ended December 31, 1996, and any and all amendments to such Form 10-K,
and to cause the same to be filed with the Securities and Exchange Commission,
granting unto said attorneys and each of them full power and authority to do
and perform any act and thing necessary and proper to be done in the premises,
as fully to all intents and purposes as the undersigned could do if personally
present, and the undersigned hereby ratifies and confirms all that said
attorneys or any one of them shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on this 23rd day of January, 1997.
/S/ DAVID R. GOODE
David R. Goode
Director
cjk/wp
<PAGE>
-64-
DIRECTOR OF
TRINOVA CORPORATION
ANNUAL REPORT ON FORM 10-K
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of
TRINOVA Corporation, an Ohio corporation ("TRINOVA"), does hereby constitute
and appoint Darryl F. Allen, James E. Kline and William R. Ammann, and each of
them, a true and lawful attorney in his name, place and stead, in any and all
capacities, to sign his name to TRINOVA's Annual Report on Form 10-K for the
year ended December 31, 1996, and any and all amendments to such Form 10-K,
and to cause the same to be filed with the Securities and Exchange Commission,
granting unto said attorneys and each of them full power and authority to do
and perform any act and thing necessary and proper to be done in the premises,
as fully to all intents and purposes as the undersigned could do if personally
present, and the undersigned hereby ratifies and confirms all that said
attorneys or any one of them shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on this 23rd day of January, 1997.
/S/ PAUL A. ORMOND
Paul A. Ormond
Director
cjk/wp
<PAGE>
-65-
DIRECTOR OF
TRINOVA CORPORATION
ANNUAL REPORT ON FORM 10-K
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of
TRINOVA Corporation, an Ohio corporation ("TRINOVA"), does hereby constitute
and appoint Darryl F. Allen, James E. Kline and William R. Ammann, and each of
them, a true and lawful attorney in his name, place and stead, in any and all
capacities, to sign his name to TRINOVA's Annual Report on Form 10-K for the
year ended December 31, 1996, and any and all amendments to such Form 10-K,
and to cause the same to be filed with the Securities and Exchange Commission,
granting unto said attorneys and each of them full power and authority to do
and perform any act and thing necessary and proper to be done in the premises,
as fully to all intents and purposes as the undersigned could do if personally
present, and the undersigned hereby ratifies and confirms all that said
attorneys or any one of them shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on this 23rd day of January, 1997.
/S/ JOHN P. REILLY
John P. Reilly
Director
cjk/wp
<PAGE>
-66-
DIRECTOR OF
TRINOVA CORPORATION
ANNUAL REPORT ON FORM 10-K
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of
TRINOVA Corporation, an Ohio corporation ("TRINOVA"), does hereby constitute
and appoint Darryl F. Allen, James E. Kline and William R. Ammann, and each of
them, a true and lawful attorney in his name, place and stead, in any and all
capacities, to sign his name to TRINOVA's Annual Report on Form 10-K for the
year ended December 31, 1996, and any and all amendments to such Form 10-K,
and to cause the same to be filed with the Securities and Exchange Commission,
granting unto said attorneys and each of them full power and authority to do
and perform any act and thing necessary and proper to be done in the premises,
as fully to all intents and purposes as the undersigned could do if personally
present, and the undersigned hereby ratifies and confirms all that said
attorneys or any one of them shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on this 23rd day of January, 1997.
/S/ ROBERT H. SPILMAN
Robert H. Spilman
Director
cjk/wp
<PAGE>
-67-
DIRECTOR OF
TRINOVA CORPORATION
ANNUAL REPORT ON FORM 10-K
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of
TRINOVA Corporation, an Ohio corporation ("TRINOVA"), does hereby constitute
and appoint Darryl F. Allen, James E. Kline and William R. Ammann, and each of
them, a true and lawful attorney in his name, place and stead, in any and all
capacities, to sign his name to TRINOVA's Annual Report on Form 10-K for the
year ended December 31, 1996, and any and all amendments to such Form 10-K,
and to cause the same to be filed with the Securities and Exchange Commission,
granting unto said attorneys and each of them full power and authority to do
and perform any act and thing necessary and proper to be done in the premises,
as fully to all intents and purposes as the undersigned could do if personally
present, and the undersigned hereby ratifies and confirms all that said
attorneys or any one of them shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on this 23rd day of January, 1997.
/S/ W. R. TIMKEN, JR.
W. R. Timken, Jr.
Director
cjk/wp
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF FINANCIAL POSITION AND THE CONDENSED STATEMENT OF OPERATIONS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 23,934
<SECURITIES> 0
<RECEIVABLES> 358,744
<ALLOWANCES> 16,032
<INVENTORY> 262,169
<CURRENT-ASSETS> 674,087
<PP&E> 997,350
<DEPRECIATION> 559,867
<TOTAL-ASSETS> 1,289,487
<CURRENT-LIABILITIES> 424,956
<BONDS> 257,727
<COMMON> 139,559
0
0
<OTHER-SE> 306,857
<TOTAL-LIABILITY-AND-EQUITY> 1,289,487
<SALES> 2,032,915
<TOTAL-REVENUES> 2,032,915
<CGS> 1,520,736
<TOTAL-COSTS> 1,520,736
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,813
<INCOME-PRETAX> 153,421
<INCOME-TAX> 50,700
<INCOME-CONTINUING> 102,721
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 102,721
<EPS-PRIMARY> 3.51
<EPS-DILUTED> 3.51
</TABLE>
