SCHEDULE 14A INFORMATION STATEMENT
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PARKER-HANNIFIN CORPORATION
_______________________________________________________________________
(Name of Registrant as Specified in its Charter)
Joseph D. Whiteman, Secretary
______________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
<PAGE>
PARKER-HANNIFIN CORPORATION
6035 PARKLAND BOULEVARD - MAYFIELD HEIGHTS, OHIO 44124-4141
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 22, 1997
The annual meeting of shareholders of Parker-Hannifin Corporation will
be held at the Corporation's headquarters at 6035 Parkland Boulevard,
Mayfield Heights, Ohio 44124, on Wednesday, October 22, 1997, at 9:00 a.m.,
Eastern Daylight Time, for the following purposes:
1. Fixing at five the number of Directors in the class whose three-
year term of office will expire in 2000 and electing five Directors
in such class;
2. Adopting an Amendment to the Corporation's Amended Articles of
Incorporation to increase the authorized Common Shares of the
Corporation from 300,000,000 to 600,000,000;
3. Adopting an Amendment to the Corporation's Amended Articles of
Incorporation to change the principal place of business of the
Corporation in Ohio from the City of Cleveland to the City of
Mayfield Heights;
4. Adopting an Amendment to the Corporation's 1993 Stock Incentive
Program to limit the number of stock options granted to any
individual in a three-year period;
5. Appointing Coopers & Lybrand L.L.P. as independent public
accountants for the fiscal year ending June 30, 1998; and
6. Transacting such other business as may properly come before the
meeting.
Shareholders of record at the close of business on August 29, 1997,
are entitled to vote at the meeting. Please sign and return the enclosed
Proxy promptly. A return envelope is enclosed for your convenience.
By Order of the Board of Directors
JOSEPH D. WHITEMAN
JOSEPH D. WHITEMAN
Secretary
September 22, 1997
<PAGE>
PARKER-HANNIFIN CORPORATION
6035 Parkland Boulevard - Mayfield Heights, Ohio 44124-4141
Web Site: http://www.parker.com
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of the Corporation of proxies to be voted at the
annual meeting of shareholders scheduled to be held on October 22, 1997,
and at all adjournments thereof. Only shareholders of record at the close
of business on August 29, 1997 will be entitled to vote. On that date,
74,430,962 Common Shares were outstanding and entitled to vote at the
meeting, each share being entitled to one vote. The number of Common Shares
entitled to vote on the record date does not reflect the 3-shares-for-2
Common Stock split subsequently paid to shareholders on September 5, 1997.
This Proxy Statement and the form of Proxy are being mailed to shareholders on
September 22, 1997.
Shareholders of the Corporation have cumulative voting rights in the
election of Directors, provided any shareholder gives notice in writing to
the President or a Vice President or the Secretary of the Corporation not
less than 48 hours before the time fixed for holding the meeting that he
desires that the voting at such election be cumulative and an announcement
of the giving of such notice is made upon the convening of the meeting by
the Chairman or the Secretary or by or on behalf of the shareholder giving
such notice. In such event, each shareholder has the right to cumulate
his votes and give one nominee the number of votes equal to the number of
Directors to be elected multiplied by the number of votes to which his
Common Shares are entitled, or he may distribute his votes on the same
principle among two or more nominees, as he sees fit. In the event that
voting at the election is cumulative, the persons named in the Proxy will vote
Common Shares represented by valid Board of Directors' Proxies on a cumulative
basis for the election of the nominees named below, allocating the votes of
such Common Shares in accordance with their judgment.
ELECTION OF DIRECTORS
The Directors of the class elected at each annual election hold office
for terms of three years. The Board of Directors of the Corporation
presently consists of 15 members divided into three classes. The class
whose term expires in 1997 consists of five members, the class whose term
expires in 1998 consists of four members and the class whose term expires
in 1999 consists of six members. Since the last annual meeting of
shareholders, pursuant to authority granted in the Corporation's Code of
Regulations, Hector R. Ortino was elected to the Board of Directors in
January 1997 to a term expiring in 1999 and Debra L. Starnes was elected
to the Board of Directors in July 1997 to a term expiring in 1999. In
addition, in October 1996, Walter Seipp retired from the Board of Directors.
Shareholder approval is sought to fix at five the number of directors
in the class whose term will expire in 2000 and to elect Duane E. Collins,
Allen H. Ford, Allan L. Rayfield, Paul G. Schloemer and Michael A.
Treschow, Directors whose terms of office expire in 1997, to such class.
A plurality of the Common Shares voted in person or by proxy is required
to elect a Director.
Should any nominee become unable to accept nomination or election, the
proxies will be voted for the election of such other person as a Director
as the Board of Directors may recommend. However, the Board of Directors
has no reason to believe that this contingency will occur.
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<PAGE>
NOMINEES FOR ELECTION AS DIRECTORS FOR TERM EXPIRING IN 2000
DUANE E. COLLINS, 61, has served as a Director of the Corporation since
1992. Mr. Collins became President and Chief Executive Officer of the
Corporation in July 1993. Prior to that date, Mr. Collins served as the
Corporation's Vice Chairman of the Board from June 1992 to June 1993 and
Executive Vice President and President, International, from 1987 to 1992.
Mr. Collins also serves as a Director of National City Corporation and The
Sherwin Williams Company.
ALLEN H. FORD, 69, has served as a Director of the Corporation since 1975.
He is Chairman of the Audit Committee and a member of the Nominating and
Pension Committees. Now a Consultant, Mr. Ford was formerly the Senior
Vice President-Finance and Control of The Standard Oil Company
(diversified natural resources). Mr. Ford is also a Director of First
Union Real Estate Investments and Gliatech, Inc.
ALLAN L. RAYFIELD, 62, has served as a Director of the Corporation since
1984. He is a member of the Audit, Compensation and Management
Development and Nominating Committees. Now retired, Mr. Rayfield
previously served as President, Chief Executive Officer and Director of
M/A-COM, Inc. (microwave manufacturing) from November 1993 to December
1994, and President and Chief Operating Officer of M/A-COM, Inc. from
March 1991 to November 1993. Mr. Rayfield is also a Director of Acme
Metals Inc. and Arch Communications Group, Inc.
PAUL G. SCHLOEMER, 69, has served as a Director of the Corporation since
1982. He is a member of the Nominating Committee. Now retired, Mr.
Schloemer was President and Chief Executive Officer of the Corporation from
1984 to 1993. Mr. Schloemer is also a Director of Rubbermaid Incorporated,
AMP Incorporated and Esterline Technologies Corporation.
MICHAEL A. TRESCHOW, 54, was elected to the Board of Directors in July
1996. He is a member of the Audit and Nominating Committees. Mr.
Treschow has been the President and Chief Executive of AB Electrolux
(electrical appliances) in Sweden since April 1997. He was previously
the President and Chief Executive Officer of Atlas Copco AB from
1991 to 1997. Mr. Treschow is also a Director of SKF AB and Saab
Automobile AB.
PRESENT DIRECTORS WHOSE TERMS EXPIRE IN 1998
JOHN G. BREEN, 63, has served as a Director of the Corporation since 1980.
He is Chairman of the Compensation and Management Development Committee
and a member of the Nominating and Pension Committees. Mr. Breen is the
Chairman of the Board and Chief Executive Officer of The Sherwin Williams
Company (paints and coatings). Mr. Breen is also a Director of National
City Corporation, Mead Corporation and Goodyear Tire and Rubber Company.
HECTOR R. ORTINO, 55, was elected to the Board of Directors in January
1997. He is a member of the Audit and Nominating Committees. Mr. Ortino
has been the President and Chief Operating Officer of Ferro Corporation
(specialty materials) since February 1996 and Chief Operating Officer since
September 1996. He was previously Executive Vice President and Chief
Financial Administrative Officer of Ferro from May 1993 to February 1996
and Senior Vice President and Chief Financial Officer of Ferro from January
1991 to May 1993. Mr. Ortino is a Director of Ferro Corporation and
Defiance, Inc.
PATRICK S. PARKER, 67, has served as a Director of the Corporation since
1960. Mr. Parker is the Chairman of the Board of Directors of the
Corporation.
DENNIS W. SULLIVAN, 58, has served as a Director of the Corporation since
1983. Mr. Sullivan is Executive Vice President and, since July 1, 1997,
a member of the Office of the President of the Corporation. Mr. Sullivan
is also a Director of Ferro Corporation and KeyCorp.
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<PAGE>
PRESENT DIRECTORS WHOSE TERMS EXPIRE IN 1999
PAUL C. ELY, JR., 65, has served as a Director of the Corporation since
1984. He is Chairman of the Pension Committee and a member of the
Nominating Committee. Mr. Ely is presently General Partner of Alpha
Partners (venture capital seed financing). Mr. Ely is also a Director
of Tektronix, Inc.
FRANK A. LEPAGE, 70, has served as a Director of the Corporation since
1977. He is a member of the Audit and Nominating Committees. Now
retired, Mr. LePage previously served as Director and Executive Vice
President of The Firestone Tire & Rubber Company (manufacturer of tires
and related products). Mr. LePage is also a Director of Acme Metals Inc.
PETER W. LIKINS, 61, has served as a Director of the Corporation since
1989. He is Chairman of the Nominating Committee and a member of the
Audit and Compensation and Management Development Committees. Dr. Likins
is the President of Lehigh University. Dr. Likins also serves as Director
of Consolidated Edison Company of New York, Inc., Communications Satellite
Corp. and Safeguard Scientifics, Inc.
WOLFGANG R. SCHMITT, 53, has served as a Director of the Corporation since
1992. He is a member of the Compensation and Management Development and
Nominating Committees. Mr. Schmitt is the Chairman of the Board and Chief
Executive Officer of Rubbermaid Incorporated (manufacturer of rubber and
plastic products). He was previously President and Chief Operating
Officer of Rubbermaid from 1991 to 1992. Mr. Schmitt also serves as a
Director of Kimberly-Clark Inc.
DEBRA L. STARNES, 44, was elected to the Board of Directors in July 1997.
She is a member of the Nominating and Pension Committees. Ms. Starnes
has been the Senior Vice President, Petrochemicals of Lyondell
Petrochemical Company (petrochemical production) since January 1997. She
was previously Senior Vice President, Polymers of Lyondell from May 1995 to
January 1997 and Senior Vice President, Petrochemical Management and
Marketing at Lyondell from May 1992 to May 1995.
STEPHANIE A. STREETER, 40, was elected to the Board of Directors in April
1996. She is a member of the Audit and Nominating Committees. Ms.
Streeter is the Group Vice President of Worldwide Office Products of Avery
Dennison Corporation (adhesives and office products). She was previously
Vice President and General Manager of Avery Dennison Brands from November
1993 to May 1996 and Vice President and General Manager of Office Labels
at Avery Dennison from June 1991 to November 1993.
No Director of the Corporation is related to any other Director.
During the fiscal year ended June 30, 1997, there were five meetings of
the Corporation's Board of Directors. Each Director attended at least 75%
of the meetings held by the Board of Directors and the Committees of the
Board on which he or she served except for Mr. Schmitt.
The Audit Committee, which met twice during the fiscal year ended June
30, 1997, is responsible for reviewing with the Corporation's financial
management and its independent auditors the proposed auditing program
(including both the independent and the internal audits) for each fiscal
year, the results of the audits and the adequacy of the Corporation's
internal control structure. This Committee recommends to the Board of
Directors the appointment of the independent auditors for the fiscal year.
The Pension Committee, which met once during the fiscal year ended
June 30, 1997, is responsible for reviewing with the Corporation's
management the funding and investment policies for defined benefit plans
and defined contribution plans sponsored by the Corporation.
The Compensation and Management Development Committee, which met three
times during the fiscal year ended June 30, 1997, is responsible for
annually reviewing and fixing the salaries and other compensation of the
officers of the Corporation, deciding upon the grant of stock options to
the officers and other employees of the Corporation and reviewing
corporate policies and programs for the development of management
personnel.
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<PAGE>
` The Nominating Committee, which met three times during the fiscal year
ended June 30, 1997, is responsible for evaluating and recommending to the
Board qualified nominees for election as Directors of the Corporation and
considering other matters pertaining to the size and composition of the
Board. The Nominating Committee will give appropriate consideration to
qualified persons recommended by shareholders for nomination as Directors
of the Corporation, provided that such recommendations are accompanied by
information sufficient to enable the Committee to evaluate the
qualifications of the nominee. Nominations should be sent to the
attention of the Secretary of the Corporation.
Compensation of Directors. The Corporation compensates Directors,
other than officers who are Directors, for their services. Except as
otherwise indicated below, the annual retainer for such Directors is
$24,000. The fee for attending each Board and Committee meeting is $1,000
for all such Directors other than Committee Chairmen, whose fee is $1,500
for chairing committee meetings. Patrick S. Parker, Chairman of the Board
of Directors, receives an annual retainer of $132,000, plus meeting fees,
club memberships and the use of a leased automobile. Directors may elect
to defer all or a portion of their fees under the Corporation's Deferred
Compensation Plan for Directors (the "Directors Deferral Plan") or to
elect to receive all or a portion of their fees in Common Shares of the
Corporation pursuant to the Corporation's Non-Employee Directors' Stock
Plan.
In August 1996, the Board of Directors terminated the Retirement Plan
for Directors, except with respect to Directors who had already retired
and who continue to receive payments under the Plan. Upon termination,
each Director received credit under the Directors Deferral Plan in a
phantom Parker-Hannifin Common Stock account in an amount equal to the
present value of their vested benefits under the Directors Retirement
Plan. The account balance is non-transferable and must remain in the
Directors Deferral Plan until the retirement of the Director.
The Board of Directors adopted the Non-Employee Directors Stock Option
Plan in August 1996. Each Director who is not a current or retired
employee of the Corporation was granted 1,000 stock options under the
Plan in August 1996 at an option price equal to the then current fair
market value of the Corporation's Common Stock. Such options have a ten-
year term and vest following one year of continued service as a Director.
Mr. Ortino was granted 500 stock options upon identical terms upon his
election to the Board in January 1997.
Compensation Committee Interlocks and Insider Participation. The
following Directors serve as members of the Corporation's Compensation and
Management Development Committee: Messrs. Breen, Likins, Rayfield, and
Schmitt. Mr. Collins, the President and Chief Executive Officer of the
Corporation, serves on the Compensation Committee of The Sherwin Williams
Company. Mr. Breen is the Chairman and Chief Executive Officer of The
Sherwin Williams Company.
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<PAGE>
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Management Development Committee of the Board of
Directors (the "Committee") has furnished the following report on
executive compensation.
The Committee, which consists entirely of four outside non-employee
Directors, has overall responsibility to:
* review the performance and long-term management potential of the
executive officers of the Corporation; and
* review and fix the salaries and other compensation of the
executive officers of the Corporation.
Following review and approval by the Committee, all issues pertaining
to executive compensation are submitted to the full Board of Directors in
conjunction with its approval and review of the Corporation's strategies
and operating plans, thereby assuring that the Corporation's system of
executive compensation is reasonable and appropriate, meets its stated
purpose and effectively serves the interests of the shareholders and the
Corporation.
The Corporation's executive compensation programs are designed to
attract and retain key executives critical to the long-term success of the
Corporation by remaining competitive with other multinational diversified
manufacturing companies of similar size. Comparative compensation
information is used by the Committee to establish competitive salary grade
ranges at the market median for base pay, annual bonus and long-term
compensation. The group of companies used for compensation comparison
purposes is not the same as the S&P Manufacturing (Diversified
Industrials) Index, which is the peer group of companies included in the
performance graph on page 12. Comparative compensation information is
obtained by the Committee from independent surveys of numerous diversified
manufacturers, which the Committee believes is important in order to
establish competitive compensation ranges at the appropriate levels. On
the other hand, the S&P Manufacturing (Diversified Industrials) Index
utilized in the performance graph contains data only with respect to a
limited number of companies that are in businesses similar to the
Corporation, which data is theoretically reflective of the stock
performance of all diversified manufacturers as a whole.
The Corporation's executive compensation programs also are intended to
reward executives commensurate with performance and attainment of pre-
determined financial objectives. Accordingly, compensation of executive
officers is directly and materially linked to both operating and stock
price performance, thus aligning the financial interests of the
Corporation's executives with those of its shareholders.
Compensation for the Corporation's executives consists of three
primary elements:
1. A base salary within a competitively established range. The
specific base salary within the range is determined by length
of service and individual contributions and performance as
measured against pre-established goals and objectives. Goals
and objectives for each executive vary in accordance with each
executive's responsibilities and are established by each
executive's supervisor.
2. An annual cash incentive bonus that is comprised of two
components:
a. An amount that is determined by the Corporation's pre-tax
return on average assets as compared to the Corporation's
annual plan established at the beginning of the fiscal year
(the "Target Incentive Bonus"); and
b. An amount that is determined based on the return on division
net assets for the divisions in each executive's individual
operating unit (or the average return for all divisions for
corporate staff executive officers) (the "RONA Bonus").
The target amounts of the annual cash incentive bonuses are
established in such a manner that base salary plus the target
bonuses will be within the competitively determined total annual
compensa-
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<PAGE>
tion range mentioned above. Target annual cash incentive bonuses
represent approximately 35-45% of total targeted annual compensation
for the executive officers with operational profit and loss responsi-
bility (including the Chief Executive Officer) and 25-35% of total
targeted annual compensation for the other executive officers.
The Chief Executive Officer, with the approval of the Committee,
also has the authority to establish additional annual incentive
programs for operating executives. In fiscal year 1997, under a
Volume Incentive Plan, operating group presidents had the oppor-
tunity to earn an additional bonus of 1% of base salary for each
1% of sales by which their group exceeded their previous year's
sales by between 7.5% and 12.5%, and an additional bonus of 2% of
base salary for each 1% of sales by which their group exceeded their
previous year's sales by more than 12.5%; subject, however, to an
overall maximum of 15% of the participant's base salary. Acqui-
sitions may only account for up to 5% of the increase in sales.
Also, sales growth above 12.5% resulted in additional payment under
the Plan only if the group exceeded corporate goals with respect to
its return on sales and its asset/sales ratio. An identical Volume
Incentive Plan has been adopted for fiscal year 1998.
3. Long-term incentive compensation that is comprised of two
components:
a. A long-term incentive plan ("LTIP") award that is based upon
the Corporation's actual average return on equity for a three
fiscal year period, payable in restricted stock (unless the
participant elects to receive cash pursuant to an election under
the Corporation's Executive Deferral Plan). The amount of the
LTIP award in shares is calculated by dividing a target LTIP
dollar value (adjusted for risk of forfeiture) by the market
price of the Corporation's Common Stock at the beginning of the
three-year performance period. The target LTIP value is estab-
lished by the Committee at the market median of comparative LTIP
compensation.
b. A stock option grant determined by utilizing the Black-
Scholes valuation model to convert a target stock option dollar
value (adjusted for risk of non-vesting) into the number of
stock options to be granted. The target stock option value is
established by the Committee at the market median of comparative
stock option compensation. Stock options are granted with an
exercise price equal to the fair market value of the Corpora-
tion's Common Stock on the day of grant and grants are generally
exercisable between one and ten years from the date granted.
Incentive compensation for the Corporation's executives is
significantly "at risk", based upon the financial performance of the
Corporation. Indeed, more than one-half of each executive's targeted
total compensation (including base salary, annual bonus, LTIP payouts and
stock options) may fluctuate significantly from year to year because it is
directly tied to business and individual performance.
Long-term incentive programs are designed to link the interests of the
executives with those of the stockholders. LTIP awards, whether paid in
cash or restricted stock, focus on long-term return on equity and provide an
incentive to increase the stock price during the three-year performance period,
both of which are directly related to enhancing shareholder value. Restricted
stock awards build stock ownership and encourage a long-term focus on share-
holder value, since the stock is restricted from being sold, transferred or
assigned for a specified period. Stock option grants provide an incentive
that aligns the executive's interests with those of the shareholders,
since stock options will provide value to the executive only when the
price of the Corporation's stock increases above the option grant price.
In August 1996, the Board of Directors, at the recommendation of the
Committee, adopted stock ownership guidelines that are designed to
encourage the accumulation and retention of the Corporation's Common Stock
by its Directors, executive officers and other key executives. These
guidelines, stated as a multiple of executives' base salaries and of
Directors' annual retainer, are as follows: Chief Executive Officer:
three times; Vice Presidents: two times; other executive officers and
group presidents: one time; and non-officer Directors: four times. The
recommended time period for reaching the above guidelines is five years.
The Chief Executive Officer reviews compliance with this policy with the
Committee on an annual basis.
The Corporation's executive compensation philosophy is specifically
evident in the compensation paid
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<PAGE>
during the most recent fiscal year to the Corporation's President and Chief
Executive Officer, Duane E. Collins. Mr. Collins' increase in base salary
from fiscal 1996 to fiscal 1997 of 6.25% is reflective of his "outstanding"
performance rating for fiscal 1996. In addition, based on the Corporation's
fiscal 1997 operating plan, Mr. Collins was entitled to receive 100% of his
Target Incentive Bonus of $300,000 if the Corporation's actual pre-tax return
on average assets, adjusted primarily for acquisitions and currency transac-
tions, was 14.6%. A minimum payout of 15% of the Target Incentive Bonus was
established at a 3.4% pre-tax return on average assets and a maximum payout of
150% of the Target Incentive Bonus was established at a 17.8% pre-tax return
on average assets. During the fiscal year ended June 30, 1997, the
Corporation's adjusted pre-tax return on average assets was 14.96% and
each executive officer, including Mr. Collins, received an amount equal to
105.9% of his Target Incentive Bonus, which is included in the "Bonus"
column of the Summary Compensation Table on page 8.
Mr. Collins' RONA Bonus was targeted at $377,550 based upon an
approximate 31.8% average return on division net assets. The average
return on division net assets was 33.8%, resulting in a RONA Bonus payment
to Mr. Collins of $400,484, which is included in the "Bonus" column of the
Summary Compensation Table on page 8. The other executive officers
also received RONA Bonuses based upon the return on division net assets by
their respective operating units (or the average return for all divisions
for corporate staff executive officers).
Based on the Corporation's average return on equity of 19.18% for the
three fiscal years ended June 30, 1997, Mr. Collins and the other
executive officers received a payment under the 1995-96-97 Long Term
Incentive Plan in the form of either restricted shares or contributions to
their Executive Deferral Plan accounts in an amount equal to the value of
the restricted shares earned, as reported in the "LTIP Payouts" column of
the Summary Compensation Table on page 8. Such payment represents
186.47% of the target payment that would have been achieved had the
Corporation achieved its return on equity goal of 14% during such period.
During fiscal year 1997, Mr. Collins and the other executive officers
also received a long-term incentive award as described in the LTIP table
on page 10 and a stock option grant as reported in Option Grants Table on
page 9.
During the past fiscal year, the Corporation once again recorded all-
time sales and earnings records, exceeding the prior year's record
performance as well as forecasted performance. Accordingly, incentive
compensation payable to each executive, including Mr. Collins, exceeded
the target levels of annual compensation established by the Committee at
the beginning of the fiscal year and greatly exceeded the 1995-96-97 LTIP
target compensation.
During 1993, the Omnibus Budget Reconciliation Act of 1993 (the "Act")
was enacted by Congress. The Act includes potential limitations on the
deductibility of compensation in excess of $1 million paid to the
Corporation's Chief Executive Officer and four other highest paid
executive officers beginning in fiscal year 1995. The Committee has taken
or is taking the necessary actions to ensure the deductibility of compensation
paid by the Corporation to such individuals, including seeking amendment to the
1993 Stock Incentive Program.
JOHN G. BREEN PETER LIKINS
JOHN G. BREEN, CHAIRMAN DR. PETER W. LIKINS
ALLAN L. RAYFIELD WOLFGANG R. SCHMITT
ALLAN L. RAYFIELD WOLFGANG R. SCHMITT
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EXECUTIVE COMPENSATION
The following table summarizes compensation paid by the Corporation
for each of the last three fiscal years to its Chief Executive Officer and
each of the other four most highly compensated executive officers:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
___________________________________ ______________________
Awards Payouts
__________ _______
Securities
Other Annual Underlying LTIP All Other
Fiscal Compensation Options Payouts Compensation
Name and Principal Position Year Salary ($) Bonus ($) ($)(a) (#)(b) ($)(c) ($)(d)
___________________________________ _______ __________ _________ ____________ __________ __________ ___________
<S> <C> <C> <C> <C> <C> <C> <C>
Duane E. Collins, 1997 830,880 718,184 14,222 88,500 2,898,556 11,531
President and Chief Executive 1996 783,473 611,981 18,068 99,000 988,348 14,570
Officer 1995 680,004 659,082 8,066 45,000 225,798 20,078
Dennis W. Sullivan, 1997 551,256 358,129 7,137 39,000 1,270,554 12,814
Executive Vice President 1996 525,000 323,325 8,144 56,250 436,055 12,934
1995 500,004 417,252 8,202 23,850 173,121 20,432
Michael J. Hiemstra, 1997 376,392 215,491 2,939 18,000 678,972 12,637
Vice President - 1996 361,920 199,074 6,574 22,500 232,553 14,672
Finance and Administration 1995 351,348 242,837 2,648 14,400 120,483 19,519
Donald A. Zito, 1997 331,500 239,672 8,467 18,000 678,972 13,338
Vice President, and President, 1996 318,744 236,557 7,015 22,500 232,553 13,502
Fluid Connectors Group 1995 300,000 583,380 705 14,400 97,868 19,879
Stephen L. Hayes, 1997 314,196 235,623 9,727 18,000 678,972 11,448
Vice President, and President, 1996 299,244 215,668 9,734 22,500 232,553 13,507
Parker Bertea Aerospace Group 1995 285,000 166,797 3,823 14,400 107,427 15,163
<FN>
(a) No executive officers named in the Summary Compensation Table received
personal benefits or perquisites in excess of the lesser of $50,000 or
10% of his total compensation reported in the Salary and Bonus columns.
Reported in this column is annual compensation consisting of amounts
reimbursed by the Corporation for the payment of income taxes on certain
executive perquisites.
(b) All option grants have been adjusted for the 3-shares-for-2 Common Stock
split paid on September 5, 1997.
(c) For fiscal 1997 the amounts represent contributions to the executives'
Executive Deferral Plan ("EDP") accounts made under the 1995-96-97 Long
Term Incentive Plan. For fiscal 1996 and 1995 the amounts represent the
dollar value of restricted shares issued as payments under the 1994-95-96
and 1993-94-95 Long Term Incentive Plans, respectively, based on the
Corporation's stock price on the date of issuance of the shares. The
restricted shares and EDP contributions are subject to a three-year
vesting period, with accelerated vesting in the event of the death,
disability or normal retirement of the Plan participant. Dividends are
paid by the Corporation on the restricted shares. The number and value of
the aggregate restricted stock holdings for each of the above-named
executive officers as of June 30, 1997 was as follows: Mr. Collins,
51,266 shares with a value of $2,074,116; Mr. Sullivan, 26,730 shares with
a value of $1,081,451; Mr. Hiemstra, 15,828 shares with a value of
$640,375; Mr. Zito, 14,564 shares with a value of $589,215; and Mr. Hayes,
13,196 shares with a value of $533,868. The number of restricted shares
has been adjusted for the 3-shares-for-2 Common Stock split paid on
September 5, 1997.
(d) Represents matching contributions by the Corporation to the Parker
Hannifin Retirement Savings Plan and the Parker Hannifin Savings
Restoration Plan.
</FN>
</TABLE>
- 8 -
<PAGE>
The following table summarizes stock option grants by the Corporation
during the fiscal year ended June 30, 1997 to each of the executive officers
identified in the Summary Compensation Table on page 8:
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1997
Individual Grants
_____________________________________________________
Number of % of Total Potential realizable value at
Securities Options Exercise assumed annual rates of stock
Underlying Granted to Or Base price appreciation for option term (b)
Options Employees Price Expiration _______________________________________
Name Granted (#)(a) in Fiscal 1997 ($/Sh) Date 5% ($) 10% ($) 10.68% ($)(c)
___________________ _______________ ______________ ________ __________ ___________ ___________ _____________
<S> <C> <C> <C> <C> <C> <C> <C>
Duane E. Collins 88,500 6.5% $24.667 8/14/06 1,372,812 3,479,112 3,839,042
Dennis W. Sullivan 39,000 2.9% $24.667 8/14/06 604,968 1,533,168 1,691,781
Michael J. Hiemstra 18,000 1.3% $24.667 8/14/06 279,216 707,616 780,822
Donald A. Zito 18,000 1.3% $24.667 8/14/06 279,216 707,616 780,822
Stephen L. Hayes 18,000 1.3% $24.667 8/14/06 279,216 707,616 780,822
<FN>
(a) Options are exercisable on the date following completion of one year of
continuous employment after the date of grant (i.e., August 15, 1997).
Restorative or "reload" option rights are attached to each option and
up to two reload options will be granted upon exercise, subject to
certain provisions, if the exercise price is paid using shares of
the Corporation's common stock owned by the optionee. Fiscal 1997
grants and exercise prices have been adjusted for the 3-shares-for-2
Common Stock split paid on September 5, 1997.
(b) The potential realizable value illustrates the value that might be
recognized upon the exercise of the options immediately prior to the
expiration of their term, assuming the specified compounded rates of
appreciation over the entire term of the option. Shareholders of the
Corporation, as a group, would realize $1,728,684,426 and $4,380,998,076
at assumed annual rates of appreciation of 5% and 10%, respectively, over
the ten-year life of the options. There can be no assurance that the
amounts reflected in this table will be achieved.
(c) Represents the Corporation's actual rate of stock price appreciation over
the 10-year period ending June 30, 1997.
</FN>
</TABLE>
The following table summarizes exercises of stock options during the
fiscal year ended June 30, 1997 by each of the executive officers identified
in the Summary Compensation Table on page 8 and the fiscal year-end value of
unexercised options for such executive officers:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR-END OPTION VALUES
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money
Shares Value at FY-End (#)(a) Options at FY-End ($)
Acquired on Realized ___________________________ ___________________________
Name Exercise (#)(a) ($) Exercisable / Unexercisable Exercisable / Unexercisable
___________________ _______________ ________ ___________________________ ___________________________
<S> <C> <C> <C> <C>
Duane E. Collins 19,125 419,156 319,500 / 88,500 7,175,379 / 1,397,565
Dennis W. Sullivan 16,875 242,775 237,375 / 39,000 6,648,104 / 615,876
Michael J. Hiemstra 19,125 414,375 175,500 / 18,000 4,514,770 / 284,251
Donald A. Zito - - 144,000 / 18,000 3,623,343 / 284,251
Stephen L. Hayes 15,000 319,614 60,000 / 18,000 1,227,743 / 284,251
<FN>
(a) Adjusted to reflect the 3-shares-for-2 Common Stock split paid on
September 5, 1997.
</FN>
</TABLE>
- 9 -
<PAGE>
The following table summarizes awards by the Corporation during the
fiscal year ended June 30, 1997 to each of the executive officers identified
in the Summary Compensation Table on page 8 under the Corporation's Long Term
Incentive Plan:
<TABLE>
<CAPTION>
LONG TERM INCENTIVE PLAN - AWARDS IN FISCAL 1997
Estimated Future Payouts under
Number of Performance or Non-Stock Price-Based Plans
Shares Other Period Until ________________________________________
Name (#) Maturation or Payout Threshold (#) Target (#) Maximum (#)
___________________ _________ ____________________ _____________ __________ ___________
<S> <C> <C> <C> <C> <C>
Duane E. Collins 23,398.5 3 Years 5,849.6 23,398.5 46,797.0
Dennis W. Sullivan 10,336.5 3 Years 2,584.1 10,336.5 20,673.0
Michael J. Hiemstra 5,911.5 3 Years 1,477.9 5,911.5 11,823.0
Donald A. Zito 5,911.5 3 Years 1,477.9 5,911.5 11,823.0
Stephen L. Hayes 5,911.5 3 Years 1,477.9 5,911.5 11,823.0
</TABLE>
Target awards under the Corporation's Long Term Incentive Plan ("LTIP")
during the last fiscal year were made in the form of restricted shares of the
Corporation's Common Stock and entitle each executive officer to receive a
pro rata share of his award based upon the Corporation's actual average return
on equity (threshold of 8%; target of 14%; maximum of 20%) for the three fiscal
years ending June 30, 1999. Awards are payable in August 1999. Executive
officers will receive cash in lieu of restricted shares under the LTIP if they
are retired at the time of payment or if they elect, prior to May 31, 1998, to
defer the amount earned under the LTIP pursuant to the Corporation's Executive
Deferral Plan. The cash equivalent will be calculated based upon the value of
the Corporation's Common Shares at the end of the three-year period. The
target number of shares awarded under the LTIP and the estimated future payouts
have been adjusted for the 3-shares-for-2 Common Stock split paid on
September 5, 1997.
PENSION PLAN TABLE
The following table summarizes the estimated annual benefits payable upon
retirement to the executive officers identified in the Summary Compensation
Table on page 8:
Years of Service
________________
Remuneration 15 or more
____________ ________________
$ 300,000 $ 165,000
500,000 275,000
700,000 385,000
900,000 495,000
1,100,000 605,000
1,300,000 715,000
1,500,000 825,000
1,700,000 935,000
1,900,000 1,045,000
The foregoing table sets forth the straight-life annuity payable under
the Corporation's Supplemental Executive Retirement Benefits Program at the
normal retirement age of 65. The years of service under the Program for
each of the executive officers identified in the Summary Compensation Table
on page 8, at their respective retirement dates, except for Mr. Zito, will
be as follows: Mr. Collins, 40 years; Mr. Sullivan, 44 years; Mr. Hiemstra, 25
years; and Mr. Hayes, 34 years. Mr. Zito has announced his early retirement
effective September 30, 1997 at which time he will have 35 years of service
under the Program (but will receive a reduced benefit in accordance with the
terms of the Program due to his age). The Program provides an annual benefit
based upon the average of the participant's three highest years of cash compen-
- 10 -
<PAGE>
sation (Salary, RONA Bonus and Target Incentive Bonus) with the Corporation.
Benefits payable under the Program are based on calendar year compensation.
Since the amounts set forth in the "Salary" and "Bonus" columns in the Summary
Compensation Table on page 8 are determined on a fiscal year basis and since
the amounts set forth in the "Bonus" column for Mr. Zito in fiscal 1996 and
1995 and Mr. Hayes in fiscal 1997 and 1996 include payments received under the
Volume Incentive Plan (which is not included in determining benefits under the
Program), such amounts do not reflect the benefits payable under the Program.
If the benefits were to be payable to each named participant based on
retirement as of June 30, 1997, the average of the three highest calendar
years of cash compensation included in determining benefits under the Program
for each of the named participants would be as follows: Mr. Collins,
$1,316,404; Mr. Sullivan, $856,991; Mr. Hiemstra, $564,902; Mr. Zito,
$539,474; and Mr. Hayes, $440,427. Benefits are subject to reduction for
payments received under the Corporation's Retirement Plan plus 50% of
primary social security benefits.
"Change in Control" Severance Agreements with Officers. The
Corporation has entered into separate agreements (collectively the
"Agreements") with Messrs. Collins, Sullivan, Hiemstra, Zito and Hayes.
The Agreements are designed to retain the executives and provide for
continuity of management in the event of any actual or threatened change
in the control of the Corporation. Each Agreement only becomes operative
upon a "Change in Control" of the Corporation, as that term is defined in
the Agreements, and the subsequent termination of the employment of the
executive pursuant to the terms of the Agreement. A Change in Control of
the Corporation shall be deemed to have occurred if and when: (i) subject
to certain exceptions, any "person" (as such term is used in Sections
13(d)(2) and 14(d)(2) of the Securities Exchange Act of 1934, as amended)
is or becomes a beneficial owner, directly or indirectly, of securities of
the Corporation representing 20% or more of the combined voting power of
the Corporation's then outstanding securities; (ii) during any period of
twenty-four consecutive months, individuals who at the beginning of such
twenty-four month period were Directors of the Corporation (the "Incumbent
Board") cease to constitute at least a majority of the Board of Directors
of the Corporation, unless the election, or nomination for election, of
any person becoming a Director subsequent to the beginning of such twenty-
four month period was approved by a vote of at least two-thirds of the
Incumbent Board; (iii) the Corporation enters into a merger, consolidation
or other reorganization, or sells all its assets, unless (a) immediately
following the business combination: (1) more than 50% of the total voting
power eligible to elect directors of the resulting corporation is
represented by shares that were Common Shares immediately prior to the
business combination, (2) subject to certain exceptions, no person becomes
the beneficial owner, directly or indirectly, of 20% or more of the voting
power of the corporation resulting from the business combination, and (3)
at least a majority of the members of the board of directors of the
resulting corporation were members of the Incumbent Board at the time of
the Board of Directors of the Corporation's approval of the execution of
the initial agreement providing for such business combination, or (b) the
business combination is effected by means of the acquisition of Common
Shares from the Corporation, and the Board of Directors of the Corporation
approves a resolution providing expressly that such business combination
does not constitute a "Change in Control"; or (iv) the shareholders of the
Corporation approve a plan of complete liquidation or dissolution of the
Corporation.
Each Agreement provides that, if the employment of the executive is
terminated during the three years following a Change in Control of the
Corporation, either by the Corporation without "Cause" (as defined in the
Agreements) or by the executive for "Good Reason" (as defined in the
Agreements and described below), the executive shall be entitled to
receive (a) pro rata salary and bonus for the year of termination of
employment; (b) severance pay equal to three times the executive's annual
salary and bonus; (c) continuation of welfare benefits (e.g., medical,
life insurance, disability coverage) for a period of three years; (d) to the
extent not previously received, all amounts previously deferred under the
Corporation's non-qualified income deferral plans together with a "make
whole" amount designed to compensate the executive for the lost
opportunity to continue to defer receipt of such income (and the earnings
thereon) pursuant to elections made under such deferral plans; and (e) a
"gross-up" payment to offset the effect, if any, of the excise tax imposed
by Section 4999 of the Internal Revenue Code. "Good Reason" for
termination of employment by the executive includes, without limitation,
diminution in duties, reduction in compensation or benefits or
- 11 -
<PAGE>
relocation. In addition, termination of employment by the executive for
any or no reason during the 180-day period beginning on the 91st day after the
Change in Control shall constitute Good Reason.
A Change in Control of the Corporation also has an effect under other
executive compensation plans of the Corporation, as follows: (1) any
outstanding unvested stock option held by an executive vests immediately
upon a Change in Control; (2) any outstanding unvested restricted stock
issued to an executive pursuant to the Corporation's Long Term Incentive
Plans ("LTIP") vests immediately in the event of a Change in Control; (3)
any outstanding LTIP award to an executive will be paid in full in cash
upon a Change in Control, at the target amount or on the basis of
corporate financial performance to the date of the Change in Control,
whichever is greater; (4) if previously elected by the executive, upon a
Change in Control, all amounts previously deferred by the executive under
the Executive Deferral Plan, together with the "make whole" amount
(described in subsection (d) of the preceding paragraph), will be paid to
the executive; and (5) upon a Change in Control, each participant under
the Corporation's Supplemental Executive Retirement Benefits Program will
receive three additional years of age and service credit under the Program
and will receive a lump-sum payment equal to the present value of the
participant's vested benefit under the Program.
COMMON SHARE PRICE PERFORMANCE GRAPH
The following graph sets forth a comparison of the cumulative share-
holder return on the Corporation's Common Shares with the S&P 500 Index and
the S&P Manufacturing (Diversified Industrials) Index during the period
June 30, 1992 through June 30, 1997, assuming the investment of $100 on
June 30, 1992, and the reinvestment of dividends.
<TABLE>
<CAPTION>
Comparison of Five Year Cumulative Total Return Among
Parker-Hannifin Corporation, the S&P 500 Index and the
S&P Manufacturing (Diversified Industrials) Index
6/30/92 6/30/93 6/30/94 6/30/95 6/30/96 6/30/97
<S> <C> <C> <C> <C> <C> <C>
Parker-Hannifin Corporation 100 117 155 202 241 351
S&P 500 Index 100 114 115 145 183 247
S&P Manufacturing (Diversified Industrials) Index 100 119 132 175 223 332
</TABLE>
- 12 -
<PAGE>
ADOPTION OF AMENDMENTS TO AMENDED ARTICLES OF INCORPORATION
Increase in Authorized Shares. The Board of Directors recommends that
the shareholders adopt an amendment to the Corporation's Amended Articles
of Incorporation to increase the number of authorized Common Shares, $.50
par value ("Common Shares"), from 300,000,000 to 600,000,000. This action
would increase the total authorized shares of the Corporation from
303,000,000 to 603,000,000. The shares would consist of 600,000,000
Common Shares and 3,000,000 shares of Serial Preferred Stock.
On July 10, 1997, the Board of Directors approved a 3-shares-for-2
stock split of the Common Shares payable September 5, 1997 to
shareholders of record on August 21, 1997. The stock split increased by
50% the number of Common Shares outstanding on September 5, 1997. As of
September 10, 1997 there were 111,633,754 Common Shares issued and
outstanding, 111,633,754 Common Shares reserved for issuance under the
1997 Shareholder Rights Agreement, and 7,711,280 Common Shares
reserved for issuance of restricted stock and upon the exercise of stock
options held by employees and Directors under Stock Option and Stock Incentive
Plans, leaving only 69,021,212 authorized, unissued and unreserved Common
Shares. As of September 10, 1997, there was no Serial Preferred Stock issued.
The availability of additional shares will enhance the Corporation's
flexibility in connection with possible future actions, such as stock
dividends, stock splits, financing alternatives, employee benefit
programs, acquisitions or other corporate actions. Although the
Corporation has no present plans, arrangements, understandings or
commitments to issue additional Common Shares, the Board of Directors
believes that it is in the best interests of the Corporation to have the
flexibility to issue such Common Shares without seeking shareholder
approval at the time possible actions are identified. The Board of
Directors will determine whether, when and on what terms the issuance of
Common Shares may be warranted in connection with any of the foregoing
purposes.
The availability for issuance of additional Common Shares could enable
the Board of Directors to render more difficult or discourage an attempt
to obtain control of the Corporation. For example, the issuance of Common
Shares in a public or private sale, merger or similar transaction would
increase the number of outstanding shares, thereby possibly diluting the
interest of a party attempting to gain control of the Corporation. The
Corporation is not aware, however, of any pending or threatened efforts to
obtain control of the Corporation.
The additional Common Shares, like the presently authorized Common
Shares, will not be subject to preemptive rights. The additional shares
may be issued by the Board of Directors without further authorization by
the shareholders, except in accordance with any requirements of applicable
law or if required by the policies of the New York Stock Exchange. It is
possible that under certain circumstances the issuance of such shares may
result in dilution of shareholders' voting rights and per share equity in
the earnings and assets of the Corporation.
Change in Principal Place of Business. In August 1997, the
Corporation moved to a new state-of-the art headquarters facility in
Mayfield Heights, Ohio from its previous headquarters in Cleveland, Ohio.
Accordingly, the Board of Directors recommends that the Corporation adopt
an amendment to the Corporation's Amended Articles of Incorporation to
change the location of the Corporation's principal place of business in
the State of Ohio from Cleveland to Mayfield Heights.
Vote Required for Adoption of the Amended Articles. The increase in
the number of authorized shares and the change in the location of the
Corporation's principal place of business would be effected by the
adoption of amendments to the Amended Articles of Incorporation. No
change other than the increase in the number of authorized Common Shares
from 300,000,000 to 600,000,000 and the change in the location of the
Corporation's principal place of business will be made in the existing
Amended Articles. Adoption of each of the amendments to the Amended
Articles of Incorporation requires the affirmative vote of the holders of
at least two-thirds of the outstanding Common Shares.
The Board of Directors unanimously recommends a vote FOR adoption of
the amendments to the Amended Articles of Incorporation.
- 13 -
<PAGE>
AMENDMENT TO 1993 STOCK INCENTIVE PROGRAM
General. In 1993, the shareholders of the Corporation approved the
1993 Stock Incentive Program (the "1993 Program") in order to permit the
Corporation to continue to provide a long-term incentive to key employees
by encouraging them to participate in the Corporation's anticipated future
growth through the ownership of the Corporation's Common Shares made
available through the grant of stock options and other forms of stock
incentives. The 1993 Program permits the Corporation to grant to key
employees non-qualified stock options ("NQSOs"), incentive stock options
("ISOs"), stock appreciation rights, restricted stock, incentive shares and
dividend equivalent rights. The 1993 Program is administered by the
Compensation and Management Development Committee of the Board of
Directors, which must be comprised of at least three non-employee Directors
of the Corporation. The 1993 Program provides for the annual grant of
awards in an amount not in excess of 1.5% of the Common Shares outstanding
on June 30 of the preceding fiscal year, provided that Common Shares available
for awards in any fiscal year that are not utilized will be available for use
in subsequent years. In no event will the number of Common Shares available
for awards in any fiscal year exceed 2.5% of the Common Shares outstanding on
June 30 of the previous fiscal year. The amount and terms of any awards are
subject to the sole discretion of the Committee; provided, however, that all
stock option exercise prices must be at least 100% of the fair market value
of the Common Shares at the time of grant.
Subject to limited exceptions, the Board of Directors may amend the
1993 Program or any award granted thereunder without the approval of the
shareholders. The 1993 Program will continue in effect until terminated
by the Board of Directors. The New York Stock Exchange closing price for
the Corporation's Common Shares on September 10, 1997 was $42.50.
Eligibility. The persons eligible to receive awards under the 1993
Program are those key salaried employees of the Corporation or its
subsidiaries with executive, managerial, technical or professional
responsibility, including an officer who is also a Director. The
Committee, in its sole discretion, selects those persons entitled to
participate in the 1993 Program. There are approximately 900 employees of
the Corporation eligible to participate in the 1993 Program.
The Committee determines, subject to the terms of the 1993 Program,
the individuals to whom awards will be granted, the number and type of
awards to be granted and the terms and conditions of any award granted.
The Committee is also authorized to adopt rules, guidelines and practices
governing the 1993 Program and to interpret the provisions of the 1993
Program and any awards.
Income Tax Treatment of Options. A NQSO issued under the 1993 Program
will not result in any taxable income to the optionee or deduction to the
Corporation at the time it is granted. The holder of a NQSO will be deemed
to have received compensation, taxable as ordinary income, at the time of
exercise of the option in an amount equal to the difference between the fair
market value of the Common Shares at the time of exercise and the option
price, and the Corporation will at the same time become entitled to a tax
deduction of like amount. If the Common Shares acquired are later sold or
exchanged, the difference between the sale price and the fair market value
of the shares on the date of exercise of the option is taxable as long-term
or short-term capital gain or loss depending on the holding period.
Generally there are no federal income tax consequences to the
Corporation or to the recipient of ISOs either at the time of grant or at the
time of exercise of such options, except that the excess of the fair market
value at the time of exercise of Common Shares acquired on exercise of ISOs
over the option price may be subject to the alternative minimum tax. If
Common Shares acquired on exercise of ISOs are held for at least two years
after the date of grant and for one year after acquisition of the Common
Shares by the optionee upon exercise, then any gain or loss on subsequent
disposition of the Common Shares will be treated for federal income tax
purposes as long-term capital gain or loss. If the foregoing holding period
requirements are not met, gain recognized on disposition of the Common Shares
is taxable as ordinary income to the optionee to the extent of the excess, if
any, of the fair market value of the Common Shares acquired on the exercise
date over the option price, and the Corporation will become entitled to a
deduction in the same
- 14 -
<PAGE>
amount. Any further gain or loss to the optionee will be taxed as short-term
or long-term capital gain depending on the holding period.
Amendment. The Board of Directors seeks approval to amend the 1993
Program solely with respect to limiting the number of stock options
that may be granted to any individual in a three-year period. Other than this
amendment, the 1993 Program will remain as currently in effect. Section
162(m) of the Internal Revenue Code generally disallows a tax deduction to
public companies for compensation over $1 million paid, or otherwise
taxable, to persons named in the Summary Compensation Table and employed
by the Company at the end of the applicable year. Qualifying performance-
based compensation will not be subject to the deduction limit if certain
requirements are met. In the case of stock options, one requirement is
that the 1993 Program state a maximum number of shares with respect to
which stock options may be granted during a specified period. The 1993
Program, as amended, provides that no employee shall be granted stock
options for more than 500,000 shares of Common Stock in a three-year
period, thereby satisfying the new requirement.
Set forth below is a table showing the number of stock options which
were outstanding as of August 21, 1997 and the number and dollar value of
shares of restricted stock issued for fiscal year 1997 under the 1993
Program for each of the named executive officers in the Summary
Compensation Table on page 8, all current executive officers as a
group, and all employees (except executive officers) as a group:
Number Number of Shares (a)
of and Value of Restricted
Name Options (a) Stock Issued for FY97
Duane E. Collins 321,990 - -
Dennis W. Sullivan 160,200 - -
Michael J. Hiemstra 75,735 - -
Donald A. Zito 63,000 - -
Stephen L. Hayes 75,735 - -
All current executive
officers as a group 1,040,408 24,414 $ 1,047,768
All employees (except
executive officers)
as a group 1,998,645 10,548 $ 452,685
(a) All share amounts have been adjusted for the 3-shares-for-2 Common Stock
split paid on September 5, 1997.
Approval of the amendment to the 1993 Program requires the affirmative
vote of the holders of at least a majority of the votes present or
represented and entitled to vote on the proposal at the Annual Meeting.
The Board of Directors unanimously recommends a vote FOR approval of
the amendment.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee and the Board of Directors recommend the
appointment of Coopers & Lybrand L.L.P. as certified public accountants to
examine the financial statements of the Corporation as of and for the
fiscal year ending June 30, 1998. Coopers & Lybrand L.L.P. has made the
annual audit of the Corporation's accounts since its organization in 1938.
A representative of Coopers & Lybrand L.L.P. is expected to be present at
the meeting with an opportunity to make a statement if he desires to do so
and to respond to appropriate questions. Ratification of the appointment
of Coopers & Lybrand L.L.P. as certified public accountants requires the
affirmative vote of the holders of at least a majority of the votes present
or represented and entitled to vote on the proposal at the Annual Meeting.
The Board of Directors unanimously recommends a vote FOR the proposal.
- 15 -
<PAGE>
PRINCIPAL SHAREHOLDERS OF THE CORPORATION
The following table sets forth, as of August 21, 1997, the name and
address of each person believed to be a beneficial owner of more than 5%
of the Common Shares of the Corporation, the number of shares and the
percentage so owned, as well as the beneficial ownership of Common Shares
of the Corporation by the Directors, the executive officers of the
Corporation named in the Summary Compensation Table on page 8, and
all Directors and executive officers as a group:
Amount and Nature Percentage
Name of of of
Beneficial Owner Beneficial Ownership(a)(b) Class(C)
Capital Research and Management Company 7,309,500(d) 6.6%
333 South Hope Street
Los Angeles, CA 90071
J. G. Breen 8,250(e)
P. C. Ely 5,674(e)
A. H. Ford 10,500(e)
F. A. LePage 12,750(e)
P. W. Likins 6,561(e)
H. R. Ortino 2,004(e)
P. S. Parker 710,257(e)
A. L. Rayfield 3,825(e)
P. G. Schloemer 327,019(e)
W. R. Schmitt 5,451(e)
D. L. Starnes 0
S. A. Streeter 3,226(e)
M. A. Treschow 3,937(e)
D. E. Collins 558,269(e)
D. W. Sullivan 513,945(e)
M. J. Hiemstra 108,163(e)
D. A. Zito 94,629(e)
S. L. Hayes 84,221(e)
All Directors and executive 3,043,678(e) 2.7%
officers as a group
(27 persons)
(a) Unless otherwise indicated, the beneficial owner has sole voting and
investment power.
(b) All share amounts have been adjusted for the 3-shares-for-2
Common Stock split paid on September 5, 1997.
(c) No Director or executive officer beneficially owned more than 1% of
the Corporation's Common Stock as of August 21, 1997.
(d) Pursuant to a statement filed by Capital Research and Management
Company with the SEC in accordance with Rule 13d-1 of the Securities
Exchange Act of 1934, Capital Research Development Company has
reported that as of June 30 1997, it had sole investment power over
4,873,000 Common Shares, adjusted to 7,309,500 Common Shares after
the effect of the 3-shares-for-2 Common Stock split paid on
September 5, 1997.
(e) These amounts include 1,500 (750 for Mr. Ortino), 150,000, 408,000,
312,375, 63,000, 63,000, 63,000 and 1,432,876 Common Shares
subject to options exercisable on or prior to October 20, 1997
granted under the Corporation's stock option plans held by each designated
non-employee Director, Messrs. Schloemer, Collins, Sullivan, Hiemstra,
Zito and Hayes and all Directors and executive officers as a group,
respectively. Such Common Shares are deemed to be outstanding only for the
purpose of computing the percentage of shares owned by each of the
individuals and the officers and Directors as a group. These amounts also
include 30,823, 5,247, 20,941, 7,427, 3,802, 9,275, 6,058 and
and 137,199 Common Shares as to which Messrs. Parker, Schloemer,
Collins, Sullivan, Hiemstra, Zito and Hayes and all Directors and
executive officers as a group, respectively, hold voting power
pursuant to the Corporation's Retirement Savings Plan as of June 30,
1997, as adjusted for the 3-shares-for-2 Common Stock split paid on
September 5, 1997.
- 16 -
<PAGE>
SHAREHOLDERS' PROPOSALS
The deadline for shareholders to submit proposals to be considered for
inclusion in the proxy statement for the 1998 Annual Meeting of
Shareholders is expected to be May 25, 1998.
GENERAL
The Board of Directors knows of no other matters which will be
presented at the meeting. However, if any other matters properly come
before the meeting or any adjournment, the person or persons voting the
proxies will vote in accordance with their best judgment on such matters.
The Corporation will bear the expense of preparing, printing and
mailing this Proxy Statement. In addition to solicitation by mail,
officers and other employees of the Corporation may solicit the return of
proxies. The Corporation will request banks, brokers and other
custodians, nominees and fiduciaries to send proxy material to beneficial
owners of Common Shares. The Corporation will, upon request, reimburse
them for their expenses in so doing. The Corporation has retained Kissel-
Blake Inc., 110 Wall Street, New York, New York, to assist in the
solicitation of proxies at an anticipated cost of $14,000, plus
disbursements.
You are urged to sign and return your Proxy promptly in order to make
certain your shares will be voted at the meeting. Common Shares represented
by properly executed proxies will be voted in accordance with any
specification made thereon and, if no specification is made, will be voted
in favor of fixing at five the number of Directors in the class whose
three-year term of office will expire in 2000 and for the election of the
nominees for Directors in such class; in favor of the amendments to the
Corporation's Amended Articles of Incorporation; in favor of the amendment
to the Corporation's 1993 Stock Incentive Program; and in favor of the
appointment of Coopers & Lybrand L.L.P. as independent public accountants
for the fiscal year ending June 30, 1998. Abstentions and broker non-
votes are counted in determining the votes present at a meeting.
Consequently, an abstention or a broker non-vote has the same effect as a
vote against a proposal, as each abstention or broker non-vote would be
one less vote in favor of a proposal. You may revoke your Proxy by giving
notice to the Corporation in writing or in open meeting, without affecting
any vote previously taken. However, your mere presence at the meeting
will not operate to revoke your Proxy.
The Annual Report of the Corporation, including financial statements for
the fiscal year ended June 30, 1997, is being mailed to shareholders with
this Proxy Statement.
By Order of the Board of Directors
JOSEPH D. WHITEMAN
JOSEPH D. WHITEMAN
Secretary
September 22, 1997
- 17 -
<PAGE>
PARKER-HANNIFIN CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS ON OCTOBER 22, 1997
This Proxy is Solicited on behalf of the Board of Directors
The undersigned hereby appoints PATRICK S. PARKER, DUANE E. COLLINS and
JOSEPH D. WHITEMAN, and any of them, as proxies to represent and to vote all
shares of stock of Parker-Hannifin Corporation which the undersigned is
entitled to vote at the Annual Meeting of Shareholders of the Corporation to
be held on October 22, 1997, and at any adjournments thereof, on the proposals
more fully described in the Proxy Statement for the Meeting in the manner
specified herein and on any other business that may properly come before
the Meeting.
You are encouraged to specify your choices by marking the appropriate
boxes (SEE REVERSE SIDE) but you need not mark any boxes if you wish to
vote in accordance with the Board of Directors' recommendations. The
Proxies cannot vote your shares unless you sign and return this Card.
_____________________________________________________________________________
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
_____________________________________________________________________________
_____________________________________________________________________________
Please sign exactly as your name(s) appear(s) on the books of the Company.
Joint owners should each sign personally. Trustees and other fiduciaries
should indicate the capacity in which they sign, and where more than one
name appears, a majority must sign. If a corporation, this signature should
be that of an authorized officer who should state his or her title.
_____________________________________________________________________________
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_________________________________ ____________________________________
_________________________________ ____________________________________
_________________________________ ____________________________________
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
PARKER-HANNIFIN CORPORATION 1.Election of Directors
FOR
ALL
NOMI- WITH- FOR ALL
NEES HOLD EXCEPT
[ ] [ ] [ ]
Duane E. Collins Allen H. Ford
Allan L. Rayfield Paul G. Schloemer
Michael A. Treschow
INSTRUCTION: To withhold authority to vote for
Mark box at right if an [ ] a particular nominee, mark the "For All Except"
address change or comment box and strike a line through the name(s) of
has been noted on the the nominee(s). Your shares will be voted for
reverse side of this card. the remaining nominee(s).
FOR AGAINST ABSTAIN
RECORD DATE SHARES: 2.Amendment to Amended [ ] [ ] [ ]
Articles of Incorporation
to increase authorized
shares.
3.Amendment to Amended [ ] [ ] [ ]
Articles of Incorporation
to change principal place
of business.
4.Amendment to 1993 Stock [ ] [ ] [ ]
Incentive Program.
5.Appointment of Coopers & [ ] [ ] [ ]
Lybrand L.L.P. as
auditors for FY98.
Please be sure to
sign and date
this Proxy. Date [ ]
______________________________ The Board of Directors recommends a vote FOR
Shareholder sign here Items 1, 2, 3, 4 and 5.
______________________________
Co-owner sign here
