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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from ......................to ........................
Commission file number 1-4982
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
COMMERCIAL INTERTECH 401(k) PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
PARKER-HANNIFIN CORPORATION
6035 PARKLAND BOULEVARD
CLEVELAND, OHIO 44124-4141
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Commercial Intertech 401(k) Plan
Audited Financial Statements
and Supplemental Schedule
Years ended December 31, 1999 and 1998
CONTENTS
Report of Independent Auditors..............................................1
Financial Statements
Statements of Assets Available for Plan Benefits............................2
Statement of Changes in Assets Available for Plan Benefits..................3
Notes to Financial Statements...............................................4
Supplemental Schedule
Schedule H, Line 4i-Schedule of Assets Held for
Investment Purposes at End of Year......................................10
Exhibits
Consent of Independent Auditors............................................11
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Report of Independent Auditors
Administrative Committee
Commercial Intertech 401(k) Plan
We have audited the accompanying statements of assets available for plan
benefits of the Commercial Intertech 401(k) Plan (the "Plan") as of December 31,
1999 and 1998, and the related statement of changes in assets available for plan
benefits for the year ended December 31, 1999. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets available for plan benefits of the Plan at
December 31, 1999 and 1998, and the changes in its assets available for plan
benefits for the year ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental Schedule of Assets
Held for Investment Purposes as of December 31, 1999, is presented for purposes
of additional analysis and is not a required part of the financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employment Retirement Income
Security Act of 1974. The supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audit of the 1999 financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
Ernst & Young LLP
Cleveland, Ohio
June 1, 2000
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Commercial Intertech 401(k) Plan
Statements of Assets Available for Plan Benefits
DECEMBER 31
1999 1998
-----------------------------
ASSETS
Investments $47,891,838 $41,265,875
Cash and cash equivalents 12,696 71,127
Interest receivable 8,431 7,698
Employee contributions receivable 320,991 320,547
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342,118 399,372
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Assets available for plan benefits $48,233,956 $41,665,247
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See notes to financial statements.
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Commercial Intertech 401(k) Plan
Statement of Changes in Assets Available for Plan Benefits
Year ended December 31, 1999
ADDITIONS
Employee contributions $ 3,879,681
Interest income 82,907
Dividend income 1,842,454
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5,805,042
DEDUCTIONS
Distributions 5,771,647
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5,771,647
Net realized and unrealized appreciation in aggregate
current value of investments 6,535,314
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Net additions 6,568,709
Net assets available for plan benefits at beginning of year 41,665,247
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Net assets available for plan benefits at end of year $48,233,956
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See notes to financial statements.
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Commercial Intertech 401(k) Plan
Notes to Financial Statements
Year ended December 31, 1999
A. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accounting records of the Commercial Intertech 401(k) Plan (the "Plan") are
maintained on the accrual basis.
VALUATION OF INVESTMENTS
Investments consisting of common shares of Commercial Intertech Corp. are
carried at the closing market price on the last business day of the Plan's year.
Investments in registered investment company funds (American Century GNMA,
Strategic Allocation: Conservative, Strategic Allocation: Moderate, Strategic
Allocation: Aggressive, Equity Index, Value, Equity Growth, Ultra, Vista, and
International Growth Fund) and in common/collective trusts (American Century
Stable Asset Fund, Barclays Equity Index Fund) are carried at the value of their
underlying assets as of the last business day of the Plan's year as determined
by their respective Investment Managers. Participant loans receivable are valued
at cost which approximates fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires the administrator to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATION
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.
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Commercial Intertech 401(k) Plan
Notes to Financial Statements (continued)
B. DESCRIPTION OF THE PLAN
The Plan consists of a pre-tax savings program, under which participants may
elect to contribute up to 18% of their compensation, on a tax-deferred basis,
into the Plan. Prior to September 1, 1997, the Plan consisted of a pre-tax
savings program allowing contributions up to 15% of a participant's compensation
and a post-tax program under which participants could contribute up to an
additional 10% of their compensation. Participant contributions are subject to
IRS limitations.
Effective January 1, 1999, the Plan was amended to allow participation by
eligible employees on and after the first day of the first month following the
date the employee reaches age 18 and completes six months of eligibility
service. This amendment did not have a significant impact on the assets
available for benefits. Prior to January 1, 1999, the Plan allowed participation
by eligible employees on and after the first day of the first month following
the date the employee completed the earlier of (1) six months and 500 hours of
eligible service or (2) one year of eligible service.
Employee contributions are accrued as income by the Plan on a monthly basis. The
Company contributes, into the Commercial Intertech Employee Stock Ownership Plan
(the "ESOP"), 50% (made in Commercial Intertech Corp. Preferred and Common
shares as needed) of the first 6% of eligible compensation that a participant
contributes into the Plan on a tax-deferred basis.
The Company is obligated to make matching contributions in cash to the ESOP
which, when aggregated with the ESOP's dividends on shares and interest
earnings, equal the amount necessary to enable the ESOP to make its regularly
scheduled payments of principal and interest due on its Notes. This contribution
enables the ESOP to allocate an appropriate number of shares to participants
(see above). Should the value of shares allocated be less than the required
matching contribution, the Company will make additional contributions to the
ESOP in the form of common stock or cash. Should the value of shares allocated
be more than the required matching contributions, any excess value of shares
released over the required amount will be allocated proportionately to each
participant's account in the ESOP based upon the ratio of the participant's
current Company matching contribution to the ESOP for the Plan year to the
aggregate Company matching contributions to the ESOP for all participants for
the Plan year.
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Commercial Intertech 401(k) Plan
Notes to Financial Statements (continued)
B. DESCRIPTION OF THE PLAN (CONTINUED)
The Plan is subject to the applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and provides for separate
investment options in one or more funds as directed by the participants.
Participants may change investment options at any time. Effective March 1, 1999,
the Barclay's Equity Index Fund investment option was replaced with the American
Century Equity Index Fund.
At December 31, 1999, 502 individuals participated in the Commercial Intertech
Common Stock Fund, 486 individuals participated in the Stable Asset Fund, 177
individuals participated in the GNMA Fund, 134 individuals participated in the
Strategic Allocation: Conservative Fund, 257 individuals participated in the
Strategic Allocation: Moderate Fund, 279 individuals participated in the
Strategic Allocation: Aggressive Fund, 475 individuals participated in the
Equity Index Fund, 331 individuals participated in the Value Fund, 627
individuals participated in the Equity Growth Fund, 818 individuals participated
in the Ultra Fund, 250 individuals participated in the Vista Fund, and 483
individuals participated in the International Growth Fund.
At December 31, 1998, 519 individuals participated in the Commercial Intertech
Common Stock Fund, 556 individuals participated in the Stable Asset Fund, 179
individuals participated in the GNMA Fund, 133 individuals participated in the
Strategic Allocation: Conservative Fund, 267 individuals participated in the
Strategic Allocation: Moderate Fund, 279 individuals participated in the
Strategic Allocation: Aggressive Fund, 486 individuals participated in the
Barclays Equity Index Fund, 341 individuals participated in the Value Fund, 652
individuals participated in the Equity Growth Fund, 797 individuals participated
in the Ultra Fund, 239 individuals participated in the Vista Fund, and 489
individuals participated in the International Growth Fund.
All investment account dollars that result from employee contributions and
related investment results are immediately vested. There were no non-vested
assets in the Plan attributable to terminated employees at December 31, 1999.
The Plan also provides withdrawal: (1) in cases of financial hardship, (2) upon
attainment of age 59-1/2, and (3) of the post-tax savings program contributions.
Participating employees may borrow up to the lesser of 50% of their account
balance attributable to employee contributions or $50,000. The amount borrowed
is repaid to the participant's account via payroll deductions and carries an
interest charge at the market rate of interest at the date of the loan.
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Commercial Intertech 401(k) Plan
Notes to Financial Statements (continued)
B. DESCRIPTION OF THE PLAN (CONTINUED)
The Plan is administered by the Administrative Committee (the "Committee")
appointed by the Company's Board of Directors. The trust department of UMB Bank,
an independent third-party bank, is the Plan's trustee. The Company has the sole
right to appoint the trustee, and to terminate the Plan, subject to the
provisions of ERISA. The Company pays all significant administrative expenses.
Upon termination of the Plan, amounts credited to each participant's account
shall be 100% vested and nonforfeitable. Additionally, the interest of each
participant in the trust fund will be distributed to such participant or his or
her beneficiary at the time prescribed by the Plan terms and the Code.
The foregoing description of the Plan provides only general information.
Additional information about the Plan agreement, forfeitures and distributions
from the Plan may be obtained from the Committee.
C. INCOME TAX STATUS
The Internal Revenue Service has ruled that the Plan qualifies under Section
401(a) of the Internal Revenue Code and is, therefore, not subject to tax under
present income tax laws. The Plan is amended periodically to conform with
current income tax laws. The Committee is not aware of any action or event that
has occurred that might affect the Plan's qualified status.
D. TRANSACTIONS WITH PARTIES-IN-INTEREST
The Plan purchased shares of common stock of the Company for $1,694,543 and sold
shares of common stock of the Company for $509,392 during the year ended
December 31, 1999. The Plan also received dividends on common stock of the
Company of $248,247 during the year ended December 31, 1999.
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Commercial Intertech 401(k) Plan
Notes to Financial Statements (continued)
E. INVESTMENTS
The following presents individual investments that represent 5% or more of the
Plan's net assets at fair value as of December 31:
1999 1998
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Commercial Intertech Corp. common stock;
422,424 and 370,164 shares, respectively $ 5,385,906 $ 4,789,182
American Century Stable Asset Fund 7,591,330 7,670,845
American Century Equity Index Fund 4,833,723 0
Barclay's Equity Index Fund 0 4,218,353
American Century Equity Growth Fund 6,212,078 6,650,240
American Century Ultra Fund 10,324,662 7,240,361
American Century International Growth Fund 3,242,891 2,028,618
During 1999, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated in value as
follows:
Registered Investment Companies $ 6,532,249
Common/Collective Trusts 57,066
Common Stock (54,001)
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NET REALIZED AND UNREALIZED APPRECIATION IN AGGREGATE
CURRENT VALUE OF INVESTMENTS $ 6,535,314
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Commercial Intertech 401(k) Plan
Notes to Financial Statements (continued)
F. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of assets available for benefits per the
financial statements to the Form 5500:
DECEMBER 31
1999 1998
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Assets available for benefits per the financial
statements $48,233,956 $41,665,247
Amounts allocated to withdrawing participants (439,835) (2,860,236)
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ASSETS AVAILABLE FOR BENEFITS PER THE
FORM 5500 $47,794,121 $38,805,011
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The following is a reconciliation of distributions paid to participants per the
financial statements to the Form 5500 for the year ended December 31, 1999:
Distributions paid to participants per the financial statements $ 5,771,647
Add amounts allocated to withdrawing participants at
December 31, 1999 439,835
Less amounts allocated to withdrawing participants at
December 31, 1998 (2,860,236)
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BENEFITS PAID TO PARTICIPANTS PER THE FORM 5500 $ 3,351,246
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G. SUBSEQUENT EVENT
On April 11, 2000, Commercial Intertech merged with Parker-Hannifin Corporation
("Parker") in a cash and stock transaction whereby Commercial Intertech
shareholders received Parker common stock based on an exchange ratio of .4611
determined by the twenty-day average of Parker's closing price as determined
five days immediately preceding the closing date of the merger. Alternatively,
shareholders could elect to receive $20.00 per share in cash, subject to a
maximum of 49 percent of the value of the total shares acquired by Parker. As of
April 11, 2000, the Plan held 327,485 shares of Commercial Intertech common
stock, of which 224,809 shares were exchanged for $20.00 per share and 102,676
shares were exchanged for 47,343.904 shares of Parker stock based on the
exchange ratio. The proceeds received from the exchange of Commercial shares for
$20.00 per share were used to purchase an additional 96,411 shares of Parker
stock.
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Commercial Intertech 401(k) Plan
EIN 34-0159880
Plan Number 011
Schedule H, Line 4i--Schedule of Assets Held for
Investment Purposes at End of Year
December 31, 1999
<TABLE>
<CAPTION>
IDENTITY OF ISSUE, BORROWER, CURRENT
LESSOR OR SIMILAR PARTY DESCRIPTION OF INVESTMENT COST VALUE
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
*Commercial Intertech Corp. 422,424 common shares
$1.00 par value $ 5,275,472 $ 5,385,906
SEI Trust American Century Stable
Asset Fund 7,591,330 7,591,330
*American Century Investments GNMA Fund 1,472,301 1,412,046
*American Century Investments Strategic Allocation:
Conservative Fund 658,803 688,639
*American Century Investments Strategic Allocation:
Moderate Fund 1,456,885 1,748,979
*American Century Investments Strategic Allocation:
Aggressive Fund 1,396,048 1,787,324
*American Century Investments Equity Index Fund 4,165,832 4,833,723
*American Century Investments Value Fund 2,396,323 1,863,194
*American Century Investments Equity Growth Fund 4,936,280 6,212,078
*American Century Investments Ultra Fund 7,658,560 10,324,662
*American Century Investments Vista Fund 1,037,398 1,609,425
*American Century Investments International Growth Fund 2,130,450 3,242,891
*UMB Bank Scout Prime 1 Mutual Fund 12,696 12,696
*Participants Loans receivable; interest rates at
prime plus 1% and maturities from 1
to 10 years - 1,191,641
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$40,188,378 $47,904,534
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</TABLE>
* Indicates party-in-interest to the Plan.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the plan) have duly caused this annual
report to be signed on its behalf by the undersigned thereunto duly authorized.
(Name of Plan)
Date: June 26, 2000 Commercial Intertech 401(k) Plan
By: /s/ Michael J. Hiemstra
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Michael J. Hiemstra
Vice President-Finance & Administration &
Chief Financial Officer
Parker-Hannifin Corporation
