SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ________________________
Commission File No. 1-4982
PARKER-HANNIFIN CORPORATION
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(Exact name of registrant as specified in its charter)
Ohio 34-0451060
- ----------------------------------- ---------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
6035 Parkland Boulevard, Cleveland, Ohio 44124-4141
- ----------------------------------------- ---------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (216) 896-3000
---------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on which Registered
------------------- ---------------------
Common Shares, $.50 par value New York Stock Exchange
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, as amended, 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 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].
The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of August 31, 1999, excluding, for purposes of this
computation, only stock holdings of the Registrant's Directors and Officers.
$4,839,474,763.
The number of Common Shares outstanding on August 31, 1999 was
111,904,364.
Portions of the following documents are incorporated by reference:
(1) Annual Report to Shareholders of the Company for the fiscal year ended
June 30, 1999. Incorporated by reference into Parts I, II and IV
hereof.
(2) Definitive Proxy Statement for the Company's 1999 Annual Meeting of
Shareholders. Incorporated by reference into Part III hereof.
PARKER-HANNIFIN CORPORATION
FORM 10-K
Fiscal Year Ended June 30, 1999
PART I
ITEM 1. BUSINESS. Parker-Hannifin Corporation is a leading worldwide
full-line manufacturer of motion control products, including fluid power
systems, electromechanical controls and related components. Fluid power involves
the transfer and control of power through the medium of liquid, gas or air, in
hydraulic, pneumatic and vacuum applications. Fluid power systems move and
position materials, control machines, vehicles and equipment and improve
industrial efficiency and productivity. Components of a simple fluid power
system include a pump or compressor which generates pressure, valves which
control the fluid's flow, an actuator which translates the pressure in the fluid
into mechanical energy, a filter to insure proper fluid condition and numerous
hoses, couplings, fittings and seals. Electromechanical control involves the use
of electronic components and systems to control motion and precisely locate or
vary speed in automation applications. In addition to motion control products,
the Company also is a leading worldwide producer of fluid purification, fluid
flow, process instrumentation, air conditioning, refrigeration, and
electromagnetic shielding and thermal management products.
The Company was incorporated in Ohio in 1938. Its principal executive
offices are located at 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141,
telephone (216) 896-3000. As used in this Report, unless the context otherwise
requires, the term "Company" or "Parker" refers to Parker-Hannifin Corporation
and its subsidiaries.
The Company's manufacturing, service, distribution and administrative
facilities are located in 36 states, Puerto Rico and worldwide in 38 foreign
countries. Its motion control technology is used in the products of its two
business Segments: Industrial and Aerospace. The products are sold as original
and replacement equipment through product and distribution centers worldwide.
The Company markets its products through its direct-sales employees and more
than 7,500 independent distributors. Parker products are supplied to
approximately 400,000 customers in virtually every significant manufacturing,
transportation and processing industry. For the fiscal year ended June 30, 1999,
net sales were $4,958,800,000; Industrial Segment products accounted for 77% of
net sales and Aerospace Segment products for 23%.
MARKETS
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Motion control systems are used throughout industry in applications
which include moving of materials, controlling machines, vehicles and equipment
and positioning materials during the manufacturing process. Motion control
systems contribute to the efficient use of energy and improve industrial
productivity.
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The approximately 400,000 customers who purchase the Company's products
are found throughout virtually every significant manufacturing, transportation
and processing industry. No customer accounted for more than 6% of the Company's
total net sales for the fiscal year.
The major markets for products of the Fluid Connectors, Hydraulics,
Automation and Seal Groups of the Industrial Segment are agricultural machinery,
automotive, construction equipment, electronic equipment, fabricated metals,
food production, industrial machinery, lumber and paper, machine tools, marine,
medical equipment, mining, mobile equipment, chemicals, robotics, semi-conductor
equipment, telecommunications, textiles, transportation and every other major
production and processing industry. Products manufactured by the Industrial
Segment's Climate and Industrial Controls Group are utilized principally in
automotive and mobile air conditioning systems, industrial refrigeration systems
and home and commercial air conditioning equipment. The major markets for
products manufactured by the Instrumentation Group of the Industrial Segment are
power generation, oil and gas exploration, petrochemical and chemical
processing, pulp and paper, semi-conductor manufacturing, medical and analytical
applications. The major markets for products of the Filtration Group of the
Industrial Segment are industrial machinery, mobile equipment, process
equipment, marine, aviation, environmental and semi-conductor manufacturing.
Sales of Industrial Segment products are made to original equipment
manufacturers and their replacement markets.
Aerospace Segment sales are made primarily to the commercial, military
and general aviation markets and are made to original equipment manufacturers
and to end users for maintenance, repair and overhaul.
PRINCIPAL PRODUCTS, METHODS OF DISTRIBUTION AND COMPETITIVE CONDITIONS
- ----------------------------------------------------------------------
INDUSTRIAL SEGMENT. The product lines of the Company's Industrial
Segment cover most of the components of motion control systems. The Fluid
Connectors Group manufactures connectors, including tube fittings and hose
fittings, valves, hoses and couplers, which control, transmit and contain fluid.
The Hydraulics Group produces hydraulic components and systems for builders and
users of industrial and mobile machinery and equipment, such as cylinders,
accumulators, rotary actuators, valves, motors and pumps, hydrostatic steering
units, power units, integrated hydraulic circuits, electrohydraulic systems and
metering pumps. The Automation Group supplies pneumatic and electromechanical
components and systems, including pneumatic valves, air preparation units,
indexers, stepper and servo drives, multi-axis positioning tables, electric and
pneumatic cylinders, structural extrusions, vacuum products, pneumatic logic and
human/machine interface hardware and software. The Climate and Industrial
Controls Group manufactures components for use in industrial, residential,
automotive and mobile air conditioning and refrigeration systems and other
applications, including pressure regulators, solenoid valves, expansion valves,
filter-dryers, gerotors and hose assemblies. The Seal Group manufactures sealing
devices, including o-rings and o-seals, gaskets and packings, which insure
leak-proof connections and electromagnetic interference shielding and thermal
management products. The Filtration Group manufactures filters, systems and
instruments to monitor and to remove contaminants from fuel, air, oil, water and
other fluids and gases, including hydraulic, lubrication and coolant filters;
process, chemical and microfiltration filters; compressed air and gas
purification filters; lube oil and fuel filters; fuel conditioning filters; fuel
filters/water separators; cabin air filters and condition monitoring devices.
The Instrumentation
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Group manufactures high quality critical flow components for process
instrumentation, ultra-high-purity, medical and analytical applications,
including instrumentation and ultra-high-purity tube fittings, ball, plug and
needle valves, packless ultra-high-purity valves, Teflon(R) fittings, valves and
spray guns, miniature solenoid valves, multi-solenoid manifolds, regulators,
transducers, quick connects, hose products and cylinder connections.
Industrial Segment products include both standard items which are
produced in large quantities and custom units which are engineered and produced
to original equipment manufacturers' specifications for application to a
particular end product. Both standard and custom products are also used in the
replacement of original motion control system components. Industrial Segment
products are marketed primarily through field sales employees and more than
7,500 independent distributors.
AEROSPACE SEGMENT. The principal products of the Company's Aerospace
Segment are hydraulic, fuel and pneumatic systems and components that are used
on most commercial and military airframe and engine programs in production in
the Western world today.
The Aerospace Segment offers complete hydraulic systems, as well as
components that include hydraulic, electrohydraulic and electromechanical
systems used for precise control of aircraft rudders, elevators, ailerons and
other aerodynamic control surfaces and utility hydraulic components such as
reservoirs, accumulators, selector valves, electrohydraulic servovalves,
thrust-reverser actuators, engine-driven pumps, nosewheel steering systems,
electromechanical actuators, engine controls and electronic controllers. The
Aerospace Segment also designs and manufactures aircraft wheels and brakes for
the general aviation and military markets.
The Aerospace fuel product line includes complete fuel systems as well
as components such as fuel transfer and pressurization controls, in-flight
refueling systems, fuel pumps and valves, fuel measurement and management
systems and center of gravity controls, engine fuel injection atomization
nozzles and augmentor controls, and electronic monitoring computers.
Pneumatic components include bleed air control systems, pressure
regulators, low-pressure pneumatic controls, heat transfer systems, engine start
systems, engine bleed control and anti-ice systems, and electronic control and
monitoring computers.
Aerospace Segment products are marketed by the Company's regional sales
organization and are sold directly to manufacturers and end users.
COMPETITION. All aspects of the Company's business are highly
competitive. No single manufacturer competes with respect to all products
manufactured and sold by the Company and the degree of competition varies with
different products. In the Industrial Segment, the Company competes on the basis
of product quality and innovation, customer service, its manufacturing and
distribution capability, and competitive price. The Company believes that, in
most of the major markets for its products, it is one of the principal suppliers
of motion control systems and components.
In the Aerospace Segment, the Company has developed alliances with key
customers based on Parker's advanced technological and engineering capabilities,
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superior performance in quality, delivery, and service, and price
competitiveness, which has enabled Parker to obtain significant original
equipment business on new aircraft programs for its systems and components and,
thereby, obtain the follow-on repair and replacement business for these
programs. The Company believes that it is one of the primary suppliers in the
aerospace marketplace.
RESEARCH AND PRODUCT DEVELOPMENT
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The Company continually researches the feasibility of new products
through its development laboratories and testing facilities in many of its
worldwide manufacturing locations. Its research and product development staff
includes chemists, mechanical, electronic and electrical engineers and
physicists.
Research and development costs relating to the development of new
products or services and the improvement of existing products or services
amounted to $86,953,000 in fiscal 1999, $83,117,000 in fiscal 1998 and
$103,155,000 in fiscal 1997. Reimbursements of customer-sponsored research
included in the total cost for each of the respective years were $15,239,000,
$15,753,000 and $35,986,000.
PATENTS, TRADEMARKS, LICENSES
- -----------------------------
The Company owns a number of patents, trademarks and licenses related
to its products and has exclusive and non-exclusive rights under patents owned
by others. In addition, patent applications on certain products are now pending,
although there can be no assurance that patents will be issued. The Company is
not dependent to any material extent on any single patent or group of patents.
BACKLOG AND SEASONAL NATURE OF BUSINESS
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The Company's backlog at June 30, 1999 was approximately $1,625,637,000
and at June 30, 1998 was approximately $1,649,377,000. Approximately 78% of the
Company's backlog at June 30, 1999 is scheduled for delivery in the succeeding
twelve months. The Company's business generally is not seasonal in nature.
ENVIRONMENTAL REGULATION
- ------------------------
The Company is subject to federal, state and local laws and regulations
designed to protect the environment and to regulate the discharge of materials
into the environment. Among other environmental laws, the Company is subject to
the federal "Superfund" law, under which the Company has been designated as a
"potentially responsible party" and may be liable for cleanup costs associated
with various waste sites, some of which are on the U.S. Environmental Protection
Agency Superfund priority list. The Company believes that its policies,
practices and procedures are properly designed to prevent unreasonable risk of
environmental damage and the consequent financial liability to the Company.
Compliance with environmental laws and regulations requires continuing
management effort and expenditures by the Company. Compliance with environmental
laws and regulations has not had in the past, and, the Company believes, will
not have in the future, material effects on the capital expenditures, earnings,
or competitive position of the Company. The information set forth in Footnote 13
to the Financial Statements contained on pages 34 and 35 of the Company's Annual
Report to Shareholders for the fiscal year ended June 30, 1999 ("Annual
Report"), as specifically excerpted on pages 13-32 and 13-33 of Exhibit 13
hereto, is incorporated herein by reference.
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ENERGY MATTERS AND SOURCES AND AVAILABILITY OF RAW MATERIALS
- ------------------------------------------------------------
The Company's primary energy source for each of its business segments
is electric power. While the Company cannot predict future costs of such
electric power, the primary source for production of the required electric power
will be coal from substantial, proven coal reserves available to electric
utilities. The Company is subject to governmental regulations in regard to
energy supplies both in the United States and elsewhere. To date the Company has
not experienced any significant disruptions of its operations due to energy
curtailments.
Steel, brass, aluminum and elastomeric materials are the principal raw
materials used by the Company. These materials are available from numerous
sources in quantities sufficient to meet the requirements of the Company.
EMPLOYEES
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The Company employed 38,928 persons as of June 30, 1999, of whom 13,974
were employed by foreign subsidiaries.
BUSINESS SEGMENT INFORMATION
- ----------------------------
The net sales, segment operating income and identifiable assets by
business segment and net sales and long-lived assets by geographic area for the
past three fiscal years, as set forth on page 25 of the Annual Report and
specifically excerpted on pages 13-16 to 13-17 of Exhibit 13 hereto, are
incorporated herein by reference.
ITEM 1A. EXECUTIVE OFFICERS OF THE COMPANY
The Company's Executive Officers are as follows:
Officer
Name Position Since(1) Age
---- -------- -------- ---
Duane E. Collins President, Chief Executive Officer, 1983 63
Member of the Office of the President
and Director
Dennis W. Sullivan Executive Vice President, Member of the 1978 60
Office of the President and Director
Lawrence M. Zeno Vice President and Member of the Office 1993 57
of the President
Claus Beneker Vice President - Technical Director 1999 59
Paul L. Carson Vice President - Information 1993 63
Services
Lynn M. Cortright Vice President and President, Climate & 1999 58
Industrial Controls Group
Dana A. Dennis Controller 1999 51
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Daniel T. Garey Vice President - Human Resources 1995 56
Stephen L. Hayes Vice President and President, 1993 58
Aerospace Group
Michael J. Hiemstra Vice President - Finance and 1987 52
Administration and
Chief Financial Officer
John D. Myslenski Vice President and President, 1997 48
Fluid Connectors Group
John K. Oelslager Vice President and President, 1997 56
Automation Group
Thomas A. Piraino, Jr. Vice President, General Counsel 1998 50
and Secretary
Timothy K. Pistell Treasurer 1993 52
Nickolas W. Vande Steeg Vice President and President, Seal Group 1995 56
Donald E. Washkewicz Vice President and President, 1997 49
Hydraulics Group
(1) Officers of Parker-Hannifin serve for a term of office from the
date of election to the next organizational meeting of the
Board of Directors and until their respective successors are
elected, except in the case of death, resignation or removal.
Messrs. Collins, Carson, Hayes, Hiemstra and Pistell have
served in the executive capacities indicated above during the
past five years.
Mr. Sullivan was elected as Executive Vice President in 1981 and a
Member of the Office of the President in April 1996.
Mr. Zeno was elected as a Vice President in October 1993 and a Member
of the Office of the President in July 1997. He was President of the Motion and
Control Group from January 1994 to June 1997.
Mr. Beneker was elected as Vice President - Technical Director
effective in February 1999. He was Vice President of Business Development of the
Aerospace Group from July 1995 to February 1999 and General Manager of the Metal
Bellows Division from July 1994 to July 1995.
Mr. Cortright was elected as a Vice President in January 1999 and was
named President of the Climate & Industrial Controls Group in October 1998. He
was President of the Latin American Group from November 1987 to October 1998.
Mr. Dennis was elected Controller effective July 1999. He was Vice
President/Controller of the Automation Group from August 1997 to July 1999 and
Vice President/Controller of the Motion and Control Group from July 1994 to
August 1997.
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Mr. Garey was elected as a Vice President effective in January 1995. He
was Vice President-Human Resources of the Motion and Control Group (formerly the
Fluidpower Group) from July 1982 to December 1994.
Mr. Myslenski was elected as a Vice President in October 1997 and named
President of the Fluid Connectors Group in July 1997. He was Vice President-
Operations of the Fluid Connectors Group from March 1989 to June 1997.
Mr. Oelslager was elected as a Vice President in October 1997 and named
President of the Automation Group in July 1997. He was Vice President Operations
of the Motion and Control Group from July 1995 to June 1997 and General Manager
of the Cylinder Division from July 1989 to July 1995.
Mr. Piraino was elected as Vice President, General Counsel and
Secretary effective in July 1998. He was Vice President-Law from July 1990 to
June 1998.
Mr. Vande Steeg was elected as a Vice President effective in September
1995. He has been President of the Seal Group since 1987.
Mr. Washkewicz was elected as a Vice President and named President of
the Hydraulics Group in October 1997. He was Vice President-Operations of the
Fluid Connectors Group from October 1994 to October 1997 and General Manager of
the Parflex Division from July 1982 to September 1994.
ITEM 2. PROPERTIES. The following table sets forth the principal plants
and other materially important properties of the Company and its subsidiaries.
The leased properties are indicated with an asterisk. A "(1)" indicates that the
property is occupied by the Company's Industrial Segment and a "(2)" indicates
properties occupied by the Aerospace Segment.
UNITED STATES
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State City
----- ----
Alabama Boaz(1)
Decatur(1)
Huntsville(1)
Jacksonville(1)
Arizona Glendale(2)
Tolleson(2)
Tucson*(1)
Arkansas Siloam Springs(1)
Trumann(1)
California Cypress*(2)
Irvine(1)(2)
Modesto(1)
Newbury Park*(1)
Richmond(1)
Rohnert Park(1)
San Diego(1)
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State City
----- ----
Connecticut New Britain(1)
Florida Longwood(1)
Miami*(1)
Georgia Dublin(2)
Idaho Boise*(1)
Illinois Broadview(1)
Des Plaines(1)
Hampshire(1)
Lincolnshire*(1)
Mount Prospect*(1)
Rockford(1)
Indiana Albion(1)
Ashley(1)
Lebanon(1)
Tell City(1)
Iowa Red Oak(1)
Kansas Manhattan(1)
Kentucky Berea(1)
Lexington(1)
Louisiana Harvey*(1)
Maine Portland(1)
Massachusetts Ayer(2)
Woburn(1)
Michigan Kalamazoo(2)
Lakeview(1)
Otsego(1)
Oxford(1)
Richland(1)
Troy*(1)
Minnesota Golden Valley(1)
Mississippi Batesville(1)
Booneville(1)
Madison(1)
Missouri Kennett(1)
Nebraska Lincoln(1)
Nevada Carson City(1)
New Hampshire Hollis*(1)
Hudson(1)
Portsmouth*(1)
New Jersey Belleville*(1)
Fairfield*(1)
New York Clyde(2)
Lyons(1)
Smithtown(2)
North Carolina Forest City(1)
Hillsborough(1)
Mooresville(1)
Sanford(1)
Wake Forest*(1)
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State City
----- ----
Ohio Akron(1)
Andover(2)
Avon(2)
Brookville(1)
Columbus(1)
Cuyahoga Falls*(1)
Eastlake(1)
Eaton(1)
Elyria(1)(2)
Forest(2)
Green Camp(1)
Kent(1)
Lewisburg(1)
Mayfield Heights(1)(2)
Mentor(2)
Metamora(1)
Milford*(1)
Ravenna(1)
St. Marys(1)
Wadsworth(1)
Wickliffe(1)
Oklahoma Henryetta*(1)
Oregon Eugene(1)
Pennsylvania Canton(1)
Harrison City(1)
Reading(1)
South Carolina Beaufort(2)
Spartanburg(1)
Tennessee Greenfield(1)
Greeneville(1)
Memphis*(1)
Texas Cleburne(1)
Ft. Worth(1)
Mansfield(1)
Utah Ogden(2)
Salt Lake City(1)
Washington Seattle*(1)
Wisconsin Butler*(1)
Chetek(1)
Grantsburg(1)
Mauston(1)
Territory City
--------- ----
Puerto Rico Ponce*(2)
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FOREIGN COUNTRIES
-----------------
Country City
------- ----
Argentina Buenos Aires(1)
Australia Castle Hill(1)
Wodonga(1)
Austria Wiener Neustadt(1)
Belgium Brussels*(1)
Brazil Jacarei(1)
Sao Paulo(1)
Canada Grimsby(1)
Owen Sound(1)
Czech Republic Chomutov*(1)
Prague*(1)
Sadska*(1)
Denmark Espergarde(1)
Ishoj(1)
England Barnstaple(1)
Buxton(1)
Cannock(1)
Derby(1)
Dewsbury(1)
Hemel Hempstead(1)
Littlehampton(1)
Marlow*(1)
Ossett(1)
Poole*(1)
Rotherham(1)
Thetford(1)
Watford(1)
Finland Hyrynsalmi*(1)
Urjala(1)
Vantaa(1)
France Annemasse(1)
Contamine(1)
Evreux(1)
Pontarlier(1)
Wissembourg(1)
Germany Berlin*(1)
Bielefeld(1)
Bietigheim-Bissingen(1)
Chemnitz*(1)
Cologne(1)
Erfurt(1)
Hochmossingen(1)
Kaarst(1)
Lampertheim(1)
Mucke(1)
Offenburg*(1)
Pleidelsheim(1)
Queckborn(1)
Scholss-Holte(1)
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FOREIGN COUNTRIES
-----------------
Country City
------- ----
Wiesbaden(2)
Greece Athens*(1)
Hong Kong Hong Kong*(1)
Hungary Budapest*(1)
India Mumbai*(1)
Italy Adro(1)
Arsago Seprio(1)
Corsico(1)
Gessate(1)
Japan Yokohama(1)(2)
Malaysia Kuala Lumpur(2)
Mexico Matamoros(1)
Monterrey(1)
Tijuana(1)
Toluca(1)
Netherlands Amelo*(1)
Hendrik-Ido-Ambacht(1)
Hoogezand(1)
Oldenzaal(1)
New Zealand Mt. Wellington(1)
Norway Langhus(1)
Peoples Republic of China Beijing*(1)(2)
Shanghai*(1)
Philippines Manila*(1)
Poland Warsaw*(1)
Wroclaw*(1)
Russia Moscow*(1)
Singapore Singapore*(1)(2)
South Africa Kempton Park(1)
South Korea Chonan(1)
Seoul*(1)
Suwon*(1)
Yangsan(1)
Spain Madrid*(1)
Sweden Boras(1)
Falkoping(1)
Flen(1)
Spanga(1)
Trollhatten(1)
Ulricehamn(1)
Switzerland Geneva(1)
Taiwan Taipei*(1)
Thailand Bangkok*(1)
Ukraine Kiev*(1)
United Arab Emirates Abu Dhabi*(1)
Venezuela Caracas*(1)
Puerto Ordaz*(1)
The Company believes that its properties have been adequately
maintained, are in good condition generally and are suitable and adequate for
its business as
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presently conducted. The extent of utilization of the Company's properties
varies among its plants and from time to time. Additional capacity has been
added as the Company expands through business combinations. The Company's
material manufacturing facilities remain capable of handling additional volume
increases.
ITEM 3. LEGAL PROCEEDINGS. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not
applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS. As of August 31, 1999, the approximate number of
shareholders of record of the Company was 4,536 and the number of beneficial
owners was 39,380. Information regarding stock price and dividend information
with respect to the Company's common stock, as set forth on page 35 of the
Annual Report and specifically excerpted on page 13-35 of Exhibit 13 hereto, is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA. The information set forth on pages 36
and 37 of the Annual Report, as specifically excerpted on page 13-38 of Exhibit
13 hereto, is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. The information set forth on pages 18, 20, 22, 24 and 38
of the Annual Report, as specifically excerpted on pages 13-1 to 13-9 of Exhibit
13 hereto, is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company enters into forward exchange contracts and cross-currency swap
agreements to reduce its exposure to fluctuations in related foreign currencies.
These contracts are with major financial institutions and the risk of loss is
considered remote. The Company does not hold or issue derivative financial
instruments for trading purposes. In addition, the Company's foreign locations,
in the ordinary course of business, enter into financial guarantees, through
financial institutions, which enable customers to be reimbursed in the event of
non-performance by the Company. The total value of open contracts and any risk
to the Company as a result of these arrangements is not material to the
Company's financial position, liquidity or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information
set forth on pages 17, 19, 21, 23, 25 to 35 and 38 of the Annual Report, as
specifically excerpted on pages 13-10 to 13-37 of Exhibit 13 hereto, is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required as to the Directors of the Company is contained on pages 1
to 3 of the Company's definitive Proxy Statement dated September 27, 1999 (the
"Proxy Statement") under the caption "Election of Directors." The foregoing
information is
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incorporated herein by reference. Information as to the executive officers of
the Company is included in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION. The information set forth under the
caption "Compensation of Directors" on pages 3 and 4 of the Proxy Statement and
under the caption "Executive Compensation" on pages 7 to 10 of the Proxy
Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT. The information set forth under the caption ""Change in Control"
Severance Agreements with Officers" on pages 10 and 11 of the Proxy Statement
and under the caption "Principal Shareholders of the Corporation" on page 12 of
the Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Not
applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
a. The following are filed as part of this report:
1. FINANCIAL STATEMENTS AND SCHEDULES
The financial statements and schedule listed in
the accompanying Index to Consolidated
Financial Statements and Schedules are filed or
incorporated by reference as part of this
Report.
2. EXHIBITS
The exhibits listed in the accompanying Exhibit
Index and required by Item 601 of Regulation
S-K (numbered in accordance with Item 601 of
Regulation S-K) are filed or incorporated by
reference as part of this Report.
b. The Registrant did not file a Current Report on Form
8-K in the quarter ended June 30, 1999.
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.
PARKER-HANNIFIN CORPORATION
By: /s/ Michael J. Hiemstra
-----------------------
Michael J. Hiemstra
Vice President - Finance and
Administration
and Chief Financial Officer
September 24, 1999
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Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report on Form 10-K has been signed below by the following persons in the
capacities and on the date indicated.
Signature and Title
-------------------
PATRICK S. PARKER, Chairman of the Board of Directors;
DUANE E. COLLINS, President, Chief Executive Officer
and Director; DANA A. DENNIS, Controller and Principal
Accounting Officer; JOHN G. BREEN, Director;
PAUL C. ELY, JR., Director; PETER W. LIKINS, Director;
GUILIO MAZZALUPI, Director; KLAUS-PETER MULLER, Director;
HECTOR R. ORTINO, Director; ALLAN L. RAYFIELD, Director;
WOLFGANG R. SCHMITT, Director; DEBRA L. STARNES, Director;
and DENNIS W. SULLIVAN, Director.
Date: September 24, 1999
/s/ Michael J. Hiemstra
- -----------------------
Michael J. Hiemstra, Vice President - Finance and
Administration, Principal Financial Officer and
Attorney-in-Fact
-15-
PARKER-HANNIFIN CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
Reference
-----------------------------------
Excerpt from Annual
Form 10-K Report as set forth
Annual Report in Exhibit 13
(Page) (Page)
------------- -------------------
DATA INCORPORATED BY REFERENCE FROM THE
ANNUAL REPORT AS SPECIFICALLY EXCERPTED
IN EXHIBIT 13 HERETO:
Report of Independent Accountants --- 13-37
Consolidated Statement of Income for the
years ended June 30, 1999, 1998 and 1997 --- 13-10
Consolidated Statement of Comprehensive Income
for the years ended June 30, 1999, 1998 and
1997. --- 13-11
Consolidated Balance Sheet at June 30, 1999
and 1998 --- 13-12 and 13-13
Consolidated Statement of Cash Flows for
the years ended June 30, 1999, 1998 and 1997 --- 13-14 and 13-15
Notes to Consolidated Financial Statements --- 13-18 to 13-35
Report of Independent Accountants on the
Financial Statement Schedule F-2
SCHEDULE:
II - Valuation and Qualifying Accounts F-3 ---
Individual financial statements and related applicable schedules for
the Registrant (separately) have been omitted because the Registrant is
primarily an operating company and its subsidiaries are considered to be
totally-held.
F-1
Report of Independent Accountants on the
Financial Statement Schedule
To the Board of Directors
of Parker-Hannifin Corporation
Our audits of the consolidated financial statements referred to in our report
dated July 29, 1999 included in the 1999 Annual Report to Shareholders of
Parker-Hannifin Corporation (which report and consolidated financial statements
are incorporated by reference in this Annual Report on Form 10-K) also included
an audit of the financial statement schedule listed in Item 14(a)(1) of this
Form 10-K. In our opinion, this financial statement schedule presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Cleveland, Ohio
July 29, 1999
F-2
PARKER-HANNIFIN CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1997, 1998 and 1999
(Dollars in Thousands)
Column A Column B Column C Column D Column E
------------------------------ -------------- --------------- -------------- ---------------
Additions
Balance at Charged to Other Balance
Beginning Costs and (Deductions)/ At End
Description Of Period Expenses Additions(A) Of Period
------------------------------ -------------- --------------- -------------- ---------------
Allowance for doubtful accounts:
Year ended June 30, 1997 $ 6,445 $ 1,288 $ (1,829) $ 5,904
Year ended June 30, 1998 5,904 2,267 833 9,004
Year ended June 30, 1999 9,004 2,318 (1,925) 9,397
(A) Net balance of deductions due to uncollectible accounts charged off
and additions due to acquisitions or recoveries.
F-3
Exhibit Index
EXHIBIT NO. Description Of Exhibit
- ----------- ----------------------
(3) Articles Of Incorporation And By-laws
- ----------- -------------------------------------
(3)(a) Amended Articles of Incorporation(A).
(3)(b) Code of Regulations, as amended(B).
(4) Instruments Defining Rights of Security Holders:
- ----------- ------------------------------------------------
(4)(a) Rights Agreement, dated January 31, 1997, between the
Registrant and KeyBank National Association
("KeyBank")(C), as amended by the First Addendum to
Shareholder Protection Rights Agreement, dated April
21, 1997, between the Registrant and Wachovia Bank of
North Carolina N.A. ("Wachovia"), as successor to
KeyBank, and the Second Addendum to Shareholder
Protection Rights Agreement, dated June 15, 1999,
between the Registrant and National City Bank, as
successor to Wachovia.
The Registrant is a party to other instruments,
copies of which will be furnished to the Commission
upon request, defining the rights of holders of its
long-term debt identified in Note 7 of the Notes to
Consolidated Financial Statements appearing on pages
29 and 30 of the Annual Report as specifically
excerpted on page 13-24 of Exhibit 13 hereto, which
Note is incorporated herein by reference.
(10) Material Contracts:
- ----------- -------------------
(10)(a) Form of Change in Control Severance Agreement entered
into by the Registrant and executive officers(D).*
(10)(b) Parker-Hannifin Corporation Change in Control
Severance Plan, as amended(E).*
(10)(c) Form of Indemnification Agreement entered into by the
Registrant and its directors and executive
officers(F).
(10)(d) Exchange Agreement entered into as of May 11, 1999
between the Registrant and Duane E. Collins including
an Executive Estate Protection Plan comprised of the
Executive Estate Protection Agreement entered into by
the Registrant, Duane E. Collins and The Duane E.
Collins Irrevocable Trust dated 5/10/99 (the
"Trust"), the Collateral Assignment between the
Registrant and the Trust and the "as sold"
illustration of an Executive Estate Protection Plan
Insurance Policy.*
(10)(e) Form of Executive Life Insurance Agreement entered
into by the Registrant and executive officers.*
Exhibit No. Description of Exhibit
- ----------- ----------------------
(10)(f) Parker-Hannifin Corporation Supplemental Executive
Retirement Benefits Program (August 15, 1996
Restatement)(G).*
(10)(g) Parker-Hannifin Corporation 1987 Employees Stock
Option Plan, as amended(H).*
(10)(h) Parker-Hannifin Corporation 1990 Employees Stock
Option Plan, as amended(I).*
(10)(i) Parker-Hannifin Corporation 1993 Stock Incentive
Program, as amended(J).*
(10)(j) Parker-Hannifin Corporation 1999 Target Incentive
Bonus Plan Description (K).*
(10)(k) Parker-Hannifin Corporation 2000 Target Incentive
Bonus Plan Description.*
(10)(l) Parker-Hannifin Corporation 1997-98-99 Long Term
Incentive Plan Description, as amended(L).*
(10)(m) Parker-Hannifin Corporation 1998-99-00 Long Term
Incentive Plan Description, as amended(M).*
(10)(n) Parker-Hannifin Corporation 1999-00-01 Long Term
Incentive Plan Description(N).*
(10)(o) Parker-Hannifin Corporation 2000-01-02 Long Term
Incentive Plan Description.*
(10)(p) Parker-Hannifin Corporation Savings Restoration Plan,
as amended.*
(10)(q) Parker-Hannifin Corporation Pension Restoration Plan,
as amended(O).*
(10)(r) Parker-Hannifin Corporation Executive Deferral Plan,
as amended(P).*
(10)(s) Parker-Hannifin Corporation Volume Incentive
Plan(Q).*
(10)(t) Parker-Hannifin Corporation Non-Employee Directors'
Stock Plan, as amended(R).*
(10)(u) Parker-Hannifin Corporation Non-Employee Directors
Stock Option Plan(S).*
(10)(v) Parker-Hannifin Corporation Deferred Compensation
Plan for Directors, as amended(T).*
Exhibit No. Description of Exhibit
- ----------- ----------------------
(10)(w) Parker-Hannifin Corporation Stock Option Deferral
Plan(U).*
(11) Computation of Common Shares Outstanding and Earnings
Per Share is incorporated by reference to Note 4 of
the Notes to Consolidated Financial Statements
appearing on page 29 of the Annual Report as
specifically excerpted on pages 13-22 and 13-23 of
Exhibit 13 hereto.
(12) Computation of Ratio of Earnings to Fixed Charges as
of June 30, 1999.
(13) Excerpts from Annual Report to Shareholders for the
fiscal year ended June 30,1999 which are incorporated
herein by reference thereto.
(21) List of subsidiaries of the Registrant.
(23) Consent of Independent Accountants.
(24) Power of Attorney.
(27) Financial Data Schedule.
*Management contracts or compensatory plans or arrangements.
- -----------
(A) Incorporated by reference to Exhibit 3 to the
Registrant's Report on Form 10-Q for the quarterly
period ended September 30, 1997.
(B) Incorporated by reference to Exhibits to the
Registrant's Registration Statement on Form S-8 (No.
33-53193) filed with the Commission on April 20,
1994.
(C) Incorporated by reference to Exhibit 4.1 to the
Registrant's Report on Form 8-K filed with the
Commission on February 4, 1997.
(D) Incorporated by reference to Exhibit 10(a) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1996.
(E) Incorporated by reference to Exhibit 10(b) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1996.
(F) Incorporated by reference to Exhibit 10(f) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1994.
(G) Incorporated by reference to Exhibit 10(e) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1996.
(H) Incorporated by reference to Exhibit 10(f) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1996.
(I) Incorporated by reference to Exhibit 10(g) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1996.
(J) Incorporated by reference to Exhibit 10 to
the Registrant's Report on Form 10-Q for the
quarterly period ended September 30, 1997.
(K) Incorporated by reference to Exhibit 10(i) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1998.
(L) Incorporated by reference to Exhibit 10(n) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1996.
(M) Incorporated by reference to Exhibit 10(m) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1996.
(N) Incorporated by reference to Exhibit 10(m) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1998.
(O) Incorporated by reference to Exhibit 10(p) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1996.
(P) Incorporated by reference to Exhibit 10(p) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1998.
(Q) Incorporated by reference to Exhibit 10(r) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1996.
(R) Incorporated by reference to Exhibit 10(s) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1996.
(S) Incorporated by reference to Exhibit 10(t) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1996.
(T) Incorporated by reference to Exhibit 10(u) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1996.
(U) Incorporated by reference to Exhibit 10(u) to the
Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1998.
Shareholders may request a copy of any of the exhibits to this Annual Report on
Form 10-K by writing to the Secretary, Parker-Hannifin Corporation, 6035
Parkland Boulevard, Cleveland, Ohio 44124-4141.