SCHEDULE 14A INFORMATION
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 Rule 14a-11(c) or Rule 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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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.:
3) Filing Party:
4) Date Filed:
PARKER-HANNIFIN CORPORATION
17325 Euclid Avenue - Cleveland, Ohio 44112
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 23, 1996
The annual meeting of shareholders of Parker-Hannifin Corporation will be
held at Tower City Center, 230 Huron Road, N.W., Cleveland, Ohio 44113, in the
English Oak Room, on Wednesday, October 23, 1996, 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 1999 and electing five Directors in such class;
2. Appointing Coopers & Lybrand L.L.P. as independent public accountants for
the fiscal year ending June 30, 1997; and
3. Transacting such other business as may properly come before the meeting.
Shareholders of record at the close of business on August 29, 1996, 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 23, 1996
PARKER-HANNIFIN CORPORATION
17325 Euclid Avenue - Cleveland, Ohio 44112
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 23, 1996, and at all
adjournments thereof. Only shareholders of record at the close of business on
August 29, 1996 will be entitled to vote. On that date, 74,296,372 Common
Shares of the Corporation were outstanding and entitled to vote at the
meeting, each share being entitled to one vote. This Proxy Statement and the
form of Proxy are being mailed to shareholders on September 23, 1996.
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 14 members divided into three classes. The classes whose terms
expire in 1996 and 1997 consist of five members each and the class whose term
expires in 1998 consists of four members. Since the last annual meeting of
shareholders, pursuant to authority granted in the Corporation's Code of
Regulations, the Board of Directors has added two additional members, as
follows: Stephanie A. Streeter was elected to the Board of Directors in April
1996 to a term expiring in 1996 and Michael A. Treschow was elected to the
Board of Directors in July 1996 to a term expiring in 1997.
Shareholder approval is sought to fix at five the number of directors in
the class whose term will expire in 1999 and to elect Paul C. Ely, Jr., Frank
A. LePage, Peter W. Likins, Wolfgang R. Schmitt and Stephanie A. Streeter,
directors whose terms of office expire in 1996, 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.
- 1 -
NOMINEES FOR ELECTION AS DIRECTORS FOR TERM EXPIRING IN 1999
PAUL C. ELY, JR., 64, 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 General Partner of Alpha Partners (venture capital
seed financing). Mr. Ely is also a Directory of Tektronix, Inc.
FRANK A. LEPAGE, 69, has served as a Director of the Corporation since 1977.
He is a member of the Nominating and Audit 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, 60, 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, 52, has served as a Director of the Corporation since
1992. He is a member of the Nominating and Compensation and Management
Development 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.
STEPHANIE A. STREETER, 39, was elected to the Board of Directors in April
1996. She is a member of the Nominating and Audit Committees. Ms. Streeter
is the Group Vice President of Office Products Worldwide of Avery Dennison
Corporation (adhesives and office products). She was previously Vice
President and General Manager of Avery Dennison Brands from June 1993 to
April 1996 and Vice President and General Manager of Office Labels at Avery
Dennison from February 1991 to May 1993.
PRESENT DIRECTORS WHOSE TERMS EXPIRE IN 1998
JOHN G. BREEN, 62, 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.
PATRICK S. PARKER, 66, has served as a Director of the Corporation since 1960.
Mr. Parker is the Chairman of the Board of Directors of the Corporation.
WALTER SEIPP, 70, has served as a Director of the Corporation since 1992. He
is a member of the Nominating Committee. Dr. Seipp is the Chairman of the
Supervisory Board of Commerzbank AG in Frankfurt, Germany.
DENNIS W. SULLIVAN, 57, has served as a Director of the Corporation since
1983. Mr. Sullivan is the Executive Vice President - Industrial of the
Corporation. Mr. Sullivan is also a Director of Ferro Corporation and
KeyCorp.
- 2 -
PRESENT DIRECTORS WHOSE TERMS EXPIRE IN 1997
DUANE E. COLLINS, 60, 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, 68, 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, 61, has served as a Director of the Corporation since 1984.
He is a member of the Nominating, Compensation and Management Development
and Audit 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; 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.
PAUL G. SCHLOEMER, 68, has served as a Director of the Corporation since 1982.
Mr. Schloemer served as 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, 53, was elected to the Board of Directors in July 1996.
He is a member of the Nominating and Audit Committees. Mr. Treschow is the
President and Chief Executive Officer of Atlas Copco AB (mechanical
engineering) in Sweden. Mr. Treschow is also a Director of SKF AB and Saab
Automobile AB.
No Director of the Corporation is related to any other Director. During the
fiscal year ended June 30, 1996, there were six 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 Dr. Seipp.
The Audit Committee, which met twice during the fiscal year ended June 30,
1996, 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,
1996, is responsible for reviewing with the Corporation's management the
funding and investment policies for retirement benefit plans sponsored by the
Corporation.
The Compensation and Management Development Committee, which met twice
during the fiscal year ended June 30, 1996, 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.
- 3 -
The Nominating Committee, which met twice during the fiscal year ended June
30, 1996, 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,
received an annual retainer of $120,000, plus meeting fees, club memberships
and the use of a leased automobile. Mr. Parker's annual retainer was increased
to $129,000 for fiscal year 1997. 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.
The Corporation adopted a Retirement Plan for Directors, other than
officers who are Directors, in 1987 (the "Directors Retirement Plan") which
provided for payments of 50% of the annual retainer in effect on the date of
retirement until the monthly payments made equaled the Director's months of
service, or until 120 monthly payments had been made, or until death,
whichever occurred first. Minimum requirements to qualify for the plan were
three years of service (one full term) and attainment of age 65 prior to
retirement as a Director. All current directors had met the service
requirements of the Plan except for Ms. Streeter and Mr. Treschow. In August
1996, the Board of Directors terminated the Directors Retirement Plan, except
with respect to former Directors, who will continue to receive payments under
the Plan. Upon termination, each eligible 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. Said account balance is non-transferable and must
remain in the Directors Deferral Plan until the retirement of the Director.
The Board of Directors also adopted the Non-Employee Directors Stock Option
Plan in August 1996. Upon adoption of the Plan, the Board granted to each
Director who was not a current or retired employee of the Corporation 1,000
stock options under such Plan at an option price equal to the then current
fair market value of the Corporation's Common Shares. Such options have a term
of ten years and fully vest one year after the date of grant provided such
Director continues as a Director during such year.
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.
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, 1997. 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 a
majority of the votes cast thereon.
The Board of Directors unanimously recommends a vote FOR the proposal.
- 4 -
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 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 both base pay and total annual 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 who 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, aligning closely the financial interests of the Corporation's
executives with those of its shareholders.
Compensation for the Corporation's executives consists of four 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 so that base salary plus the target bonus will be
within the competitively determined total annual compensation range
mentioned above. Target annual incentive bonuses represent approximately
35-45% of total targeted annual compensation for the executive officers
with operational profit and loss re-
- 5 -
sponsibility (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 1996, under a Volume Incentive
Plan, operating group presidents had the opportunity 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 equal to 15% of the
participant's base salary. An identical Volume Incentive Plan has been
adopted for fiscal year 1997.
3. A long-term incentive plan ("LTIP") award. The LTIP award 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 value of the LTIP award is intended by the
Committee to approximate the median of competitive incentive
compensation market data. This value is divided by the market price of
the Corporation's Common Shares at the beginning of the three-year
performance period to determine the number of shares in the LTIP award.
4. Stock option grants determined by the recipient's salary grade level.
Grants are intended to recognize different levels of responsibility as
indicated by salary grade. Stock options are granted with an exercise
price equal to the fair market value of the Corporation's Common Shares
on the day of grant and all current grants are 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 bonuses, 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 shareholders. LTIP awards, whether paid in cash
or restricted stock, focus on long-term return on equity, which is directly
related to enhancing shareholder value. Restricted stock awards build stock
ownership and encourage a long-term focus on shareholder 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 Shares by its
Directors, executive officers and other key executives. Under the guidelines,
the Chief Executive Officer should hold Common Shares of the Corporation with
a minimum aggregate value equivalent to three times his base salary. Vice
Presidents should hold two times base salary; other executive officers and
group presidents, one times base salary; and non-officer Directors, four times
their annual retainer. The recommended time period for reaching the above
guidelines is five years. Compliance with the guidelines will be reviewed
annually by the Chief Executive Officer with the Committee.
The Corporation's executive compensation philosophy is specifically evident
in the compensation paid 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 1995 to fiscal 1996 of 15% is
reflective of his "outstanding" performance rating for fiscal 1995, the fact
that his base salary was below the mid-point of his rate range, and the
resulting desire of the Committee to increase his base salary significantly to
the mid-point of the range to be reflective of Mr. Collins' responsibilities
as the Chief Executive of a large multinational diversified manufacturing
company and to reward Mr. Collins' performance in fiscal year 1995. In
addition, based on the Corporation's fiscal 1996 operating plan, Mr. Collins
was to receive 100% of his
- 6 -
Target Incentive Bonus of $250,000 if the Corporation's actual pre-tax return
on average assets, adjusted primarily for acquisitions and currency
transactions, was 17.1%. A minimum payout of 15% of the Target Incentive Bonus
was established at a 4.4% pre-tax return on average assets and a maximum payout
of 150% of the Target Incentive Bonus was established at a 20.6% pre-tax return
on average assets. During the fiscal year ended June 30, 1996, the
Corporation's adjusted pre-tax return on average assets was 16.58%; therefore
each executive officer, including Mr. Collins, received an amount equal to
96.9% 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 $372,544 based upon a forecasted
33.35% average return on division net assets. The average return on division
net assets was 33.11%, resulting in a RONA Bonus payment to Mr. Collins of
$369,731, 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 16.04% for the three
fiscal years ended June 30, 1996, Mr. Collins and the other executive officers
received a payment under the 1994-95-96 Long Term Incentive Plan in the form
of restricted shares, as reported in the "LTIP Payouts" column of the Summary
Compensation Table on page 8. Such payment represents 101% of the target
payment that would have been achieved had the Corporation achieved the LTIP's
return on equity goal of 16% for such three-year period.
During fiscal year 1996, 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 the Option Grants Table on page 9. The
intended value of stock options granted to each executive officer is
established by the Committee by reference to the median of competitive
incentive compensation market data. This value is divided by the estimated
value of each option based upon the Black-Scholes valuation model in order to
determine the number of stock options granted.
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 $1 million paid to the
Corporation's Chief Executive Officer and four other highest paid executive
officers beginning in fiscal year 1995. The Committee has taken the necessary
actions to ensure the deductibility of compensation paid by the Corporation to
such individuals.
John G. Breen Peter Likins
John G. Breen, Chairman Dr. Peter W. Likins
Allan L. Rayfield Wolfgang R. Schmitt
Allan L. Rayfield Wolfgang R. Schmitt
- 7 -
EXECUTIVE COMPENSATION
The following table summarizes compensation paid by the Corporation for each
of the last three fiscal years to its Chief Executive Officer and each of the
other four most highly compensated executive officers:
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
___________________________________ ______________________
Awards Payouts
__________ _______
Securities
Other Annual Underlying LTIP All Other
Fiscal Compensation Options Payouts Compensation
Name and Principal Position Year Salary ($) Bonus ($) ($) (a) (#) ($) (b) ($) (c)
___________________________________ _______ __________ _________ ____________ __________ _______ ___________
Duane E. Collins, 1996 783,473 611,981 18,068 66,000 988,348 14,570
President and Chief Executive 1995 680,004 659,082 8,066 30,000 225,798 20,078
Officer 1994 600,000 465,840 7,920 22,500 73,425 4,500
Dennis W. Sullivan, 1996 525,000 323,325 8,144 37,500 436,055 12,934
Executive Vice President - 1995 500,004 417,252 8,202 15,900 173,121 20,432
Industrial 1994 472,992 276,990 83,569 9,600 53,306 6,765
Michael J. Hiemstra, 1996 361,920 199,074 6,574 15,000 232,553 14,672
Vice President - 1995 351,348 242,837 2,648 9,600 120,483 19,519
Finance and Administration 1994 338,645 173,489 1,897 5,400 39,146 7,450
Donald A. Zito, 1996 318,744 236,557 7,015 15,000 232,553 13,502
Vice President, and President, 1995 300,000 583,380 705 9,600 97,868 19,879
Fluid Connectors Group 1994 279,996 217,247 2,779 5,400 31,804 6,276
Stephen L. Hayes, 1996 299,244 215,668 9,734 15,000 232,553 13,507
Vice President, and President, 1995 285,000 166,797 3,823 9,600 107,427 15,163
Parker Bertea Aerospace 1994 259,020 97,371 2,990 5,400 0 8,981
(a) Unless otherwise indicated, 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 (i) amounts reimbursed by the Corporation for the payment
of income taxes on certain executive perquisites; and (ii) $76,097 in
executive perquisites received by Mr. Sullivan in fiscal year 1994,
including $42,800 for the payment of a country club membership fee.
(b) Dollar value of restricted shares issued as payment under the 1994-95-96
Long Term Incentive Plan and as final and interim payments under the
1993-94-95 Long Term Incentive Plan. Such value is based on the
Corporation's stock price on the date of issuance of the shares. The
restricted shares are subject to a three-year vesting period from the
date of issuance, 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, 1996 are as follows: Mr. Collins,
28,425 shares with a value of $1,204,509; Mr. Sullivan, 13,410 shares
with a value of $568,249; Mr. Hiemstra, 7,483 shares with a value of
$317,092; Mr. Zito, 7,216 shares with a value of $305,778; and Mr. Hayes,
6,060 shares with a value of $256,793.
(c) Represents matching contributions by the Corporation to the Parker
Hannifin Retirement Savings Plan and the Parker Hannifin Savings
Restoration Plan.
- 8 -
The following table summarizes stock option grants by the Corporation during
the fiscal year ended June 30, 1996 to each of the executive officers
identified in the Summary Compensation Table on page 8:
OPTION GRANTS IN FISCAL 1996
Individual Grants
_____________________________________________________
Number of % of Total Potential realizable value at
Securities Options Exercise assumed annual rates of stock
Underlying Granted to Or Base price appreciation for option term (b)
Options Employees Price Expiration _______________________________________
Name Granted (#) (a) in Fiscal 1996 ($/Sh) Date 5% ($) 10% ($) 9.19% ($) (c)
___________________ _______________ ______________ ________ __________ ___________ ___________ _____________
Duane E. Collins 66,000 25.9% $39.125 8/15/05 1,623,963 4,115,441 3,638,274
Dennis W. Sullivan 37,500 14.7% $39.125 8/15/05 922,706 2,338,319 2,067,201
Michael J. Hiemstra 15,000 5.9% $39.125 8/15/05 369,083 935,328 826,880
Donald A. Zito 15,000 5.9% $39.125 8/15/05 369,083 935,328 826,880
Stephen L. Hayes 15,000 5.9% $39.125 8/15/05 369,083 935,328 826,880
(a) Options are exercisable on the date following completion of one year of
continuous employment after the date of grant (i.e., August 16, 1996).
(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 $1,820,870,281 and $4,614,442,799
at assumed annual rates of appreciation of 5% and 10%, respectively, over
the ten-year life of the options. There can be no assurance that the
amounts reflected in this table will be achieved.
(c) Represents the Corporation's actual rate of stock price appreciation for
the 10-year period ending June 30, 1996.
The following table summarizes exercises of stock options during the fiscal
year ended June 30, 1996 by each of the executive officers identified in the
Summary Compensation Table on page 8 and the fiscal year-end value of
unexercised options for such executive officers:
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR-END OPTION VALUES
Number of
Securities Underlying Value of Unexercised
Shares Value Unexercised Options In-the-Money
Acquired on Realized at FY-End (#) Options at FY-End ($)
Name Exercise (#) ($) Exercisable / Unexercisable Exercisable / Unexercisable
___________________ ____________ ________ ___________________________ ___________________________
Duane E. Collins - - 159,750 / 66,000 3,361,534 / 214,500
Dennis W. Sullivan 10,500 216,090 156,000 / 37,500 3,432,957 / 121,875
Michael J. Hiemstra - - 114,750 / 15,000 2,624,677 / 48,750
Donald A. Zito - - 81,000 / 15,000 1,816,593 / 48,750
Stephen L. Hayes 10,000 218,930 35,000 / 15,000 671,043 / 48,750
- 9 -
The following table summarizes awards by the Corporation during the fiscal
year ended June 30, 1996 to each of the executive officers identified in the
Summary Compensation Table on page 8 under the Corporation's Long Term Incentive
Plan:
LONG TERM INCENTIVE PLAN - AWARDS IN FISCAL 1996
Estimated Future Payouts under
Number of Performance or Non-Stock Price-Based Plans
Shares Other Period Until ________________________________________
Name (#) Maturation or Payout Threshold (#) Target (#) Maximum (#)
___________________ _________ ____________________ _____________ __________ ___________
Duane E. Collins 14,566 3 Years 3,642 14,566 29,132
Dennis W. Sullivan 6,759 3 Years 1,690 6,759 13,518
Michael J. Hiemstra 4,083 3 Years 1,021 4,083 8,166
Donald A. Zito 4,083 3 Years 1,021 4,083 8,166
Stephen L. Hayes 4,083 3 Years 1,021 4,083 8,166
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, 1998. Awards are payable in August 1998. 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, 1997, to
defer the amount earned under the LTIP pursuant to the Corporation's Executive
Deferral Plan.
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
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, will be as follows: Mr. Collins, 35 years;
Mr. Sullivan, 35 years; Mr. Hiemstra, 25 years; Mr. Zito, 35 years and Mr.
Hayes, 34 years. The Program provides an annual benefit based upon the average
of the participant's three highest years of cash compensation (Salary, RONA
Bonus and Target Incentive Bonus) with the Corporation. Benefits payable under
the Program are based on calen-
- 10 -
dar 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 1995 and Mr. Hayes in fiscal 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, 1996, 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, $1,076,816;
Mr. Sullivan, $777,746; Mr. Hiemstra, $534,768; Mr. Zito, $486,696; and
Mr. Hayes, $374,753. 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, Zito, Hiemstra 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 (the "1934 Act")) 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
appoves 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 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.
- 11 -
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 Plan ("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 shareholder
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, 1991 through June 30, 1996, assuming the investment of $100 on
June 30, 1991, and the reinvestment of dividends.
Comparison of Five Year Cumulative Total Return Among
Parker-Hannifin Corporation, the S&P 500 Index and the
S&P Manufacturing (Diversified Industrials) Index
6/30/91 6/30/92 6/30/93 6/30/94 6/30/95 6/30/96
Parker-Hannifin Corporation 100 112 131 173 226 269
S&P 500 Index 100 113 129 131 165 208
S&P Manufacturing (Diversified Industrials) Index 100 99 117 131 173 221
- 12 -
PRINCIPAL SHAREHOLDERS OF THE CORPORATION
The following table sets forth, as of the most recent practicable date, 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) Class(B)
FMR Corp 4,447,131(C) 5.99%(C)
82 Devonshire Street
Boston, MA 02109-3614
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071 6,504,100(D) 8.75%(D)
J. G. Breen 4,500
P. C. Ely 1,846
A. H. Ford 6,000
F. A. LePage 7,500
P. W. Likins 1,594
P. S. Parker 628,436(E)
A. L. Rayfield 1,550
P. G. Schloemer 295,309(E)
W. R. Schmitt 760
W. Seipp 6,000
S. A. Streeter 0
M. A. Treshow 1,000
D. E. Collins 321,374(E)
D. W. Sullivan 325,027(E)
D. A. Zito 119,742(E)
M. J. Hiemstra 152,246(E)
S. L. Hayes 64,065(E)
All Directors and executive 2,310,405(E) 3.06%
officers as a group
(26 persons)
(A) Unless otherwise indicated, beneficial ownership was determined as of
August 22, 1996 and the beneficial owner has sole voting and
investment power
(B) No Director or executive officer beneficially owned more than 1% of the
Corporation's Common Shares as of August 22, 1996.
(C) Pursuant to a statement filed by FMR Corp. with the SEC in accordance with
Rule 13d-1 of the Securities Exchange Act of 1934 on behalf of itself,
Edward C. Johnson 3rd (Chairman of FMR Corp.), Abigail Johnson (Director
of FMR Corp.), Fidelity Management & Research Company, Fidelity Magellan
Fund and Fidelity Management Trust Company, FMR Corp. has reported that as
of August 31, 1996 it had sole voting power over 206,098 Common Shares and
sole investment power over 4,447,131 Common Shares.
(D) The Corporation was informed by Capital Research and Management Company by
letter dated September 12, 1996 that Capital Research and Management
Company had sole investment power over 5,740,000 Common Shares and sole
voting power over 3,550,000 Common Shares and that Capital Guardian Trust
Company had sole investment power over 764,100 Common Shares and sole
voting power over 499,600 Common Shares.
(E) These amounts include 108,000, 175,000, 225,750, 193,500, 96,000, 129,750,
50,000, and 1,225,200 Common Shares subject to options exercisable on or
prior to October 21, 1996 granted under the Corporation's stock option
plans held by Messrs. Parker, Schloemer, Collins, Sullivan, Zito, Hiemstra
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 12,243, 3,569, 13,772, 4,963, 6,684, 2,446, 3,956 and 83,124
Common Shares as to which Messrs. Parker, Schloemer, Collins, Sullivan,
Zito, Hiemstra 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, 1996.
- 13 -
Section 16(a) Beneficial Ownership Reporting Compliance. As required by the
Securities and Exchange Commission's rules under Section 16 of the Securities
Exchange Act of 1934, the Corporation notes that during the fiscal year ended
June 30, 1996, the following officers and directors filed untimely reports
regarding transactions in the Corporation's Common Shares: Mr. Rayfield, a
Director: one untimely report for one transaction; Daniel T. Garey, Vice
President, one untimely report for annual Dividend Reinvestment Plan
transactions; Paul L. Carson, Vice President, one untimely report for one
Retirement Savings Plan transaction; and Lawrence M. Zeno, Vice President,
three untimely reports for annual Dividend Reinvestment Plan transactions for
three years.
SHAREHOLDERS' PROPOSALS
The deadline for shareholders to submit proposals to be considered for
inclusion in the proxy statement for the 1997 Annual Meeting of Shareholders
is expected to be May 25, 1997.
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
$13,000 plus disbursements.
You are urged to sign and return your Proxy promptly in order to make
certain your Common 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 1999 and for the election of the nominees for
Directors in such class; and in favor of the appointment of Coopers & Lybrand
L.L.P. as independent public accountants for the fiscal year ending June 30,
1997. 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, 1996, is being mailed to shareholders with this
Proxy Statement.
By Order of the Board of Directors
Joseph D. Whiteman
Joseph D. Whiteman
Secretary
September 23, 1996
PARKER-HANNIFIN CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS ON OCTOBER 23, 1996
This Proxy is Solicited on behalf of the Board of Directors
1996 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
P all shares of stock of Parker-Hannifin Corporation which the undersigned
is entitled to vote at the Annual Meeting of Shareholders of the
R Corporation to be held on October 23, 1996, and at any adjournments
thereof, on the proposals more fully described in the Proxy Statement
O for the Meeting in the manner specified herein and on any other business
that may properly come before the Meeting.
X
Y Election of Directors (change of address)
Proposal to fix at five the number _________________________________
of Directors in the class whose term _________________________________
of office will expire in 1999 and to _________________________________
elect the following to such class: _________________________________
(If you have written in the above
Paul C. Ely, Jr. Peter W. Likins space, please mark the correspon-
Frank A. LePage Wolfgang R. Schmitt ding box on the reverse side of
Stephanie A. Streeter this card.)
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. _______________
SEE REVERSE
SIDE
_______________
[X] Please mark your SHARES IN YOUR NAME REINVESTMENT SHARES
votes as in this
example.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Appointment of [ ] [ ] [ ]
Directors Coopers &
(see reverse) Lybrand L.L.P. as
auditors for FY97
For, except vote withheld The Board of Directors recommends a vote
from the following FOR Items 1 and 2.
nominee(s):
_________________________
Change of Address [ ]
Signature(s) ___________________________________ Date _____________________
Signature(s) ___________________________________ Date _____________________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.