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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
PARKER-HANNIFIN CORPORATION
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(Name of Registrant as Specified In Its Charter)
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Reg. (S) 240.14a-101.
SEC 1913 (3-99)
[LOGO] Parker
PARKER-HANNIFIN CORPORATION
6035 Parkland Boulevard - Mayfield Heights, Ohio 44124-4141
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 23, 2002
The annual meeting of shareholders of Parker-Hannifin Corporation will be
held at the Corporation's headquarters at 6035 Parkland Boulevard, Mayfield
Heights, Ohio 44124, on Wednesday, October 23, 2002, at 9:00 a.m., Eastern
Daylight Time, for the following purposes:
1.Electing four Directors in the class whose three-year term of office will
expire in 2005;
2.Appointing PricewaterhouseCoopers LLP as independent certified public
accountants for the fiscal year ending June 30, 2003; and
3.Transacting such other business as may properly come before the meeting.
Shareholders of record at the close of business on August 30, 2002 are
entitled to vote at the meeting. If you do not expect to attend the Annual
Meeting, or if you do plan to attend but wish to vote by proxy, please mark,
date, sign and return the enclosed proxy card promptly in the envelope provided
or vote electronically via the internet or by telephone in accordance with the
instructions on the proxy card.
By Order of the Board of Directors
/s/ Thomas A. Piraino, Jr.
Thomas A. Piraino, Jr.
Secretary
September 23, 2002
PARKER-HANNIFIN CORPORATION
6035 Parkland Boulevard - Mayfield Heights, Ohio 44124-4141
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, 2002, and at all
adjournments thereof. Only shareholders of record at the close of business on
August 30, 2002 will be entitled to vote. On that date, 118,024,557 Common
Shares 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 or about September 23, 2002.
Shareholders of the Corporation have cumulative voting rights in the
election of Directors if 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 cumulative voting
at such election is desired 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 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 the shareholder is entitled, or to distribute votes on the
same principle among two or more nominees, as the shareholder sees fit. In the
event that voting at the election is cumulative, the persons named in the proxy
will vote Common Shares represented by valid Board of Directors' proxies on a
cumulative basis for the election of the nominees named below, allocating the
votes of such Common Shares in accordance with their judgment.
ELECTION OF DIRECTORS
The Directors of the class elected at each annual election hold office for
terms of three years. The Board of Directors of the Corporation presently
consists of 15 members divided equally into three classes. As permitted under
the Corporation's Code of Regulations, Candy M. Obourn was elected to the Board
of Directors in January 2002 to a term expiring in 2004 and Robert J. Kohlhepp
was elected to the Board of Directors in July 2002 to a term expiring in 2003.
Shareholder approval is sought to elect William E. Kassling, Peter W.
Likins, Wolfgang R. Schmitt and Debra L. Starnes, Directors whose terms of
office expire in 2002, to the class whose term will expire in 2005. Paul C.
Ely, Jr., a director since 1984, whose term expires in 2002, has elected to
retire as of October 23, 2002. 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 2005
WILLIAM E. KASSLING, 58, was elected to the Board of Directors in July 2001. He
is a member of the Audit and Nominating Committees. Mr. Kassling has been
Chairman of the Board of Wabtec Corporation (technology-based equipment for
the rail industry) since 1990. He was previously the Chief Executive Officer
of Wabtec from March 1990 to February 2001 and the President of Wabtec from
March 1990 to February 1998. Mr. Kassling is also a Director of Scientific
Atlanta, Inc.
PETER W. LIKINS, 66, has served as a Director of the Corporation since 1989. He
is a member of the Audit, Compensation and Management Development and
Nominating Committees. Dr. Likins is President of the University of Arizona.
He was previously the President of Lehigh University from July 1982 to
October 1997. Dr. Likins is also a Director of Consolidated Edison, Inc.
WOLFGANG R. SCHMITT, 58, has served as a Director of the Corporation since
1992. He is a member of the Audit, Compensation and Management Development
and Nominating Committees. Mr. Schmitt is the Chief Executive Officer of
Trends 2 Innovation (strategic growth consultants). He was previously the
Chairman of the Board of ValueAmerica, Inc. (on-line electronics and
technology superstore) from November 1999 to May 2000 and Vice Chairman of
the Board of Newell Rubbermaid Inc. (consumer products) as a result of the
merger between Newell Co. and Rubbermaid Incorporated from April 1999 to
August 1999. Prior to the merger, he was the Chairman of the Board of
Rubbermaid Incorporated (manufacturer of rubber and plastic products) since
1993 and the Chief Executive Officer since 1992. Mr. Schmitt is also a
Director of Kimberly-Clark Corporation.
DEBRA L. STARNES, 49, has served as a Director of the Corporation since 1997.
She is a member of the Compensation and Management Development, Finance and
Nominating Committees. Now a Consultant, Ms. Starnes was the Senior Vice
President, Organizational and Process Change, of Lyondell Chemical Company
(petrochemical production) from May 2000 to October 2001; Senior Vice
President, Intermediate Chemicals, of Lyondell from July 1998 to April 2000;
Senior Vice President, Polymers-Equistar Chemical (a joint venture majority
owned by Lyondell) from December 1997 to July 1998; and Senior Vice
President, Polymers, of Lyondell from May 1995 to December 1997.
PRESENT DIRECTORS WHOSE TERMS EXPIRE IN 2004
JOHN G. BREEN, 68, 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 Finance and Nominating Committees. Now retired, Mr. Breen was
the Chairman of the Board of The Sherwin Williams Company (paints and
coatings) until May 2000 and Chief Executive Officer of Sherwin Williams
until October 1999. Mr. Breen is also a Director of Goodyear Tire and Rubber
Company, MeadWestvaco Corporation, The Sherwin Williams Company and The
Stanley Works.
CANDY M. OBOURN, 52, was elected to the Board of Directors in January 2002. She
is a member of the Audit and Nominating Committees. Ms. Obourn has been Chief
Operating Officer, Health Imaging Division of Eastman Kodak Company
(photography and digital imaging) since January 2002 and has been Senior Vice
President of Eastman Kodak since January 2000. She was previously Vice
President of Eastman Kodak from 1993 to December 1999; President, Document
Imaging of Eastman Kodak from 1998 to December 2001; and President, Business
Imaging Systems of Eastman Kodak from 1993 to 1998.
HECTOR R. ORTINO, 60, has served as a Director of the Corporation since 1997.
He is Chairman of the Audit Committee and a member of the Nominating
Committee. Mr. Ortino has been the President of Ferro Corporation (specialty
materials) since February 1996 and has been Chief Executive Officer and
Chairman of the Board of Ferro Corporation since April 1999. He was
previously Chief Operating Officer of Ferro Corporation from February 1996 to
April 1999. Mr. Ortino is also a Director of New York Life Insurance Company.
DENNIS W. SULLIVAN, 63, has served as a Director of the Corporation since 1983.
Mr. Sullivan is Executive Vice President of the Corporation. Mr. Sullivan is
also a Director of Ferro Corporation and KeyCorp.
2
DONALD E. WASHKEWICZ, 52, has served as a Director of the Corporation since
2000. Mr. Washkewicz has been the Chief Executive Officer of the Corporation
since July 2001 and the President of the Corporation since February 2000. He
was previously the Chief Operating Officer of the Corporation from February
2000 to July 2001; a Vice President of the Corporation and President of the
Hydraulics Group of the Corporation from October 1997 to February 2000; and
Vice President-Operations of the Fluid Connectors Group of the Corporation
from October 1994 to October 1997.
PRESENT DIRECTORS WHOSE TERMS EXPIRE IN 2003
DUANE E. COLLINS, 66, has served as a Director of the Corporation since 1992.
Mr. Collins has been Chairman of the Board of Directors since October 1999.
He was previously the Chief Executive Officer of the Corporation from July
1993 to July 2001 and the President of the Corporation from July 1993 to
February 2000. Mr. Collins is also a Director of MeadWestvaco Corporation,
National City Corporation and The Sherwin Williams Company.
ROBERT J. KOHLHEPP, 58, was elected to the Board of Directors in July 2002. He
is a member of the Audit and Nominating Committees. Mr. Kohlhepp has been
Chief Executive Officer of Cintas Corporation (corporate identity uniform
industry) since August 1995 and has been a Director of Cintas since 1979.
GIULIO MAZZALUPI, 61, has served as a Director of the Corporation since 1999.
He is a member of the Finance and Nominating Committees. Now retired, Mr.
Mazzalupi was the President, Chief Executive Officer and a Director of Atlas
Copco AB (industrial manufacturing) in Sweden until July 2002.
KLAUS-PETER MULLER, 58, has served as a Director of the Corporation since 1998.
He is a member of the Finance and Nominating Committees. Mr. Muller has been
Chairman of the Board of Managing Directors of Commerzbank AG (international
banking) in Frankfurt, Germany since May 2001 and a member of the Board of
Managing Directors of Commerzbank since 1990.
ALLAN L. RAYFIELD, 67, has served as a Director of the Corporation since 1984.
He is Chairman of the Finance and Nominating Committees and a member of the
Audit and Compensation and Management Development Committees. Now retired,
Mr. Rayfield previously served as President, Chief Executive Officer and
Director of M/A-COM, Inc. (microwave manufacturing).
No Director of the Corporation is related to any other Director. During the
fiscal year ended June 30, 2002, there were five meetings of the Corporation's
Board of Directors. Each Director attended at least 75% of the meetings held by
the Board of Directors and the Committees of the Board on which he or she
served, except for Dr. Likins.
The Audit Committee, which met three times during the fiscal year ended June
30, 2002, is responsible for reviewing with the Corporation's financial
management and its independent certified public accountants 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 certified public
accountants for the fiscal year. Under the Sarbanes-Oxley Act of 2002, the
Audit Committee will have direct responsibility for appointment, compensation
and oversight of the work of the independent auditors and insuring their
independence.
The Compensation and Management Development Committee, which met three times
during the fiscal year ended June 30, 2002, 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
succession management and the development of management personnel.
The Finance Committee, which met once during the fiscal year ended June 30,
2002, is responsible for reviewing with the Corporation's management the
funding and investment policies for defined benefit plans and defined
contribution plans sponsored by the Corporation.
The Nominating Committee, which met twice during the fiscal year ended June
30, 2002, 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
3
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. The annual retainer for such
Directors is $30,000. The fee for attending each Board and Committee meeting is
$1,500 for all such Directors other than Committee Chairmen, whose fee is
$2,000 for chairing committee meetings. Duane E. Collins, Chairman of the Board
of Directors, receives an annual retainer of $175,000, plus meeting fees, club
memberships and the use of a leased automobile. Directors may elect to defer
all or a portion of their fees under the Corporation's Deferred Compensation
Plan for Directors 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.
Each Director who was not a current or retired employee of the Corporation
("Non-Employee Director") was granted 700 stock options under the Non-Employee
Directors Stock Option Plan in August 2001 at an option price equal to the then
current fair market value of the Corporation's Common Shares. Such options have
a ten-year term and vest 50% following one year of continued service as a
Director and the remaining 50% following the second year of continued service
as a Director.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of
the Securities Exchange Act of 1934, as amended, requires the Corporation's
executive officers, directors and beneficial owners of more than 10% of the
Corporation's Common Shares to file initial stock ownership reports and reports
of changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. SEC regulations require that the Corporation be furnished
with copies of these reports. Based solely on a review of these reports and
written representations from the executive officers and directors, the
Corporation believes that there was compliance with all such filing
requirements for the fiscal year ended June 30, 2002 with one exception. Claus
Beneker, Vice President - Chief Technical Officer, filed a Form 4 to report two
transactions one day late because of the delay associated with obtaining a
renewal of his EDGAR electronic filing password, which had inadvertently
expired.
4
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is composed of eight directors
who are independent, as defined in the listing standards of the New York Stock
Exchange in effect as of the date of this Proxy Statement. The responsibilities
of the Audit Committee are set forth in the written Audit Committee Charter
adopted by the Board of Directors. The Audit Committee is reviewing its charter
and responsibilities in light of the Sarbanes-Oxley Act of 2002 and proposed
corporate governance standards of the New York Stock Exchange.
In fulfilling its responsibilities, the Audit Committee has reviewed and
discussed the audited consolidated financial statements of the Corporation for
the fiscal year ended June 30, 2002, with the Corporation's management and
PricewaterhouseCoopers LLP ("PwC"), the Corporation's independent certified
public accountants.
The Audit Committee has discussed with PwC the matters required to be
discussed by Statement on Auditing Standards No. 61, Communications with Audit
Committees. In addition, the Audit Committee has received and reviewed the
written disclosures and the letter from PwC required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees, and has
discussed with PwC their objectivity and independence.
Based on the review and discussions described above, the Audit Committee
recommended to the Board of Directors that the audited consolidated financial
statements for the fiscal year ended June 30, 2002, be included in the
Corporation's Annual Report on Form 10-K for the fiscal year ended June 30,
2002 filed with the Securities and Exchange Commission.
/s/ Hector R. Ortino /s/ Dr. Peter W. Likins
Hector R. Ortino, Chairman Dr. Peter W. Likins
/s/ Paul C. Ely, Jr. /s/ Candy M. Obourn
Paul C. Ely, Jr. Candy M. Obourn
/s/ William E. Kassling /s/ Allan L. Rayfield
William E. Kassling Allan L. Rayfield
/s/ Robert J. Kohlhepp /s/ Wolfgang R. Schmitt
Robert J. Kohlhepp Wolfgang R. Schmitt
5
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 five outside non-employee
Directors, has overall responsibility to:
* review the performance and long-term management potential of the
executive officers of the Corporation; and
* review and fix the salaries and other compensation of the executive
officers of the Corporation.
Following review and approval by the Committee, all issues pertaining to
executive compensation are submitted to the full Board of Directors in
conjunction with its approval and review of the Corporation's strategies and
operating plans, thereby assuring that the Corporation's system of executive
compensation is reasonable and appropriate, meets its stated purpose and
effectively serves the interests of the shareholders and the Corporation.
The Corporation's executive compensation programs are designed to attract,
retain and motivate key executives critical to the long-term success of the
Corporation by remaining competitive with other multinational diversified
manufacturing companies of similar size. Comparative compensation information
is used by the Committee to establish competitive salary grade ranges at the
market median for base pay, annual bonus and long-term compensation. The group
of companies used for compensation comparison purposes is not identical to the
S&P 500 Industrial Machinery Index, which is the peer group of companies
included in the performance graph on page 14. Comparative compensation
information is obtained by the Committee from independent surveys of numerous
comparable 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 500 Industrial Machinery Index utilized in the performance
graph contains data only with respect to a limited number of companies that are
in businesses similar to the Corporation, which data is theoretically
reflective of the stock performance of all industrial machinery manufacturers
as a whole.
In addition to being competitive, the Corporation's executive compensation
programs are also 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 performance and increases in shareholder value, thus aligning the
financial interests of the Corporation's executives with those of its
shareholders.
Compensation for the Corporation's executives consists of three primary
elements:
1. A base salary within a competitively established range. The specific base
salary within the range is determined by experience, 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. In the case of the Chief Executive Officer,
such goals and objectives are set by the Committee.
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").
6
The target amounts of the annual cash incentive bonuses are established in
such a manner that base salary plus the target bonuses will be within the
competitively determined total annual compensation range mentioned above.
Target annual cash incentive bonuses represent approximately 25-45% of
total targeted annual compensation for the executive officers with
operational profit and loss responsibility (including the Chief Executive
Officer) and 20-40% 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 2002, 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 10% and 15%, 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 15%; subject, however,
to an overall maximum of 15% of the participant's base salary.
Acquisitions may only account for up to 5% of the increase in sales. Also,
sales growth above 15% resulted in additional payments under the Volume
Incentive Plan only if the group exceeded corporate goals with respect to
its return on sales and its assets/sales ratio.
3. Long-term incentive compensation that is comprised of two components:
a. A long-term incentive plan ("LTIP") award that is based upon the
Corporation's actual average return on equity for a three fiscal year
period, payable in either restricted stock or as an account entry
under the Corporation's Executive Deferral Plan ("EDP") in an amount
equal to the value of such restricted stock. The amount of the LTIP
award in shares is calculated by dividing a target LTIP dollar value
(adjusted for risk of forfeiture) by the market price of the
Corporation's Common Shares at the beginning of the three-year
performance period. The target LTIP value is established by the
Committee at the market median of comparative LTIP compensation.
b. A stock option grant determined by utilizing the Black-Scholes
valuation model to convert a target stock option dollar value
(adjusted for risk of non-vesting) into the number of stock options to
be granted. The target stock option value is established by the
Committee at the market median of comparative stock option
compensation. Stock options are granted with an exercise price equal
to the fair market value of the Corporation's Common Shares on the day
of grant, and grants historically had a ten-year term with one year
vesting. Beginning in August 1999, grants have a ten-year term and
vest 50% following one year of continued service and the remaining 50%
following the second year of continued service from the date granted.
The Corporation's Stock Option Deferral Plan permits executives to
defer the recognition of gain upon the exercise of stock options under
the Plan.
Incentive compensation for the Corporation's executives is significantly "at
risk," based upon the financial performance of the Corporation. Indeed, more
than one-half of each executive's targeted total compensation (including base
salary, annual bonus, LTIP payouts and stock options) may fluctuate
significantly from year to year because it is directly tied to business and
individual performance.
Long-term incentive programs are designed to link the interests of the
executives with those of the shareholders. LTIP awards focus on long-term
return on equity and provide an incentive to increase the stock price during
the three year performance period. 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. These guidelines,
stated as a multiple of executives' base salaries and of Directors' annual
retainer, are as follows: Chief Executive Officer and President: three times;
Vice Presidents: two times; other executive officers and group presidents: one
time; and non-management Directors: four times. The recommended time period for
reaching the above guidelines is five years. The Chief Executive Officer
reviews compliance with this policy with the Committee on an annual basis.
7
The Corporation's executive compensation philosophy is specifically evident
in the compensation paid during the most recent fiscal year to Donald E.
Washkewicz, the Corporation's Chief Executive Officer. Mr. Washkewicz's
increase in base salary from fiscal 2001 to fiscal 2002 of 33.65% is reflective
of his promotion to Chief Executive Officer. In addition, based on the
Corporation's fiscal 2002 operating plan, Mr. Washkewicz was entitled to
receive 100% of his Target Incentive Bonus of $300,000 if the Corporation's
actual pre-tax return on average assets, adjusted primarily for acquisitions
and currency transactions, was 11.1%. A minimum payout of 15% of the Target
Incentive Bonus was established at a 2.6% pre-tax return on average assets and
a maximum payout of 150% of the Target Incentive Bonus was established at a
13.6% pre-tax return on average assets. During the fiscal year ended June 30,
2002, the Corporation's adjusted pre-tax return on average assets, further
adjusted as described below, was 5.40% and each executive officer, including
Mr. Washkewicz, received an amount equal to 25.8% of his Target Incentive
Bonus, which is included in the "Bonus" column of the Summary Compensation
Table on page 10.
Mr. Washkewicz's RONA Bonus was targeted at $361,905 based upon an
approximate 29.44% average return on division net assets. The average return on
division net assets, adjusted as described below, was 19.07%, resulting in a
RONA Bonus payment to Mr. Washkewicz of $234,619, which is included in the
"Bonus" column of the Summary Compensation Table on page 10. 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, adjusted as described
below, of 12.96% for the three fiscal years ended June 30, 2002, Mr. Washkewicz
and the other executive officers received a payment under the 2000-01-02 LTIP
in the form of either restricted shares and/or contributions to their EDP
accounts in an amount equal to the value of the restricted shares earned, as
reported in the "LTIP Payouts" column of the Summary Compensation Table on page
10. Such payment represents 87% of the target payment that would have been
achieved had the Corporation achieved its return on equity goal of 14% during
such period.
During fiscal year 2002, Mr. Washkewicz and the other executive officers
also received a long-term incentive award as described in the LTIP Table on
page 12 and a stock option grant as reported in the Option Grants Table on page
11. The Committee approved special one-time grants to Messrs. Washkewicz,
Hiemstra and Myslenski and Nickolas W. Vande Steeg equal to twice the number of
options each would normally receive at his grade level. These special grants
not only reflected Mr. Washkewicz's promotion to Chief Executive Officer, Mr.
Hiemstra's promotion to Executive Vice President - Finance and Administration
and Mr. Myslenski's and Mr. Vande Steeg's promotions to Corporate Vice
President and Operating Officer, but also reflected the Committee's desire to
provide significant additional incentive to these new members of the Office of
the Chief Executive to increase the Corporation's share price.
8
Fiscal year 2002 was a challenging year for the Corporation's management due
to the recessionary economic climate, exacerbated by the events of September
11. The Corporation's disappointing results are reflected in the lower levels
of incentive compensation paid to the Corporation's executives. During fiscal
year 2002, the Corporation recorded charges of approximately $53.8 million to
reduce the book value of certain long-term assets, including goodwill.
Consistent with past practice, the Committee unanimously approved the principle
that these non-cash charges against earnings would not have an effect on the
Corporation's annual and long-term incentive compensation plans. Accordingly,
the Corporation's actual return on average assets, return on division net
assets and return on equity were adjusted for purposes of determining
compensation payable under such plans. This adjustment resulted in the payment
of approximately $700,000 to the Corporation's executives and approximately
3,500 other employees. The Committee also determined that this decision would
not constitute a precedent and that the impact of future long-term asset
impairments on executive incentive plans would be considered on a case-by-case
basis.
The Omnibus Budget Reconciliation Act of 1993 includes potential limitations
on the deductibility of compensation in excess of $1 million paid to the
Corporation's Chief Executive Officer and four other highest paid executive
officers. The Committee has taken the necessary actions to ensure the
deductibility of compensation paid by the Corporation to such individuals.
/s/ John G. Breen /s/ Dr. Peter W. Likins
John G. Breen, Chairman Dr. Peter W. Likins
/s/ Allan L. Rayfield /s/ Wolfgang R. Schmitt
Allan L. Rayfield Wolfgang R. Schmitt
/s/ Debra L. Starnes
Debra L. Starnes
9
EXECUTIVE COMPENSATION
The following table summarizes compensation paid by the Corporation for each
of the last three fiscal years to its Chief Executive Officer and each of the
other four most highly compensated executive officers:
Summary Compensation Table
Annual Compensation Long-Term Compensation
---------------------------------------------------------------
Awards Payouts
---------------------------
Other Annual Securities All Other
Name and Principal Fiscal Compensation Underlying LTIP Compensation
Position Year Salary ($) Bonus ($) ($) Options (#) Payouts ($) ($)
- -------------------------------------------------------------------------------------------------------------------
Donald E. Washkewicz, 2002 860,040 312,019 9,985 (a) 171,500 179,213 (b) 123,851 (d)
President and Chief 2001 614,250 377,363 135,344 71,260 254,895 61,411
Executive Officer (c) 2000 320,105 162,955 21,235 62,310 153,680 31,063
Dennis W. Sullivan, 2002 716,640 198,225 13,783 (a) 36,000 350,922 (b) 90,562 (d)
Executive Vice President 2001 689,076 391,993 10,390 53,530 467,392 86,322
2000 656,256 415,715 14,534 29,590 443,400 93,454
Michael J. Hiemstra, 2002 525,004 164,085 147,805 (a) 72,000 238,233 (b) 171,751 (e)
Executive Vice President - 2001 428,604 288,710 5,386 27,340 336,082 129,639
Finance and Administration 2000 412,923 261,578 4,674 16,390 258,930 140,399
and Chief Financial Officer
John D. Myslenski, 2002 465,996 127,593 3,055 (a) 49,600 238,233 (b) 111,672 (d)
Senior Vice President 2001 378,996 201,009 3,244 23,090 336,082 52,997
and Operating Officer 2000 354,204 232,770 3,387 16,390 258,930 56,751
Stephen L. Hayes, 2002 432,240 224,437 13,920 (a) 18,500 238,233 (b) 65,720 (d)
Vice President, and 2001 407,700 289,831 13,457 23,090 336,082 63,839
President, Parker 2000 388,284 252,592 20,507 16,390 258,930 71,302
Aerospace Group
(a)Unless otherwise indicated, no executive officers named in the Summary
Compensation Table received personal benefits or perquisites in an amount at
least equal to 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) $83,899 in
executive perquisites received by Mr. Hiemstra in fiscal year 2002,
including payments of $69,530 for country club dues.
(b)Represents: (i) contributions to the Executive Deferral Plan ("EDP")
accounts of Messrs. Washkewicz, Sullivan, Hiemstra and Hayes based upon
performance achieved under the 2000-01-02 Long Term Incentive Plan ("LTIP");
and (ii) the dollar value of restricted shares issued to Mr. Myslenski under
the 2000-01-02 LTIP based on the Corporation's stock price on the date of
issuance of the shares. The EDP contributions and restricted shares are
subject to a three-year vesting period, with accelerated vesting in the
event of the death, disability or normal retirement of the Plan participant.
Dividends are paid by the Corporation on the restricted shares. The number
and value of the aggregate restricted stock holdings for each of the
above-named executive officers with restricted stock as of June 30, 2002 was
as follows: Mr. Sullivan, 29,990 shares with a value of $1,433,222, Mr.
Hiemstra, 4,640 shares with a value of $221,746, and Mr. Myslenski, 15,479
shares with a value of $739,741.
(c)Mr. Washkewicz was named Chief Executive Officer effective July 1, 2001.
(d)Represents: (i) $15,000, $8,000, $15,000 and $17,047 of matching
contributions by the Corporation to the Parker Retirement Savings Plan
("Savings Plan") and the Parker-Hannifin Corporation Savings Restoration
Plan ("Restoration Plan") for Messrs. Washkewicz, Sullivan, Myslenski and
Hayes, respectively; and (ii) $108,851, $82,562, $96,672 and $48,673 of
compensatory split-dollar life insurance benefits for Messrs. Washkewicz,
Sullivan, Myslenski and Hayes, respectively, under the Corporation's
Executive Life Insurance Plan.
(e)Represents: (i) $15,000 of matching contributions by the Corporation to the
Savings Plan and the Restoration Plan; (ii) $83,830 of compensatory
split-dollar life insurance benefits under the Corporation's Executive Life
Insurance Plan; and (iii) $72,921 of additional compensatory split-dollar
life insurance benefits under a policy purchased by the Corporation pursuant
to an Executive Estate Protection Agreement entered into between Mr.
Hiemstra and the Corporation in exchange for the surrender by Mr. Hiemstra
of $50,000 per year in base salary until October 2006.
10
The following table summarizes stock option grants by the Corporation during
the fiscal year ended June 30, 2002 to each of the executive officers
identified in the Summary Compensation Table on page 10:
Option Grants in Fiscal 2002
Individual Grants
- -------------------------------------------------------------------------
Number of % of Total Potential realizable value at assumed
Securities Options Exercise annual rates of stock price
Underlying Granted to Or Base appreciation for option term (b)
Options Employees Price Expiration -------------------------------------
Name Granted (#) (a) in Fiscal 2002 ($/Sh) Date 5% ($) 10% ($) 13.95% ($) (c)
- - - - - - -------------------------------------
Donald E. Washkewicz 171,500 8.0% $44.42 08/07/11 4,790,853 12,141,171 20,500,081
Dennis W. Sullivan 36,000 1.7% $44.42 08/07/11 1,005,660 2,548,584 4,303,224
Michael J. Hiemstra 72,000 3.4% $44.42 08/07/11 2,011,320 5,097,168 8,606,448
8,159 (d) 0.4% $54.00 08/14/06 106,573 232,099 346,170
10,073 (d) 0.5% $54.00 08/12/07 164,996 368,732 561,439
10,551 (d) 0.5% $54.00 08/11/08 209,954 481,822 749,596
13,553 (d) 0.6% $54.00 08/10/09 319,769 753,994 1,199,291
9,028 (d) 0.4% $54.00 08/08/10 247,674 600,190 976,414
John D. Myslenski 49,600 2.3% $44.42 08/07/11 1,385,576 3,511,382 5,928,886
Stephen L. Hayes 18,500 0.9% $44.42 08/07/11 516,798 1,309,689 2,211,379
(a)Options, except for reload option grants, are 50% exercisable on the date
following completion of one year of continuous employment after the date
of grant and the remaining 50% is exercisable on the date following
completion of two years of continuous employment after the date of grant
with accelerated vesting in the event of a Change in Control (as defined
on page 13). Restorative or "reload" option rights are attached to each
option and up to two reload options will be granted upon exercise,
subject to certain vesting provisions, if the exercise price is paid
using shares of the Corporation's common stock owned by the optionee.
(b)The potential realizable value illustrates the value that might be
realized 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 approximately $3.22 billion and
$8.15 billion at assumed annual rates of appreciation of 5% and 10%,
respectively, over the life of the options. There can be no assurance
that the amounts reflected in this table will be achieved.
(c)Represents the Corporation's actual rate of stock price appreciation over
the 10-year period ending June 30, 2002.
(d)Reload option grant which is exercisable on the date following completion
of one year of continuous full-time employment after the exercise date of
the underlying option, provided, the executive officer retains ownership
for one year of the shares resulting from the underlying option exercise.
The following table summarizes exercises of stock options during the fiscal
year ended June 30, 2002 by each of the executive officers identified in the
Summary Compensation Table on page 10 and the fiscal year-end value of
unexercised options for such executive officers:
Aggregated Option Exercises in Fiscal 2002 and Fiscal Year-End Option Values
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money
Shares Value at FY-End (#) Options at FY-End ($)
Acquired on Realized -------------------------------------------------------
Name Exercise (#) ($) Exercisable / Unexercisable Exercisable / Unexercisable
- - - - -------------------------------------------------------
Donald E. Washkewicz - - 132,820 / 207,130 1,496,831 / 1,000,260
Dennis W. Sullivan 38,250 1,985,884 188,325 / 62,765 2,872,189 / 438,552
Michael J. Hiemstra 79,095 4,286,158 0 / 137,034 0 / 404,664
John D. Myslenski - - 51,470 / 61,145 507,815 / 303,989
Stephen L. Hayes - - 121,970 / 30,045 2,109,616 / 199,182
11
The following table summarizes awards by the Corporation during the fiscal
year ended June 30, 2002 to each of the executive officers identified in the
Summary Compensation Table on page 10 under the Corporation's Long Term
Incentive Plan ("LTIP"):
Long Term Incentive Plan - Awards in Fiscal 2002
Estimated Future Payouts under
Number of Performance or Non-Stock Price-Based Plans
Shares Other Period Until ------------------------------------
Name (#) Maturation or Payout Threshold (#) Target (#) Maximum (#)
- - - - ------------------------------------
Donald E. Washkewicz 30,500 3 Years 7,625 30,500 61,000
Dennis W. Sullivan 12,750 3 Years 3,188 12,750 25,500
Michael J. Hiemstra 12,750 3 Years 3,188 12,750 25,500
John D. Myslenski 10,750 3 Years 2,688 10,750 21,500
Stephen L. Hayes 8,000 3 Years 2,000 8,000 16,000
Target awards under the Corporation's LTIP during the last fiscal year were
made in the form of restricted shares of the Corporation's Common Shares 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 9%; target
of 15%; maximum of 21%) for the three fiscal years ending June 30, 2004. Awards
are payable in August 2004. 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, 2003, 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 10:
Years of Service
Remuneration 15 or more
------------ ----------
$ 400,000 $220,000
600,000 330,000
800,000 440,000
1,000,000 550,000
1,200,000 660,000
1,400,000 770,000
1,600,000 880,000
The foregoing table sets forth the straight-life annuity payable under the
Corporation's Supplemental Executive Retirement Benefits Program (the
"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 10, at their respective retirement dates, will be as
follows: Mr. Washkewicz, 43 years; Mr. Sullivan, 44 years; Mr. Hiemstra, 25
years; Mr. Myslenski, 43 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 calendar year
compensation. If the benefits were to be payable to each named participant
based on retirement as of June 30, 2002, 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. Washkewicz,
$719,994; Mr. Sullivan, $1,055,563; Mr. Hiemstra, $693,716; Mr. Myslenski,
$583,798; and Mr. Hayes, $654,190. Benefits are subject to reduction for
payments received under the Corporations Retirement Plan plus 50% of primary
social security benefits.
12
"Change in Control" Severance Agreements with Officers. The Corporation has
entered into separate agreements (collectively the "Agreements") with Messrs.
Washkewicz, Sullivan, Hiemstra, Myslenski and Hayes that 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)(3) and 14(d)(2) of the Exchange 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 eligible to vote for the election of the Board; (ii) during any
period of twenty-four consecutive months, individuals who at the beginning of
such twenty-four month period were Directors of the Corporation (the "Incumbent
Board") cease to constitute at least a majority of the Board of Directors of
the Corporation, unless the election, or nomination for election, of any person
becoming a Director subsequent to the beginning of such twenty-four month
period was approved by a vote of at least two-thirds of the Incumbent Board;
(iii) the Corporation enters into a merger, consolidation or other
reorganization, or sells all its assets, unless (a) immediately following the
business combination: (1) more than 50% of the total voting power eligible to
elect directors of the resulting corporation is represented by shares that were
Common Shares immediately prior to the business combination, (2) subject to
certain exceptions, no person becomes the beneficial owner, directly or
indirectly, of 20% or more of the voting power of the corporation resulting
from the business combination, and (3) at least a majority of the members of
the board of directors of the resulting corporation were members of the
Incumbent Board at the time of the Board of Directors of the Corporation's
approval of the execution of the initial agreement providing for such business
combination, or (b) the business combination is effected by means of the
acquisition of Common Shares from the Corporation, and the Board of Directors
of the Corporation approves a resolution providing expressly that such business
combination does not constitute a "Change in Control"; or (iv) the shareholders
of the Corporation approve a plan of complete liquidation or dissolution of the
Corporation.
Each Agreement provides that, if the employment of the executive is
terminated during the three years following a Change in Control of the
Corporation, either by the Corporation without "Cause" (as defined in the
Agreements) or by the executive for "Good Reason" (as defined in the Agreements
and described below), the executive shall be entitled to receive (a) pro rata
salary and bonus for the year of termination of employment; (b) severance pay
equal to three times the executive's annual salary and bonus; (c) continuation
of welfare benefits (e.g., medical, life insurance, disability coverage) for a
period of three years; (d) to the extent not previously received, all amounts
previously deferred under the Corporation's non-qualified income deferral plans
together with a "make whole" amount designed to compensate the executive for
the lost opportunity to continue to defer receipt of such income (and the
earnings thereon) pursuant to elections made under the Executive Deferral Plan
("EDP"); 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.
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 shares of restricted stock
issued or unvested EDP amounts credited to an executive pursuant to the
Corporation's Long Term Incentive Plans ("LTIP") vest 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) upon a Change in Control, all amounts previously
deferred by the executive under the EDP, together with the "make whole" amount
(described in subsection (d) of the preceding paragraph), will be paid to the
executive; (5) upon a Change in Control, all shares the receipt of which were
previously deferred by the executive under the Stock Option Deferral Plan will
be issued to the executive; and (6) upon a Change in Control, each participant
under the Corporation's Supplemental Executive Retirement Benefits Program (the
"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.
13
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
500 Industrial Machinery Index during the period June 30, 1997 through June 30,
2002, assuming the investment of $100 on June 30, 1997, and the reinvestment of
dividends. The S&P 500 Industrial Machinery Index is a new global index
selected by the Corporation to replace the S&P Manufacturing (Diversified
Industrials) Index used in prior years but which no longer exists.
[CHART]
Comparison of Five Year Cumulative Total Return Among Parker-Hannifin
Corporation, the S&P 500 Index and the S&P 500 Industrial Machinery Index
Parker-Hannifin S&P 500 S&P 500 Industrial
Corporation Index Machinery Index
--------------- ------- ------------------
6/30/1997 100 100 100
6/30/1998 96 130 108
6/30/1999 117 160 128
6/30/2000 89 171 100
6/30/2001 112 146 112
6/30/2002 128 120 124
APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Audit Committee and the Board of Directors recommend the appointment of
PricewaterhouseCoopers LLP ("PwC") as independent certified public accountants
to examine the financial statements of the Corporation as of and for the fiscal
year ending June 30, 2003. PwC has conducted the annual audit of the
Corporation's accounts since its organization in 1938. A representative of PwC
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 PwC as independent certified public
accountants requires the affirmative vote of the holders of at least a majority
of the votes present or represented and entitled to vote on the proposal at the
Annual Meeting.
Audit Fees
The aggregate fees billed by PwC for auditing the Corporation's annual
consolidated financial statements for the fiscal year ended June 30, 2002 and
reviewing the Corporation's interim financial statements included in the
Corporation's Form 10-Q's filed with the Securities and Exchange Commission
during fiscal 2002 were $2.91 million.
14
Financial Information Systems Design and Implementation Fees
PwC did not provide any services to the Corporation relating to financial
information systems design and implementation during the fiscal year ended June
30, 2002.
All Other Fees
The aggregate fees billed by PwC for all other professional services
provided to the Corporation (other than the services described above under
"Audit Fees") for the fiscal year ended June 30, 2002 were $3.67 million. These
fees were primarily for tax services.
After review, the Audit Committee has unanimously determined that the
services rendered by PwC with respect to the foregoing fees are compatible with
maintaining their independence as the independent certified public accountants
for the Corporation.
The Board of Directors unanimously recommends a vote FOR the proposal to
appoint PricewaterhouseCoopers LLP as the Corporation's independent certified
public accountants for the fiscal year ending June 30, 2003.
PRINCIPAL SHAREHOLDERS OF THE CORPORATION
The following table sets forth, as of August 30, 2002 except as otherwise
indicated, 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 10, and all
Directors and executive officers as a group:
Amount and Nature Percentage
Name of of of
Beneficial Owner Beneficial Ownership(a) Class(b)
---------------- ----------------------- ----------
Capital Research and Management Company 6,104,000 (c) 5.2%
333 South Hope Street
Los Angeles, CA 90071
FMR Corp. 13,103,074 (d) 11.2%
82 Devonshire Street
Boston, MA 02109
J. G. Breen 20,610 (e)
D. E. Collins 479,624 (f)
P. C. Ely 11,728 (g)
W. E. Kassling 5,642 (h)
R. J. Kohlhepp 1,000
P. W. Likins 12,614 (i)
G. Mazzalupi 3,300 (j)
K. P. Muller 6,289 (j)
C. M. Obourn 0
H. R. Ortino 8,254 (k)
A. L. Rayfield 9,843 (g)
W. R. Schmitt 8,357 (l)
D. L. Starnes 7,531 (m)
D. E. Washkewicz 285,605 (n)
D. W. Sullivan 340,671 (o)
M. J. Hiemstra 77,537 (p)
J. D. Myslenski 137,276 (q)
S. L. Hayes 158,377 (r)
All Directors and executive 2,142,697 (s) 1.8%
officers as a group
(32 persons)
15
(a)Unless otherwise indicated, 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 30, 2002.
(c)Pursuant to a statement filed by Capital Research and Management Company
with the Securities and Exchange Commission ("SEC") in accordance with
Rule 13d-1 of the Securities and Exchange Act of 1934 ("Exchange Act"),
Capital Research and Management Company has reported that, as of December
31, 2001, it had sole investment power over 6,104,000 Common Shares.
(d)Pursuant to a statement filed by FMR Corp. with the SEC in accordance
with Rule 13d-1 of the Exchange Act, FMR Corp. has reported on behalf of
itself, Edward C. Johnson 3d (Chairman of FMR Corp.), Abigail P. Johnson
(Director of FMR Corp.), Fidelity Management & Research Company, Fidelity
Management Trust Company and Fidelity International Limited that, as of
December 31, 2001, it had sole voting power over 916,657 Common Shares
and sole investment power over 13,103,074 Common Shares.
(e)This amount includes 11,000 Common Shares owned jointly by Mr. Breen and
his spouse and 2,500 Common Shares subject to options exercisable on or
prior to October 30, 2002 granted under the Corporation's Non-Employee
Directors Stock Option Plan.
(f)This amount includes 41,850 Common Shares owned solely by Mr. Collins'
spouse and 372,029 Common Shares subject to options exercisable on or
prior to October 30, 2002 granted under the Corporation's 1993 Stock
Incentive Program.
(g)These amounts include 5,550 Common Shares subject to options exercisable
by each of Messrs. Ely and Rayfield on or prior to October 30, 2002
granted under the Corporation's Non-Employee Directors Stock Option Plan.
(h)This amount includes 4,500 Common Shares owned jointly by Mr. Kassling
and his spouse and 350 Common Shares subject to options exercisable on or
prior to October 30, 2002 granted under the Corporation's Non-Employee
Directors Stock Option Plan.
(i)This amount includes 1,424 Common Shares owned jointly by Dr. Likins and
his spouse as co-trustees of a revocable family trust and 5,550 Common
Shares subject to options exercisable on or prior to October 30, 2002
granted under the Corporation's Non-Employee Directors Stock Option Plan.
(j)These amounts include 2,300 Common Shares subject to options exercisable
by each of Messrs. Mazzalupi and Muller on or prior to October 30, 2002
granted under the Corporation's Non-Employee Directors Stock Option Plan.
(k)This amount includes 4,800 Common Shares subject to options exercisable
on or prior to October 30, 2002 granted under the Corporation's
Non-Employee Directors Stock Option Plan.
(l)This amount includes 900 Common Shares subject to options exercisable on
or prior to October 30, 2002 granted under the Corporation's Non-Employee
Directors Stock Option Plan.
(m)This amount includes 1,714 Common Shares owned jointly by Ms. Starnes and
her spouse and 4,050 Common Shares subject to options exercisable on or
prior to October 30, 2002 granted under the Corporation's Non-Employee
Directors Stock Option Plan.
(n)This amount includes 3,939 Common Shares owned jointly by Mr. Washkewicz
and his mother, 22,302 Common Shares as to which Mr. Washkewicz holds
voting power pursuant to the Corporation's Retirement Savings Plan as of
June 30, 2002, and 254,200 Common Shares subject to options exercisable
on or prior to October 30, 2002 granted under the Corporation's 1993
Stock Incentive Program.
(o)This amount includes 307 Common Shares as to which Mr. Sullivan holds
voting power pursuant to the Corporation's Retirement Savings Plan as of
June 30, 2002 and 233,090 Common Shares subject to options exercisable on
or prior to October 30, 2002 granted under the Corporation's 1993 Stock
Incentive Program.
16
(p)This amount includes 2,250 Common Shares owned jointly by Mr. Hiemstra
and his spouse, 2,389 Common Shares as to which Mr. Hiemstra holds voting
power pursuant to the Corporation's Retirement Savings Plan as of June
30, 2002, and 49,670 Common Shares subject to options exercisable on or
prior to October 30, 2002 granted under the Corporation's 1993 Stock
Incentive Program.
(q)This amount includes 4,486 Common Shares as to which Mr. Myslenski holds
voting power pursuant to the Corporation's Retirement Savings Plan as of
June 30, 2002 and 87,815 Common Shares subject to options exercisable on
or prior to October 30, 2002 granted under the Corporation's 1993 Stock
Incentive Program.
(r)This amount includes 6,903 Common Shares as to which Mr. Hayes holds
voting power pursuant to the Corporation's Retirement Savings Plan as of
June 30, 2002 and 142,765 Common Shares subject to options exercisable on
or prior to October 30, 2002 granted under the Corporation's 1993 Stock
Incentive Program.
(s)This amount includes 40,310 Common Shares for which voting and investment
power is shared, 87,052 Common Shares as to which all Directors and
executive officers as a group hold voting power pursuant to the
Corporation's Retirement Savings Plan as of June 30, 2002, and 1,607,824
Common Shares subject to options exercisable on or prior to October 30,
2002 granted under the Corporation's stock option plans held by all
Directors and executive officers as a group.
SHAREHOLDERS' PROPOSALS
The Corporation must receive by May 26, 2003 any proposal of a shareholder
intended to be presented at the 2003 Annual Meeting of Shareholders of the
Corporation (the "2003 Meeting") and to be included in the Corporation's proxy,
notice of meeting and proxy statement related to the 2003 Meeting pursuant to
Rule 14a-8 under the Securities and Exchange Act of 1934 (the "Exchange Act").
Such proposals should be submitted by certified mail, return receipt requested.
Proposals of shareholders submitted outside the processes of Rule 14a-8 under
the Exchange Act ("Non-Rule 14a-8 Proposals") in connection with the 2003
Meeting must be received by the Corporation by August 9, 2003 or such proposals
will be considered untimely under Rule 14a-4(c) of the Exchange Act. The
Corporation's proxy related to the 2003 Meeting will give discretionary
authority to the proxy holders to vote with respect to all Non-Rule 14a-8
Proposals received by the Corporation after August 9, 2003. The Corporation's
proxy related to the 2002 Annual Meeting of Shareholders gives discretionary
authority to the proxy holders to vote with respect to all Non-Rule 14a-8
Proposals received by the Corporation after August 10, 2002.
17
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 Georgeson Shareholder Communications Inc., 88 Pine
Street, Wall Street Plaza, 30th Floor, New York, New York, to assist in the
solicitation of proxies at an anticipated cost of $14,000, plus disbursements.
You are urged to vote your proxy promptly by internet, telephone or mail by
following the instructions on the enclosed proxy card in order to make certain
your shares will be voted at the meeting. Common Shares represented by properly
executed proxies will be voted in accordance with any specification made
thereon and, if no specification is made, will be voted in favor of the
election of the four nominees for Directors in the class whose three-year term
of office will expire in 2005; and in favor of the appointment of
PricewaterhouseCoopers LLP as independent certified public accountants for the
fiscal year ending June 30, 2003. 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 which requires
the affirmative vote of a certain number of Common Shares, as each abstention
or broker non-vote would be one less vote in favor of a proposal. You may
revoke your proxy at any time prior to the close of voting at the Annual
Meeting by giving notice to the Corporation in writing, in open meeting, or by
internet or telephone as set forth on the proxy card, 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, 2002, is being mailed to shareholders with this
Proxy Statement.
By Order of the Board of Directors
/s/ Thomas A. Piraino, Jr.
Thomas A. Piraino, Jr.
Secretary
September 23, 2002
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[GRAPHIC]
Directions to Corporate Headquarters
Vote by Telephone
Have this proxy card available when you call the Toll-Free number 1-800-542-1160
using a Touch-Tone phone. You will be prompted to enter your control number and
then you can follow the simple prompts that will be presented to you to record
your vote.
Vote by Internet
Have this proxy card available when you access the website
http://www.votefast.com. You will be prompted to enter your control number and
then you can follow the simple prompts that will be presented to you to record
your vote.
Vote by Mail
Please mark, sign and date this proxy card and return it in the postage paid
envelope provided or return it to: Stock Transfer Dept. (PH), National City
Bank, P.O. Box 92301, Cleveland, OH 44197-1200.
If voting by telephone or internet, please do not
send this proxy card by mail.
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Vote by Telephone Vote by Internet Vote by Mail
Call Toll-Free using a Access the Website and Return this proxy card
Touch-Tone phone cast your vote in the postage-paid
1-800-542-1160 http://www.votefast.com envelope provided
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Vote 24 hours a day, 7 days a week!
Your telephone or internet vote must be received by
11:59 p.m. Eastern Daylight Time on
October 22, 2002 to be counted in the final tabulation.
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Your Control Number is:
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Proxy card must be signed and dated below.
Please fold and detach card at perforation before mailing
PARKER-HANNIFIN CORPORATION PROXY
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YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOXES (SEE
REVERSE SIDE) BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR
SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both should sign.
When signing on behalf of a corporation or as a
fiduciary, attorney, executor, administrator, trustee
or guardian, please give full title as such.
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Signature
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Signature
Date: , 2002
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Proxy card must be signed and dated on the reverse side.
Please fold and detach card at perforation before mailing
This proxy is solicited on behalf of the Board of Directors for the Annual
Meeting of Shareholders on October 23, 2002.
The undersigned hereby appoints DUANE E. COLLINS, DONALD E. WASHKEWICZ
and THOMAS A. PIRAINO, JR., and any of them, as proxies to represent and to vote
all shares of stock of Parker-Hannifin Corporation which the undersigned is
entitled to vote at the Annual Meeting of Shareholders of the Corporation to be
held on October 23, 2002, and at any adjournment(s) thereof, on the proposals
more fully described in the Proxy Statement for the Meeting in the manner
specified herein and on any other business that may properly come before the
Meeting.
1. Election of Directors in the class whose three-year term of office will
expire in 2005.
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as otherwise marked below) to vote for all nominees listed below
(01) William E. Kassling (02) Peter W. Likins (03) Wolfgang R. Schmitt (04) Debra L. Starnes
(Instructions: to withhold authority to vote for any individual
nominee, strike a line through that nominee's name.)
2. Appointment of PricewaterhouseCoopers LLP as independent certified public
accountants for FY03.
[_] FOR [_] AGAINST [_] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
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