1 Securities and Exchange Commission Washington, D. C. 20549 FORM 11-K Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1994 Commission File No. 1-10697 COMMERCIAL INTERTECH RETIREMENT STOCK OWNERSHIP AND SAVINGS PLAN COMMERCIAL INTERTECH CORP. 1775 Logan Avenue Youngstown, Ohio 44501 2 Audited Financial Statements COMMERCIAL INTERTECH RETIREMENT STOCK OWNERSHIP AND SAVINGS PLAN December 31, 1994 and 1993 3 Commercial Intertech Retirement Stock Ownership and Savings Plan Audited Financial Statements December 31, 1994 and 1993 CONTENTS REQUIRED INFORMATION Report of Independent Auditors .................................................................. 1 FINANCIAL STATEMENTS PROVIDED Statements of Net Assets Available for Plan Benefits ............................................ 2 Statement of Changes in Net Assets Available for Plan Benefits .................................. 3 Notes to Financial Statements ................................................................... 4 SCHEDULES Item 27(a)--Schedule of Assets Held for Investment Purposes ..................................... 14 Item 27(d)--Schedule of Reportable Transactions ................................................. 15 EXHIBITS Exhibit 23--Consent of Independent Auditors ..................................................... 16 4 Report of Independent Auditors Administrative Committee Commercial Intertech Retirement Stock Ownership and Savings Plan We have audited the accompanying statements of net assets available for plan benefits of the Commercial Intertech Retirement Stock Ownership and Savings Plan (the "Plan") as of December 31, 1994 and 1993, and the related statement of changes in net assets available for plan benefits for the year ended December 31, 1994. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan at December 31, 1994 and 1993, and the changes in its net assets available for plan benefits for the year ended December 31, 1994 in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental Schedule of Assets Held for Investment Purposes as of December 31, 1994, and Schedule of Reportable Transactions for the year ended December 31, 1994, are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and are not a required part of the financial statements. The supplemental schedules have been subjected to the auditing procedures applied in our audit of the 1994 financial statements and, in our opinion, are fairly stated in all material respects in relation to the 1994 financial statements taken as a whole. ERNST & YOUNG LLP Cleveland, Ohio June 5, 1995 1 5 Commercial Intertech Retirement Stock Ownership and Savings Plan Statements of Net Assets Available for Plan Benefits DECEMBER 31, 1994 DECEMBER 31, 1993 ----------------------------------------- -------------------------------------------- ALLOCATED UNALLOCATED TOTAL ALLOCATED UNALLOCATED TOTAL ----------------------------------------- -------------------------------------------- ASSETS Cash and cash equivalents $ 47,369 $ 2,280 $ 49,649 $ 105 $ 2,079 $ 2,184 Interest receivable 3,186 1,143 4,329 35,431 177 35,608 Employer contributions receivable 531,166 531,166 483,911 483,911 Employee contributions receivable 274,639 274,639 260,562 260,562 Other receivables 792 792 ----------------------------------------- -------------------------------------------- 856,360 3,423 859,783 780,801 2,256 783,057 Investments: Interest in a registered investment company (Fidelity Management Trust Company) 7,452,915 7,452,915 5,925,187 5,925,187 Unallocated insurance contracts (CIGNA guaranteed account) 11,957,033 11,957,033 10,684,684 10,684,684 Commercial Intertech Corp. Series B preferred stock 3,339,235 10,755,125 14,094,360 2,672,927 11,472,131 14,145,058 Commercial Intertech Corp. common stock 6,378,578 6,378,578 3,717,098 3,717,098 Participant loans receivable 561,300 561,300 442,522 442,522 ----------------------------------------- -------------------------------------------- 29,689,061 10,755,125 40,444,186 23,442, 418 11,472,131 34,914,549 LIABILITIES Distributions payable 120,502 120,502 Notes payable 12,358,268 12,358,268 12,814,721 12,814,721 Other liabilities 49,826 24 49,850 793 5 798 ----------------------------------------- -------------------------------------------- 49,826 12,358,292 12,408,118 121,295 12,814,726 12,936,021 ----------------------------------------- -------------------------------------------- NET ASSETS AVAILABLE (DEFICIENT) FOR PLAN BENEFITS $30,495,595 $(1,599,744) $28,895,851 $24,101,924 $(1,340,339) $22,761,585 ========================================= ============================================ <FN> See notes to financial statements. 2 6 Commercial Intertech Retirement Stock Ownership and Savings Plan Statement of Changes in Net Assets Available for Plan Benefits For the Year Ended December 31, 1994 Allocated Unallocated Total ----------------------------------------------------- ADDITIONS Employer contributions $ 154,000 $ 154,000 Employee contributions $ 3,207,662 3,207,662 Employer non-cash contributions 531,166 531,166 Interest income 610,605 13,201 623,806 Dividend income 379,865 975,131 1,354,996 Dividend transfers 222,889 222,889 Allocation of Commercial Intertech Corp. Series B preferred stock 717,007 717,007 ----------------------------------------------------- 5,446,305 1,365,221 6,811,526 DEDUCTIONS Interest expense 907,282 907,282 Distributions 483,669 483,669 Dividend transfers 222,889 222,889 Other expense 5 337 342 Allocation of Commercial Intertech Corp. Series B preferred stock 717,007 717,007 ----------------------------------------------------- 706,563 1,624,626 2,331,189 Net realized and unrealized appreciation in aggregate current value of investments 1,649,895 1,649,895 Transfers to plan 4,034 4,034 ----------------------------------------------------- Net additions (deductions) 6,393,671 (259,405) 6,134,266 Net assets available (deficient) for plan benefits at beginning of year 24,101,924 (1,340,339) 22,761,585 ----------------------------------------------------- NET ASSETS AVAILABLE (DEFICIENT) FOR PLAN BENEFITS AT END OF YEAR $30,495,595 $ (1,599,744) $ 28,895,851 ===================================================== <FN> See notes to financial statements. 3 7 Commercial Intertech Retirement Stock Ownership and Savings Plan Notes to Financial Statements Year ended December 31, 1994 A. SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The accounting records of the Commercial Intertech Retirement Stock Ownership and Savings Plan (the "Plan") are maintained on the accrual basis. VALUATION OF INVESTMENTS Investments consisting of Commercial Intertech Corp. (the "Company") common shares (Commercial Intertech Common Stock Fund) are carried at the closing market price on the last business day of the year. Investments consisting of Convertible Series B Preferred Stock ("Preferred Shares") are valued by an independent appraiser. Currently, the independent appraiser uses the greater of 1.235 of the price of Company common stock as of the last business day of the year or $23.25, the price guaranteed to the Plan participants by the Company. Investments in unallocated insurance contracts (Guaranteed Account) are valued at contract value as estimated by Connecticut General Life Insurance Company. Investments in registered investment company funds (Fidelity Intermediate Bond Fund, Fidelity Balanced Fund, Fidelity U.S. Equity Index Fund, and Fidelity Growth Company Fund) are carried at the value of their underlying assets as determined by Fidelity Management Trust Company. Participant loans receivable are valued at cost which approximates fair value. B. DESCRIPTION OF THE PLAN The Plan consists of a pre-tax savings program, a post-tax savings program and a leveraged matching employee stock ownership plan. All employees of designated subsidiaries, with at least one year of service, are eligible to participate in the Plan. The Plan is subject to the applicable provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The leveraged matching employee stock ownership features of the Plan are designed to comply with Section 4975(e)(7) and the regulations thereunder of the Internal Revenue Code of 1986, as amended, (the "Code"). 4 8 Commercial Intertech Retirement Stock Ownership and Savings Plan Notes to Financial Statements--Continued B. DESCRIPTION OF THE PLAN--CONTINUED Under the pre-tax program, participants may elect to contribute up to 15% of their compensation, on a tax-deferred basis, to the Plan. Under the post-tax program, participants may elect to contribute up to an additional 10% of their compensation. These contributions are made with after-tax dollars and do not receive Company matching contributions. Employee contributions are recognized as income by the Plan as they are earned by the participants. A 50% Company matching contribution, made in Preferred Shares, is applied to the first 6% of a participant's tax-deferred contribution, not to exceed $1,350 per year (see Note I). The Plan provides for separate investment options in one or more funds as directed by the participants. Participants may change investment options once every two months. At December 31, 1994, 1,180 individuals participated in the Guaranteed Account (1,158--1993), 548 individuals participated in the Commercial Intertech Common Stock Account Fund (1,129--1993), 392 individuals participated in the Fidelity Intermediate Bond Fund (371--1993), 546 individuals participated in the Fidelity Balanced Fund (485--1993), 366 individuals participated in the Fidelity U.S. Equity Index Fund (335--1993), and 610 individuals participated in the Fidelity Growth Company Fund (548--1993). All investment account dollars that result from employee contributions and related investment results are immediately vested. Company matching contributions and related investment results vest according to the following schedule: Years of Vesting Service % Vested -------------------------- ---------- Less than 1 year 0% 1 year 20 2 years 40 3 years 60 4 years 80 5 years 100 5 9 Commercial Intertech Retirement Stock Ownership and Savings Plan Notes to Financial Statements--Continued B. DESCRIPTION OF THE PLAN--CONTINUED Participants become fully vested in Company matching contributions upon attainment of their normal retirement date, or upon their death or disability. If the participant's employment with the Company terminates for other reasons, his or her account will be closed. The vested portion of his or her account is distributed to the participant and the non-vested portion will be treated as a forfeiture and applied as a matching contribution if the employee experiences a break in service greater than five years. Non-vested assets attributable to terminated employees amounted to $9,018 at December 31, 1994. The Plan also provides for withdrawal in cases of financial hardship, upon attainment of age 59-1/2, and of the post-tax savings program contributions. Participating employees may borrow up to 50% of their account balance attributable to employee contributions. The amount borrowed is repaid to the participant's account via payroll deductions and carries an interest charge at the market rate of interest. The Plan purchased the Preferred Shares, which are held in a trust established under the Plan, in 1990 using the proceeds of a $14.3 million borrowing guaranteed by the Company. In June 1993, the loan was refinanced through the placement of 7.08% Senior Notes (the "Notes"), totaling $13,240,994, with two insurance company lenders. The Notes, which are guaranteed by the Company, provide for repayment through 2009. Scheduled payments of principal under this agreement at December 31, 1994 are as follows: 1995 $ 488,770 1996 523,375 1997 560,430 1998 600,108 1999 642,596 Thereafter 9,542,989 Each year dividends on the Preferred Shares and Company contributions to the Plan will be used to repay the Notes. As the Plan makes each payment of principal and interest each year, an appropriate number of Preferred Shares are allocated to eligible employees' accounts in accordance with matching provisions noted above. 6 10 Commercial Intertech Retirement Stock Ownership and Savings Plan Notes to Financial Statements--Continued B. DESCRIPTION OF THE PLAN--CONTINUED The financial statements of the Plan present separately the assets and liabilities and changes therein pertaining to: a. The accounts of employees with vested rights in allocated stock (Allocated) and b. Stock not yet allocated to employees (Unallocated). Preferred Shares distributed to participants are converted to Company common stock based upon a predetermined formula set forth in the Company's Amended Articles of Incorporation. Benefits payable to participants represent the fair value of vested common stock and cash in terminated participants' accounts, after conversion of Preferred Shares. Each participant is entitled to exercise voting rights attributable to the shares allocated to his or her account and to exercise proportional voting rights of unallocated Preferred Shares. Each participant is notified prior to the time that such rights are to be exercised. The Plan is administered by the Administrative Committee (the "Committee") appointed by the Company's Board of Directors. The trust department of Mellon Bank, N.A., an independent third-party bank, is the Plan's trustee. The Company has the sole right to appoint the trustee, and to terminate the Plan, subject to the provisions of ERISA. The Company pays all significant administrative expenses. Upon termination of the Plan, amounts credited to each participant's account shall be 100% vested and nonforfeitable. Additionally, the interest of each participant in the trust fund will be distributed to such participant or his or her beneficiary at the time prescribed by the Plan terms and the Code. The foregoing description of the Plan provides only general information. Additional information about the Plan agreement, allocation of Preferred Shares, forfeitures and distributions from the Plan may be obtained from the Committee. 7 11 Commercial Intertech Retirement Stock Ownership and Savings Plan Notes to Financial Statements--Continued C. STATEMENTS OF CHANGES IN ASSETS OF PARTICIPANT DIRECTED FUNDS The amount of assets invested in each participant directed fund at the beginning and end of the Plans' year and changes in assets in each fund during the year were as follows: FUND ASSETS FUND ASSETS AVAILABLE NET AVAILABLE DECEMBER 31, ADDITIONS DECEMBER 31, 1993 (DEDUCTIONS) 1994 ---------------------------------------------------- PARTICIPANT DIRECTED ACCOUNTS CIGNA Guaranteed Account $10,684,684 $1,272,349 $11,957,033 Fidelity Intermediate Bond Fund 1,082,428 82,600 1,165,028 Fidelity Balanced Fund 1,535,474 478,879 2,014,353 Fidelity U.S. Equity Index Fund 849,891 145,663 995,554 Fidelity Growth Company Fund 2,457,394 820,586 3,277,980 Commercial Intertech Common Stock Fund 3,184,790 (351,005) 2,833,785 Participant loans receivable 442,522 118,778 561,300 D. INCOME TAX STATUS The Internal Revenue Service has ruled that the Plan qualifies under Section 401(a) of the Internal Revenue Code and is, therefore, not subject to tax under present income tax laws. The Plan is amended periodically to conform with current income tax laws. The Committee is not aware of any action or event that has occurred that might affect the Plan's qualified status. E. TRANSACTIONS WITH PARTIES-IN-INTEREST The Plan purchased shares of common stock of the Company for $601,990 and sold shares of common stock of the Company for $158,218 during the year ended December 31, 1994. The Plan received dividends on common stock of the Company of $156,976 and dividends on Preferred Shares of the Company of $1,198,020 during the year ended December 31, 1994. 8 12 Commercial Intertech Retirement Stock Ownership and Savings Plan Notes to Financial Statements--Continued E. TRANSACTIONS WITH PARTIES-IN-INTEREST--CONTINUED At December 31, 1994 and 1993, the Plan had a noncash contribution receivable from the Company of 28,519 shares and 24,817 shares, respectively, of Company common stock with a market value of $531,166 and $483,911, respectively. F. INVESTMENTS The Plan's investments consist of common and Preferred Shares of the Company, interests in a registered investment company (Fidelity Trust Management Company), unallocated insurance contracts (CIGNA Guaranteed Account), amounts in a temporary investment fund, and loans to participants as follows: Identity of Issuer Description of Current or Similar Party Investment Cost Value - -------------------------------------------------------------------------------------------------------------- DECEMBER 31, 1994 *Commercial Intertech Corp. 342,474 Common Shares, $1.00 Par Value **$ 4,530,658 **$ 6,378,578 *Commercial Intertech Corp. 143,623 Convertible Series B Preferred Shares-Allocated ** 3,339,235 ** 3,339,235 *Commercial Intertech Corp. 462,586 Convertible Series B Preferred Shares-Unallocated ** 10,755,125 ** 10,755,125 Connecticut General Life Insurance Company Guaranteed Account ** 11,957,033 ** 11,957,033 Fidelity Trust Mgt. Co. Intermediate Bond Fund 1,233,589 1,165,028 Fidelity Trust Mgt. Co. Balanced Fund ** 2,102,701 ** 2,014,353 Fidelity Trust Mgt. Co. U.S. Equity Index Fund 956,157 995,554 Fidelity Trust Mgt. Co. Growth Company Fund ** 3,385,348 ** 3,277,980 Mellon Bank, N.A. Temporary Investment Fund 43,849 43,849 Participants Loans Receivable 561,300 561,300 9 13 Commercial Intertech Retirement Stock Ownership and Savings Plan Notes to Financial Statements--Continued F. INVESTMENTS--CONTINUED Identity of Issuer Description of Current or Similar Party Investment Cost Value - --------------------------------------------------------------------------------------------------------------- DECEMBER 31, 1993 *Commercial Intertech Corp. 190,619 Common Shares, $1.00 Par Value **$ 3,614,649 **$ 3,717,098 *Commercial Intertech Corp. 114,965 Convertible Series B Preferred Shares Allocated ** 2,672,927 ** 2,672,927 *Commercial Intertech Corp. 493,425 Convertible Series B Preferred Shares--Unallocated ** 11,472,131 ** 11,472,131 Connecticut General Life Insurance Company Guaranteed Account ** 10,684,684 ** 10,684,684 Fidelity Trust Mgt. Co. Intermediate Bond Fund ** 1,050,788 ** 1,082,428 Fidelity Trust Mgt. Co. Balanced Fund ** 1,475,612 ** 1,535,474 Fidelity Trust Mgt. Co. U.S. Equity Index Fund 785,719 849,891 Fidelity Trust Mgt. Co. Growth Company Fund ** 2,379,575 ** 2,457,394 Mellon Bank, N.A. Temporary Investment Fund 2,184 2,184 Participants Loans Receivable 442,522 442,522 <FN> * Party-in-interest. ** Investment representing five percent or more of the Plan's net assets available for benefits. 10 14 Commercial Intertech Retirement Stock Ownership and Savings Plan Notes to Financial Statements--Continued F. INVESTMENTS--CONTINUED The net appreciation (depreciation) (including investments bought, sold and held during the year) for each significant class of investment for the year ended December 31, 1994 is as follows: Fair value determined by closing market price: Commercial Intertech Corp. Common Stock $1,745,471 Fidelity Intermediate Bond Fund (100,201) Fidelity Balanced Fund (148,210) Fidelity U.S. Equity Index Fund (24,775) Fidelity Growth Company Fund (185,187) Fair value determined by insurance company or independent appraiser: Series B Preferred Stock 0 Guaranteed Account 0 Participant loans receivable 0 ------------ $1,287,098 ============ The Company's common stock is publicly traded on the New York Stock Exchange (ending per share price at December 31, 1994 was $18.625). The Company's Preferred Shares are not registered or publicly traded. Each Preferred Share is convertible into 1.235 shares of common stock at any time subject to anti-dilution adjustments. Annual dividends on the Preferred Shares are $1.97625 per share. The Preferred Shares are callable by the Company effective January 1, 1995 and thereafter (at the following prices) and under certain other conditions specified in the Plan. Call Date Call Price ---------------------------- ---------- January 1, 1995 $24.23 January 1, 1996 24.03 January 1, 1997 23.83 January 1, 1998 23.63 January 1, 1999 23.44 January 1, 2000 and thereafter 23.25 11 15 Commercial Intertech Retirement Stock Ownership and Savings Plan Notes to Financial Statements--Continued G. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500: DECEMBER 31, 1994 ----------------- Net assets available for benefits per the financial statements $28,895,851 Amounts allocated to withdrawing participants (485,389) ---------- Net assets available for benefits per the Form 5500 $28,410,462 =========== The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500: YEAR ENDED DECEMBER 31, 1994 ----------------- Benefits paid to participants per the financial statements $483,669 Amounts allocated to withdrawing participants 485,389 -------- Benefits paid to participants per the Form 5500 $969,058 ======== 12 16 Commercial Intertech Retirement Stock Ownership and Savings Plan Notes to Financial Statements--Continued H. EMPLOYER CONTRIBUTIONS The Company is obligated to make contributions in cash to the Plan which, when aggregated with the Plan's dividends on Preferred Shares and interest earnings, equal the amount necessary to enable the Plan to make its regularly scheduled payments of principal and interest due on its Notes. This contribution enables the Plan to allocate an appropriate number of Preferred Shares to participants (see Note B). Should the value of Preferred Shares allocated be less than the required matching contribution, the Company will make additional contributions to the Plan in the form of common stock or cash. Should the value of Preferred Shares allocated be more than the required matching contributions, any excess value of Preferred Shares released over the required amount will be allocated proportionately to each participant's account in the Plan based upon the ratio of the participant's current Company matching contribution to the Plan for the plan year to the aggregate Company matching contributions to the Plan for all participants for the Plan year. I. SUBSEQUENT PLAN AMENDMENT Effective January 1, 1995, the Plan was amended to eliminate the $1,350 limit on the Company match, allowing the 50% Company match to be applied to participant tax-deferred contributions not exceeding 6% of the participants' eligible compensation. 13 17 Commercial Intertech Retirement Stock Ownership and Savings Plan Item 27(a)--Schedule of Assets Held for Investment Purposes December 31, 1994 Identity of Issue Description of Current or Similar Party Investment Cost Value - -------------------------------------------------------------------------------------------------- Mellon Bank, N.A. Temporary Investment Fund $ 43,849 $ 43,849 Fidelity Trust Mgt. Co. U.S. Equity Index Fund 956,157 995,554 Fidelity Trust Mgt. Co. Intermediate Bond Fund 1,233,589 1,165,028 Fidelity Trust Mgt. Co. Growth Company Fund 3,385,348 3,277,980 Fidelity Trust Mgt. Co. Balanced Fund 2,102,701 2,014,353 Connecticut General Life Insurance Company Guaranteed Long-Term Fund 11,957,033 11,957,033 *Commercial Intertech Corp. 342,474 Common Shares $1.00 Par Value 4,530,658 6,378,578 Participants Loans Receivable 561,300 561,300 *Commercial Intertech Corp. 606,209 Convertible Series B Preferred Shares 14,094,360 14,094,360 <FN> * Party-in-interest 14 18 Commercial Intertech Retirement Stock Ownership and Savings Plan Item 27(d)--Schedule of Reportable Transactions December 31, 1994 Current Value Net Identity of Description Purchase Sales Cost of of Asset on Gain Party Involved of Assets Price Price Asset Transaction Date (Loss) - -------------------------------------------------------------------------------------------------------------------------- CATEGORY (iii)--SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS Mellon Bank, N.A. Temporary Investment Fund $1.00 $1.00 $4,584,167 $4,584,167 Bankers Trust Units in Growth Company Fund VARIOUS VARIOUS 1,330,575 1,329,038 $1,537 Connecticut General Life Insurance Units in Guaranteed Long-Term Company Fund 2,936,525 2,936,525 Mellon Bank, N.A. Deposit at Interest 1,000 1,000 3,252,000 3,252,000 15