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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 11-K

 

 

 

x	ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended December 31, 2011

OR

 

¨	TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-4982

 

 

 

A.	Full title of the plan and the address of the plan, if different from that of the issuer named below:

PARKER RETIREMENT SAVINGS PLAN

 

B.	Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

PARKER-HANNIFIN CORPORATION

6035 PARKLAND BOULEVARD

CLEVELAND, OHIO 44124-4141

 

 

 

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Table of Contents

Parker Retirement Savings Plan

Index of Financial Statements

 

Report of Independent Registered Public Accounting Firm			1
Financial Statements:
Statements of Net Assets Available for Benefits at December 31, 2011 and 2010			2
Statements of Changes in Net Assets Available for Benefits for the Years Ended December  31, 2011 and 2010			3
Notes to Financial Statements			4-15
Supplemental Schedule:
Schedule of Assets (Held at End of Year) at December 31, 2011			16-17

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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Plan Participants and Board of Directors

Parker-Hannifin Corporation

Parker Retirement Savings Plan

Cleveland, Ohio

We have audited the accompanying statements of net assets available for benefits of the Parker Retirement Savings Plan as of December 31, 2011 and 2010, and the related statements of changes in net assets available for benefits for the years then ended. 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 the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Parker Retirement Savings Plan as of December 31, 2011 and 2010, and the changes in net assets available for benefits for the years then ended, in conformity with U.S. generally accepted accounting principles.

Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) as of December 31, 2011 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ McGladrey LLP

Cleveland, Ohio

June 22, 2012

 

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Table of Contents

Parker Retirement Savings Plan

Statements of Net Assets Available for Benefits

At December 31, 2011 and 2010

 

(Dollars in Thousands)		2011				2010
ASSETS
Plan investments at fair value		$	2,838,211			$	2,973,545
Notes receivable from participants			82,011				77,421
Employer contribution receivable			17,717				15,263
Total assets			2,937,939				3,066,229
LIABILITIES			—				—
Net assets available for benefits at fair value			2,937,939				3,066,229
Adjustment from fair value to contract value for fully benefit-responsive investment contracts			(14,736	)			(10,201	)
Net assets available for benefits		$	2,923,203			$	3,056,028

The accompanying notes are an integral part of these financial statements

 

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Parker Retirement Savings Plan

Statements of Changes in Net Assets Available for Benefits

For The Years Ended December 31, 2011 and 2010

 

(Dollars in Thousands)		2011				2010
ADDITIONS
Participants’ contributions		$	118,261			$	110,162
Employer contributions			74,400				67,064
Net appreciation in fair value of investments			—				579,866
Dividend and interest income on investments			61,056				39,110
Plan interest in Parker Master Savings Plan Trust			—				36,887
Interest income on notes receivable from participants			3,691				4,088
Total additions			257,408				837,177
DEDUCTIONS
Distributions to participants			200,732				236,601
Net depreciation in fair value of investments			194,401				—
Trustee fees and other expenses			1,178				1,375
Total deductions			396,311				237,976
Net (decrease) increase before transfers			(138,903	)			599,201
Plan transfers			6,078				8,300
Net (decrease) increase			(132,825	)			607,501
Net assets available for benefits - beginning of year			3,056,028				2,448,527
Net assets available for benefits - end of year		$	2,923,203			$	3,056,028

The accompanying notes are an integral part of these financial statements

 

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Table of Contents

Parker Retirement Savings Plan

Notes to Financial Statements

(Dollars in Thousands)

 

1. Summary of Significant Accounting Policies

 

Investment Valuation

The Parker Retirement Savings Plan’s (the Plan) investments are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (See Note 7 for discussion of fair value measurements). Effective March 1, 2010, the Plan assets held by the Parker Master Savings Plan Trust (the Master Trust) were transferred to the Plan and the Master Trust ceased to exist. The Plan presents in the Statements of Changes in Net Assets Available for Benefits interest and dividend income and the net depreciation or appreciation in the fair value of its investments which consists of the realized gains and losses from the sale of investments and the unrealized appreciation and depreciation of investments held by the Plan and the Master Trust.

Purchases and sales of securities are reflected on a trade-date basis.

Dividend income is recorded on the ex-dividend date. Interest and other income are recorded as earned on the accrual basis.

Costs incident to the purchase and sale of securities, such as brokerage commissions and stock transfer taxes, as well as investment advisory fees, are charged to the funds to which they relate and are netted against dividend and interest income. Certain costs and expenses incurred in administering the Plan are paid out of the Plan’s assets and Parker-Hannifin Corporation (the Company) pays the remainder.

Risks and Uncertainties

Management believes that the Plan’s investments are well diversified and do not create a significant concentration of interest rate, market or credit risk. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amount reported in the Statements of Net Assets Available for Benefits. Participants assume all risk in connection with any decrease in the fair value of any securities in all the funds. Although the annual rates of return with respect to the contracts held in the Contract Income Fund are guaranteed by major insurance companies and banks, the Company does not make any representations as to the financial capability of such companies or their ability to make payments under the contracts.

Subsequent Events

The Plan has evaluated subsequent events that have occurred through the date these financial statements were issued. No subsequent events occurred that required either adjustment to, or disclosure in, these financial statements.

Other

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

The financial statements of the Plan are prepared using the accrual method of accounting.

Benefit distributions are recorded when paid.

Certain prior period amounts have been reclassified to conform to the current year presentation.

 

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Parker Retirement Savings Plan

Notes to Financial Statements

(Dollars in Thousands)

 

1. Summary of Significant Accounting Policies (cont’d)

 

In May 2011, the Financial Accounting Standards Board (FASB) issued new accounting guidance to improve consistency with fair value measurement disclosure requirements. This guidance is effective for interim and annual periods beginning after December 15, 2011. The Plan administrator is currently evaluating the impact this update will have on the Plan’s financial statements. However, the Plan administrator does not expect any significant change as a result of applying this new guidance.

2. Description of the Plan

General

The following description of the Plan provides only general information. Participants should refer to the Plan document or Summary Plan Description for a more complete description of the Plan’s provisions.

The Plan is a defined contribution plan available to all U.S. domestic regular full-time and part-time non-union employees, and some union employees (if negotiated). Employees are eligible for participation in the Plan the first day of the month following their date of hire and are generally automatically enrolled in the Plan 30 days after their date of hire or rehire. The Plan is subject to Sections 401(a) and 401(k) of the Internal Revenue Code and the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended.

Contributions and Transfers

Participants may make contributions on a before-tax and/or after-tax basis. Contributions from employees and the Company are recorded in the period that payroll deductions are made from Plan participants. Contributions are subject to certain limitations.

Company matching contributions are invested solely in a non-participant directed Employee Stock Ownership Plan (the ESOP Fund), which holds primarily Company stock (see Note 5).

Participants may elect to contribute, through payroll deductions, not less than 1% nor more than 75% of their total compensation for a Plan year and may change such percentage upon request. Participants may suspend their contributions at any time and may designate one or more of several available funds within the Plan in which their contributions are to be invested. Investment elections may be changed at any time. Available funds are:

 

(a)

Parker-Hannifin Common Stock Fund (Company Stock Fund): Invested primarily in common shares of the Company purchased on the open market. A participant’s contribution is limited to 50% of the total amount invested.

 

(b)

Vanguard Institutional Index Fund: Invested in stocks which comprise the S&P 500 Index.

 

(c)

Vanguard Extended Market Index Fund: Invested primarily in the Standard & Poor’s Completion Index.

 

(d)

Vanguard FTSE All-World ex-US Index Fund: Invested primarily in securities that tracks the performance of the FTSE All-World ex US Index.

 

(e)

Vanguard Total Bond Market Index Fund: Invested in a sampling of assets in the Barclays Capital U.S. Aggregate Float Adjusted Index and maintains a dollar-weighted average maturity consistent with that of the index.

 

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Parker Retirement Savings Plan

Notes to Financial Statements

(Dollars in Thousands)

 

2. Description of the Plan (cont’d)

 

(f)

Contract Income Fund: A separate managed fund invested primarily in high-quality fixed income investments such as contracts issued by insurance companies and banks which provide a return guaranteed by the issuer, and debt securities such as notes and bonds issued by Federal agencies or mortgage and other asset-backed securities, with each of these investments typically providing a stable rate of return for a specific period of time. Refer to Note 6 for a further description of this fund.

 

(g)

PIMCO Total Return Portfolio: A managed account invested primarily in securities which have a fixed rate of return such as U.S. government and corporate debt securities, mortgage and other asset-backed securities, U.S. dollar and foreign currency-denominated securities of foreign issuers, and money market instruments.

 

(h)

BlackRock Inflation-Protected Bond Fund: Invested primarily in inflation-indexed bonds issued by the U.S. and non-U.S. governments, their agencies, and non-U.S. corporations.

 

(i)

Victory EB Diversified Stock Fund: A fund invested primarily in a portfolio of common stocks of large publicly-held companies and securities convertible into common stock.

 

(j)

INVESCO Mid Cap Core Equity Fund: Invested primarily in equity securities, including convertible securities, of mid-capitalization companies. (This fund was closed effective December 15, 2011; all investments were transferred to RidgeWorth Mid-Cap Value Equity Trust).

 

(k)

Sentinel Small Company Fund: Invested primarily in common stocks issued by small companies using the S&P Small-Cap 600 Index as a weighting guide.

 

(l)

Dodge and Cox International Stock Fund: Invested primarily in equity securities including common stocks, preferred stock, and convertible securities issued by well established non-U.S. companies from at least three different foreign countries, including emerging markets.

 

(m)

Fidelity Freedom K Funds: Twelve mutual funds designed to help participants diversify their assets based on their life cycle. The Freedom Funds are invested in equities, fixed income, and money markets based on the participant’s targeted retirement date.

 

(n)

Aberdeen Emerging Markets Institutional Fund: A diversified fund invested primarily in equity securities of emerging market country issuers (Fund available to participants effective May 16, 2011).

 

(o)

Pyramis Small Company Commingled Pool: A fund invested primarily in equity securities of smaller, growing companies listed on national and regional exchanges (Fund available to participants effective December 15, 2011).

 

(p)

RidgeWorth Mid-Cap Value Equity Trust: A fund invested in a value oriented portfolio of 60 to 80 stocks with emphasis on dividends, valuation and fundamentals (Fund available to participants effective December 15, 2011).

 

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Parker Retirement Savings Plan

Notes to Financial Statements

(Dollars in Thousands)

 

2. Description of the Plan (cont’d)

 

Parker-Hannifin Corporation Contributions

The Company generally contributes an amount equal to 100% of the first 3 percent of the before-tax participant contribution and an amount equal to 50% of the 4^th percent and 5^th percent of the participant’s contribution. The Company may also match after-tax participant contributions, but matches only 25% of the 4^th percent and 5^th percent of after-tax participant contributions. Company contributions match the before-tax contributions prior to the after-tax contributions. Participants may diversify their shares of stock in the ESOP Fund at any time to any of the investment funds available within the Plan.

Notes Receivable from Participants

The Plan has a loan provision which allows an active participant to borrow a minimum of five hundred dollars and up to the lesser of a) 50% of their account balance or b) fifty thousand dollars less the largest outstanding loan balance he/she had in the last 12 months. The loan must be repaid, with interest equal to the prime rate at the time the loan is entered into plus 1%, over a period from 1 year to 4 1/2 years for a general purpose loan and up to 10 years for a residential loan. Some participant loans have interest rate and repayment terms that differ from the Plan’s loan provisions as some loans were included in the net assets of a plan transfer into the Plan. Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent loans are reclassified as distributions based upon the terms of the plan document.

Participant Accounts

The Plan utilizes the unit value method for allocating Plan earnings for all funds. Unit values are determined on a daily basis and exclude contributions receivable and benefits payable.

3. Vesting, Withdrawals and Distributions

Participants are fully vested at all times, except for the retirement income account portion (See Note 12). In general, a participant’s account is only paid out after termination of employment, but under certain circumstances, a participant may withdraw in cash a portion of his/her before-tax and/or after-tax contributions, subject to certain limitations and restrictions.

After a participant terminates employment for any reason, all amounts are distributable to the participant or if the participant is deceased, to the participant’s designated beneficiary. The distribution may be deferred until the age of 70  ¹/2 if the participant’s account exceeds five thousand dollars. Distribution is in cash either in a single payment, quarterly installments, or by purchase of an annuity, except that amounts held in the Company Stock Fund and ESOP Fund may be distributed in the form of common shares. The Plan provides that mandatory or involuntary lump-sum distributions in an amount in excess of one thousand dollars but less than five thousand dollars shall only be made in the form of an automatic rollover IRA. Dividends received by the ESOP Fund are either paid to the participants quarterly or annually or reinvested quarterly, at the participants’ election.

 

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Parker Retirement Savings Plan

Notes to Financial Statements

(Dollars in Thousands)

 

4. Investments

 

The following represents the fair value of investments held by the Plan at December 31, 2011 and 2010 (investments which exceed 5% of the Plan’s net assets in 2011 or 2010 are separately identified):

 

		2011				2010
Money Market Fund		$	55			$	41
Mutual Funds:
Vanguard Institutional Index Fund			149,883				149,174
Others			749,214				761,263
Common/Collective Funds:
Victory EB Diversified Stock Fund			212,989				242,608
Others			27,172				—
Contract Income Fund			482,790				454,672
PIMCO Total Return Portfolio			150,449				150,703
Company Stock Fund			267,681				291,009
ESOP Fund			797,978				924,075
Total investments		$	2,838,211			$	2,973,545

The following table presents the investment (loss) income for the Plan for the years ended December 31, 2011 and 2010:

 

		2011				2010
Net (depreciation) appreciation in fair value of investments:
Mutual Funds		$	(64,516	)		$	97,169
Common/Collective Funds			(12,808	)			28,798
PIMCO Total Return Portfolio			6,941				12,406
Company Stock Fund			(23,314	)			121,903
ESOP Fund			(100,704	)			353,914
			(194,401	)			614,190
Interest and dividends			61,056				41,673
		$	(133,345	)		$	655,863

The investment income for the Plan for the year ended December 31, 2010 included net appreciation of $34,324 and interest and dividends of $2,563 earned while the investments were held in the Master Trust for the period January 1, 2010 to March 1, 2010.

 

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Parker Retirement Savings Plan

Notes to Financial Statements

(Dollars in Thousands)

 

5. Nonparticipant-Directed Investments

 

Information about the net assets and the significant components of the changes in net assets relating to the non-participant directed investments at December 31, 2011 and 2010 is as follows:

 

		2011				2010
ESOP Fund		$	797,978			$	924,075
		Year ended December 31,
		2011				2010
Changes in Net Assets:
Contributions		$	56,128			$	51,568
Transfers (to) other plan funds			(45,487	)			(48,286	)
Dividend and interest income			8,982				11,728
Net (depreciation) appreciation			(100,704	)			353,914
Benefits paid to participants			(45,016	)			(55,751	)
		$	(126,097	)		$	313,173

6. Contract Income Fund

The Contract Income Fund holds a portfolio of traditional, separate account and synthetic guaranteed investment contracts (GICs) and other short-term securities. All contracts are fully benefit-responsive.

As required by FASB Accounting Standards Codification (ASC) Topic No. 962, Plan Accounting—Defined Contribution Pension Plans, the Statements of Net Assets Available for Benefits presents the Plan’s investments at fair value within the Plan at December 31, 2011 and 2010 as well as the adjustment of the Contract Income Fund investments from fair value to contract value. The Statements of Changes in Net Assets Available for Benefits are prepared on a contract value basis.

 

		2011				2010
Average yield earned by entire fund			2.55	%			2.94	%
Return on plan assets for 12 months			2.85	%			3.37	%

 

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Parker Retirement Savings Plan

Notes to Financial Statements

(Dollars in Thousands)

 

6. Contract Income Fund (cont’d)

 

Traditional GICs are unsecured, general account obligations of insurance companies. The obligation is backed by the general account assets of the insurance company that writes the investment contract. The crediting rate on this product is typically fixed for the life of the investment. Separate account GICs are investments in a segregated account of assets maintained by an insurance company for the benefit of the investors. The total return of the segregated account assets supports the separate account GICs’ return. The crediting rate on this product will reset periodically and it will have an interest rate of not less than 0%.

General fixed maturity synthetic GICs consist of an asset or collection of assets and a benefit responsive, book value wrap contract purchased for the portfolio. The wrap contract provides book value accounting for the asset and assures that book value, benefit responsive payments will be made for participant directed withdrawals. The crediting rate of the contract is set at the start of the contract and typically resets every quarter. Generally, fixed maturity synthetics are held to maturity. The initial crediting rate is established based on the market interest rates at the time the initial asset is purchased and it will have an interest crediting rate of not less than 0%.

Constant duration synthetic GICs consist of a portfolio of securities and a benefit responsive, book value wrap contract purchased for the portfolio. The wrap contract amortizes gains and losses of the underlying securities over the portfolio duration, and assures that book value, benefit responsive payments will be made for participant-directed withdrawals. The crediting rate on a constant duration synthetic GIC resets every quarter based on the book value of the contract, the market yield of the underlying assets, the market value of the underlying assets and the average duration of the underlying assets. The crediting rate aims at converging the book value of the contract and the market value of the underlying portfolio over the duration of the contract and therefore will be affected by movements in interest rates and/or changes in the market value of the underlying portfolio. The initial crediting rate is established based on the market interest rates at the time the underlying portfolio is first put together and it will have an interest crediting rate of not less than 0%.

Withdrawals and transfers resulting from certain events, including employer initiated events and changes in the qualification of the Plan may limit the ability of the fund to transact at book or contract value. These events may cause liquidation of all or a portion of a contract at market value. The Plan administrator does not believe that the occurrence of any event which would limit the Plan’s ability to transact at book or contract value is probable.

 

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Parker Retirement Savings Plan

Notes to Financial Statements

(Dollars in Thousands)

 

7. Fair Value Measurements

 

The following is a summary of the assets held by the Plan that were measured at fair value on a recurring basis at December 31, 2011. There were no significant transfers in or out of Levels 1, 2 or 3.

 

		Total				Quoted Prices In Active Markets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Money Market Fund		$	55			$	55			$	—			$	—
Mutual Funds
Fidelity Freedom K Funds			416,077				416,077				—				—
Vanguard Institutional Index Fund			149,883				149,883				—				—
Sentinel Small Company Fund			126,026				126,026				—				—
Dodge and Cox International Stock Fund			94,657				94,657				—				—
Vanguard Total Bond Market Index Fund			36,811				36,811				—				—
BlackRock Inflation-Protected Bond Fund			28,895				28,895				—				—
Vanguard Extended Market Index Fund			28,855				28,855				—				—
Vanguard FTSE All-World ex-US Index Fund			15,211				15,211				—				—
Aberdeen Emerging Markets Institutional Fund			2,682				2,682				—				—
Common / Collective Funds
Victory EB Diversified Stock Fund			212,989				—				212,989				—
RidgeWorth Mid-Cap Value Equity Trust			26,520				—				26,520				—
Pyramis Small Company Commingled Pool			652				—				652				—
Contract Income Fund
Short-Term Investment Fund			45,348				45,348				—				—
Stable Value Pooled Fund			6,297				—				6,297				—
Traditional GICs			20,233				—				20,233				—
Separate Account GICs			76,146				—				76,146				—
Fixed Maturity Synthetic GICs			22,104				22,104				—				—
Constant Duration Synthetic GICs			312,662				—				312,662				—
PIMCO Total Return Portfolio			150,449				—				150,449				—
Company Stock Fund			267,681				267,681				—				—
ESOP Fund			797,978				797,978				—				—
Total at December 31, 2011		$	2,838,211			$	2,032,263			$	805,948			$	—

 

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Parker Retirement Savings Plan

Notes to Financial Statements

(Dollars in Thousands)

 

7. Fair Value Measurements (cont’d)

 

A summary of the assets held by the Plan that were measured at fair value on a recurring basis at December 31, 2010 follows:

 

		Total				Quoted Prices In Active Markets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Money Market Fund		$	41			$	41			$	—			$	—
Mutual Funds
Fidelity Freedom K Funds			394,380				394,380				—				—
Vanguard Institutional Index Fund			149,174				149,174				—				—
Sentinel Small Company Fund			124,503				124,503				—				—
Dodge and Cox International Stock Fund			122,431				122,431				—				—
Vanguard Total Bond Market Index Fund			34,107				34,107				—				—
INVESCO Mid Cap Core Equity Fund			28,446				28,446				—				—
Vanguard Extended Market Index Fund			28,083				28,083				—				—
Vanguard FTSE All-World ex-US Index Fund			18,313				18,313				—				—
BlackRock Inflation-Protected Bond Fund			11,000				11,000				—				—
Common / Collective Funds
Victory EB Diversified Stock Fund			242,608				—				242,608				—
Contract Income Fund
Short-Term Investment Fund			75,922				75,922				—				—
Stable Value Pooled Fund			6,056				—				6,056				—
Traditional GICs			29,748				—				29,748				—
Fixed Maturity Synthetic GICs			60,188				60,188				—				—
Constant Duration Synthetic GICs			282,758				—				282,758				—
PIMCO Total Return Portfolio			150,703				—				150,703				—
Company Stock Fund			291,009				—				291,009				—
ESOP Fund			924,075				924,075				—				—
Total at December 31, 2010		$	2,973,545			$	1,970,663			$	1,002,882			$	—

Refer to Note 2 for information on the above investments.

The following is a description of the valuation methodologies used to measure the fair values in the tables above. There have been no changes in the methodologies used to measure fair value at December 31, 2011 and 2010.

 

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Parker Retirement Savings Plan

Notes to Financial Statements

(Dollars in Thousands)

 

7. Fair Value Measurements (cont’d)

 

Money Market Fund, Mutual Funds, Company Stock Fund and ESOP Fund: Measured at fair value using quoted market prices. In the December 31, 2011 table presented above, the classification of the Company Stock Fund category has been changed from the prior year classification to more accurately categorize the assets within the fair value hierarchy. There has been no change in the method used to calculate the fair value of these assets.

Common / Collective Funds: Measured at fair value using the Funds’ closing net asset values. The common / collective funds consist of common stocks and securities convertible into common stock. These investments can be redeemed daily and without any restrictions on the timing of the redemption. Redemption of the entire investment balance generally requires at least a 30-day notice. At December 31, 2011 and 2010, the Plan had no unfunded commitments related to these investments.

Contract Income Fund: Short-term investment fund and fixed maturity synthetic GICs are measured at fair value using quoted market prices. The underlying securities of the fixed maturity synthetic GICs primarily include investments in commercial, mortgage and asset-backed securities, Freddie Mac and Fannie Mae securities, rate reduction bonds and GNMA project loans. Separate account GICs and constant duration synthetic GICs are measured at fair value as provided by FT Interactive, insurance company and the external investment manager based upon the contracts’ underlying securities. The underlying securities of separate account GICs primarily include fixed income securities consisting of government and corporate issued bonds and mortgage and asset-backed securities. The underlying securities of the constant duration synthetic GICs primarily include fixed income government bonds and asset and mortgage-backed securities index funds, some of which are held in collective trusts. The investments held in the collective trusts can be redeemed daily and without any restriction on the timing of the redemption. At December 31, 2011 and 2010, the Plan had no unfunded commitments related to the investments held in the collective trusts. The stable value pooled fund and traditional GICs are measured at fair value by reference to third-party index rates for instruments with comparable durations.

PIMCO Total Return Portfolio: Measured at fair value using a net asset value per share. The account provides exposure to U. S. Government bonds, corporate bonds, foreign bonds and mortgage bonds. These investments can be redeemed daily and without any restrictions on the timing of the redemption. At December 31, 2011 and 2010, the Plan had no unfunded commitments related to these investments.

The primary investment objective of the Mutual Funds, Common/Collective Funds and the PIMCO Total Return Portfolio is to obtain a maximum total return and capital appreciation in an amount that at least equals various market-based benchmarks. The primary investment objective of the Contract Income Fund is to provide for a stable rate of return while preserving principal.

8. Tax Status

The Internal Revenue Service has determined and informed the Company by letter dated December 27, 2005, that the terms of the Plan and related trust comply with applicable sections of the Internal Revenue Code (IRC). Since receiving the determination letter, the Plan has been amended to provide for various administrative changes including adding additional investment funds. The Plan administrator believes that the Plan continues to be designed and operated in compliance with the applicable provisions of the IRC.

On January 31, 2011, the Company requested a determination letter based on the current plan provisions and is awaiting a response from the Internal Revenue Service.

 

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Parker Retirement Savings Plan

Notes to Financial Statements

(Dollars in Thousands)

 

8. Tax Status (cont’d)

 

United States generally accepted accounting principles require plan management to evaluate uncertain tax positions taken by the Plan. The plan administrator has concluded that as of December 31, 2011, there were no uncertain tax positions taken or expected to be taken by the Plan. The Plan has not recognized any interest or penalties related to uncertain tax positions. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits in progress for any tax years prior to 2007.

9. Plan Termination

Although it has not expressed any intent to do so, the Company, by action of its Board of Directors, without further approval by the shareholders, has the right to amend, modify, suspend, or terminate the Plan in its entirety, or as to any subsidiary or operating location. No amendment, modification, suspension, or termination may permit assets held in trust by the Trustee to be used for or diverted to purposes other than for the exclusive benefit of participants or their beneficiaries. If the Plan is terminated, all participant accounts would become fully vested.

10. Party-In-Interest

Certain Plan investments that are held by the Plan are investment funds managed by Fidelity Management Trust Company (Fidelity). Fidelity is the trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions.

The Plan also holds shares of Parker-Hannifin Corporation common stock. These shares qualify as party-in-interest transactions.

11. Plan Transfers

On March 30, 2011 and April 1, 2011, net assets of $3,659 and $2,419, respectively, were transferred from the Gulf Coast Seal 401(k) Plan and the Legris, Inc. Retirement Savings Plan, respectively, to the Plan.

On March 1, 2010, net assets of $8,300 were transferred from the Goshen Rubber Company, Inc. GRC Employees 401(k) Savings Plan and Trust to the Plan.

12. Retirement Income Account

A separate Retirement Income Account (RIA) exists within the Plan. A portion of the Company’s employees participate in the RIA in lieu of participating in a defined benefit plan. The Company makes a contribution to the participants RIA account in February of each year. The amount of the contribution relates to the prior year and is based on a formula taking into account the participant’s age and years of service. Participants do not make contributions to the RIA. A contribution receivable of $17,717 and $15,263, reflecting the contribution earned by participants in 2011 and 2010 but paid in 2012 and 2011, has been recorded at December 31, 2011 and 2010, respectively.

The RIA offers the employee the flexibility to invest the money in any of the investment funds (except the Company Stock Fund) offered by the Plan. After three years of service, employees are vested in their RIA and may withdraw their money after termination of employment. Active participants may not borrow or withdraw funds from their RIA account.

 

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Parker Retirement Savings Plan

Notes to Financial Statements

(Dollars in Thousands)

 

13. Reconciliation of Financial Statements to Form 5500

Fully benefit-responsive GICs are recorded on the Form 5500 at fair value while in the Plan’s financial statements these investments are presented at fair value with an adjustment to contract value. Notes receivable from participants are reported on the Form 5500 as participant loans and are considered to be plan investments while in the Plan’s financial statements they are classified as receivables from participants.

 

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Parker Retirement Savings Plan

Schedule H, Line 4(i) – Schedule of Assets (Held at End of Year)

December 31, 2011

EIN 34-0451060

(Dollars in Thousands)

 

(a)

(b) Identity of issue, borrower, lessor, or similar party

(c) Description of investment including maturity date, rate of interest, collateral, par, or maturity value

(d) Cost

(e) Current value

*

Fidelity Investments

Money Market Fund

**

$

55

Vanguard Group, Inc.

Vanguard Institutional Index Fund

**

149,883

Sentinel Group Funds Inc.

Sentinel Small Company Fund

**

126,026

Dodge & Cox Funds

Dodge and Cox International Stock Fund

**

94,657

Vanguard Group

Vanguard Total Bond Market Index Fund

**

36,811

Vanguard Group, Inc.

Vanguard Extended Market Index Fund

**

28,855

Vanguard Group, Inc.

Vanguard FTSE All-World ex-US Index Fund

**

15,211

Black Rock Funds

BlackRock Inflation-Protected Bond Fund

**

28,895

Aberdeen Asset Management Inc.

Aberdeen Emerging Markets Institutional Fund

**

2,682

Victory Capital Management, Inc.

Victory EB Diversified Stock Fund

**

212,989

*

Fidelity Investments

Fidelity Freedom K Income

**

6,920

*

Fidelity Investments

Fidelity Freedom K 2000

**

4,481

*

Fidelity Investments

Fidelity Freedom K 2005

**

4,810

*

Fidelity Investments

Fidelity Freedom K 2010

**

25,556

*

Fidelity Investments

Fidelity Freedom K 2015

**

63,461

*

Fidelity Investments

Fidelity Freedom K 2020

**

92,555

*

Fidelity Investments

Fidelity Freedom K 2025

**

73,915

*

Fidelity Investments

Fidelity Freedom K 2030

**

58,774

*

Fidelity Investments

Fidelity Freedom K 2035

**

35,304

*

Fidelity Investments

Fidelity Freedom K 2040

**

31,742

*

Fidelity Investments

Fidelity Freedom K 2045

**

8,028

*

Fidelity Investments

Fidelity Freedom K 2050

**

10,531

RidgeWorth Capital Management Inc.

RidgeWorth Mid-Cap Value Equity Trust

**

26,520

Pyramis Global Advisors Trust Company

Pyramis Small Company Commingled Pool

**

652

PIMCO

Short-term Investment Fund

**

6,082

PIMCO

PIMCO Priv US Govt SEC Fund, 2.70%, 04/01/2024

**

27,559

PIMCO

PIMCO PRV Real Rtrn BD SEC, 1.91%, 12/1/2021

**

18,382

PIMCO

PIMCO PRV Mortgage SEC Fund, 3.43%, 9/1/2014

**

50,020

PIMCO

PIMCO PRV High Yield SEC Fd, 10.88%, 9/1/2016

**

2,743

PIMCO

PIMCO PRIV Inv Grd Corp SEC, 5.91%, 10/01/2020

**

22,660

PIMCO

PIMCO PRIV ABS Sector Fund, 2.69%, 12/1/2015

**

3,354

PIMCO

PIMCO Muni Sector FD Portf, 4.91%, 6/1/2025

**

1,618

PIMCO

PIMCO PRIV Emrg Mkt SECT, 5.81%, 4/1/2022

**

4,868

PIMCO

PIMCO PRV Intl Sector Fund, 2.67%, 4/1/2025

**

13,163

*

Fidelity Investments

100-31-GDPH Govt MM POI

**

45,348

Goode Stable Value Trust Fund

Goode SV Trust Fund

**

6,297

ING Life & Annuity Co

060319

**

35,482

Metropolitan

GAC 32320

**

10,310

New York Life

GA 29012

**

40,664

Pacific Life

G 27368.02.0000

**

6,880

Pacific Life

G 27368.01.0001

**

3,043

Prudential

Pru Core Conserv Int Bond Fund

**

108,572

Monumental Life

MFB NT GI-QM COLTV Daily 1-5 Yr. CR BD Index Fd

**

13,156

Monumental Life

MFB NT Collective 1-10 Yr. Interm Govt Bond Index Fd

**

10,687

Monumental Life

MFB NT Collective Asset-Backed SEC Bond Index Fd

**

21,926

Monumental Life

MFB NT Collective Commercial Mort-Backed SEC Index

**

3,290

 

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Parker Retirement Savings Plan

Schedule H, Line 4(i) – Schedule of Assets (Held at End of Year)

December 31, 2011

EIN 34-0451060

(Dollars in Thousands)

 

(a)

(b) Identity of issue, borrower, lessor, or similar party

(c) Description of investment including maturity date, rate of interest, collateral, par, or maturity value

(d) Cost

(e) Current value

Monumental Life

MFB NT Collective Long-Term Govt Bd Index Fd

**

3,022

Monumental Life

MFB Collective Short-Term Government Fd

**

9,311

Monumental Life

MFB NT COLTV Mtg-Backed SEC Index Fd

**

24,277

Monumental Life

MFB NT GI-QM Collective Dly 1-10 yr. Interm Credit Bd IDX

**

24,133

Bank of America N.A.

MFB NT GI-QM COLTV Daily 1-5 Yr. CR BD Index Fd

**

11,297

Bank of America N.A.

MFB NT Collective 1-10 Yr. Interm Govt Bond Index Fd

**

9,177

Bank of America N.A.

MFB NT Collective Asset-Back Securities Bond Index Fd

**

18,828

Bank of America N.A.

MFB NT Collective Commercial Mort-Backed SEC Index

**

2,825

Bank of America N.A.

MFB NT Collective Long-Term Govt Bd Index Fd

**

2,595

Bank of America N.A.

MFB Collective Short-Term Government Fd

**

7,996

Bank of America N.A.

MFB NT COLTV Mtg-Backed SEC Index Fd

**

20,702

Bank of America N.A.

MFB NT GI-QM Collective Dly 1-10 yr. Interm Credit Bd IDX

**

20,868

Bank of America N.A.

BSCMS 2003-T12 A3, 4.24%, 9/13/2012

**

762

Bank of America N.A.

CGCMT 2005-C3 A2, 4.64%,1/15/2014

**

2,163

Bank of America N.A.

FHR 2885 DE, 4.5%, 11/15/2012

**

561

Bank of America N.A.

FHR 2900 PB, 4.5%, 11/15/2012

**

400

Bank of America N.A.

MLMT 2005-MCP1 A2, 4.56%, 6/12/2013

**

540

Bank of America N.A.

PSNH 2001-1 A3, 6.48%, 5/1/2013

**

1,905

Natixis Financial Products

CARAT 2007-3 A4, 5.21%, 3/15/2012

**

385

Natixis Financial Products

GNR 2006-51 A, 4.25%, 4/16/2013

**

1,113

Natixis Financial Products

MSC 2006-T21 A2, 5.09%, 1/12/2012

**

1,635

Natixis Financial Products

RSBBC 2007-A A1, 5.47%, 10/1/2012

**

1,010

State Street Bank

CD 2006-CD2 A2, 5.41%, 1/17/2012

**

1,452

State Street Bank

FHR 2707 XD, 5.0%, 10/15/2012

**

1,532

State Street Bank

FNR 2006-50 PB, 5.0%, 9/25/2012

**

2,924

State Street Bank

FHR 2891 MC, 5.0%, 5/15/2012

**

1,753

State Street Bank

GNR 2007-55 A, 3.91%, 3/18/2013

**

1,240

State Street Bank

GNR 2006-55 A, 4.25%, 12/17/2012

**

367

State Street Bank

MPEF 2007-A A1, 4.98%, 7/16/2012

**

990

State Street Bank

MLMT 2005-CIP1 A2, 4.96%, 5/12/2014

**

1,372

*

Parker-Hannifin Corporation

Company Stock Fund (3,448,445 shares)

**

267,681

*

ESOP Fund

Parker-Hannifin Corporation common stock (10,296,140 shares)

$

223,127

797,978

*

Participant Loans

Participant Loans - 4.25% - 9.50%, maturing through 2020

**

82,011

Total

$

223,127

$

2,920,222

 

*	Denotes Party-in-Interest

**	Cost information is not required for participant-directed investments

 

17

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Administrator of the Plan has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Parker-Hannifin Corporation,

Plan Administrator

June 22, 2012

 

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Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statement (No. 333-164335) on Form S-8 of Parker-Hannifin Corporation of our report dated June 22, 2012, relating to our audit of the financial statements and supplement schedule of the Parker Retirement Savings Plan which appears in this Annual Report on Form 11-K of the Parker Retirement Savings Plan for the year ended December 31, 2011.

/s/ McGladrey LLP

Cleveland, Ohio

June 22, 2012