<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission file number 1-6747
----------------- ------
THE GORMAN-RUPP COMPANY
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Ohio 34-0253990
- ------------------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
305 Bowman St., Mansfield, Ohio 44903
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (419) 755-1011
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
Common Shares, without par value American Stock Exchange
- -------------------------------- -----------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in the definitive proxy statement incorporated
by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
-----
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. The aggregate market value is computed by reference to the
price at which the stock was sold as of February 28, 1995. $71,111,024
-----------
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock as of February 28, 1995.
Common Shares, without par value--8,572,871
-------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1994 Annual Report to Shareholders incorporated by reference
into Part II (Item 5-8).
Portions of Notice of 1995 Annual Meeting of Shareholders and related Proxy
Statement incorporated by reference into Part III (Items 10-13).
**************
The Exhibit Index is located at Page 13
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PART I
ITEM 1. BUSINESS
Registrant ("Gorman-Rupp" or the "Company") designs, manufactures and sells
pumps and related equipment (pump and motor controls) for use in construction,
industrial, petroleum, agricultural, water and wastewater, original equipment,
fire, military and other liquid-handling applications.
PRODUCTS
The principal products of the Company are pumps and fluid control products.
(The Company operates principally in one business segment, the manufacture and
sale of pumps and other fluid control equipment.) The following table sets
forth, for the years 1992 through 1994, the total net sales, income before
income taxes and identifiable assets ($000 omitted) of the Company.
1994 1993 1992
---- ---- ----
Net Sales $137,508 $131,535 $126,019
Income Before Income Taxes 14,952 13,858 12,659
Identifiable Assets 107,100 98,706 86,434
The Company's product line is composed of pump models ranging in rated capacity
from less than one gallon per minute up to 200,000 gallons per minute. The
types of pumps which the Company produces include self priming centrifugal,
standard centrifugal, magnetic drive centrifugal, rotary gear, diaphragm,
bellows and oscillating.
The pumps have drives that range from 1/35 horsepower electric motors up to
much larger electric motors or internal combustion engines. Many of the
larger units comprise encased, fully integrated sewage pumping stations. In
certain cases, units are designed for the inclusion of customer-supplied
drives.
The Company's larger pumps are sold principally for use in the construction,
industrial, sewage and waste handling fields; for pumping refined petroleum
products, including the ground refueling of aircraft; for agricultural
applications; and for fire fighting.
Many of the Company's smallest pumps are sold to customers for incorporation
into such products as X-ray processing equipment; gas air conditioning
equipment; office copy machines; chemical feeding, instrumentation and ice cube
making machinery; photographic processing and soft drink dispensing equipment;
laser cooling applications; graphic arts equipment; and floor cleaning
equipment.
Although principally a pump manufacturer, the Company, for a number of years,
also produced electric motors for sale to others and for use in its submersible
and smaller capacity pumps. In August 1992, the Company sold its electric
motor division (Durham Products) to concentrate on its primary business of
manufacturing pumps. The sale of the electric motor division did not have a
significant effect on 1992 sales or on the operations of the Company.
2
<PAGE> 3
PART I--CONTINUED
ITEM 1. BUSINESS--CONTINUED
In 1992 the Company introduced a positive displacement rotary gear pump line
designed for pumping viscous liquids such as paint, tar and glue, as well as
solvents and chemicals of lower viscosity. The product line was marketed
widely beginning in 1993.
An "Auto-Start" pump allowing for unattended operation, pumping units featuring
two or more pumps and motors, and pump and motor controls for industrial and
residential wastewater applications were also introduced in 1992.
The Company expanded its metering pump lines in 1992 with the introduction of
additional mini and mini-compact bellows metering pumps. A smaller version,
the micro-metering pump, was developed primarily for the photographic
processing market.
Although no new significant products were introduced in 1994 or 1993, the
Company continued to emphasize product development. Several of the Company's
existing products, which have been designed with added features, have been
expanded to various applications. The Company continued to penetrate
international markets principally by its aggressive response to worldwide pump
needs.
MARKETING
Except for government, component and export sales, the Company's pumps are
marketed in the United States and Canada through a network of about 1,000
distributors, through manufacturers' representatives (for sales to many
original equipment manufacturers) and by the Company's wholly owned subsidiary,
Gorman-Rupp of Canada Limited. Government and component sales are handled
directly by the Company; and export sales are made through the Company's wholly
owned subsidiary, The Gorman-Rupp International Company, as well as through
foreign distributors and representatives. During 1994, shipments to two
customers accounted for approximately 15% of total sales. The single largest
customer, General Electric Company, accounted for slightly less than 13% of the
Company's 1994 sales, and approximately 13% of all sales were made to customers
outside North America.
COMPETITION
The pump business is highly competitive. Gorman-Rupp estimates that 80 other
companies sell pumps and pump units which compete in one or more of the
industries and applications in which comparable products of the Company are
utilized. Many pumps are specifically designed and engineered for a particular
customer's application. The Company believes that proper application, product
performance and service are the principal methods of competition, and
attributes its success to its emphasis in these areas.
3
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PART I--CONTINUED
ITEM 1. BUSINESS--CONTINUED
PURCHASING AND PRODUCTION
Virtually all materials, supplies, components and accessories used by the
Company in the fabrication of its products, including all castings (for which
the patterns are made and owned by the Company), structural steel, bar stock,
motors, solenoids, engines, seals, and phenolic, polyethylene and rubber
components, are purchased by the Company from other suppliers and
manufacturers. No purchases are made under long-term contracts and the Company
is not dependent upon a single source for any materials, supplies, components
or accessories which are of material importance to its business.
The Company purchases motors for its polypropylene bellows pumps and its
magnetic drive pumps from several alternate vendors and motor components for
its large submersible pumps from a limited number of suppliers. The Company
had an agreement with the purchaser of its Durham Products Division to supply a
minimum quantity of electric coils, shaded pole and gear motors over a two year
period which ended August 31, 1994. Small motor requirements are currently
sourced from that purchaser and alternate suppliers.
The other production operations of the Company consist of the machining of
castings, the cutting and shaping of bar stock and structural members, the
manufacture of a few minor components, and the assembling, painting and testing
of its products. Virtually all of the Company's products are tested prior to
shipment.
OTHER ASPECTS
As of December 31, 1994, the Company employed approximately 994 persons, of
whom approximately 608 were hourly employees. The Company has no collective
bargaining agreements, has never experienced a strike and considers its labor
relations to be satisfactory.
Although the Company owns a number of patents, and several of them are
important to its business, Gorman-Rupp believes that the business of the
Company is not materially dependent upon any one or more patents.
As of December 31, 1994, the value of the Company's backlog of unfilled orders
was approximately $56,653,000, of which $28,471,000 was for the unfilled orders
of Patterson Pump Company. Approximately $55,637,000 is scheduled to be
shipped during 1995, with the balance ($1,016,000) being shipped in 1996. At
December 31, 1993, the value of the backlog of unfilled orders was
approximately $54,255,000.
4
<PAGE> 5
PART I--CONTINUED
ITEM 2. PROPERTIES
All of the production operations of the Company are conducted at its plants
located in Mansfield and Bellville, Ohio; St. Thomas, Ontario; Sand Springs,
Oklahoma; and Toccoa, Georgia. All of the Company's properties are owned in fee
without any material encumbrance. The Company also owns facilities (formerly
utilized by its Durham Products Division) located in Durham, North Carolina,
which are currently leased to another manufacturer. In addition, the Company
owns in fee an approximately 26,000 square foot facility in Sparks, Nevada
which comprises a training center and warehouse space.
The Company's Ohio operations are principally located in facilities in
Mansfield. These facilities consist of five buildings containing approximately
682,200 square feet of floor space for production, office and warehousing
functions. The original portion of the largest production plant, consisting of
approximately 238,000 square feet located on a 26 acre site, was built in 1917
and has been expanded on several occasions, the latest in 1973. Another
production plant, also situated on the 26 acre site, was built in 1968 and has
been frequently expanded, most recently in 1994. The 1994 expansion added
approximately 37,600 square feet, including a modern test facility. This plant
currently comprises approximately 134,200 square feet of floor space. A third
plant, containing approximately 215,000 square feet of floor space, located on
a 5-1/2 acre site, was purchased in 1975 and is used for most machining
operations and storage of raw materials. Its latest addition, consisting of
30,000 square feet of floor space, was made in 1978. A small office building
of approximately 11,500 square feet was purchased in 1979 and houses a training
facility and the Company's personnel and advertising departments. In late
1982, the Company purchased a building built in 1920 and located on 3.4 acres
adjacent to the Company's 26 acre site. This acquisition, which was renovated
in 1983, contains 83,500 square feet and is being used for additional warehouse
space.
The remainder of the Company's Ohio operations are conducted at two plants in
Bellville, which comprise approximately 107,500 square feet of floor space
situated on an 8.5 acre site. The initial portion of the larger plant,
containing approximately 93,200 square feet of floor space, was built in 1953
and has been expanded on several occasions, most recently in 1973-74. The
smaller facility, which contains approximately 14,300 square feet of floor
space, was acquired in 1984.
The plant in St. Thomas, Ontario has undergone five major expansions since it
was established in 1960. In 1986, a minor expansion of approximately 600
square feet was added as a receiving and shipping area to improve materials
handling. This facility contains about 52,600 square feet of floor space and
is situated on an 11 acre site.
The Oklahoma facility, located on 4.5 acres of land, was purchased in 1977.
Manufacturing and warehousing facilities are located in a 26,700 square foot
building, originally built in 1973 and expanded in 1978, 1981, 1982 and 1991.
A detached 2,200 square foot building is used for offices. In 1980, a
contiguous parcel of two acres of undeveloped land was purchased for future
needs.
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PART I--CONTINUED
ITEM 2. PROPERTIES--CONTINUED
A building, built in 1959 and located on 20 acres of land in Durham, North
Carolina, formerly housed the Company's Durham Products Division and is
currently being leased to another manufacturer through August 31, 1995. It was
purchased in 1980 and contains 43,500 square feet of manufacturing, warehousing
and office space, 3,500 square feet of which were added in 1982. In 1981-82,
19 contiguous undeveloped acres were purchased for future needs. In 1989, the
Company completed an addition of 15,000 square feet on the ground floor and
5,000 square feet on the second floor. The offices are located on the second
floor addition and the expanded ground floor addition is available for
manufacturing.
Patterson Pump Company, in Toccoa, Georgia, includes a 31 acre site with
buildings totaling approximately 165,900 square feet, with about 28,000 square
feet of office space and 137,900 square feet of manufacturing space. In 1989,
Patterson Pump Company completed an addition of 38,500 square feet to the
building for manufacturing purposes and razed an approximately 12,700 square
foot portion of the manufacturing facility. In 1992, the Company completed a
64,000 square foot addition to the manufacturing plant, including a modern
400,000 gallon test facility. A 28,000 square foot office addition was
completed in 1993. Upon occupancy of the new building in 1993, the pre-existing
office space of 15,200 square feet was razed for additional parking space.
The Company considers its plants, machinery and equipment to be well
maintained, in good operating condition and adequate for the present uses and
business requirements of the Company.
ITEM 3. LEGAL PROCEEDINGS
Gorman-Rupp is not currently engaged in any litigation which in the opinion of
the Company is material to its operations or assets.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this Form 10-K, no
matter was submitted to a vote of the Company's shareholders, through the
solicitation of proxies or otherwise.
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PART I --CONTINUED
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3), the information regarding executive
officers called for by Item 401 of Regulation S-K and by Item 10 of this Form
10-K is set forth below.
<TABLE>
<CAPTION>
Date Elected to
Name Age Office Position
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
James C. Gorman 70 Chairman and Chief Executive Officer 1964
John A. Walter 61 President and Chief Operating Officer 1989
K. Jack Bargahiser 62 Vice President Communications 1975
Jeffrey S. Gorman 42 Vice President; General Manager,
Mansfield Division 1989
Kenneth E. Dudley 57 Treasurer 1982
Robert E. Kirkendall 52 Corporate Secretary/Assistant Treasurer 1982
William D. Danuloff 47 Vice President Information Services 1991
</TABLE>
Except as noted, each of the above-named officers has held his executive
position with the Company for the past five years. Mr. J. C. Gorman has served
as the Company's Chief Executive Officer since 1964; in 1989, he also assumed
the office of Chairman and relinquished the office of President. Mr. Walter
was elected to the additional position of Chief Operating Officer in 1993; he
served as Vice President and General Manager of the Industries Division from
1978 until 1990. Mr. J. S. Gorman was elected Vice President and General
Manager of the Mansfield Division in 1989, after serving as Assistant General
Manager from 1986 to 1988; he held the office of Corporate Secretary from 1982
to 1990. Mr. Kirkendall was elected as Assistant Treasurer in 1982; he assumed
the additional office of Corporate Secretary in 1990. Mr. Danuloff was elected
Vice President Information Services in 1991, after serving as Director of
Information Services from 1981 to 1991.
Mr. J. S. Gorman is the son of Mr. J. C. Gorman. Otherwise, there is no family
relationship among any of the Executive Officers and Directors of the Company.
7
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Attention is directed to the section "Ranges of Stock Prices" and the data
immediately below pertaining to the shareholder information reported by the
Transfer Agent on page 16 in the Company's 1994 Annual Report to Shareholders,
which are incorporated herein by this reference.
ITEM 6. SELECTED FINANCIAL DATA
Attention is directed to the section "Ten Year Summary of Selected Financial
Data" on pages 16 and 17 in the Company's 1994 Annual Report to Shareholders,
which is incorporated herein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Attention is directed to the section "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page 15 in the Company's 1994
Annual Report to Shareholders, which is incorporated herein by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attention is directed to the Company's consolidated financial statements, the
notes thereto and the report of independent auditors thereon on pages 10-14,
and 17, and to the section "Summary of Quarterly Results of Operations" on page
16, in the Company's 1994 Annual Report to Shareholders, which are incorporated
herein by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNT-
ING AND FINANCIAL DISCLOSURE
The Company has not changed its independent public accountants and there have
been no reportable disagreements with such accountants regarding accounting
principles or practices or financial disclosure matters.
8
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
With respect to Directors, attention is directed to the section "Election of
Directors" in the Company's definitive Notice of 1995 Annual Meeting of
Shareholders and related Proxy Statement (filed pursuant to Regulation 14A not
later than 120 days after the end of the fiscal year covered by this Form
10-K), which is incorporated herein by this reference.
With respect to executive officers, attention is directed to Part I of this
Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Attention is directed to the sections "Executive Compensation", "Pension and
Retirement Benefits", "Salary Committee Report on Executive Compensation" and
"Shareholder Return Performance Presentation" in the Company's definitive
Notice of 1995 Annual Meeting of Shareholders and related Proxy Statement
(filed pursuant to Regulation 14A not later than 120 days after the end of the
fiscal year covered by this Form 10-K), which are incorporated herein by this
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MAN-
AGEMENT
Attention is directed to the sections "Principal Shareholders", "Election of
Directors" and "Shareholdings by Executive Officers" in the Company's
definitive Notice of 1995 Annual Meeting of Shareholders and related Proxy
Statement (filed pursuant to Regulation 14A not later than 120 days after the
end of the fiscal year covered by this Form 10-K), which are incorporated
herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as disclosed in the footnote in the section "Shareholdings by Executive
Officers" and in footnote 2 in the section "Principal Shareholders" in the
Company's definitive Notice of 1995 Annual Meeting of Shareholders and related
Proxy Statement (filed pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this Form 10-K), which are incorporated
herein by this reference, the Company has no relationships or transactions
required to be reported by Item 404 of Regulation S-K.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
--------------------
With respect to the consolidated financial statements of the
Registrant and its subsidiaries, the following documents have been
incorporated by reference into this report:
(i) Consolidated balance sheets--December 31, 1994 and 1993
(ii) Consolidated statements of income--Years ended
December 31, 1994, 1993 and 1992
(iii) Consolidated statements of shareholders' equity--Years
ended December 31, 1994, 1993 and 1992
(iv) Consolidated statements of cash flows--Years ended
December 31, 1994, 1993 and 1992
(v) Notes to consolidated financial statements
(vi) Report of independent auditors
2. Financial Statement Schedules
-----------------------------
All financial statement schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions or are
inapplicable and, therefore, have been omitted.
3. Exhibits
--------
The exhibits listed below are submitted in a separate section of this
report immediately following the Exhibit Index.
(3) (i) Articles of incorporation and (ii) By-laws
(4) Instruments defining the rights of security holders,
including indentures
(10) Material contracts
(13) Annual report to security holders
(21) Subsidiaries of the registrant
(23) Consents of experts and counsel
(24) Powers of attorney
(27) Financial data schedule
(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
10
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PART IV--CONTINUED
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE GORMAN-RUPP COMPANY
*By ROBERT E. KIRKENDALL
-------------------------
Robert E. Kirkendall
Attorney-In-Fact
Date: March 28, 1995
11
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Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
*JAMES C. GORMAN Chairman, Principal Executive
- ------------------------ Officer and Director
James C. Gorman
*KENNETH E. DUDLEY Treasurer and Principal Financial
- ------------------------ and Accounting Officer
Kenneth E. Dudley
*WILLIAM A. CALHOUN Director
- ------------------------
William A. Calhoun
*PETER B. LAKE Director
- ------------------------
Peter B. Lake
*BURTON PRESTON Director
- ------------------------
Burton Preston
*JOHN A. WALTER Director
- ------------------------
John A. Walter
*JEFFREY S. GORMAN Director
- ------------------------
Jeffrey S. Gorman
*JAMES R. WATSON Director
- ------------------------
James R. Watson
Director
- ------------------------
Thomas E. Hoaglin
*The undersigned, by signing his name hereto, does sign and execute this Annual
Report on Form 10-K on behalf of The Gorman-Rupp Company and on behalf of each
of the above-named Officers and Directors of The Gorman-Rupp Company pursuant
to Powers of Attorney executed by The Gorman-Rupp Company and by each such
Officer and Director and filed with the Securities and Exchange Commission.
March 28, 1995
By: /s/ ROBERT E. KIRKENDALL
- ----------------------------
Robert E. Kirkendall
Attorney-In-Fact
12
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ANNUAL REPORT ON FORM 10-K
THE GORMAN-RUPP COMPANY
For the Year Ended December 31, 1994
EXHIBIT INDEX
EXHIBIT
(3)(4) Amended Articles of Incorporation, as amended 14
(3)(4) Regulations 16
(10) Form of Indemnification Agreement between the
Company and its Directors and Officers 24
(13) Incorporated Portions of 1994 Annual Report to
Shareholders 34
(21) Subsidiaries of the Company 46
(23) Consent of Independent Auditors 47
(24) Powers of Attorney 48
(27) Financial Data Schedule 51
13
<PAGE> 1
Exhibit (3)(4)
Effective May 4, 1993
---------------------
AMENDED ARTICLES OF INCORPORATION
OF
THE GORMAN-RUPP COMPANY
(AS AMENDED)
---------------------------------
ARTICLE I: The name of the Company shall be The Gorman-Rupp Company.
ARTICLE II: The place is the State of Ohio where the principal office
of the Company is to be located is the City of Mansfield, Richland County.
ARTICLE III: The purposes for which, and for any of which, the
Company is formed is to buy, sell and generally deal in, in every manner, and
to develop, manufacture, repair, treat and finish in every manner, materials,
articles or products of every kind and description, to provide services of all
kinds, and to do all things necessary or incidental to any of the foregoing,
including owning, holding and dealing, in every manner, in all real and personal
property necessary or incidental to the foregoing purposes.
The Company reserves the right at any time and from time to time to
substantially change its purposes in any manner now or hereafter permitted by
statute. Any change of the purposes of the Company authorized or approved by
the holders of shares entitled to exercise the proportion of the voting power
of the Company now or hereafter required by statute for such authorization or
approval shall be binding and conclusive upon every shareholder of the Company
as fully as if such shareholder had voted therefor; and no shareholder,
notwithstanding that he may have voted against such change of purposes or may
have objected in writing thereto, shall be entitled to payment of the fair cash
value of his shares.
ARTICLE IV: The number of shares which the Company is authorized to
have outstanding is 14,000,000 Common Shares, without par value.
Each Common Share shall be equal to every other Common Share. The
holders of Common Shares shall be entitled to one vote for each share upon all
matters presented to the shareholders.
ARTICLE V: No holders of any class of shares of the Company shall
have any pre-emptive right to purchase or have offered to them for purchase any
shares or other securities of the Company.
<PAGE> 2
2
ARTICLE VI: The Company may from time to time, pursuant to
authorization by its Directors and without action by the shareholders, purchase
or otherwise acquire shares of the Company of any class or series upon such
terms and in such amounts as the Directors shall determine, to the extent
permitted by law; subject, however, to such limitation or restriction, if any,
as may be imposed by the terms of any class or series of shares or other
securities of the Company outstanding at the time of the purchase or
acquisition in question.
ARTICLE VII: Any and every statute of the State of Ohio hereafter
enacted whereby the rights, powers and privileges of corporations or of the
shareholders of corporations organized under the laws of the State of Ohio are
increased or diminished or in any way affected, or whereby effect is given to
the action taken by any number, less than all, of the shareholders of any such
corporation, shall apply to the Company and shall be binding not only upon the
Company but upon every shareholder of the Company to the same extent as if such
statute had been in force on the date of filing these Amended Articles of
Incorporation of the Company in the office of the Secretary of State of Ohio.
ARTICLE VIII: These Amended Articles of Incorporation supersede and
take the place of the heretofore existing Articles of Incorporation of the
Company and all amendments thereto.
<PAGE> 3
Exhibit (3)(4)
Effective April 21, 1988
------------------------
REGULATIONS
OF
THE GORMAN-RUPP COMPANY
-----------------------
ARTICLE I
---------
SHAREHOLDERS' MEETINGS
- ----------------------
Section 1. Annual Meetings.
--------- ---------------
The annual meeting of the Company shall be held at such time as
is set forth in the notice of the meeting, on the third Thursday in April of
each year, if not a legal holiday, and if a legal holiday, then on the next day
not a legal holiday, for the election of Directors and the consideration of
reports to be laid before such meeting. Upon due notice, there may also be
considered and acted upon at an annual meeting any matter which could properly
be considered and acted upon at a special meeting, in which case and for which
purpose the annual meeting shall also be considered as, and shall be, a special
meeting. When the annual meeting is not held or Directors are not elected
thereat, they may be elected at a special meeting called for that purpose.
Section 2. Special Meetings.
--------- ----------------
Special meetings of shareholders may be called by the Chairman
of the Board or the President or a Vice President, or by the Directors by
action at a meeting or by a majority of the Directors acting without a meeting,
or by the person or persons who hold of record not less than twenty-five
percent of all shares outstanding and entitled to be voted on any proposal to
be submitted at such meeting.
Upon request in writing delivered either in person or by
registered mail to the President or Secretary by any person or persons entitled
to call a meeting of shareholders, such officer shall forthwith cause to be
given, to the shareholders entitled thereto, notice of a meeting to be held not
less than seven nor more than sixty days after the receipt of such request, as
such officer shall fix. If such notice shall not be given within twenty days
after the delivery or mailing of such request, the person or persons calling
the meeting may fix the time of the meeting and give, or cause to be given,
notice in the manner hereinafter provided.
<PAGE> 4
2
Section 3. Place of Meetings.
--------- -----------------
Any meeting of shareholders may be held either at the principal
office of the Company or at such other place within or without the State of
Ohio as may be designated in the notice of said meeting.
Section 4. Notice of Meetings.
--------- ------------------
Not more than sixty days nor less than ten days before the date
fixed for a meeting of shareholders, whether annual or special, written notice
of the time, place and purposes of such meeting shall be given by or at the
direction of the President, a Vice President, the Secretary or an Assistant
Secretary. Such notice shall be given either by personal delivery or by mail
to each shareholder of record entitled to notice of such meeting. If such
notice is mailed, it shall be addressed to the shareholders at their respective
addresses as they appear upon the records of the Company, and notice shall be
deemed to have been given on the day so mailed. Notice of adjournment of a
meeting need not be given if the time and place to which it is adjourned are
fixed and announced at such meeting.
Section 5. Shareholders Entitled to Notice and to Vote.
--------- -------------------------------------------
If a record date shall not be fixed and the books of the Company
shall not be closed against transfers of shares pursuant to statutory
authority, the record date for the determination of shareholders who are
entitled to notice of, or who are entitled to vote at, a meeting of
shareholders, shall be the date next preceding the day on which notice is
given, or the date next preceding the day on which the meeting is held, as the
case may be.
Section 6. Inspectors of Election - List of Shareholders.
--------- ---------------------------------------------
Inspectors of Election may be appointed to act at any meeting of
shareholders in accordance with statute.
At any meeting of shareholders, a list of shareholders,
alphabetically arranged, showing their respective addresses and the number and
classes of shares held by each on the record date applicable to such meeting
shall be produced on the request of any shareholder.
<PAGE> 5
3
Section 7. Quorum.
--------- ------
Subject to the provisions of the Amended Articles of
Incorporation, to constitute a quorum at any meeting of shareholders, there
shall be present in person or by proxy shareholders of record entitled to
exercise not less than fifty percent of the voting power of the Company in
respect of any one of the purposes for which the meeting is called.
The shareholders present in person or by proxy, whether or not a
quorum be present, may adjourn the meeting from time to time.
Section 8. Voting.
--------- ------
In all cases, except where otherwise by statute or the Articles
or the Regulations provided, a majority of the votes cast shall control.
Cumulative voting in the election of Directors shall be
permitted as provided by statute.
Section 9. Reports to Shareholders.
--------- -----------------------
At the annual meeting, or the meeting held in lieu thereof, the
officers of the Company shall lay before the shareholders a financial statement
as required by statute.
Section 10. Action Without a Meeting.
---------- ------------------------
Any action which may be authorized or taken at a meeting of the
shareholders may be authorized or taken without a meeting with the affirmative
vote or approval of, and in a writing or writings signed by, all of the
shareholders who would be entitled to notice of a meeting for such purpose,
which writing or writings shall be filed with or entered upon the records of
the Company.
ARTICLE II
DIRECTORS
- ---------
Section 1. Election, Number and Term of Office.
--------- -----------------------------------
The Directors shall be elected at the annual meeting of
shareholders, or if not so elected, at a special meeting of shareholders called
for that purpose, and each Director shall hold office until the date fixed by
these Regulations for the
<PAGE> 6
4
next succeeding annual meeting of shareholders and until his successor is
elected, or until his earlier resignation, removal from office, or death. At
any meeting of shareholders at which Directors are to be elected, only persons
nominated as candidates shall be eligible for election.
The number of Directors, which shall not be less than three, may
be fixed or changed at a meeting called for the purpose of electing Directors
at which a quorum is present, by the affirmative vote of the holders of a
majority of the shares represented at the meeting and entitled to vote on such
proposal. In case the shareholders at any meeting for the election of
Directors shall fail to fix the number of Directors to be elected, the number
elected shall be deemed to be the number of Directors so fixed.
Section 2. Meetings.
--------- --------
Regular meetings of the Directors shall be held immediately
after the annual meeting of shareholders and at such other times and places as
may be fixed by the Directors, and such meetings may be held without further
notice.
Special meetings of the Directors may be called by the Chairman
of the Board or by the President or by a Vice President or by the Secretary of
the Company, or by not less than one-third of the Directors. Notice of the
time and place of a special meeting shall be served upon or telephoned to each
Director at least twenty-four hours, or mailed, telegraphed or cabled to each
Director at least forty-eight hours, prior to the time of the meeting.
Section 3. Quorum.
--------- ------
A majority of the number of Directors then in office shall be
necessary to constitute a quorum for the transaction of business, but if at any
meeting of the Directors there shall be less than a quorum present, a majority
of those present may adjourn the meeting from time to time without notice other
than announcement at the meeting until a quorum shall attend.
Section 4. Action Without a Meeting.
--------- ------------------------
Any action which may be authorized or taken at a meeting of the
Directors may be authorized or taken without a meeting with the affirmative
vote or approval of, and in a writing or writings signed by, all of the
Directors, which writing or writings shall be filed with or entered upon the
records of the Company.
<PAGE> 7
5
Section 5. Committees.
--------- ----------
The Directors may from time to time create a committee or
committees of Directors to act in the intervals between meetings of the
Directors and may delegate to such committee or committees any of the authority
of the Directors other than that of filling vacancies among the Directors or in
any committee of the Directors. No committee shall consist of less than three
Directors. The Directors may appoint one or more Directors as alternate
members of any such committee, who may take the place of any absent member or
members at any meeting of such committee.
In particular, the Directors may create and define the powers
and duties of an Executive Committee. Except as above provided and except to
the extent that its powers are limited by the Directors, the Executive
Committee during the intervals between meetings of the Directors shall possess
and may exercise, subject to the control and direction of the Directors, all of
the powers of the Directors in the management and control of the business of
the Company, regardless of whether such powers are specifically conferred by
these Regulations. All action taken by the Executive Committee shall be
reported to the Directors at their first meeting thereafter.
Unless otherwise ordered by the Directors, a majority of the
members of any committee appointed by the Directors pursuant to this section
shall constitute a quorum at any meeting thereof, and the act of a majority of
the members present at a meeting at which a quorum is present shall be the act
of such committee. Action may be taken by any such committee without a meeting
by a writing or writings signed by all of its members. Any such committee
shall prescribe its own rules for calling and holding meetings and its method
of procedure, subject to any rules prescribed by the Directors, and shall keep
a written record of all action taken by it.
ARTICLE III
-----------
OFFICERS
- --------
Section 1. Officers.
--------- --------
The Company may have a Chairman of the Board and shall have a
President (both of whom shall be Directors), a Secretary and a Treasurer. The
Company may also have one or more Vice Presidents and such other officers and
assistant officers as the Directors may deem necessary. All of the officers
and assistant officers shall be elected by the Directors.
<PAGE> 8
6
Section 2. Authority and Duties of Officers.
--------- --------------------------------
The officers of the Company shall have such authority and shall
perform such duties as are customarily incident to their respective offices, or
as may be specified from time to time by the Directors regardless of whether
such authority and duties are customarily incident to such office.
Section 3. Compensation.
--------- ------------
The Directors shall fix the compensation of the Chairman of the
Board and of the President and shall fix or authorize one or more officers or
Directors to fix the compensation of any or all other officers. The Directors
may authorize compensation to any Director and to any member of any committee
for attendance at meetings and for any special services.
ARTICLE IV
----------
INDEMNIFICATION AND INSURANCE
- -----------------------------
Section 1. Indemnification.
--------- ---------------
(a) The Company shall indemnify any person who was or is a
party or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a Director, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a director, trustee, officer, employee or agent of another
corporation, domestic or foreign, nonprofit or for profit, partnership, joint
venture, trust or other enterprise, to the full extent permitted from time to
time under the laws of the State of Ohio; provided, however, that the Company
shall indemnify any such agent (as opposed to any Director, officer or
employee) of the Company to an extent greater than that required by law only if
and to the extent that the Directors may, in their discretion, so determine.
(b) The indemnification authorized by this Article shall not be
exclusive of, and shall be in addition to, any other rights granted to those
seeking indemnification hereunder or under the Articles or any agreement, vote
of shareholders or disinterested Directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
trustee, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
<PAGE> 9
7
(c) No amendment, termination or repeal of this Article IV
shall affect or impair in any way the rights of any Director or officer of the
Company to indemnification under the provisions hereof with respect to any
action, suit or proceeding arising out of, or relating to, any actions,
transactions or facts occurring prior to the final adoption of such amendment,
termination or repeal.
Section 2. Liability Insurance.
--------- -------------------
The Company may purchase and maintain insurance or furnish
similar protection, including but not limited to trust funds, letters of credit
or self-insurance, on behalf of or for any person who is or was a Director,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, trustee, officer, employee or agent of another
corporation, domestic or foreign, nonprofit or for profit, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
regardless of whether the Company would have the power to indemnify him against
such liability under this Article. Insurance may be purchased from or
maintained with a person in which the Company has a financial interest.
ARTICLE V
---------
MISCELLANEOUS
- -------------
Section 1. Transfer and Registration of Certificates.
--------- -----------------------------------------
The Directors shall have authority to make such rules and
regulations as they deem expedient concerning the issuance, transfer and
registration of certificates for shares and the shares represented thereby and
may appoint transfer agents and registrars thereof.
Section 2. Substituted Certificates.
--------- ------------------------
Any person claiming a certificate for shares to have been lost,
stolen or destroyed shall make an affidavit or affirmation of that fact, shall
give the Company and its registrar or registrars and its transfer agent or
agents a bond of indemnity satisfactory to the Directors or to the Executive
Committee or to the President or a Vice President and the Secretary or the
Treasurer, and, if required by the Directors or the Executive Committee or such
officers, shall advertise the same in such manner as may be required, whereupon
a new certificate may be executed and delivered of the same tenor and for the
same number of shares as the one alleged to have been lost, stolen or
destroyed.
<PAGE> 10
8
Section 3. Voting Upon Shares Held by the Company.
--------- --------------------------------------
Unless otherwise ordered by the Directors, the President, in
person or by proxy or proxies appointed by him, shall have full power and
authority on behalf of the Company to vote, act and consent with respect to any
shares issued by other corporations which the Company may own.
Section 4. Corporate Seal.
--------- --------------
The seal of the Company shall be circular in form with the name
of the Company stamped around the margin and the words "Corporate Seal" stamped
across the center.
Section 5. Articles to Govern.
--------- ------------------
In case any provision of these Regulations shall be inconsistent
with the Articles, the Articles shall govern.
Section 6. Amendments.
--------- ----------
These Regulations may be amended by the affirmative vote or the
written consent of the shareholders of record entitled to exercise a majority
of the voting power on such proposal, provided, however, that if an amendment
is adopted by written consent without a meeting of the shareholders, the
Secretary shall mail a copy of such amendment to each shareholder of record who
would have been entitled to vote thereon and did not participate in the
adoption thereof.
<PAGE> 1
Exhibit (10)
FORM OF INDEMNIFICATION AGREEMENT
---------------------------------
This Indemnification Agreement ("Agreement") is made as of the
____ day of _____, 19__, by and between The Gorman-Rupp Company, an Ohio
corporation (the "Company"), and (the "Indemnitee"), a Director and an officer
of the Company.
RECITALS
--------
A. The Indemnitee is presently serving as a Director and
an officer of the Company and the Company desires the Indemnitee to continue in
those capacities. The Indemnitee is willing, subject to certain conditions,
including, without limitation, the execution and performance of this Agreement
by the Company, to continue in those capacities.
B. In addition to the indemnification to which the
Indemnitee is entitled under the Regulations of the Company, as amended (the
"Regulations"), the Company has obtained, at its sole expense, insurance
protecting the Company and its officers and Directors, including the
Indemnitee, against certain losses arising out of actual or threatened actions,
suits or proceedings to which such persons may be made or threatened to be made
parties. However, as a result of circumstances having no relation to, and
beyond the control of, the Company and the Indemnitee, the scope of that
insurance has been reduced, and there can be no assurance of the continuation
or renewal of that insurance.
Accordingly, and in order to induce the Indemnitee to continue
to serve in his present capacities, the Company and the Indemnitee agree as
follows:
1. CONTINUED SERVICE. The Indemnitee shall continue to
serve at the will of the Company as a Director and an officer of the Company so
long as he is duly elected and qualified in accordance with the Regulations or
until he resigns in writing in accordance with applicable law.
2. INITIAL INDEMNITY. (a) The Company shall indemnify
the Indemnitee if or when he is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the
<PAGE> 2
2
Company), by reason of the fact that he is or was a Director or an officer of
the Company or is or was serving at the request of the Company as a director,
trustee, officer, employee or agent of another corporation, domestic or
foreign, nonprofit or for profit, partnership, joint venture, trust or other
enterprise, or by reason of any action alleged to have been taken or omitted in
any such capacity, against any and all costs, charges, expenses (including,
without limitation, fees and expenses of attorneys and/or others; all such
costs, charges and expenses being herein jointly referred to as "Expenses"),
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by the Indemnitee in connection therewith including any appeal of or
from any judgment or decision, unless it is proved by clear and convincing
evidence in a court of competent jurisdiction that the Indemnitee's action or
failure to act involved an act or omission undertaken with deliberate intent to
cause injury to the Company or undertaken with reckless disregard for the best
interests of the Company. In addition, with respect to any criminal action or
proceeding, indemnification hereunder shall be made only if the Indemnitee had
no reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement or conviction, or
upon a plea of "nolo contendere" or its equivalent, shall not, of itself,
create a presumption that the Indemnitee did not satisfy the foregoing standard
of conduct to the extent applicable thereto.
(b) The Company shall indemnify the Indemnitee if or when
he is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by or in the right of the Company to
procure a judgment in its favor, by reason of the fact that the Indemnitee is
or was a Director or an officer of the Company or is or was serving at the
request of the Company as a director, trustee, officer, employee or agent of
another corporation, domestic or foreign, nonprofit or for profit, partnership,
joint venture, trust or other enterprise, against any and all Expenses actually
and reasonably incurred by the Indemnitee in connection with the defense or
settlement thereof or any appeal of or from any judgment or decision, unless it
is proved by clear and convincing evidence in a court of competent jurisdiction
that the Indemnitee's action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to the Company or undertaken
with reckless disregard for the best interests of the Company, except that no
indemnification shall be made in respect of any action or suit in which the
only liability asserted against the Indemnitee is pursuant to Section 1701.95
of the Ohio Revised Code (the "ORC").
(c) Any indemnification under Section 2(a) or 2(b) (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the Indemnitee is
proper in the circumstances because he has met the applicable standard of
conduct set forth
<PAGE> 3
3
in Section 2(a) or 2(b). Such authorization shall be made (i) by the Directors
of the Company (the "Board") by a majority vote of a quorum consisting of
Directors who were not and are not parties to or threatened with such action,
suit or proceeding, or (ii) if such a quorum of disinterested Directors is not
available or if a majority of such quorum so directs, in a written opinion by
independent legal counsel (designated for such purpose by the Board) which
shall not be an attorney, or a firm having associated with it an attorney, who
has been retained by or who has performed services for the Company, or any
person to be indemnified, within the five years preceding such determination,
or (iii) by the shareholders of the Company (the "Shareholders"), or (iv) by
the court in which such action, suit or proceeding was brought.
(d) To the extent that the Indemnitee has been successful
on the merits or otherwise, including, without limitation, the dismissal of an
action without prejudice, in defense of any action, suit or proceeding referred
to in Section 2(a) or 2(b), or in defense of any claim, issue or matter
therein, he shall be indemnified against Expenses actually and reasonably
incurred by him in connection therewith. Expenses actually and reasonably
incurred by the Indemnitee in defending any such action, suit or proceeding
shall be paid by the Company as they are incurred in advance of the final
disposition of such action, suit or proceeding under the procedure set forth in
Section 4(b) hereof.
(e) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on the Indemnitee with respect to any
employee benefit plan; references to "serving at the request of the Company"
shall include any service as a director, officer, employee or agent of the
Company which imposes duties on, or involves services by, the Indemnitee with
respect to an employee benefit plan, its participants or beneficiaries;
references to the masculine shall include the feminine; and references to the
singular shall include the plural and VICE VERSA.
3. ADDITIONAL INDEMNIFICATION. Pursuant to Section
1701.13(E)(6) of the ORC, without limiting any right which the Indemnitee may
have pursuant to Section 2 hereof or any other provision of this Agreement or
the Articles of Incorporation, as amended, of the Company (the "Articles"), the
Regulations, the ORC, any policy of insurance, or otherwise, but subject to any
limitation on the maximum permissible indemnity which may exist under
applicable law at the time of any request for indemnity hereunder and subject
to the following provisions of this Section 3, the Company shall indemnify the
Indemnitee against any amount which he is or becomes obligated to pay relating
to or arising out of any claim made against him because of any act,
<PAGE> 4
4
failure to act or neglect or breach of duty, including any actual or alleged
error, misstatement or misleading statement, which he commits, suffers, permits
or acquiesces in while acting in his capacity as a Director or an officer of
the Company. The payments which the Company is obligated to make pursuant to
this Section 3 shall include, without limitation, judgments, fines and amounts
paid in settlement and any and all Expenses actually and reasonably incurred by
the Indemnitee in connection therewith including any appeal of or from any
judgment or decision; PROVIDED, HOWEVER, that the Company shall not be
obligated under this Section 3 to make any payment in connection with any claim
against the Indemnitee:
(a) to the extent of any fine or similar governmental
imposition which the Company is prohibited by applicable law from paying
which results from a final, nonappealable order; or
(b) to the extent based upon or attributable to the
Indemnitee having actually realized a personal gain or profit to which
he was not legally entitled, including, without limitation, profit from
the purchase and sale by the Indemnitee of equity securities of the
Company which are recoverable by the Company pursuant to Section 16(b)
of the Securities Exchange Act of 1934, or profit arising from
transactions in publicly traded securities of the Company which were
effected by the Indemnitee in violation of Section 10(b) of the
Securities Exchange Act of 1934, or Rule 10b-5 promulgated thereunder.
A determination as to whether the Indemnitee shall be entitled to
indemnification under this Section 3 shall be made in accordance with Section
4(a) hereof. Expenses incurred by the Indemnitee in defending any claim to
which this Section 3 applies shall be paid by the Company as they are actually
and reasonably incurred in advance of the final disposition of such claim under
the procedure set forth in Section 4(b) hereof.
4. CERTAIN PROCEDURES RELATING TO INDEMNIFICATION. (a)
For purposes of pursuing his rights to indemnification under Section 3 hereof,
the Indemnitee shall (i) submit to the Board a sworn statement of request for
indemnification substantially in the form of Exhibit 1 attached hereto and made
a part hereof (the "Indemnification Statement") averring that he is entitled to
indemnification hereunder; and (ii) present to the Company reasonable evidence
of all amounts for which indemnification is requested. Submission of an
Indemnification Statement to the Board shall create a presumption that the
Indemnitee is entitled to indemnification hereunder, and the Company shall,
within sixty (60) calendar days after submission of the Indemnification
Statement, make the payments requested in the Indemnification Statement to or
for the benefit of the Indemnitee, unless (i)
<PAGE> 5
5
within such 60-calendar-day period the Board shall resolve by vote of a
majority of the Directors at a meeting at which a quorum is present that the
Indemnitee is not entitled to indemnification under Section 3 hereof, (ii) such
vote shall be based upon clear and convincing evidence (sufficient to rebut the
foregoing presumption) and (iii) the Indemnitee shall have received within such
period notice in writing of such vote, which notice shall disclose with
particularity the evidence upon which the vote is based. The foregoing notice
shall be sworn to by all persons who participated in the vote and voted to deny
indemnification. The provisions of this Section 4(a) are intended to be
procedural only and shall not affect the right of the Indemnitee to
indemnification under Section 3 of this Agreement so long as the Indemnitee
follows the prescribed procedure, and any determination by the Board that the
Indemnitee is not entitled to indemnification and any failure to make the
payments requested in the Indemnification Statement shall be subject to
judicial review by any court of competent jurisdiction.
(b) For purposes of obtaining payments of Expenses in
advance of final disposition pursuant to the second sentence of Section 2(d) or
the last sentence of Section 3 hereof, the Indemnitee shall submit to the
Company a sworn request for advancement of Expenses substantially in the form
of Exhibit 2 attached hereto and made a part hereof (the "Undertaking"),
averring that he has reasonably incurred actual Expenses in defending an
action, suit or proceeding referred to in Section 2(a) or 2(b) or any claim
referred to in Section 3, or pursuant to Section 7 hereof. Unless at the time
of the Indemnitee's act or omission at issue, the Articles or Regulations of
the Company prohibit such advances by specific reference to ORC Section
1701.13(E)(5)(a) and unless the only liability asserted against the Indemnitee
in the subject action, suit or proceeding is pursuant to ORC Section 1701.95,
the Indemnitee shall be eligible to execute Part A of the Undertaking by which
he undertakes to (a) repay such amount if it is proved by clear and convincing
evidence in a court of competent jurisdiction that the Indemnitee's action or
failure to act involved an act or omission undertaken with deliberate intent to
cause injury to the Company or undertaken with reckless disregard for the best
interests of the Company and (b) reasonably cooperate with the Company
concerning the action, suit, proceeding or claim. In all cases, the Indemnitee
shall be eligible to execute Part B of the Undertaking by which he undertakes
to repay such amount if it ultimately is determined that he is not entitled to
be indemnified by the Company under this Agreement or otherwise. In the event
that the Indemnitee is eligible to and does execute both Part A and Part B of
the Undertaking, the Expenses which are paid by the Company pursuant thereto
shall be required to be repaid by the Indemnitee only if he is required to do
so under the terms of both Part A and Part B of the Undertaking. Upon
<PAGE> 6
6
receipt of the Undertaking, the Company shall thereafter promptly pay such
Expenses of the Indemnitee as are noticed to the Company in writing and in
reasonable detail arising out of the matter described in the Undertaking. No
security shall be required in connection with any Undertaking.
5. LIMITATION ON INDEMNITY. Notwithstanding anything
contained herein to the contrary, the Company shall not be required hereby to
indemnify the Indemnitee with respect to any action, suit or proceeding that
was initiated by the Indemnitee unless (i) such action, suit or proceeding was
initiated by the Indemnitee to enforce any rights to indemnification arising
hereunder and such person shall have been formally adjudged to be entitled to
indemnity by reason hereof, (ii) authorized by another agreement to which the
Company is a party whether heretofore or hereafter entered or (iii) otherwise
ordered by the court in which the suit was brought.
6. SUBROGATION; DUPLICATION OF PAYMENTS. (a) In the event
of payment under this Agreement, the Company shall be subrogated to the extent
of such payment to all of the rights of recovery of the Indemnitee, who shall
execute all papers required and shall do everything that may be necessary to
secure such rights, including the execution of such documents necessary to
enable the Company effectively to bring suit to enforce such rights.
(b) The Company shall not be liable under this Agreement to
make any payment in connection with any claim made against the Indemnitee to
the extent the Indemnitee has actually received payment (under any insurance
policy, the Company's Regulations or otherwise) of the amounts otherwise
payable hereunder.
7. FEES AND EXPENSES OF ENFORCEMENT. It is the intent
of the Company that the Indemnitee not be required to incur the expenses
associated with the enforcement of his rights under this Agreement by
litigation or other legal action because the cost and expense thereof would
substantially detract from the benefits intended to be extended to the
Indemnitee hereunder. Accordingly, if it should appear to the Indemnitee that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes any action
to declare this Agreement void or unenforceable, or institutes any action, suit
or proceeding to deny, or to recover from, the Indemnitee the benefits intended
to be provided to the Indemnitee hereunder, the Company irrevocably authorizes
the Indemnitee from time to time to retain counsel of his choice, at the
expense of the Company as hereafter provided, to represent the Indemnitee in
connection with the initiation or defense of any litigation or other legal
action, whether by or against the Company or any director, officer, shareholder
or
<PAGE> 7
7
other person affiliated with the Company, in any jurisdiction. Regardless of
the outcome thereof, the Company shall pay and be solely responsible for any
and all costs, charges and expenses, including, without limitation, fees and
expenses of attorneys and others, reasonably incurred by the Indemnitee
pursuant to this Section 7.
8. MERGER OR CONSOLIDATION. In the event that the Company
shall be a constituent corporation in a consolidation, merger or other
reorganization, the Company, if it shall not be the surviving, resulting or
acquiring corporation therein, shall require as a condition thereto that the
surviving, resulting or acquiring corporation agree to assume all of the
obligations of the Company hereunder and to indemnify the Indemnitee to the
full extent provided herein. Regardless of whether the Company is the
resulting, surviving or acquiring corporation in any such transaction, the
Indemnitee shall also stand in the same position under this Agreement with
respect to the resulting, surviving or acquiring corporation as he would have
with respect to the Company if its separate existence had continued.
9. NONEXCLUSIVITY AND SEVERABILITY. (a) The rights to
indemnification provided by this Agreement shall not be exclusive of any other
rights of indemnification to which the Indemnitee may be entitled under the
Articles, the Regulations, the ORC or any other statute, any insurance policy,
agreement or vote of shareholders or directors or otherwise, as to any actions
or failures to act by the Indemnitee, and shall continue after he has ceased to
be a Director, officer, employee or agent of the Company or other entity for
which his service gives rise to a right hereunder, and shall inure to the
benefit of his heirs, executors and administrators.
(b) If any provision of this Agreement or the application
of any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid and legal.
10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without giving
effect to the principles of conflict of laws thereof.
11. MODIFICATION. This Agreement and the rights and duties
of the Indemnitee and the Company hereunder may be modified only by an
instrument in writing signed by both parties hereto.
<PAGE> 8
8
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
THE GORMAN-RUPP COMPANY
By____________________________
______________________________
("Indemnitee")
<PAGE> 9
Exhibit 1
---------
INDEMNIFICATION STATEMENT
-------------------------
STATE OF _______________)
) SS:
COUNTY OF ______________)
I, _______________, being first duly sworn, do depose and say as
follows:
1. This Indemnification Statement is submitted pursuant to
the Indemnification Agreement, dated ________, 19__, between The Gorman-Rupp
Company (the "Company"), an Ohio corporation, and the undersigned.
2. I am requesting indemnification against costs, charges,
expenses (which may include fees and expenses of attorneys and/or others),
judgments, fines and amounts paid in settlement (collectively, "Liabilities"),
which have been actually and reasonably incurred by me in connection with a
claim referred to in Section 3 of the aforesaid Indemnification Agreement.
3. With respect to all matters related to any such claim,
I am entitled to be indemnified as herein contemplated pursuant to the
aforesaid Indemnification Agreement.
4. Without limiting any other rights which I have or may
have, I am requesting indemnification against Liabilities which have or may
arise out of ________________________________________________________________
_____________________________________________________________________________
______________________________________.
______________________________
(Signature of Indemnitee)
Subscribed and sworn to before me, a Notary Public in and for
said County and State, this _____ day of _________, 19__.
______________________________
[Seal]
My commission expires the _____ day of __________, 19__.
<PAGE> 10
Exhibit 2
---------
UNDERTAKING
-----------
STATE OF _______________)
) SS:
COUNTY OF ______________)
I, ________________, being first duly sworn, do depose and say
as follows:
1. This Undertaking is submitted pursuant to the Indem-
nification Agreement, dated _______, 19__, between The Gorman-Rupp Company, an
Ohio corporation (the "Company") and the undersigned.
2. I am requesting payment of costs, charges and expenses
which I have reasonably incurred or will reasonably incur in defending an
action, suit or proceeding, referred to in Section 2(a) or 2(b) or any claim
referred to in Section 3, or pursuant to Section 7, of the aforesaid
Indemnification Agreement.
3. The costs, charges and expenses for which payment is
requested are, in general, all expenses related to _________________________
_______________________________________________________________________________.
4. Part A
------
I hereby undertake to (a) repay all amounts paid pursuant
hereto if it is proved by clear and convincing evidence in a court of competent
jurisdiction that my action or failure to act which is the subject of the
matter described herein involved an act or omission undertaken with deliberate
intent to cause injury to the Company or undertaken with reckless disregard for
the best interests of the Company and (b) reasonably cooperate with the Company
concerning the action, suit, proceeding or claim.
______________________________
(Signature of Indemnitee)
4. Part B
------
I hereby undertake to repay all amounts paid pursuant hereto if
it ultimately is determined that I am not entitled to be indemnified by the
Company under the aforesaid Indemnification Agreement or otherwise.
______________________________
(Signature of Indemnitee)
Subscribed and sworn to before me, a Notary Public in and for
said County and State, this _____ day of _________, 19__.
_____________________________
[Seal]
My commission expires the ____ day of ___________, 19__.
<PAGE> 1
Exhibit (13)
<TABLE>
The Gorman-Rupp Company and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME AND SHAREHOLDERS' EQUITY
(Thousands of dollars, except per share amounts) YEAR ENDED DECEMBER 31,
<CAPTION>
<S> <C> <C> <C>
INCOME 1994 1993 1992
-------- -------- --------
Net sales......................... $137,508 $131,535 $126,019
Other income...................... 511 589 521
-------- -------- --------
TOTAL INCOME.................. 138,019 132,124 126,540
Deductions from income:
Cost of products sold......... 101,745 98,836 95,044
Selling, general and
administrative expenses.... 21,322 19,430 18,837
-------- -------- --------
123,067 118,266 113,881
-------- -------- --------
INCOME BEFORE
INCOME TAXES............... 14,952 13,858 12,659
Income taxes...................... 5,625 5,063 4,693
-------- -------- --------
Income before cumulative
effect of a change in
accounting principle......... 9,327 8,795 7,966
Cumulative effect of a change in
accounting principle......... - - (11,886)
-------- -------- --------
NET INCOME (LOSS).......... $ 9,327 $ 8,795 $ (3,920)
======== ======== ========
Per Share Amounts
Income before cumulative
effect of a change in
accounting principle......... $ 1.09 $ 1.02 $ .92
Cumulative effect of a change
in accounting principle...... - - (1.38)
-------- -------- --------
NET INCOME (LOSS).......... $ 1.09 $ 1.02 $ (.46)
======== ======== ========
SHAREHOLDERS' EQUITY
CUMULATIVE
COMMON RETAINED TRANSLATION
SHARES EARNINGS ADJUSTMENTS TOTAL
------ -------- ----------- -------
BALANCES
DECEMBER 31, 1991................. $5,124 $55,884 $ 248 $61,256
Net loss.......................... (3,920) (3,920)
Cash dividends - $.46 a share..... (3,923) (3,923)
Translation adjustment............ (654) (654)
------ -------- ----------- -------
BALANCES
DECEMBER 31, 1992................. 5,124 48,041 (406) 52,759
Net income........................ 8,795 8,795
Cash dividends - $.48 a share..... (4,122) (4,122)
Purchase of 14,305 common
shares for treasury............. (9) (266) (275)
Translation adjustment............ (246) (246)
------ -------- ----------- -------
BALANCES
DECEMBER 31, 1993................. 5,115 52,448 (652) 56,911
Net income........................ 9,327 9,327
Cash dividends - $.49 a share..... (4,209) (4,209)
Translation adjustment............ (421) (421)
------ -------- ----------- -------
BALANCES
DECEMBER 31, 1994................. $5,115 $57,566 $(1,073) $61,608
====== ======== =========== ======
<FN>
Per share data reflects the 3 for 2 stock split effective October 27, 1994.
See notes to consolidated financial statements.
</TABLE>
<PAGE> 2
<TABLE>
The Gorman-Rupp Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Thousands of dollars) DECEMBER 31,
<S> <C> <C>
ASSETS 1994 1993
-------- --------
CURRENT ASSETS
Cash and cash equivalents $ 3,062 $ 2,782
Accounts receivable 22,772 23,886
Inventories 30,814 25,614
Deferred income taxes 2,644 2,742
Other current assets 778 722
-------- --------
TOTAL CURRENT ASSETS 60,070 55,746
OTHER ASSETS 651 701
DEFERRED INCOME TAXES 5,500 5,424
PROPERTY, PLANT AND EQUIPMENT
Land 1,004 1,004
Buildings 26,130 24,472
Machinery and equipment 49,529 45,250
-------- --------
76,663 70,726
Less allowances for depreciation 35,784 33,891
-------- --------
PROPERTY, PLANT AND EQUIPMENT - NET 40,879 36,835
-------- --------
$107,100 $ 98,706
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................... $ 5,781 $ 6,844
Payrolls and related liabilities............... 2,340 2,176
Accrued expenses............................... 4,513 4,581
Income taxes................................... 257 781
Notes payable to banks......................... 3,500 -
-------- --------
TOTAL CURRENT LIABILITIES................... 16,391 14,382
LONG-TERM DEBT.................................... 4,715 4,274
PENSION LIABILITY................................. 1,512 1,064
POSTRETIREMENT HEALTH BENEFITS OBLIGATION......... 22,874 22,075
SHAREHOLDERS' EQUITY
Common Shares, without par value:
Authorized - 14,000,000 shares;
Outstanding* - 8,579,633 shares in
1994 and 8,579,949 shares in 1993
(after deducting treasury shares
of 285,543 in each year) at stated
capital amount........................... 5,115 5,115
Retained earnings.............................. 57,566 52,448
Cumulative translation adjustments............. (1,073) (652)
-------- --------
TOTAL SHAREHOLDERS' EQUITY............... 61,608 56,911
-------- --------
$107,100 $ 98,706
======== ========
<FN>
*Shares reflect the 3 for 2 stock split effective October 27, 1994.
See notes to consolidated financial statements.
</TABLE>
<PAGE> 3
<TABLE>
The Gorman-Rupp Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
YEAR ENDED DECEMBER 31,
(Thousands of dollars) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).......................................... $ 9,327 $ 8,795 $ (3,920)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Cumulative effect of an accounting change........... - - 11,886
Depreciation and amortization....................... 4,534 4,274 4,025
Deferred income taxes............................... 22 (771) (689)
Pension liability................................... 448 512 100
Changes in operating assets and liabilities:
Accounts receivable............................... 1,114 (4,528) (386)
Inventories....................................... (5,200) (1,623) 2,008
Accounts payable.................................. (1,063) 1,265 (607)
Postretirement health benefits obligation......... 799 1,448 1,796
Other............................................. (880) 408 (1,713)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES......... 9,101 9,780 12,500
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital additions, net..................................... (8,553) (10,277) (4,496)
Proceeds from sale of assets............................... - - 1,948
-------- -------- --------
NET CASH USED FOR INVESTING ACTIVITIES............ (8,553) (10,277) (2,548)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends............................................. (4,209) (4,122) (3,923)
Borrowings from (payments to) bank......................... 3,941 4,274 (5,670)
Purchase of common shares for treasury..................... - (275) -
-------- -------- --------
NET CASH USED FOR FINANCING ACTIVITIES............ (268) (123) (9,593)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS........................... 280 (620) 359
CASH AND CASH EQUIVALENTS:
Beginning of year.......................................... 2,782 3,402 3,043
-------- -------- --------
END OF YEAR................................................ $3,062 $2,782 $3,402
======== ======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE> 4
The Gorman-Rupp Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF MAJOR ACCOUNTING POLICIES
CONSOLIDATION: The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated
on the basis of cost. Depreciation is computed principally by the straight-line
method over the estimated useful lives of the assets.
INCOME TAXES: The Company uses the liability method of accounting for
income taxes.
STATEMENT OF CASH FLOWS: The Company considers highly liquid, short-term
investments to be cash equivalents.
INVENTORIES: Inventories are stated at the lower of cost or market. The cost
for approximately 67% and 59% of inventories at December 31, 1994 and 1993,
respectively, is determined using the last-in, first-out (LIFO) method, with
the remainder determined using the first-in, first-out method.
BUSINESS SEGMENT INFORMATION: The Company operates principally in one business
segment, the manufacture and sale of pumps and other fluid control equipment.
Export sales comprised approximately 13% of net sales in 1994 and 11% in 1993
and 1992.
CONCENTRATION OF CREDIT RISK: Sales to two customers were approxi-
mately 15% of total net sales in 1994 and 1993. Approximately 13% and 25% of
accounts receivable at December 31, 1994 and 1993, respectively, relate to the
same customers. The Company generally does not require collateral from its
customers. The Company has a good collection rate.
NOTE B -- INVENTORIES: The major components of inventories are
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Thousands of dollars) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and in-process.......... $ 7,883 $ 8,824
Finished parts........................ 19,834 14,941
Finished products..................... 3,097 1,849
------ ------
$ 30,814 $ 25,614
======== ========
- --------------------------------------------------------------------------------
</TABLE>
The excess of replacement cost over LIFO cost is approximately $18,758,000 and
$18,244,000 at December 31, 1994 and 1993, respectively.
During 1992, the Company's inventory levels decreased resulting in a
liquidation of LIFO inventory quantities carried at lower prior year costs as
compared to current costs. The effect of the liquidation of LIFO inventories
increased income before cumulative effect of a change in accounting principle
by $824,000 or $.10 per share.
NOTE C -- FINANCING ARRANGEMENTS: Under unsecured demand lines of credit with
banks, the Company may borrow up to $5.0 million with interest at the banks'
prime rate. At December 31, 1994, $3.5 million was outstanding at a weighted
average interest rate of 7.0%.
The Company also has an unsecured revolving loan agreement which matures in
August 1996 and provides for maximum borrowings of $8 million. $4.7 million and
$4.3 million was outstanding at December 31, 1994 and 1993, respectively; $.9
million covered outstanding letters of credit at December 31, 1994 and
1993; and the remainder in each year was available for borrowing. Interest is
payable quarterly at the LIBOR rate plus .75% or at alternative rates as
selected by the Company (7.0% and 4.3% at December 31, 1994 and 1993,
respectively). The agreement contains restrictive covenants including limits on
additional borrowings and maintenance of certain operating and financial ratios.
Interest expense was $195,000, $58,000 and $213,000 in 1994, 1993 and 1992,
respectively.
NOTE D -- INCOME TAXES: The components of income before income taxes are:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Thousands of dollars) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States....................... $14,724 $13,646 $12,568
Canada.............................. 228 212 91
------- ------- -------
$14,952 $13,858 $12,659
======= ======= =======
- --------------------------------------------------------------------------------
The components of income tax expense are as follows:
- --------------------------------------------------------------------------------
(Thousands of dollars) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal.......................... $4,888 $5,110 $4,703
Canadian......................... 115 104 49
State and local.................. 600 620 630
------- ------- -------
5,603 5,834 5,382
Deferred............................ 22 (771) (689)
------- ------- -------
$5,625 $5,063 $4,693
======= ======= =======
- --------------------------------------------------------------------------------
</TABLE>
The reasons for the difference between income tax expense and the amount
computed by applying the statutory federal income tax rate of 35% in 1994 and
1993 (34% in 1992) to income before income taxes are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Thousands of dollars) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes at
statutory rate.................. $5,233 $4,850 $4,304
Deferred benefit due to
change in federal rate.......... - (229) -
State and local income
taxes, net of federal
tax benefit..................... 390 363 416
Other............................... 2 79 (27)
------- ------- -------
$5,625 $5,063 $4,693
======= ======= =======
- --------------------------------------------------------------------------------
Deferred tax assets (liabilities) consist of the following:
- --------------------------------------------------------------------------------
(Thousands of dollars) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Inventories...................... $1,292 $1,205 $1,187
Accrued liabilities.............. 1,352 1,537 1,350
------- ------- -------
2,644 2,742 2,537
Non-current:
Depreciation..................... (3,010) (2,465) (1,945)
Postretirement health
benefits obligation............ 8,692 8,393 7,605
Other............................ (182) (504) (815)
------- ------- -------
5,500 5,424 4,845
------- ------- -------
$8,144 $8,166 $7,382
======= ======= =======
- --------------------------------------------------------------------------------
</TABLE>
The Company made income tax payments of $6,018,000, $5,857,000 and
$5,951,000 in 1994, 1993 and 1992, respectively.
<PAGE> 5
The Gorman-Rupp Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E - PENSIONS: The Company has a defined benefit pension plan covering
substantially all employees. The Company's policy is to fund the maximum tax
deductible contribution. The plan provides benefits based upon years of service
and compensation. The components of pension expense are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Thousands of dollars) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned....... $ 1,128 $ 896 $ 842
Interest cost........................ 1,467 1,411 1,255
Return on plan assets................ 1,069 (709) (904)
Net amortization and deferral........ (3,215) (1,086) (1,093)
------- ------ ------
$ 449 $ 512 $ 100
======= ====== ======
- --------------------------------------------------------------------------------
The funded status of the Plan at November 1, 1994 and 1993
is as follows:
- --------------------------------------------------------------------------------
(Thousands of dollars) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
accumulated benefit obligation:
Vested....................... $11,078 $14,068
Non-vested................... 119 188
------- -------
$11,197 $14,256
======= =======
Plan assets at fair value............ $16,487 $20,541
Actuarial present value of projected
benefit obligation.............. (16,028) (20,640)
------- -------
Plan assets in excess of (less than)
projected benefit obligation.... 459 (99)
Unrecognized net (gain) loss......... (774) 658
Unrecognized transition asset........ (1,391) (1,851)
Unrecognized prior service cost...... 194 228
------- -------
Net pension (liability) at December 31 $(1,512) $(1,064)
======= =======
- --------------------------------------------------------------------------------
</TABLE>
The projected benefit obligation was determined using an assumed discount rate
of 8 1/2% in 1994 (7% in 1993). A 7% discount rate was used to calculate lump
sum benefit payments in 1994 and 1993. Annual salary increases are assumed to
be 4 1/2% in 1994 and 1993. The long-term rate of return on plan assets was
assumed to be 8% in each year. Plan assets are invested principally in
guaranteed investment contracts and equity and fixed income funds.
The effect of the change in the discount rate was to decrease the actuarial
present value of the projected benefit obligation by approximately
$4,200,000 as of December 31, 1994. The change, which will also be used for
determining expense in 1995, is not expected to have a material effect on the
Company's financial statements.
NOTE F - POSTRETIREMENT HEALTH BENEFITS:
The Company sponsors a non-contributory defined benefit health care plan that
provides health benefits to retirees and their spouses. The Company's policy is
to fund the cost of these benefits as incurred. In 1992, the Company adopted
Statement of Financial Accounting Standards No. 106, Accounting for
Postretirement Benefits Other than Pensions (Statement 106). In adopting
Statement 106, the Company recorded the accumulated postretirement health
benefits obligation as of January 1, 1992 ($11,886,000, net of applicable
income taxes of $6,945,000) as a cumulative effect of a change in accounting
principle. The following table presents the plan's funded status reconciled
with amounts recognized in the Company's balance sheets.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Thousands of dollars) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
health benefits obligation:
Retirees....................... $ 6,363 $ 6,186
Fully eligible active
plan participants............. 5,051 5,633
Other active plan participants. 3,389 4,042
------- -------
Accumulated benefits obligation 14,803 15,861
Unrecognized assets:
Net gain....................... 2,442 61
Prior service cost from
plan amendment................ 5,629 6,153
------- -------
Accrued postretirement health
benefits obligation............ $22,874 $22,075
======= =======
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Thousands of dollars) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Postretirement health benefits
expense includes the following
components:
Service cost................. $ 785 $ 704 $ 776
Interest cost................ 1,144 1,429 1,548
Net amortization of
unrecognized prior
service cost.............. (525) (131) -
------- ------ ------
$1,404 $2,002 $2,324
======= ====== ======
- --------------------------------------------------------------------------------
</TABLE>
The weighted-average discount rate used in determining the accumulated
postretirement health benefits obligation was 8 1/2% in 1994 (7% in 1993). The
weighted-average annual assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) for 1995 and 1994 is
11 - 12 1/2%, depending on the age of the retiree, and is assumed to decrease
gradually to 5.5% by 2008 and remain at that level thereafter. Increasing the
assumed health care cost trend rates by one percentage point in each year would
increase the accumulated postretirement health benefits obligation as of
December 31, 1994 by $1,698,000 and post retirement health benefits expense
for the year ended December 31, 1994 by $202,00O.
The effect of the change in the discount rate was to decrease the
accumulated postretirement health benefits obligation by approximately
$2,400,000 as of December 31, 1994. The effect of the change on 1994 expense
was not material and the change is not expected to have a material effect on
the 1995 financial statements.
<PAGE> 6
The Gorman-Rupp Company and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1994 COMPARED TO 1993
Record sales of $137.5 million were recorded in 1994, compared to $131.5
million in 1993, an increase of $6.0 million or 4.5%. The increase in net sales
was principally the result of increased business in the waste and fresh water
business, and to a lesser degree, increases in unit pricing. Other income in
1994 was $511,000, compared to $589,000 in 1993, and consisted principally of
interest earned on short-term investments and income from leased facilities.
Cost of products sold as a percentage of net sales was 74% in 1994,
compared to 75.1% in 1993. Continued efforts to improve manufacturing
efficiencies and cost containment procedures coupled with increased utilization
of the manufacturing facilities at the Company's largest division resulted in
improved cost of products sold for the comparative periods.
Selling, general and administrative expense was 15.5% of net sales in 1994,
compared to 14.8% in 1993. The increase of $1,892,000 in 1994 was principally
the result of increased salaries and related employee benefits and expenses
associated with the design and implementation of upgraded information
management systems.
The effective income tax rate was 37.6% in 1994, compared to 36.5% in 1993.
(See Note D to the financial statements.)
Net income in 1994 was a record $9,327,000, compared to net income of
$8,795,000 in 1993, an increase of 6.0%. Net income as a percent of net sales
in 1994 was 6.8%, as compared to 6.7% in 1993. Net income per share in 1994 was
a record $1.09, an increase of $.07 from net income per share of $1.02 in 1993.
On August 25, 1994, the Board of Directors of the Company declared and
authorized a 3 for 2 split of the Company's Common Shares which was
effected by a distribution of additional Common Shares on October 27, 1994 to
shareholders of record on September 29, 1994. The authorized distribution
increased the shares outstanding by 2,859,667 to 8,579,633. Accordingly, per
share data has been restated to reflect the 3 for 2 stock split.
1993 COMPARED TO 1992
Record sales of $131.5 million were recorded in 1993, compared to $126 million
in 1992, an increase of $5.5 million or 4.4%. The increase in net sales was
principally the result of increased business in the waste and fresh water
business, and to a lesser degree, increases in unit pricing. The sale of pumps,
the Company's primary business, increased approximately 8% in 1993, more than
offsetting the reduction in sales due to the divestiture in August 1992 of the
Durham Products Division, a manufacturer of electric motors. Other income in
1993 was $589,000, compared to $521,000 in 1992, and consisted principally of
interest earned on short-term investments and income from leased facilities.
Cost of products sold as a percentage of net sales was 75.1% in 1993, compared
to 75.4% in 1992. Continued efforts to improve manufacturing efficiencies and
cost containment procedures resulted in stabilized cost of product sold for the
comparative periods.
Selling, general and administrative expense was 14.8% of net sales in
1993, compared to 14.9% in 1992. The $593,000 increase in 1993 was principally
the result of increased advertising expense due to the Company's participation
in Con Expo '93, a national construction show held every six years.
The effective income tax rate was 36.5% in 1993, compared to 37.1% in 1992.
(See Note D to the financial statements.)
Net income in 1993 was a record $8,795,000, compared to income of $7,966,000
before cumulative effect of a change in accounting in 1992, an increase of
10.4%. Net income as a percent of net sales in 1993 was 6.7%, as compared to
income before cumulative effect of a change in accounting in 1992 as a percent
of net sales of 6.3%. Net income per share in 1993 was a record $1.02, an
increase of $.10 from income per share before cumulative effect of a change in
accounting in 1992 of $.92. In 1992 the cumulative effect of a change in a
accounting reduced income by $11,886,000 or $1.38 per share, resulting in a net
loss of $3,920,000 or $.46 per share.
LIQUIDITY AND SOURCES OF CAPITAL
Cash and cash equivalents were $3 million as of December 31, 1994. The
Company has $5 million in bank lines of credit. $3.5 million was borrowed
against these lines at December 31, 1994.
The Company also maintains an unsecured revolving credit facility which
provides for maximum borrowings of $8 million, $2.4 million of which is
available. As of December 31, 1994, $4.7 million had been borrowed and $.9
million covered outstanding letters of credit.
During 1994, the Company financed its capital improvements and working capital
requirements through internally generated funds and line of credit arrangements
with banks. Capital expenditures for 1995 are expected to be financed through
internally generated funds and existing credit arrangements.
The ratio of current assets to current liabilities was 3.7 to 1 at
December 31, 1994, compared to 3.9 to 1 at December 31, 1993. Management
believes that it has adequate working capital and a healthy liquidity position.
IMPACT OF INFLATION
The Company continues to implement programs that improve productivity and
efficiency in a stabilizing inflationary economy.
<PAGE> 7
<TABLE>
The Gorman-Rupp Company and Subsidiaries
TEN YEAR SUMMARY OF SELECTED FINANCIAL DATA
<CAPTION>
(Thousands of dollars, except per share amounts)
1994 1993 1992 1991
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATING RESULTS:
Net sales $137,508 $131,535 $126,019 $123,442
Gross profit 35,763 32,699 30,975 29,872
Income taxes 5,625 5,063 4,693 4,664
Income (1) 9,327 8,795 7,966 7,689
Return on sales (%) 6.8 6.7 6.3 6.2
Sales dollars per employee 138.5 133.9 125.6 120.0
FINANCIAL POSITION:
Current assets $ 60,070 $ 55,746 $ 50,152 $ 53,642
Current liabilities 16,391 14,382 12,380 14,471
Working capital 43,679 41,364 37,772 39,171
Current ratio 3.7 3.9 4.1 3.7
Property, plant and
equipment - net 40,879 36,835 30,807 30,838
Capital additions 8,553 10,277 4,496 8,224
Total assets 107,100 98,706 86,434 85,131
Shareholders' equity 61,608 56,911 52,759 61,256
Dividends paid 4,209 4,122 3,923 3,820
Average number of employees 993 982 1,003 1,029
SHAREHOLDER INFORMATION:
Income per share (1) $1.09 $1.02 $.92 $.89
Cash dividends per share .49 .48 .46 .45
Shareholders' equity per share at December 31, 7.18 6.63 6.14 7.13
Average number of shares outstanding 8,579,633 8,588,493 8,594,255 8,594,255
<FN>
Per share data reflects the 3 for 2 split effective October 27, 1994.
(1) Income for 1992 is before cumulative effect of a change in accounting
principle which reduced income by $11,886,000 or $1.38 per share.
* Includes the aquisition of Patterson Pump Company in November 1988.
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
Ranges of Stock Prices
The high and low sales price and dividends per share for Common Shares traded on the American Stock Exchange were:
<CAPTION>
Sales Price of Common Shares Dividends Per Share
1994 1993 1994 1993
---------------- ----------------- ---- ----
Quarter High Low High Low
<S> <C> <C> <C> <C> <C> <C>
First $20.000 $16.750 $19.500 $16.583 $.12 $.12
Second 18.583 16.333 18.583 17.000 .12 .12
Third 17.333 15.167 20.333 17.833 .12 .12
Fourth 8.500 15.750 18.917 17.333 .13 .12
<FN>
Per share data reflects the 3 for 2 split effective October 27, 1994.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
SHAREHOLDER INFORMATION REPORTED BY TRANSFER AGENT AND REGISTRAR, NATIONAL CITY BANK, FEBRUARY 15, 1995
<CAPTION>
Holders Shares
----- ---------
<S> <C> <C>
Individuals 1,273 2,584,141
Nominees, Brokers and Other 33 5,999,980
----- ---------
Total 1,306 8,584,121
===== =========
<FN>
An additional 281,055 Common Shares are held in Treasury.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS
The following is a summary of unaudited quarterly results of operations for the years ended December 31, 1994 and 1993.
(Thousands of dollars, except per share amounts)
<CAPTION>
QUARTER ENDED 1994 MAR. 31 JUNE 30 SEPT. 30 DEC.31
------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales $38,118 $34,003 $33,781 $31,606
Gross profit 9,732 9,372 8,860 7,799
Net income 2,968 2,615 2,329 1,415
Net income per share .35 .30 .27 .17
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED 1993 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales $32,832 $33,858 $33,532 $31,313
Gross profit 8,070 8,326 8,624 7,679
Net Income 2,199 2,281 2,485 1,830
Net Income per share .26 .26 .29 .21
<FN>
Per share data reflects the 3 for 2 stock split effective October 27, 1994.
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
1990 1989 1988* 1987 1986 1985
---- ---- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$ 119,715 $ 114,253 $ 82,750 $ 74,435 $ 65,274 $ 67,324
28,602 27,663 22,308 20,460 17,376 19,908
4,888 4,638 4,221 4,851 3,821 4,780
7,342 6,771 6,618 5,919 4,397 5,762
6.1 5.9 8.0 8.0 6.7 8.6
120.7 118.6 106.9 99.2 85.3 87.2
$ 50,531 $ 48,793 $ 44,118 $ 39,663 $ 34,539 $ 35,289
14,805 15,871 14,789 6,402 4,688 5,802
35,726 32,922 29,329 33,261 29,851 29,487
3.4 3.1 3.0 6.2 7.4 6.1
26,134 24,479 22,795 16,890 16,988 16,884
4,962 4,844 2,873 2,100 2,174 3,424
77,643 74,560 68,695 57,119 52,028 52,730
57,310 53,711 50,476 48,248 45,330 45,144
3,743 3,667 3,399 3,258 3,151 3,020
992 963 774 750 765 772
$ .85 $ .79 $ .76 $ .68 $ .50 $ .66
.44 .43 .39 .38 .36 .34
6.67 6.25 5.83 5.56 5.17 5.15
8,594,255 8,594,255 8,655,119 8,682,711 8,772,465 8,772,711
</TABLE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
The Gorman-Rupp Company
We have audited the accompanying consolidated balance sheets of The Gorman-Rupp
Company and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1994, appearing on pages 10
through 14. These financial statements are the responsibility of the Company'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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
The Gorman-Rupp Company and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note F to the consolidated financial statements, in 1992 the
Company changed its method of accounting for postretirement health benefits.
/S/ ERNST & YOUNG LLP
Cleveland, Ohio
February 3, 1995
<PAGE> 1
Exhibit (21)
SUBSIDIARIES OF THE COMPANY
---------------------------
The Company has three wholly owned subsidiaries: (i) Gorman-Rupp of Canada
Limited, organized under the laws of the Province of Ontario; (ii) The
Gorman-Rupp International Company, organized under the laws of the State of
Ohio; and (iii) Patterson Pump Company, organized under the laws of the State
of Ohio. The consolidated financial statements of the Company, filed as a part
of this Form 10-K, include the account of each such subsidiary.
46
<PAGE> 1
Exhibit (23)
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of The Gorman-Rupp Company of our report dated February 3, 1995, included in
the 1994 Annual Report to Shareholders of The Gorman-Rupp Company.
We also consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 33-87198) pertaining to the registration of 60,000 shares of The
Gorman-Rupp Company common stock and in the related Prospectus, and in the
Registration Statement (Form S-3 No. 33-86322) pertaining to the registration
of 75,000 shares of The Gorman-Rupp Company common stock and in the related
Prospectus, and in the Registration Statement (Form S-8 No. 33-47712)
pertaining to the Employee Stock Purchase Plan of The Gorman-Rupp Company and
in the related Prospectus, and in the Registration Statement (Form S-8 No.
33-44370) pertaining to the Individual Profit Sharing Retirement Plan of The
Gorman-Rupp Company and in the related Prospectus of our report dated February
3, 1995, with respect to the consolidated financial statements of The Gorman-
Rupp Company incorporated by reference in this Annual Report (Form 10-K) for
the year ended December 31, 1994.
/S/ ERNST & YOUNG LLP
---------------------
Ernst & Young LLP
Cleveland, Ohio
March 28, 1995
47
<PAGE> 1
Exhibit (24)
THE GORMAN-RUPP COMPANY
CERTIFICATE OF THE SECRETARY
The undersigned hereby certifies that he is the duly elected, qualified
and acting Corporate Secretary of The Gorman-Rupp Company, an Ohio corporation
(the "Company"), and that the following resolutions were duly adopted by the
Company's Board of Directors at a duly noticed and called meeting held on March
23, 1995 at which a quorum was present and acting throughout, which resolutions
have not been amended, rescinded or modified and are in full force and effect
on the date hereof.
RESOLVED, that the officers of the Company, and each of them, hereby are
authorized, for and on behalf of the Company, to prepare, sign and file, or
cause to be prepared, signed and filed, with the Securities and Exchange
Commission, under the Securities Exchange Act of 1934, the Company's 1994
Annual Report on Form 10-K, and any and all amendments thereto, and to do or
cause to be done all things necessary or advisable in connection therewith.
FURTHER RESOLVED, that James C. Gorman, Jeffrey S. Gorman, Robert E.
Kirkendall and Anthony R. Moore, and each of them, hereby are appointed
attorneys for the Company, with full power of substitution, for and in the
name, place and stead of the Company, to sign and file the Company's 1994
Annual Report on Form 10-K and any and all amendments thereto, and any and all
other documents in connection therewith, with full power and authority to do
and perform any and all acts necessary or advisable.
FURTHER RESOLVED, that the officers of the Company and each of them,
hereby are authorized, for and on behalf of the Company, to execute a power of
attorney evidencing the foregoing appointments.
IN WITNESS WHEREOF, I have hereunto signed this Certificate as of the 28th
day of March, 1995.
/S/ ROBERT E. KIRKENDALL
-----------------------------
Robert E. Kirkendall
Corporate Secretary
48
<PAGE> 2
Exhibit (24)
POWER OF ATTORNEY
-----------------
The undersigned, The Gorman-Rupp Company (the "Company"), by the
undersigned officer of the Company hereunto duly authorized, hereby appoints
James C. Gorman, Jeffrey S. Gorman, Robert E. Kirkendall and Anthony R. Moore,
and each of them, as attorneys for the Company with full power of substitution,
for and in its name, place and stead, to sign and file with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, the
Company's 1994 Annual Report on Form 10-K and any and all amendments thereto,
and any and all other documents to be filed with the Securities and Exchange
Commission or otherwise in connection therewith, with full power and authority
to do and perform any and all acts whatsoever necessary or advisable.
Executed this 23rd day of March 1995.
THE GORMAN-RUPP COMPANY
BY: /S/ ROBERT E. KIRKENDALL
------------------------
Robert E. Kirkendall
Corporate Secretary
49
<PAGE> 3
Exhibit (24)
POWER OF ATTORNEY
-----------------
The undersigned Officers and Directors of The Gorman-Rupp Company (the
"Company") hereby appoint James C. Gorman, Jeffrey S. Gorman, Robert E.
Kirkendall, and Anthony R. Moore, and each of them, as attorneys for each of
the undersigned, with full power of substitution, for and in the name, place
and stead of each of the undersigned to sign and file with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, the
Company's 1994 Annual Report on Form 10-K and any and all amendments thereto,
and any and all other documents to be filed with the Securities and Exchange
Commission or otherwise in connection therewith, with full power and authority
to do and perform any and all acts whatsoever necessary or advisable.
Executed this 23rd day of March 1995.
/S/ JAMES C. GORMAN Chairman, Principal Executive Officer
- -------------------------- and Director
James C. Gorman
/S/ KENNETH E. DUDLEY Treasurer and Principal Financial
- -------------------------- and Accounting Officer
Kenneth E. Dudley
/S/ WILLIAM A. CALHOUN Director
- --------------------------
William A. Calhoun
/S/ PETER B. LAKE Director
- --------------------------
Peter B. Lake
/S/ BURTON PRESTON Director
- --------------------------
Burton Preston
/S/ JOHN A. WALTER Director
- --------------------------
John A. Walter
/S/ JEFFREY S. GORMAN Director
- --------------------------
Jeffrey S. Gorman
/S/ JAMES R. WATSON Director
- --------------------------
James R. Watson
Director
- --------------------------
Thomas A. Hoaglin
50
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 3,062
<SECURITIES> 0
<RECEIVABLES> 22,772
<ALLOWANCES> 0
<INVENTORY> 30,814
<CURRENT-ASSETS> 60,070
<PP&E> 76,663
<DEPRECIATION> 35,784
<TOTAL-ASSETS> 107,100
<CURRENT-LIABILITIES> 16,391
<BONDS> 0
<COMMON> 5,115
0
0
<OTHER-SE> 56,493
<TOTAL-LIABILITY-AND-EQUITY> 107,100
<SALES> 137,508
<TOTAL-REVENUES> 138,019
<CGS> 101,745
<TOTAL-COSTS> 123,067
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,952
<INCOME-TAX> 5,625
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,327
<EPS-PRIMARY> 1.09 <F1>
<EPS-DILUTED> 1.09 <F2>
<FN>
<F1> Per share data reflects the 3 for 2 Stock Split effective October 27, 1994.
<F2> Per share data reflects the 3 for 2 Stock Split effective October 27, 1994.
</FN>
</TABLE>
