<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For nine months ended September 30, 1998 Commission File Number 1-6747
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The Gorman-Rupp Company
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(Exact name of registrant as specified in its charter)
Ohio 34-0253990
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
305 Bowman Street, P. O. Box 1217, Mansfield, Ohio 44901
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (419) 755-1011
---------------------
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 (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Shares outstanding at September 30, 1998 -----
common, without par value, 8,564,834
Page 1 of 7 pages
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PART I - FINANCIAL INFORMATION
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
INCOME ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 44,535 $ 42,278 $ 130,773 $ 122,971
Other income 177 134 656 423
----------- ----------- ---------- ----------
TOTAL INCOME 44,712 42,412 131,429 123,394
DEDUCTIONS FROM INCOME
Cost of products sold 32,495 31,503 96,563 91,717
Selling, general and
administrative expenses 6,643 6,133 19,112 18,033
----------- ----------- ---------- ----------
TOTAL DEDUCTIONS 39,138 37,636 115,675 109,750
----------- ----------- ---------- ----------
INCOME BEFORE INCOME TAXES 5,574 4,776 15,754 13,644
Income taxes 2,190 1,768 6,092 5,088
----------- ----------- ---------- ----------
NET INCOME $ 3,384 $ 3,008 $ 9,662 $ 8,556
=========== =========== ========== ==========
Basic And Diluted
Earnings Per Share $ 0.39 $ 0.35 $ 1.12 $ 0.99
Dividends Paid Per Share $ 0.15 $ 0.14 $ 0.43 $ 0.42
Average Shares Outstanding 8,608,676 8,603,013 8,562,385 8,611,680
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands of dollars)
Nine Months Ended
September 30
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES: ----------- -----------
<S> <C> <C>
Net income $ 9,662 $ 8,556
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,714 4,414
Deferred income taxes (1,022) (2)
Changes in operating assets and liabilities 7,676 (163)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital additions, net (5,314) (5,124)
Change in short-term investments (3,809) (1,504)
Other (419) (43)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends (3,697) (3,616)
Change in treasury shares (876) (338)
Repayments to bank (4,692) (278)
NET INCREASE IN CASH ----------- -----------
AND CASH EQUIVALENTS 2,223 1,902
CASH AND CASH EQUIVALENTS:
Beginning of year 836 830
---------- -----------
September 30 $ 3,059 $ 2,732
=========== ===========
</TABLE>
2
<PAGE> 3
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands of dollars)
<TABLE>
<CAPTION>
September 30 December 31
1998 1997
ASSETS --------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,059 $ 836
Short-term investments 10,710 6,901
Accounts receivable 29,428 31,263
Inventories 35,982 39,761
Other current assets and deferred income taxes 3,312 2,934
--------- ---------
TOTAL CURRENT ASSETS 82,491 81,695
OTHER ASSETS 914 816
DEFERRED INCOME TAXES 5,457 4,435
PROPERTY, PLANT AND EQUIPMENT 89,509 86,997
Less allowances for depreciation 48,173 46,078
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PROPERTY, PLANT AND EQUIPMENT - NET 41,336 40,919
--------- ---------
TOTAL ASSETS $ 130,198 $ 127,865
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 8,113 $ 7,669
Payrolls and related liabilities,
accrued expenses 11,164 7,908
Income taxes 621 1,459
--------- ---------
TOTAL CURRENT LIABILITIES 19,898 17,036
LONG TERM DEBT 1,997 6,689
PENSION LIABILITY 608 1,418
POSTRETIREMENT HEALTH BENEFITS OBLIGATION 25,052 24,662
SHAREHOLDERS' EQUITY
Common shares, without par value
at stated capital amount 5,105 5,135
Retained earnings 79,260 74,143
Accumulated comprehensive income (1,722) (1,218)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 82,643 78,060
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 130,198 $ 127,865
========= =========
Common shares - authorized 14,000,000 14,000,000
* Common shares - outstanding 8,564,834 8,609,368
Common shares - treasury 300,342 255,808
* After deducting treasury shares
</TABLE>
3
<PAGE> 4
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE A - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three
month period and nine month period ended September 30, 1998 are not necessarily
indicative of results that may be expected for the year ending December 31,
1998. For further information, refer to the consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
NOTE B - INVENTORIES
The major components of inventories are as follows:
<TABLE>
<CAPTION>
September 30 December 31
(Thousands of dollars) 1998 1997
--------- ---------
<S> <C> <C>
Raw materials and in-process $21,492 $23,749
Finished parts 11,286 12,471
Finished products 3,204 3,541
--------- ---------
Inventories $35,982 $39,761
========= =========
</TABLE>
NOTE C - COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income. Statement 130 establishes new
rules for the reporting and display of comprhensive income and its components;
however, the adoption of this Statement had no impact on the Company's net
income or shareholders equity. Statement 130 requires foreign currency
translation adjustments, which prior to adoption were reported separately in
shareholders' equity to be included in other comprehensive income. Prior year
financial statements have been reclassified to conform to the requirements of
Statement 130.
During the three months ended September 30 of 1998 and 1997, total comprehensive
income amounted to $3,696,000 and $2,989,000. During the nine months ended
September 30 of 1998 and 1997, total comprehensive income amounted to
$10,166,000 and $8,614,000.
4
<PAGE> 5
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Third Quarter 1998 vs Third Quarter 1997
- ------------------------------------------
Net sales were $44,535,000 in 1998 compared to $42,278,000 in 1997, an increase
of 5.3%. Most of the increase was due to increased sales at the Mansfield
Division and Patterson Pump Company. The Mansfield Division has experienced
strong shipments in the construction market and wastewater equipment sales
remain strong. Patterson Pump Company continues to experience good sales of its
fire pumps.
Other income was $177,000 in 1998 compared to $134,000 in 1997. This increase
was primarily due to higher interest income.
Cost of products sold in 1998 was $32,495,000 compared to $31,503,000 in 1997.
The largest factors in the increase were higher material and labor costs
incurred to support increased sales. As a percentage of net sales, cost of
products sold was 73.0% in 1998 compared to 74.5% in 1997. Some change in
product mix resulted in the higher gross margin percentage in 1998.
Selling, general and administrative expenses increased from $6,133,000 in 1997
to $6,643,000 in 1998 with increases in payroll related expenses being the
largest reason for the increase.
Income before income taxes was $5,574,000 in 1998 compared to $4,776,000 in
1997, an increase of $798,000. Income tax expense increased from $1,768,000 in
1997 to $2,190,000 in 1998, primarily as a result of the increase in profit. The
effective tax rate was 39.3% in 1998 compared to 37.0% in 1997.
Net income in 1998 of $3,384,000 increased $376,000 from $3,008,000 in 1997. As
a percent of net sales, net income was 7.6% in 1998 and 7.1% in 1997. Net income
per share was $.39 in 1998, an increase of $.04 from the $.35 in 1997.
5
<PAGE> 6
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
Nine Months 1998 vs Nine Months 1997
- ------------------------------------------
Net sales were $130,773,000 in 1998, an increase of $7,802,000 or 6.3% over the
$122,971,000 in 1997. Most of the increase was due to increased sales at the
Mansfield Division and Patterson Pump Company. The Mansfield Division has
experienced strong shipments in the construction market and wastewater equipment
sales remain strong. Patterson Pump Company continues to experience good sales
of its fire pumps.
Other income was $656,000 in 1998 compared to $423,000 in 1997. This increase
was primarily due to higher interest income.
Cost of products sold in 1998 was $96,563,000 compared to $91,717,000 in 1997.
The largest factors in the increase were higher material and labor costs
incurred to support increased sales. As a percentage of net sales, cost of
products sold was 73.8% in 1998 compared to 74.6% in 1997. Some change in
product mix resulted in the higher gross margin percentage in 1998.
Selling, general and administrative expenses increased from $18,033,000 in 1997
to $19,112,000 in 1998 with increases in payroll related expenses being the
largest reason for the increase.
Income before income taxes was $15,754,000 in 1998 compared to $13,644,000 in
1997, an increase of $2,110,000. Income tax expense increased from $5,088,000 in
1997 to $6,092,000 in 1998, primarily as a result of the increase in profit. The
effective income tax rate was 38.7% in 1998 compared to 37.3% in 1997.
Net income of $9,662,000 in 1998 increased $1,106,000 from $8,556,000 in 1997.
As a percent of net sales, net income was 7.4% in 1998 and 7.0% in 1997. Net
income per share was $1.12 in 1998, an increase of $.13 from $.99 in 1997.
FINANCIAL CONDITION
- -------------------
The Company continues to finance most of its capital expenditures and working
capital requirements through internally generated funds and bank financing. The
ratio of current assets to current liabilities was 4.1 to 1 at September 30,
1998 and 4.8 to 1 at December 31, 1997.
The Company presently has adequate working capital, adequate borrowing capacity
and a healthy liquidity position.
6
<PAGE> 7
PART II - OTHER INFORMATION
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - 27 Financial Data Schedule
(b) Reports filed on Form 8-K during the Quarter Ended September 30,
1998 - None
SIGNATURES
Pursuant to the requirements 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
------------------------------
(Registrant)
Date November 5, 1998 Kenneth E. Dudley
----------------------
/S/ Kenneth E. Dudley
------------------------------
(Signature)
Treasurer & Principal
Financial Officer
7
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000042682
<NAME> The Gorman-Rupp Company
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,059
<SECURITIES> 10,710
<RECEIVABLES> 30,196
<ALLOWANCES> 768
<INVENTORY> 35,982
<CURRENT-ASSETS> 82,491
<PP&E> 89,509
<DEPRECIATION> 48,173
<TOTAL-ASSETS> 130,198
<CURRENT-LIABILITIES> 19,898
<BONDS> 0
0
0
<COMMON> 5,105
<OTHER-SE> 77,538
<TOTAL-LIABILITY-AND-EQUITY> 130,198
<SALES> 130,773
<TOTAL-REVENUES> 131,429
<CGS> 96,563
<TOTAL-COSTS> 115,675
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 341
<INTEREST-EXPENSE> 174
<INCOME-PRETAX> 15,754
<INCOME-TAX> 6,092
<INCOME-CONTINUING> 9,662
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,662
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.12
</TABLE>
