<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1997 Commission file number 1-6747
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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
-----------------------------------------------------------
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. X
-
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 March 18, 1998. $86,487,028
-----------
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of March 18, 1998.
Common Shares, without par value--8,622,001
---------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1997 Annual Report to Shareholders incorporated by reference
into Part II (Items 5-8).
Portions of Notice of 1998 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
<PAGE> 2
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 1995 through 1997, the total net sales, income before income taxes and
identifiable assets ($000 omitted) of the Company.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net Sales $164,862 $155,187 $149,489
Income Before Income Taxes 16,952 15,663 15,051
Identifiable Assets 127,865 117,650 119,816
</TABLE>
The Company's product line is composed of pump models ranging in size from 1/2"
to 84" and ranging in rated capacity from less than one gallon per minute up to
500,000 gallons per minute. The types of pumps which the Company produces
include self priming centrifugal, standard centrifugal, magnetic drive
centrifugal, axial and mixed flow, 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.
2
<PAGE> 3
PART I--CONTINUED
ITEM 1. BUSINESS--CONTINUED
In 1996 the Company expanded its pump line with the introduction of the
Prime-Aire(TM) trash pump, equipped with a unique auxiliary priming system. This
priming system virtually eliminates any spewing of liquids from the priming air
exhaust line and thereby reduces operational concerns, especially for
applications containing environmentally hazardous liquids.
During 1996 vertical turbine pumps were also designed to better serve the water,
waste water and fire pump markets, extending the capacity range of the product
line.
Although no other new significant products have been introduced since 1992, the
Company has continued to emphasize product development. Several of the Company's
existing products, which were designed with added features, have also been
expanded to various new applications.
MARKETING
Except for government 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 direct sales. Government 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 1997, there were no shipments to any
single customer greater than 10% of total net sales.
Gorman-Rupp is actively pursuing international business opportunities and
established offices in Thailand and Greece in 1996 to improve access to Asian
Pacific, Mid-East and the European markets. The Company continues to penetrate
international markets principally by its aggressive response to worldwide pump
needs. Approximately 15% of all 1997 sales were made to customers outside North
America (as compared to 12% in 1996 and 11% in 1995).
COMPETITION
Increasing consolidation of pump companies is taking place in the highly
competitive pump business. Two large independent pump manufacturing companies
consolidated with other companies in 1997. 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.
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),
3
<PAGE> 4
PART I--CONTINUED
ITEM 1. BUSINESS--CONTINUED
PURCHASING AND PRODUCTION--CONTINUED
structural steel, bar stock, motors, solenoids, engines, seals, and plastic and
elastomeric 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. Small motor
requirements are also currently sourced from 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, 1997, the Company employed approximately 1,049 persons, of
whom approximately 642 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, 1997, the value of the Company's backlog of unfilled orders
was approximately $47,869,000, of which $30,905,000 was for the unfilled orders
of Patterson Pump Company. Approximately $43,969,000 is scheduled to be shipped
during 1998, with the balance ($3,900,000) to be shipped in 1999. At December
31, 1996, the value of the backlog of unfilled orders was approximately
$48,348,000.
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. (In December 1995, the Company sold facilities
and 19 contiguous undeveloped acres, utilized by its former Durham Products
Division, located in Durham, North Carolina.) The Company also owns in fee an
approximately 26,000 square foot facility in Sparks, Nevada which comprises a
training center and warehouse space.
4
<PAGE> 5
PART I--CONTINUED
ITEM 2. PROPERTIES--CONTINUED
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 testing 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. In 1997, the Company purchased 90 acres of
undeveloped land near the Mansfield Lahm Airport for future expansion and
consolidation of facilities for the Mansfield Division and the Corporate Office.
No firm plans have been made to begin construction.
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. In 1997, construction began on a 3,000 square foot expansion
of the office and training facilities and is expected to be completed in the
first quarter of 1998.
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.
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 testing facility. A 28,000 square foot
5
<PAGE> 6
PART I--CONTINUED
ITEM 2. PROPERTIES--CONTINUED
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.
********************
6
<PAGE> 7
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 73 Chairman 1989
John A. Walter 64 President and Chief Executive Officer 1989
Jeffrey S. Gorman 45 Senior Vice President; General Manager,
Mansfield Division 1989
Kenneth E. Dudley 60 Treasurer 1982
Robert E. Kirkendall 55 Corporate Secretary/Assistant Treasurer 1982
William D. Danuloff 50 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 served as
the Company's President from 1964 until 1989, and as Chief Executive Officer
from 1964 until 1996. Mr. Walter was elected to the additional position of Chief
Executive Officer in 1996; he had served as Chief Operating Officer beginning in
1993 and as Vice President and General Manager of the Industries Division from
1978 until 1990. Mr. J. S. Gorman was elected Senior Vice President in 1996 and
as Vice President and General Manager of the Mansfield Division in 1989, after
having served 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 having served 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
<PAGE> 8
PART II
ITEM 5. MARKET FOR 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 and Registrar on page 22 in the Company's 1997 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 18 and 19 in the Company's 1997 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 pages 16 and 17, and to
page 23, in the Company's 1997 Annual Report to Shareholders, which are
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 10-15, and
19, and to the section "Summary of Quarterly Results of Operations" on page 18,
in the Company's 1997 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
<PAGE> 9
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 1998 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 "Board of Directors and Directors'
Committees", "Executive Compensation", "Pension and Retirement Benefits",
"Salary Committee Report on Executive Compensation" and "Shareholder Return
Performance Presentation" in the Company's definitive Notice of 1998 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 1998 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 1998 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), the Company has no
relationships or transactions required to be reported by Item 404 of Regulation
S-K.
9
<PAGE> 10
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, 1997 and 1996
(ii) Consolidated statements of income--Years ended
December 31, 1997, 1996 and 1995
(iii)Consolidated statements of shareholders'
equity--Years ended December 31, 1997, 1996 and 1995
(iv) Consolidated statements of cash flows--Years ended
December 31, 1997, 1996 and 1995
(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
(18) Letter regarding change in accounting principles
(21) Subsidiaries of the registrant
(23) Consent of independent auditors
(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
<PAGE> 11
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 27, 1998
11
<PAGE> 12
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.
* JOHN A. WALTER President, Principal Executive
- ------------------------------ Officer and Director
John A. Walter
*KENNETH E. DUDLEY Treasurer and Principal Financial
- ------------------------------ and Accounting Officer
Kenneth E. Dudley
*JAMES C. GORMAN Director
- ------------------------------
James C. Gorman
*WILLIAM A. CALHOUN Director
- ------------------------------
William A. Calhoun
*JEFFREY S. GORMAN Director
- ------------------------------
Jeffrey S. Gorman
*THOMAS E. HOAGLIN Director
- ------------------------------
Thomas E. Hoaglin
*PETER B. LAKE Director
- ------------------------------
Peter B. Lake
*JAMES R. WATSON Director
- ------------------------------
James R. Watson
*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 27, 1998
By: /s/ ROBERT E. KIRKENDALL
-------------------------------
Robert E. Kirkendall
Attorney-In-Fact
12
<PAGE> 13
ANNUAL REPORT ON FORM 10-K
THE GORMAN-RUPP COMPANY
For the Year Ended December 31, 1997
EXHIBIT INDEX
EXHIBIT
(3) (4) Amended Articles of Incorporation, as amended *
(3) (4) Regulations *
(10) Form of Indemnification Agreement between the
Company and its Directors and Officers **
(13) Incorporated Portions of 1997 Annual Report
to Shareholders 14
(18) Letter regarding change in accounting principles 28
(21) Subsidiaries of the Company 29
(23) Consent of Independent Auditors 30
(24) Powers of Attorney 31
(27) Financial Data Schedule 34
- ---------------------
* Incorporated herein by this reference from Exhibits (3) (4) of the
Company's Annual Report on Form 10-K for the year ended December 31,
1994.
** Incorporated herein by this reference from Exhibit (10) of the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
13
<PAGE> 1
Exhibit (13)
The Gorman-Rupp Company and Subsidiaries
Consolidated Statements Of Income And Shareholders' Equity
<TABLE>
<CAPTION>
(Thousands of dollars, except per share amounts) Year ended December 31,
INCOME 1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales................................................................. $164,862 $155,187 $149,489
Other income.............................................................. 706 491 1,304
------- ------ ------
Total Income......................................................... 165,568 155,678 150,793
Deductions from income:
Cost of products sold................................................ 123,898 116,060 112,973
Selling, general and administrative expenses......................... 24,718 23,955 22,769
------- ------ ------
148,616 140,015 135,742
------- ------ ------
Income Before Income Taxes........................................ 16,952 15,663 15,051
Income taxes.............................................................. 6,340 5,735 5,590
------- ------ ------
Net Income ...................................................... $10,612 $9,928 $9,461
======= ====== ======
Basic and Diluted Earnings Per Share.............................. $1.23 $1.15 $1.10
===== ===== =====
Average number of shares outstanding...................................... 8,609,479 8,617,168 8,587,466
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
Cumulative
Common Retained Translation
Shares Earnings Adjustments Total
------ -------- ----------- -------
<S> <C> <C> <C> <C>
Balances December 31, 1994................................................ $5,115 $57,566 ($1,073) $61,608
Net income................................................................ 9,461 9,461
Cash dividends - $.52 a share............................................. (4,466) (4,466)
Sale of 49,289 common shares from treasury................................ 32 727 759
Purchase of 21,250 common shares for treasury............................. (14) (304) (318)
Translation adjustment.................................................... 196 196
------ ------- ------- -------
Balances December 31, 1995................................................ 5,133 62,984 (877) 67,240
Net income................................................................ 9,928 9,928
Cash dividends - $.53 a share............................................. (4,567) (4,567)
Sale of 10,711 common shares from treasury................................ 8 157 165
Translation adjustment.................................................... (29) (29)
------ ------- ------- -------
Balances December 31, 1996................................................ 5,141 68,502 (906) 72,737
Net income................................................................ 10,612 10,612
Cash dividends - $.56 a share............................................. (4,821) (4,821)
Sale of 11,768 common shares from treasury................................ 8 211 219
Purchase of 20,783 common shares for treasury............................. (14) (361) (375)
Translation adjustment.................................................... (312) (312)
------ ------- ------- -------
Balances December 31, 1997................................................ $5,135 $74,143 ($1,218) $78,060
====== ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
10
<PAGE> 2
The Gorman-Rupp Company and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Thousands of dollars) December 31,
ASSETS 1997 1996
------ -------
<S> <C> <C>
Current Assets
Cash and cash equivalents............................................................. $ 836 $ 4,284
Short-term investments................................................................ 6,901 -
Accounts receivable................................................................... 31,263 29,894
Inventories........................................................................... 39,761 33,621
Deferred income taxes................................................................. 2,068 3,086
Other current assets.................................................................. 866 1,041
-------- --------
Total Current Assets........................................................... 81,695 71,926
Other Assets............................................................................. 816 786
Deferred Income Taxes.................................................................... 4,435 4,389
Property, Plant and Equipment
Land............................................................................... 1,611 898
Buildings.......................................................................... 25,875 25,542
Machinery and equipment............................................................ 59,511 58,227
-------- --------
86,997 84,667
Less allowances for depreciation................................................... 46,078 44,118
-------- --------
Property, Plant and Equipment - Net ........................................... 40,919 40,549
-------- --------
$127,865 $117,650
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable...................................................................... $ 7,669 $ 6,659
Payrolls and related liabilities...................................................... 2,607 2,535
Commissions payable................................................................... 2,160 2,002
Accrued expenses ..................................................................... 2,155 2,213
Income taxes.......................................................................... 1,459 1,101
Accrued medical benefits ............................................................. 986 689
-------- --------
Total Current Liabilities...................................................... 17,036 15,199
Long-Term Debt........................................................................... 6,689 3,796
Pension Liability........................................................................ 1,418 1,921
Postretirement Health Benefits Obligation................................................ 24,662 23,997
Shareholders' Equity
Common Shares, without par value: Authorized - 14,000,000 shares;
Outstanding- 8,609,368 shares in 1997 and 8,618,383 shares in 1996
(after deducting treasury shares of 255,808 in 1997 and 246,793 in
1996) at stated capital amount.................................................. 5,135 5,141
Retained earnings..................................................................... 74,143 68,502
Cumulative translation adjustments.................................................... (1,218) (906)
-------- --------
Total Shareholders' Equity..................................................... 78,060 72,737
-------- --------
$127,865 $117,650
======== ========
</TABLE>
See notes to consolidated financial statements.
11
<PAGE> 3
The Gorman-Rupp Company and Subsidiaries
Consolidated Statements Of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
(Thousands of dollars) 1997 1996 1995
------- ------ ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................. $10,612 $9,928 $9,461
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................................... 5,959 5,675 5,173
Gain on disposal of assets...................................... - - (681)
Deferred income taxes........................................... 972 791 (122)
Pension liability............................................... (503) (298) 707
Changes in operating assets and liabilities:
Accounts receivable........................................... (1,369) 2,058 (9,180)
Inventories................................................... (6,140) (788) (2,019)
Accounts payable.............................................. 1,010 (849) 1,727
Postretirement health benefits obligation..................... 665 555 568
Other......................................................... 660 792 357
------- ------ ------
Net cash provided by operating activities..................... 11,866 17,864 5,991
Cash flows from investing activities:
Capital additions, net................................................. (6,329) (4,036) (8,229)
Proceeds from sale of assets........................................... - - 2,478
Purchases of short-term investments.................................... (25,689) - -
Proceeds from short-term investments................................... 18,788 - -
------- ------ ------
Net cash used for investing activities........................ (13,230) (4,036) (5,751)
Cash flows from financing activities:
Cash dividends ........................................................ (4,821) (4,567) (4,466)
Net borrowings from (payments to) banks................................ 2,893 (8,392) 3,973
Sale of common shares from treasury.................................... 219 165 759
Purchase of common shares for treasury................................. (375) - (318)
------- ------ ------
Net cash used for financing activities........................ (2,084) (12,794) (52)
------- ------ ------
Net increase (decrease) in cash
and cash equivalents.......................................... (3,448) 1,034 188
Cash and cash equivalents:
Beginning of year...................................................... 4,284 3,250 3,062
------- ------ ------
End of year ........................................................... $836 $4,284 $3,250
======= ====== ======
</TABLE>
See notes to consolidated financial statements.
12
<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.
Cash Equivalents and Short-term Investments: The Company considers highly
liquid, short-term investments to be cash equivalents. Short-term investments
consist of certificates of deposits having maturities of less than one year.
Because of their short maturity, the carrying amounts of the investments are
valued at cost which approximates market value.
Inventories: Inventories are stated at the lower of cost or market. At December
31, 1997, retroactive to January 1, 1997, the Company extended the use of the
last-in, first-out (LIFO) method to its remaining United States inventories to
better match the cost of products sold with related revenues. This change
decreased 1997 net income by $246,000 (equal to $.03 per share). The cumulative
impact of this change on prior periods is not determinable. The cost for
approximately 96% and 65% of inventories at December 31, 1997 and 1996,
respectively, is determined using the LIFO method, with the remainder determined
using the first-in, first-out method.
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. The estimated useful life is
primarily 30 years for buildings and ranges from 5 to 12 years for machinery and
equipment.
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 15%, 12% and 11% of net sales in 1997, 1996
and 1995, respectively. The Company must adopt Statement of Financial Accounting
Standards (FAS) No.131 "Disclosures about Segments of an Enterprise and Related
Information" no later than December 31, 1998.
Concentration of Credit Risk: The Company normally does not require collateral
from its customers and has generally had a good collection history.
Revenue Recognition: The Company recognizes revenues at the point of passage of
title, which is generally at the time of shipment to the customer.
Earnings Per Share: In 1997 the Company adopted FAS No. 128, "Earnings per
Share." Statement 128 replaces the previously reported primary earnings per
share calculations with basic earnings per share. Adoption of Statement 128 did
not have any impact on the Company's disclosures as the Company has no dilutive
securities.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassifications: Certain prior year amounts have been reclassified to conform
to the current year presentation.
Note B - Inventories: The major components of inventories are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(Thousands of dollars) 1997 1996
- ---------------------------------------------------------------
<S> <C> <C>
Raw materials and in-process........ $23,749 $16,793
Finished parts...................... 12,471 13,352
Finished products................... 3,541 3,476
------- -------
$39,761 $33,621
======= =======
- ---------------------------------------------------------------
</TABLE>
The excess of replacement cost over LIFO cost is approximately $21,500,000 and
$20,287,000 at December 31, 1997 and 1996, respectively.
Note C - Financing Arrangements: Under unsecured demand lines of credit with
banks, the Company may borrow up to $7.3 million with interest at LIBOR plus
.75% or at alternative rates as selected by the Company. At December 31, 1997,
$7.3 million was available for borrowing.
The Company also has a $10.0 million unsecured revolving loan agreement which
matures in May 1999. At December 31, 1997, $2.0 million was available for
borrowing after deducting $6.7 million of outstanding borrowings due in 1999 and
$1.3 million of outstanding letters of credit. Interest is payable quarterly at
LIBOR plus .75% or at alternative rates as selected by the Company
(weighted-average interest rate 6.2% and 5.8% at December 31, 1997 and 1996,
respectively). The agreement contains restrictive covenants including limits on
additional borrowings and maintenance of certain operating and financial ratios.
Interest expense was $238,000, $330,000 and $602,000 in 1997, 1996 and 1995,
respectively.
13
<PAGE> 5
The Gorman-Rupp Company and Subsidiaries
Notes To Consolidated Financial Statements
Note D - Income Taxes: The components of income before income taxes are:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
(Thousands of dollars) 1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
United States.............. $16,021 $14,902 $14,258
Canada..................... 931 761 793
------- ------- -------
$16,952 $15,663 $15,051
======= ======= =======
</TABLE>
- ------------------------------------------------------------------------
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
(Thousands of dollars) 1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal.................. $4,301 $4,124 $4,669
Canadian................. 454 313 393
State and local.......... 613 507 650
------ ------ ------
5,368 4,944 5,712
Deferred................... 972 791 (122)
------ ------ ------
$6,340 $5,735 $5,590
====== ====== ======
</TABLE>
- --------------------------------------------------------------------------------
The reconciliation between income tax expense and the amount computed by
applying the statutory federal income tax rate of 35% to income before income
taxes is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(Thousands of dollars) 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes at
statutory rate........ $5,933 $5,482 $5,268
State and local income
taxes, net of federal
tax benefit........... 399 330 423
Other...................... 8 (77) (101)
------ ------ ------
$6,340 $5,735 $5,590
====== ====== ======
</TABLE>
- -------------------------------------------------------------------------------
Deferred tax assets (liabilities) consist of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(Thousands of dollars) 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Inventories.............. $ 64 $1,333 $1,226
Accrued liabilities...... 2,004 1,753 1,331
------ ------ ------
2,068 3,086 2,557
Non-current:
Depreciation............. (5,217) (5,033) (3,883)
Postretirement health
benefits obligation... 9,815 9,551 9,002
Other.................... (163) (129) 590
------ ------ ------
4,435 4,389 5,709
------ ------ ------
$6,503 $7,475 $8,266
====== ====== ======
</TABLE>
- --------------------------------------------------------------------------------
The Company made income tax payments of $5,000,000, $4,600,000 and $5,600,000 in
1997, 1996 and 1995, respectively.
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) 1997 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned $ 1,312 $ 1,172 $ 851
Interest cost...................... 1,678 1,624 1,376
Return on plan assets.............. (3,201) (2,220) (2,443)
Net amortization and deferral ..... 1,405 657 1,038
------- ------- -------
$ 1,194 $ 1,233 $ 822
======= ======= =======
</TABLE>
- --------------------------------------------------------------------------
The funded status of the Plan at November 1, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Thousands of dollars) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
accumulated benefit obligation:
Vested ................................ $ 16,713 $ 15,936
Non-vested ............................ 1,058 1,170
-------- --------
$ 17,771 $ 17,106
======== ========
Plan assets at fair value ..................... $ 24,300 $ 21,714
Actuarial present value of projected
benefit obligation ....................... (25,867) (24,150)
-------- --------
Plan assets less than projected
benefit obligation ....................... (1,567) (2,436)
Unrecognized net loss ......................... 927 1,433
Unrecognized transition asset ................. (869) (1,043)
Unrecognized prior service cost ............... 91 125
-------- --------
Net pension (liability) at December 31 ........ $ (1,418) $ (1,921)
======== ========
- --------------------------------------------------------------------------------
</TABLE>
The projected benefit obligation was determined using an assumed discount rate
of 7.25% in 1997 and 1996. The assumed rate of annual compensation increase used
in 1997 and 1996 to compute the projected benefit obligation was 4.5%.
14
<PAGE> 6
The Gorman-Rupp Company and Subsidiaries
Notes To Consolidated Financial Statements
The long-term rate of return on plan assets was assumed to be 8.0% in each year.
Plan assets are invested principally in guaranteed investment contracts and
equity and fixed income funds.
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.
The following table presents the plan's funded status reconciled with
amounts recognized in the Company's balance sheets.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Thousands of dollars) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
health benefits obligation:
Retirees...................... $ 6,935 $ 5,901
Fully eligible active
plan participants...... 6,524 5,333
Other active plan participants 4,356 4,268
------- -------
Accumulated benefits obligation....... 17,815 15,502
Unrecognized assets:
Net gain......................... 2,789 3,913
Prior service cost............... 4,058 4,582
------- -------
Accrued postretirement health
benefits obligation.............. $24,662 $23,997
======= =======
</TABLE>
- --------------------------------------------------------------------------------
Postretirement health benefits expense includes the following components:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Thousands of dollars) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost.............. $ 974 $ 675 $ 661
Interest cost............. 1,099 1,138 1,336
Net amortization of
unrecognized assets. (765) (655) (556)
------ ------ ------
$1,308 $1,158 $1,441
====== ====== ======
</TABLE>
- --------------------------------------------------------------------------------
The weighted-average discount rate used in determining the accumulated
postretirement health benefits obligation was 7.25% in 1997 and 1996. The
weighted-average annual assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) for 1997 is 8.0-9.5%,
(8.5-10.0% in 1996) depending on the age of the retiree, and is assumed to
decrease gradually to 5.0% by 2006 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, 1997 by $2,450,000 and postretirement health
benefits expense for the year ended December 31, 1997 by $386,000.
15
<PAGE> 7
The Gorman-Rupp Company and Subsidiaries
Management's Discussion And Analysis Of Financial Condition And
Results Of Operations
1997 Compared to 1996
The Company achieved record net sales and net income in 1997, marking the
eleventh consecutive year for those accomplishments. Net sales increased 6.2% in
1997 to $164.9 million compared to $155.2 million in 1996. Real growth accounted
for increases of 3 to 4 percent while the remainder of the growth was the result
of increases in the prices of products sold coupled with product mix. Generally,
business at the Mansfield Division remained flat in 1997; increased commercial
business nearly offset the reduction in government sales due to the completion
of a large government contract in mid-year 1996. Patterson Pump Company sales
increased $8.5 million in 1997 resulting from an increase in pump sales and a
full year of shipments against a long-term agreement with a major customer for
fabricated products.
Other income amounted to $706,000 in 1997 compared to $491,000 in 1996 and
results principally from interest income earned on the investment of funds. The
increase in 1997 was the result of increased investments in short-term
securities.
Cost of products sold in 1997, as a percentage of net sales, was 75.2%, compared
to 74.8% in 1996. The increase in 1997 cost of products sold as a percentage of
net sales was principally the result of product mix and the increased material
and labor intensive production of product at Patterson Pump Company.
Selling, general and administrative expense was 15.0% of net sales in 1997,
compared to 15.4% in 1996. The reduction in 1997 selling, general and
administrative expense as a percent to net sales principally resulted from
increased sales volume and the reduction in expenses incurred in 1996 and 1995
associated with the design and implementation of upgraded information management
systems.
The effective income tax rate was 37.4% in 1997, compared to 36.6% in 1996. (See
Note D to the financial statements.)
Net income in 1997 increased 6.9% to a record $10.6 million from $9.9 million in
1996. Net income as a percent of net sales was 6.4% in 1997 and 1996. Earnings
per share increased 8 cents to a record $1.23 compared to $1.15 in 1996.
1996 Compared to 1995
1996 was the tenth consecutive year the Company achieved record sales and
income. Sales amounted to $155.2 million in 1996, compared to $149.5 million in
1995, an increase of 3.8%. The increase was principally the result of overall
increases in the prices of products sold and product mix. In mid-year, the
Mansfield Division completed a government contract which began in 1995 and the
reduction in sales was more than offset in the second half of 1996 by commercial
business. Also, Patterson Pump Company began shipping product the second half of
1996 under a restructured agreement with a major customer which schedules
shipments annually through 1999.
Other income in 1996 was $491,000 compared to $1,304,000 in 1995. In 1996 other
income was principally the result of interest earned on short-term investments
compared to 1995 which also included income from leased facilities and gains on
the sale of assets.
Cost of products sold as a percentage of net sales was 74.8% in 1996, compared
to 75.6% in 1995. The reduction in cost of products sold was principally the
result of changes in product mix, efficiencies in manufacturing realized from
investment in state-of-the-art technology and machinery and equipment, and
increases in the utilization of manufacturing facilities. These manufacturing
efficiencies continue to help offset increases in manufacturing cost.
16
<PAGE> 8
Selling, general and administrative expense was 15.4% of net sales in 1996,
compared to 15.2% in 1995. The increase of $1,186,000 in 1996 was principally
the result of increases in employee related expenses and benefits and
advertising expenses related to a construction exposition held every three years
and, to a lesser extent, implementation expenses through mid-year associated
with the upgraded information management system implemented in May of 1996.
The effective income tax rate was 36.6% in 1996, compared to 37.1% in 1995. (See
Note D to the financial statements.)
Record net income in 1996 was $9,928,000, compared to $9,461,000 in 1995, an
increase of $467,000 or 4.9%. Net income as a percent of net sales in 1996 was
6.4%, compared to 6.3% in 1995. Record earnings per share of $1.15 in 1996 was
an increase of $.05 from earnings per share of $1.10 in 1995.
Liquidity and Sources of Capital
Cash and cash equivalents and short-term investments totalled $7.7 million as of
December 31, 1997. In addition, the Company has $7.3 million in bank short-term
lines of credit, all of which are unused.
The Company also maintains an unsecured revolving credit facility, expiring in
1999, which provides for maximum borrowings of $10.0 million, $2.0 million of
which is available. As of December, 31, 1997, $6.7 million had been borrowed and
$1.3 million covered outstanding letters of credit. Although the facility
contains restrictive covenants which limit additional borrowings and require
maintenance of certain operating and financial ratios, the Company significantly
exceeds the requirements.
During 1997, the Company financed its capital improvements and working capital
requirements through internally generated funds and line of credit arrangements
with banks. Capital expenditures for 1998, estimated to be $8.0 to $9.0 million,
are expected to be financed through internally generated funds and existing
credit arrangements.
The ratio of current assets to current liabilities was 4.8 to 1 at December 31,
1997, compared to 4.7 to 1 at December 31, 1996. Management believes that it has
adequate working capital and a healthy liquidity position.
Impact of Year 2000
New management information systems installed over the years through 1996 have
upgraded software functionality. Costs of the new systems were capitalized;
certain implementation costs were expensed. Management believes that with the
new systems in place, and following the upgrades to those systems scheduled in
1998, the year 2000 issue will not pose significant computer system operational
problems. The costs of these upgrades, which will be expensed, and any other
year 2000 costs are not expected to be material.
Management continues to assess the extent of necessary modifications to its
operating activities and vendor and customer readiness and, to date, no
significant issues have been identified.
17
<PAGE> 9
The Gorman-Rupp Company and Subsidiaries
Ten Year Summary Of Selected Financial Data
<TABLE>
<CAPTION>
(Thousands of dollars, except per share amounts)
1997 1996 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating Results:
Net sales $164,862 $155,187 $149,489 $137,508
Gross profit 40,964 39,127 36,516 35,763
Income taxes 6,340 5,735 5,590 5,625
Income (1) 10,612 9,928 9,461 9,327
Return on net sales (%) 6.4 6.4 6.3 6.8
Sales dollars per employee 161.0 159.3 153.8 138.5
Financial Position:
Current assets $ 81,695 $ 71,926 $ 71,401 $ 60,070
Current liabilities 17,036 15,199 19,727 16,391
Working capital 64,659 56,727 51,674 43,679
Current ratio 4.8 4.7 3.6 3.7
Property, plant and
equipment - net 40,919 40,549 42,163 40,879
Capital additions 6,329 4,036 8,229 8,553
Total assets 127,865 117,650 119,816 107,100
Shareholders' equity 78,060 72,737 67,240 61,608
Dividends paid 4,821 4,567 4,466 4,209
Average number of employees 1,024 974 972 993
Shareholder Information:
Basic and diluted earnings per share (1) $1.23 $1.15 $1.10 $1.09
Cash dividends per share .56 .53 .52 .49
Shareholders' equity per share at December 31, 9.07 8.44 7.81 7.18
Average number of shares outstanding 8,609,479 8,617,168 8,587,466 8,579,633
</TABLE>
(1) Income in 1992 is before the cumulative effect of a change in accounting
principle which reduced income by $11,886,000 or $1.38 per share.
*Includes the acquisition of Patterson Pump Company in November 1988.
- --------------------------------------------------------------------------------
Summary of Quarterly Results of Operations
The following is a summary of unaudited quarterly results of operations for the
years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
(Thousands of dollars, except per share amounts)
Quarter Ended 1997 Mar. 31 June 30 Sept. 30 Dec. 31 Total
------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net sales............................................. $40,530 $40,163 $42,278 $41,891 $164,862
Gross profit.......................................... 9,907 10,572 10,775 9,710 40,964
Net income............................................ 2,736 2,812 3,008 2,056 10,612
Basic and diluted earnings per share.................. .32 .32 .35 .24 1.23
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended 1996 Mar. 31 June 30 Sept. 30 Dec. 31 Total
------- ------- -------- ------- -----
<S> <C> <C> <C> <C> <C>
Net sales............................................. $38,006 $36,251 $39,625 $41,305 $155,187
Gross profit.......................................... 8,897 8,918 10,136 11,176 39,127
Net income............................................ 1,974 1,821 2,911 3,222 9,928
Basic and diluted earnings per share.................. .23 .21 .34 .37 1.15
</TABLE>
18
<PAGE> 10
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988*
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$131,535 $126,019 $123,442 $119,715 $114,253 $ 82,750
32,699 30,975 29,872 28,602 27,663 22,308
5,063 4,693 4,664 4,888 4,638 4,221
8,795 7,966 7,689 7,342 6,771 6,618
6.7 6.3 6.2 6.1 5.9 8.0
133.9 125.6 120.0 120.7 118.6 106.9
$ 55,746 $ 50,152 $ 53,642 $ 50,531 $ 48,793 $ 44,118
14,382 12,380 14,471 14,805 15,871 14,789
41,364 37,772 39,171 35,726 32,922 29,329
3.9 4.1 3.7 3.4 3.1 3.0
36,835 30,807 30,838 26,134 24,479 22,795
10,277 4,496 8,224 4,962 4,844 2,873
98,706 86,434 85,131 77,643 74,560 68,695
56,911 52,759 61,256 57,310 53,711 50,476
4,122 3,923 3,820 3,743 3,667 3,399
982 1,003 1,029 992 963 774
$ 1.02 $ .92 $ .89 $ .85 $ .79 $ .76
.48 .46 .45 .44 .43 .39
6.63 6.14 7.13 6.67 6.25 5.83
8,588,493 8,594,255 8,594,255 8,594,255 8,594,255 8,655,119
</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, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1997, appearing on pages 10
through 15. 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, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Cleveland, Ohio
January 30, 1998
19
<PAGE> 11
Shareholder Information
Ranges of Stock Prices
The high and low sales price and dividends per share for Common Shares traded on
the American Stock Exchange were:
<TABLE>
<CAPTION>
Sales Price of Common Shares Dividends Per Share
1997 1996 1997 1996
--------------------- -------------------- ----- ------
Quarter High Low High Low
<S> <C> <C> <C> <C> <C> <C>
First............................ $16.6250 $13.3750 $16.3750 $14.1250 $.14 $.13
Second........................... 18.8750 14.8750 15.3750 12.0000 .14 .13
Third............................ 19.8750 17.3750 14.2500 12.2500 .14 .13
Fourth........................... 22.2500 17.8125 14.8750 12.8750 .14 .14
</TABLE>
- --------------------------------------------------------------------------------
Shareholder information reported by Transfer Agent and Registrar, National City
Bank, February 13, 1998.
<TABLE>
<CAPTION>
Holders Shares
------- ---------
<S> <C> <C>
Individuals............................................. 1,206 2,487,276
Nominees, Brokers and Others............................ 27 6,128,240
----- ---------
Total 1,233 8,615,516
===== =========
</TABLE>
An additional 249,660 Common Shares are held in Treasury.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Principal Office Dividend Reinvestment Plan SEC Form 10-K
The Gorman-Rupp Company
305 Bowman Street A common stock dividend The SEC Annual Report Form 10-K
Mansfield, Ohio 44903-1600 reinvestment plan is available is available free of charge by
to Gorman-Rupp shareholders written request to:
through National City Bank,
Mailing Address Cleveland, Ohio. Shareholders Robert E. Kirkendall
interested in reinvesting their Corporate Secretary
The Gorman-Rupp Company Gorman-Rupp cash dividends in
P. O. Box 1217 additional common shares should The Gorman-Rupp Company
Mansfield, Ohio 44901-1217 write to the Company, Attention: P. O. Box 1217
Phone 419-755-1011 Corporate Secretary, for a copy Mansfield, Ohio 44901-1217
Fax 419-755-1233 of the reinvestment brochure.
Phone 419-755-1294
Fax 419-755-1233
World Wide Web address:
www.gormanrupp.com
Direct Dividend Deposit
Additional Information:
Exchange Listing Gorman-Rupp offers direct James C. Gorman
dividend deposit, which Chairman
American Stock Exchange automatically deposits your 419-755-1223
Symbol GRC dividend check into your
checking or savings account.
Your dividend is available to
Incorporated you on payment date so you may John A. Walter
start earning interest earlier. President and
April 18, 1934, under the laws And, your money is deposited Chief Executive Officer
of the State of Ohio even if you're away. 419-755-1312
For additional information, call Jeffrey S. Gorman
a customer service Senior Vice President
representative at National City 419-755-1353
Bank.
Transfer Agent and Registrar
National City Bank 800-622-6757 Kenneth E. Dudley
P. O. Box 92301 Treasurer
Cleveland, Ohio 44193-0900 419-755-1235
Annual Meeting
800-622-6757
The annual meeting of the Robert E. Kirkendall
shareholders of The Gorman-Rupp Corporate Secretary and
Company will be held at the Assistant Treasurer
Company's Training Center, 270 419-755-1294
West Sixth Street, Mansfield,
Ohio, on Thursday, April 16,
1998 at 10:00 a.m., Eastern
Daylight Time.
</TABLE>
22
<PAGE> 12
THE GORMAN-RUPP COMPANY THE GORMAN-RUPP
305 Bowman Street INTERNATIONAL COMPANY*
P.O. Box 1217 305 Bowman Street
Mansfield, OH 44901-1217 P.O. Box 1217
Phone 419-755-1011 Mansfield, OH 44901-1217
FAX 419-755-1233 Phone 419-755-1011
FAX 419-755-1266
World Wide Web address:
www.gormanrupp.com
GORMAN-RUPP IPT PUMPS DIVISION
INDUSTRIES DIVISION P.O. Box 2818
180 Hines Avenue Mansfield, OH 44906
Bellville, OH 44813 Phone 419-755-1490
Phone 419-886-3001 FAX 419-755-1495
FAX 419-886-2338
GORMAN-RUPP OF CANADA LTD.* PATTERSON PUMP COMPANY*
70 Burwell Road U.S. Highway 123 South
St. Thomas, Ontario N5P 3R7 P.O. Box 790
Phone 519-631-2870 Toccoa, GA 30577
FAX 519-631-4624 Phone 706-886-2101
FAX 706-886-0023
RAMPARTS DIVISION
15601 West 19th Place
P.O. Box 697
Sand Springs, OK 74063
Phone 918-245-9555
FAX 918-245-8014
* Subsidiary Companies - 100% owned
SAFE HARBOR STATEMENT
This Annual Report contains various forward-looking statements and includes
assumptions concerning The Gorman-Rupp Company's operations, future results and
prospects. These forward-looking statements are based on current expectations
and are subject to risk and uncertainties. In connection with the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, The
Gorman-Rupp Company provides the following cautionary statement identifying
important economic, political and technological factors, among others, the
absence of which could cause the actual results or events to differ materially
from those set forth in or implied by the forward-looking statements and related
assumptions.
Such factors include the following: (1) continuation of the current and
projected future business environment, including interest rates and capital and
consumer spending; (2) competitive factors and competitor responses to
Gorman-Rupp initiatives; (3) successful development and market introductions of
anticipated new products; (4) stability of government laws and regulations,
including taxes; (5) stable governments and business conditions in emerging
economies; (6) successful penetration of emerging economies; (7) continuation of
the favorable environment to make acquisitions, domestic and foreign, including
regulatory requirements and market values of candidates; (8) successful
identification and conversion of computer systems to address the year 2000
issue by the Company, suppliers and vendors.
23
<PAGE> 1
EXHIBIT (18)
January 30, 1998
Board of Directors and Shareholders
The Gorman-Rupp Company
305 Bowman Street
Mansfield, Ohio 44903
Dear Sirs:
Note B of Notes to the Consolidated Financial Statements of The Gorman-Rupp
Company and Subsidiaries (the "Company") incorporated by reference in its Annual
Report on Form 10-K for the year ended December 31, 1997 describes a change in
the method of accounting for inventories at the Company's Patterson Pump Company
subsidiary and IPT Division. The Company has changed from the first-in first-out
to the last-in first-out ("LIFO") method of accounting for inventories. You have
advised us that you believe that the change is to a preferable method in your
circumstances because:
1) The LIFO method will provide for a better matching of current
production costs with current revenues as the most recently
incurred costs will be expensed as inventory is sold.
2) Adoption of LIFO at Patterson Pump and IPT will improve consistency
among the domestic operations of Gorman-Rupp as all U.S. operations
will then be using the LIFO method.
There are no authoritative criteria for determining a preferable inventory
cost-flow method based on the particular circumstances; however, we conclude
that the change in the method of accounting for inventories at Patterson Pump
and IPT is to an acceptable alternative method which, based on your business
judgment to make this change for the reasons cited above, is preferable in your
circumstances.
Very truly yours,
/s/ Ernst & Young LLP
28
<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.
29
<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 January 30, 1998, included in
the 1997 Annual Report to Shareholders of The Gorman-Rupp Company.
We also consent to the incorporation by reference in the Registration Statement
and in the related Prospectus (Form S-8 No. 333-32973) pertaining to the
Employee Stock Purchase Plan of The Gorman-Rupp Company, in the Registration
Statement and in the related Prospectus (Form S-8 No. 333-03395) pertaining to
the Individual Profit Sharing Retirement Plan of The Gorman-Rupp Company, in the
Registration Statement and in the related Prospectus (Form S-8 No. 333-30159)
pertaining to the Non-Employee Directors Compensation Plan of The Gorman-Rupp
Company, in the Registration Statement and in the related Prospectus (Form S-3
No. 333-37503) pertaining to Treasury shares, and in the Registration Statement
and in the related Prospectus (Form S-3 No. 333-45671) pertaining to the J.C.
Gorman Trust shares of our report dated January 30, 1998, 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,
1997.
/s/ Ernst & Young LLP
Cleveland, Ohio
March 27, 1998
30
<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
January 23, 1997 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 1997 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 John A. Walter, 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 1997 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 27th
day of March, 1998.
/s/ ROBERT E. KIRKENDALL
------------------------------
Robert E. Kirkendall
Corporate Secretary
31
<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
John A. Walter, 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 1997 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 27th day of March 1998.
THE GORMAN-RUPP COMPANY
BY: /s/ ROBERT E. KIRKENDALL
-----------------------------
Robert E. Kirkendall
Corporate Secretary
32
<PAGE> 3
EXHIBIT (24)
POWER OF ATTORNEY
The undersigned Officers and Directors of The Gorman-Rupp Company (the
"Company") hereby appoint John A. Walter, 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 1997 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 30th day of January 1998.
/s/ JOHN A. WALTER President, Principal Executive Officer
- ------------------------ and Director
John A. Walter
/s/ KENNETH E. DUDLEY Treasurer and Principal Financial
- ------------------------ and Accounting Officer
Kenneth E. Dudley
/s/ JAMES C. GORMAN Director
- ------------------------
James C. Gorman
/s/ WILLIAM A. CALHOUN Director
- ------------------------
William A. Calhoun
/s/ JEFFREY S. GORMAN Director
- ------------------------
Jeffrey S. Gorman
/s/ THOMAS E. HOAGLIN Director
- ------------------------
Thomas E. Hoaglin
/s/ PETER B. LAKE Director
- ------------------------
Peter B. Lake
/s/ JAMES R. WATSON Director
- ------------------------
James R. Watson
33
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ARTICLE 5
FDS FOR 1997 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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<NAME> GORMAN-RUPP
<MULTIPLIER> 1,000
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<S> <C>
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<PERIOD-END> DEC-31-1997
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