<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For nine months ended September 30, 1999 Commission File Number 1-6747
------------------ ------
The Gorman-Rupp Company
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(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, 1999 -----
common, without par value, 8,592,049
Page 1 of 8 pages
<PAGE> 2
PART I - FINANCIAL INFORMATION
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
---------- ---------- ---------- ----------
INCOME
<S> <C> <C> <C> <C>
Net sales $ 46,898 $ 44,535 $ 135,200 $ 130,773
Other income 168 177 626 656
---------- ---------- ---------- ----------
TOTAL INCOME 47,066 44,712 135,826 131,429
DEDUCTIONS FROM INCOME
Cost of products sold 33,829 32,495 99,334 96,563
Selling, general and
administrative expenses 6,647 6,643 19,747 19,112
---------- ---------- ---------- ----------
TOTAL DEDUCTIONS 40,476 39,138 119,081 115,675
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 6,590 5,574 16,745 15,754
Income taxes 2,687 2,190 6,600 6,092
---------- ---------- ---------- ----------
NET INCOME $ 3,903 $ 3,384 $ 10,145 $ 9,662
========== ========== ========== ==========
Basic And Diluted
Earnings Per Share $ 0.45 $ 0.39 $ 1.18 $ 1.12
Dividends Paid Per Share $ 0.15 $ 0.15 $ 0.45 $ 0.43
Average Shares Outstanding 8,591,790 8,582,940 8,583,797 8,608,676
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands of dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES: -------- --------
<S> <C> <C>
Net income $ 10,145 $ 9,662
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 5,086 4,714
Deferred income taxes 12 (1,022)
Changes in operating assets and liabilities (1,650) 7,676
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital additions, net (9,172) (5,314)
Change in short-term investments (845) (3,809)
Other (173) (419)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends (3,864) (3,697)
Change in treasury shares 124 (876)
Borrowings from (Repayments to) bank 1,197 (4,692)
NET INCREASE IN CASH -------- --------
AND CASH EQUIVALENTS 860 2,223
CASH AND CASH EQUIVALENTS:
Beginning of year 2,359 836
-------- --------
September 30 $ 3,219 $ 3,059
======== ========
</TABLE>
2
<PAGE> 3
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Thousands of dollars)
<TABLE>
<CAPTION>
September 30 December 31
1999 1998
ASSETS ------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,219 $ 2,359
Short-term investments 7,152 6,306
Accounts receivable 31,984 26,282
Inventories 37,019 38,323
Other current assets and deferred income taxes 5,991 5,286
------------ ------------
TOTAL CURRENT ASSETS 85,365 78,556
OTHER ASSETS 805 632
DEFERRED INCOME TAXES 4,361 4,373
PROPERTY, PLANT AND EQUIPMENT 100,741 93,363
Less allowances for depreciation 52,741 49,447
------------ ------------
PROPERTY, PLANT AND EQUIPMENT - NET 48,000 43,916
------------ ------------
TOTAL ASSETS $ 138,531 $ 127,477
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,932 $ 8,666
Payrolls and related liabilities 3,181 2,925
Accrued expenses 9,308 5,297
Income taxes 914 543
------------ ------------
TOTAL CURRENT LIABILITIES 21,335 17,431
LONG TERM DEBT 1,980 783
POSTRETIREMENT BENEFITS 24,744 25,557
SHAREHOLDERS' EQUITY
Common shares, without par value
at stated capital amount 5,123 5,116
Retained earnings 86,739 80,314
Accumulated comprehensive income (1,390) (1,724)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 90,472 83,706
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 138,531 $ 127,477
============ ============
Common shares - authorized 14,000,000 14,000,000
* Common shares - outstanding 8,592,049 8,581,236
Common shares - treasury 273,127 283,940
* After deducting treasury shares
</TABLE>
3
<PAGE> 4
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
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, 1999 are not necessarily
indicative of results that may be expected for the year ending December 31,
1999. 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, 1998.
NOTE B - INVENTORIES
The major components of inventories are as follows:
(Thousands of dollars) September 30 December 31
1999 1998
------- -------
Raw materials and in-process $20,609 $21,335
Finished parts 13,154 13,617
Finished products 3,256 3,371
------- -------
Inventories $37,019 $38,323
======= =======
NOTE C - COMPREHENSIVE INCOME
During the three months ended September 30 of 1999 and 1998, total comprehensive
income amounted to $3,923,000 and $3,072,000. During the nine months ended
September 30 of 1999 and 1998, total comprehensive income amounted to
$10,479,000 and $9,158,000.
4
<PAGE> 5
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Third Quarter 1999 vs Third Quarter 1998
- ----------------------------------------
Net sales were $46,898,000 in 1999 compared to $44,535,000 in 1998, an increase
of 5.3%. Most of the increase was due to increased sales at Patterson Pump
Company and Gorman-Rupp Industries Division. Patterson Pump Company continues to
experience good sales of its product, and Gorman-Rupp Industries Division
experienced stronger sales in the OEM market.
Other income was $168,000 in 1999 compared to $177,000 in 1998. This decrease
was primarily due to lower interest income.
Cost of products sold in 1999 was $33,829,000 compared to $32,495,000 in 1998.
The largest factors in the increase were higher material costs that were
incurred to support increased sales. As a percentage of net sales, cost of
products sold was 72.1% in 1999 compared to 73.0% in 1998. Some change in
product mix resulted in the lower gross margin percentage in 1999.
Selling, general and administrative expenses increased from $6,643,000 in 1998
to $6,647,000 in 1999 with increases in advertising costs being offset by a
decrease in bad debt expense.
Income before income taxes was $6,590,000 in 1999 compared to $5,574,000 in
1998, an increase of $1,016,000. Income tax expense increased from $2,190,000 in
1998 to $2,687,000 in 1999, primarily as a result of the increase in profit. The
effective tax rate was 40.8% in 1999 compared to 39.3% in 1998.
Net income in 1999 of $3,903,000 increased $519,000 from $3,384,000 in 1998. As
a percent of net sales, net income was 8.3% in 1999 and 7.6% in 1998. Net income
per share was $.45 in 1999, an increase of $.06 from the $.39 in 1998.
5
<PAGE> 6
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Nine Months 1999 vs Nine Months 1998
- ------------------------------------
Net sales were $135,200,000 in 1999, an increase of $4,427,00 or 3.4% over the
$130,773,000 in 1998. Most of the increase was due to increased sales at
Patterson Pump Company and Gorman-Rupp Industries Division. Patterson Pump
Company has continued to experience good sales of its product, and Gorman-Rupp
Industries Division has experienced stronger sales in the OEM market.
Other income was $626,000 in 1999 compared to $656,000 in 1998. This decrease
was primarily due to lower interest income.
Cost of products sold in 1999 was $99,334,000 compared to $96,563,000 in 1998.
The largest factors in the increase were higher material costs that were
incurred to support increased sales. As a percentage of net sales, cost of
products sold was 73.5% in 1999 compared to 73.8% in 1998. Some change in
product mix resulted in the lower gross margin percentage in 1999.
Selling, general and administrative expenses increased from $19,112,000 in 1998
to $19,747,000 in 1999 with an increase in advertising expense being the largest
reason for the increase.
Income before income taxes was $16,745,000 in 1999 compared to $15,754,000 in
1998, an increase of $991,000. Income tax expense increased from $6,092,000 in
1998 to $6,600,000 in 1999, primarily as a result of the increase in profit. The
effective income tax rate was 39.4% in 1999 compared to 38.7% in 1998.
Net income of $10,145,000 in 1999 increased $483,000 from $9,662,000 in 1998. As
a percent of net sales, net income was 7.5% in 1999 and 7.4% in 1998. Net income
per share was $1.18 in 1999, an increase of $.06 from $1.12 in 1998.
FINANCIAL CONDITION
- -------------------
The Company continues to finance most of its capital expenditures and working
capital requirements through internally generated funds and bank financing. An
additional credit facility for $20,000,000 to finance the construction of the
first phase of the Company's new manufacturing complex is in place. The ratio of
current assents to current liabilities was 4.0 to 1 at September 30, 1999 and
4.5 to 1 at December 31, 1998.
The Company presently has adequate working capital, adequate borrowing capacity
and a healthy liquidity position.
6
<PAGE> 7
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Impact of Year 2000
- -------------------
The Year 2000 issue, as widely reported, could cause malfunctions in certain
computer-related applications with respect to dates on or after January 1, 2000.
The Company's Year 2000 program provides for assessments of its computer
technology, operating equipment, facilities and suppliers. Assessments,
initiated in 1998, continue to be conducted primarily through internal testing
procedures and inquiry of critical suppliers. Further, individual assessments
regarding significant suppliers of services, product materials and components
continue to be conducted at the Company's various facilities in accordance with
the Company's Year 2000 program.
Management believes the completion in 1998 of additional hardware and software
upgrades to the Company's new management information systems originally
installed in 1996 thave enabled manufacturing, financial and distribution
systems to become Year 2000 compliant. Ancillary computer systems are being
evaluated in accordance with the Company's Year 2000 program to assure their
compliance.
Costs of the new systems were capitalized in 1996; certain implementation costs
were expensed and related software upgrades were substantially provided through
existing acquisition and maintenance agreements. Any other Year 2000 costs have
not been and are not expected to be material.
Management continues to assess the extent of necessary modification to its
operating activities and supplier and customer readiness. To date, no
significant issues have been identified and the Company is not aware of any
unresolved Year 2000 issue which would materially impact the Company's
operations and financial position.
7
<PAGE> 8
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,
1999 - 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 October 27, 1999 Kenneth E. Dudley
----------------------
/S/ Kenneth E. Dudley
--------------------------
(Signature)
Treasurer & Principal
Financial Officer
8
<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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,219
<SECURITIES> 7,152
<RECEIVABLES> 32,772
<ALLOWANCES> 788
<INVENTORY> 37,019
<CURRENT-ASSETS> 85,365
<PP&E> 100,741
<DEPRECIATION> 52,741
<TOTAL-ASSETS> 138,531
<CURRENT-LIABILITIES> 21,335
<BONDS> 0
0
0
<COMMON> 5,123
<OTHER-SE> 85,349
<TOTAL-LIABILITY-AND-EQUITY> 138,531
<SALES> 135,200
<TOTAL-REVENUES> 135,826
<CGS> 99,334
<TOTAL-COSTS> 119,081
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 89
<INTEREST-EXPENSE> 140
<INCOME-PRETAX> 16,745
<INCOME-TAX> 6,600
<INCOME-CONTINUING> 10,145
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,145
<EPS-BASIC> 1.18
<EPS-DILUTED> 1.18
</TABLE>
