<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 six months ended June 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 June 30, 1999 -----
common, without par value, 8,587,821
Page 1 of 8 pages
<PAGE> 2
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 Six Months Ended
June 30 June 30
1999 1998 1999 1998
INCOME ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 45,118 $ 42,535 $ 88,302 $ 86,238
Other income 256 256 458 479
---------- ---------- ---------- ----------
TOTAL INCOME 45,374 42,791 88,760 86,717
DEDUCTIONS FROM INCOME
Cost of products sold 33,615 31,472 65,505 64,068
Selling, general and
administrative expenses 6,282 6,415 13,100 12,469
---------- ---------- ---------- ----------
TOTAL DEDUCTIONS 39,897 37,887 78,605 76,537
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 5,477 4,904 10,155 10,180
Income taxes 2,096 1,877 3,913 3,902
---------- ---------- ---------- ----------
NET INCOME $ 3,381 $ 3,027 $ 6,242 $ 6,278
========== ========== ========== ==========
Basic And Diluted
Earnings Per Share $ 0.40 $ 0.35 $ 0.73 $ 0.73
Dividends Paid Per Share $ 0.15 $ 0.14 $ 0.30 $ 0.28
Average Shares Outstanding 8,579,641 8,628,152 8,579,735 8,621,758
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands of dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 30
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES: ------- -------
<S> <C> <C>
Net income $ 6,242 $ 6,278
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,279 3,112
Changes in operating assets and liabilities (3,815) 6,026
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital additions, net (4,947) (3,475)
Change in short-term investments (1,502) (4,114)
Other (177) (304)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends (2,575) (2,414)
Change in treasury shares 104 499
Borrowings from (Repayments to) bank 2,734 (5,447)
------- -------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (658) 161
CASH AND CASH EQUIVALENTS:
Beginning of year 2,359 836
------- -------
June 30 $ 1,702 $ 997
======= =======
</TABLE>
2
<PAGE> 3
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands of dollars)
<TABLE>
<CAPTION>
June 30 December 31
1999 1998
ASSETS ------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,702 $ 2,359
Short-term investments 7,808 6,306
Accounts receivable 31,540 26,282
Inventories 37,553 38,323
Other current assets and deferred income taxes 5,395 5,286
------------ ------------
TOTAL CURRENT ASSETS 83,998 78,556
OTHER ASSETS 809 632
DEFERRED INCOME TAXES 4,362 4,373
PROPERTY, PLANT AND EQUIPMENT 97,364 93,363
Less allowances for depreciation 51,780 49,447
------------ ------------
PROPERTY, PLANT AND EQUIPMENT - NET 45,584 43,916
------------ ------------
TOTAL ASSETS $ 134,753 $ 127,477
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 6,648 $ 8,666
Payrolls and related liabilities,
accrued expenses 10,864 8,222
Income taxes 1,098 543
------------ ------------
TOTAL CURRENT LIABILITIES 18,610 17,431
LONG TERM DEBT 3,517 783
POSTRETIREMENT BENEFITS 24,882 25,557
SHAREHOLDERS' EQUITY
Common shares, without par value
at stated capital amount 5,120 5,116
Retained earnings 84,034 80,314
Accumulated comprehensive income (1,410) (1,724)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 87,744 83,706
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 134,753 $ 127,477
============ ============
Common shares - authorized 14,000,000 14,000,000
* Common shares - outstanding 8,587,821 8,581,236
Common shares - treasury 277,355 283,940
* After deducting treasury shares
</TABLE>
3
<PAGE> 4
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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 six month period ended June 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:
<TABLE>
<CAPTION>
June 30 December 31
(Thousands of dollars) 1999 1998
------- -------
<S> <C> <C>
Raw materials and in-process $20,906 $21,335
Finished parts 13,343 13,617
Finished products 3,304 3,371
------- -------
Inventories $37,553 $38,323
======= =======
</TABLE>
NOTE C - COMPREHENSIVE INCOME
During the three months ended June 30 of 1999 and 1998, total comprehensive
income amounted to $3,564,000 and $2,780,000. During the six months ended June
30 of 1999 and 1998, total comprehensive income amounted to $6,556,000 and
$6,086,000.
4
<PAGE> 5
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Second Quarter 1999 vs Second Quarter 1998
- ------------------------------------------
Net sales were $45,118,000 in 1999 compared to $42,535,000 in 1998, an increase
of 6.1%. Most of the increase was due to increased sales of fire pumps.
Other income was $256,000 in 1999 and 1998.
Cost of products sold in 1999 was $33,615,000 compared to $31,472,000 in 1998.
The largest factor in the increase was material needed to support the increased
sales. Increased medical plan expenses was the next largest single item. As a
percentage of net sales, cost of products sold was 74.5% in 1999 compared to
74.0% in 1998. Some change in product mix resulted in the higher percentage in
1999.
Selling, general and administrative expenses decreased from $6,415,000 in 1998
to $6,282,000 in 1999 with a decrease in bad debt expense being the largest
reason for the decrease.
Income before income taxes was $5,477,000 in 1999 compared to $4,904,000 in
1998, an increase of $573,000. Income tax expense increased from $1,877,000 in
1998 to $2,096,000 in 1999, primarily as a result of the increase in profit. The
effective tax rate was 38.3% in 1999 compared to 38.3% in 1998.
Net income in 1999 of $3,381,000 increased $354,000 from $3,027,000 in 1998, an
increase of 11.7%. As a percent of net sales, net income was 7.5 % in 1999 and
7.1% in 1998. Net income per share was $.40 in 1999, an increase of $.05 from
the $.35 in 1998.
5
<PAGE> 6
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
Six Months 1999 vs Six Months 1998
- ----------------------------------
Net sales were $88,302,000 in 1999, an increase of $2,064,000 or 2.4% over the
$86,238,000 in 1998. Most of the increase was due to increased sales of fire
pumps.
Other income was $458,000 in 1999 compared to $479,000 in 1998. This decrease
was due primarily to a decrease in interest income.
Cost of products sold in 1999 was $65,505,000 compared to $64,068,000 in 1998.
The largest factor in the increase was material needed to support the increased
sales. An increase in medical plan expenses was the next largest single item. As
a percentage of net sales, cost of products sold was 74.2% in 1999 compared to
74.3% in 1998. Some change in product mix resulted in the lower percentage in
1999.
Selling, general and administrative expenses increased from $12,469,000 in 1998
to $13,100,000 in 1999 principally due to an increase in advertising expenses
associated with trade shows. More shows, including ConExpo, were held in 1999
than 1998. ConExpo is the largest trade show related to the construction
industry in the U.S. and is held every three years.
Income before income taxes was $10,155,000 in 1999, lower than the $10,180,000
in 1998, a decrease of $25,000. Income tax expense increased from $3,902,000 in
1998 to $3,913,000 in 1999. The effective income tax rate was 38.5% in 1999
compared to 38.3% in 1998.
Net income of $6,242,000 in 1999 was down $36,000 from $6,278,000 in 1998, a
decrease of 0.6%. As a percent of net sales, net income was 7.1 % in 1999 and
7.3% in 1998. Net income per share was $.73 in 1999, the same as the $.73 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 assets to current liabilities was 4.5 to 1 at June 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
PART I - FINANCIAL INFORMATION
THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
ITEM 2 - 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 assesments 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 have 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 acquistion 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 modifications 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 June 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 July 20, 1999 Kenneth E. Dudley
----------------------
/S/ Kenneth E. Dudley
------------------------------
(Signature)
Treasurer & Principal
Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000042682
<NAME> N/A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,702
<SECURITIES> 7,808
<RECEIVABLES> 32,246
<ALLOWANCES> 706
<INVENTORY> 37,553
<CURRENT-ASSETS> 83,998
<PP&E> 97,364
<DEPRECIATION> 51,780
<TOTAL-ASSETS> 134,753
<CURRENT-LIABILITIES> 18,610
<BONDS> 0
0
0
<COMMON> 5,120
<OTHER-SE> 82,624
<TOTAL-LIABILITY-AND-EQUITY> 134,753
<SALES> 88,302
<TOTAL-REVENUES> 88,760
<CGS> 65,505
<TOTAL-COSTS> 78,605
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6
<INTEREST-EXPENSE> 91
<INCOME-PRETAX> 10,155
<INCOME-TAX> 3,913
<INCOME-CONTINUING> 6,242
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,242
<EPS-BASIC> .73
<EPS-DILUTED> .73
</TABLE>
