<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, 1999 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 17, 2000. $68,193,374
-----------
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of March 17, 2000.
Common Shares, without par value--8,592,049
-------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1999 Annual Report to Shareholders incorporated by reference
into Part II (Items 5-8).
Portions of Notice of 2000 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 water,
wastewater, construction, industrial, petroleum, original equipment,
agricultural, fire protection, 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 related fluid control equipment.) The following table sets forth,
for the years 1997 through 1999, the total net sales, income before income taxes
and identifiable assets ($000 omitted) of the Company.
1999 1998 1997
---- ---- ----
Net Sales $179,284 $171,245 $164,862
Income Before Income Taxes 21,541 19,152 16,952
Identifiable Assets 136,875 127,477 127,865
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 boosting low residential water
pressure; 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.
The Company is scheduled to complete the purchase of selective assets of the
Fluid Products Division of Xolox Corporation in February 2000. The pump and
flowmeter line to be acquired will complement products manufactured by the
Company's Industries Division.
2
<PAGE> 3
PART I--CONTINUED
ITEM 1. BUSINESS--CONTINUED
In 1998 the Company launched a line of new pump stations, known as Booster
Pumps. These packaged systems consist of pressure booster stations designed for
water tower applications and for boosting low residential water pressure in the
municipal and commercial fresh water markets. The manufacture of Booster Pumps
are a result of the combined effort of the Company's Mansfield Division,
historically a leader in the packaged sewage pump market, and Patterson Pump
Company (the Company's wholly owned subsidiary), a current leading producer of
fire pumps for building and industry.
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,
wastewater and fire pump markets, extending the capacity range of the product
line.
Gorman-Rupp continues 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 1999 there were no shipments to any
single customer greater than 10% of total net sales.
In recent years, Gorman-Rupp has actively pursued international business
opportunities. In 1996 the Company established offices in Thailand and Greece to
improve access to Asian Pacific, Mid-East and European markets. In 1998
Patterson Pump Company's majority-owned subsidiary, Patterson Pump Ireland
Limited, started assembly of pumps in Ireland to further serve the European
market. In 1998 the Company also organized a Foreign Sales Corporation to
further enhance its exporting activities. In 1999 the Mansfield Division opened
a warehouse in Grindstead, Denmark to further enhance marketing opportunities
in Europe and the Middle East. Approximately 17% of all 1999 sales were made to
customers outside the United States (as compared to 16% in 1998 and 15% in
1997). The Company continues to penetrate international markets principally by
its aggressive response to worldwide pump needs.
3
<PAGE> 4
PART I--CONTINUED
ITEM 1. BUSINESS--CONTINUED
COMPETITION
Consolidations of pump companies have occurred within the highly competitive
pump business. Two large independent pump manufacturing companies combined with
other companies in 1997. Gorman-Rupp estimates that 80 other companies selling
pumps and pump units 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), 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 alternative vendors and motor components for
its large submersible pumps from a limited number of suppliers. Small motor
requirements are also currently sourced from alternative 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, 1999, the Company employed approximately 1,015 persons, of
whom approximately 600 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, 1999, the value of the Company's backlog of unfilled orders
was approximately $59,626,000, of which $40,378,000 was for the unfilled orders
of Patterson Pump Company. All of the backlog at December 31, 1999 is scheduled
to be shipped during 2000. At December 31, 1998,
4
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PART I--CONTINUED
ITEM I. BUSINESS--CONTINUED
the value of the backlog of unfilled orders was approximately $48,228,000.
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; Toccoa, Georgia; and County Westmeath, Ireland. All of the foregoing
properties, except the leased facility in Ireland, are owned in fee without any
material encumbrance. The Company owns in fee an approximately 26,000 square
foot facility in Sparks, Nevada comprising a training center and warehouse. In
addition, the Company leases an approximately 2,500 square foot facility in
Grindstead, Denmark to house pumps and pump parts.
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. In 1998 design work and site
preparation began on the new consolidated facilities project. In 1999
construction began on the first phase consisting of a 360,000 square foot
manufacturing and warehousing plant. Completion of the first phase is expected
in May 2000 at which time the IPT Division and machining, weld and fabrication
operations of the Mansfield Division are scheduled to move into the new
facility. The Company plans to sell the facilities currently occupied by the
machining operations and storage of raw materials. No plans or schedule have
been determined for the completion of the multi-phased, approximately one
million square foot consolidated facilities project.
The remainder of the Company's Ohio operations is conducted at a plant in
Bellville, which comprises approximately 93,200 square feet of floor space
situated on an 8.5 acre site. The initial portion of this plant was built in
1953 and has been expanded on several occasions, most recently in
5
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PART I--CONTINUED
ITEM 2. PROPERTIES--CONTINUED
1973-74. In 1999 the Company sold a smaller facility which contained
approximately 14,300 square feet of floor space.
The plant in St. Thomas, Ontario has undergone a number of expansions since it
was established in 1960. In 1998, a 3,000 square foot expansion of the office
and training facilities was completed. This facility contains about 52,600
square feet of floor space and is situated on an 11 acre site.
The Oklahoma facility, located on 4.5 acres of land, was purchased in 1977.
Manufacturing and warehousing facilities are located in a 26,700 square foot
building, originally built in 1973 and expanded four times between 1978 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 Patterson completed a 64,000
square foot addition to the manufacturing plant, including a modern 400,000
gallon testing facility. A 28,000 square foot office addition was completed in
1993. Upon occupancy of the new building in 1993, the pre-existing office space
of 15,200 square feet was razed for additional parking space. In late 1999
construction began on a 5,850 square foot addition to the manufacturing plant.
This current expansion is scheduled for completion in the first quarter of 2000.
The manufacturing facilities occupied by Patterson Pump Ireland Limited in
County Westmeath, Ireland consist of 4,500 square feet of leased manufacturing
space. Office space is shared with another occupant in the building.
The Company considers its plants, machinery and equipment to be well maintained,
in good operating condition and adequate for the present uses and business
requirements of the Company.
ITEM 3. LEGAL PROCEEDINGS
Gorman-Rupp is not currently engaged in any litigation which in the opinion of
the Company is material to its operations or assets.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this Form 10-K, no
matter was submitted to a vote of the Company's shareholders, through the
solicitation of proxies or otherwise.
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6
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PART I --CONTINUED
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3), the information regarding executive
officers called for by Item 401 of Regulation S-K and by Item 10 of this Form
10-K is set forth below.
Date
Elected to
Name Age Office Position
- ---- --- ------ ----------
James C. Gorman 75 Chairman 1989
Jeffrey S. Gorman 47 President and Chief Executive Officer;
General Manager, Mansfield Division 1998/1989
Kenneth E. Dudley 62 Chief Financial Officer and Treasurer 1999/1982
Robert E. Kirkendall 57 Vice President Corporate Development
and Corporate Secretary 1999/1990
William D. Danuloff 52 Vice President Information Services 1991
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. (He has served as a Director of the Company continuously
since 1946.) Mr. J. S. Gorman was elected President and Chief Executive Officer
effective May 1, 1998, after having served as Senior Vice President since 1996.
Mr. J. S. Gorman has held the position of General Manager of the Mansfield
Division since 1989. He served as Assistant General Manager from 1986 to 1988;
and he held the office of Corporate Secretary from 1982 to 1990. (He has served
as a Director of the Company continuously since 1989.) Mr. Dudley has held the
position of Treasurer since 1982. Mr. Kirkendall was elected as Corporate
Secretary in 1990 and also served as Assistant Treasurer from 1982 to 1999. 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.
(However, Mr. Christopher H. Lake, a Director nominee, is the son of Dr. Peter
B. Lake, a Director of the Company.)
7
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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 34 in the Company's 1999 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 30 and 31 in the Company's 1999 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 28 and 29, and to page
35, in the Company's 1999 Annual Report to Shareholders, which are incorporated
herein by this reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Attention is directed to the section "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 28 and 29, and to page
35, in the Company's 1999 Annual Report to Shareholders, which are incorporated
herein by this reference. The Company has no material market risk exposures
required to be reported by Item 305 of Regulation S-K.
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 22-27, and
31, and to the section "Summary of Quarterly Results of Operations" on page 30,
in the Company's 1999 Annual Report to Shareholders, which are incorporated
herein by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has not changed its independent public accountants and there have
been no reportable disagreements with such accountants regarding accounting
principles or practices or financial disclosure matters.
8
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
With respect to Directors, attention is directed to the section "Election of
Directors" in the Company's definitive Notice of 2000 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 2000 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 MANAGEMENT
Attention is directed to the sections "Principal Shareholders", "Election of
Directors" and "Shareholdings by Executive Officers" in the Company's definitive
Notice of 2000 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 footnote 2 in the section "Principal Shareholders" in the
Company's definitive Notice of 2000 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, the Company has no relationships or transactions
required to be reported by Item 404 of Regulation S-K.
9
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report:
1. FINANCIAL STATEMENTS
With respect to the consolidated financial statements of the
Registrant and its subsidiaries, the following documents have been
incorporated by reference into this report:
(i) Consolidated balance sheets--December 31, 1999 and 1998
(ii) Consolidated statements of income--Years ended December 31,
1999, 1998 and 1997
(iii) Consolidated statements of shareholders' equity--Years
ended December 31, 1999, 1998 and 1997
(iv) Consolidated statements of cash flows--Years ended December
31, 1999, 1998 and 1997
(v) Notes to consolidated financial statements
(vi) Report of independent auditors
2. FINANCIAL STATEMENT SCHEDULES
All financial statement schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions or are
inapplicable and, therefore, have been omitted.
3. EXHIBITS
The exhibits listed below are submitted in a separate section of this
report immediately following the Exhibit Index.
(3) (i) Articles of incorporation and (ii) By-laws
(4) Instruments defining the rights of security holders,
including indentures
(10) Material contracts
(13) Annual report to security holders
(21) Subsidiaries of the registrant
(23) 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
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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 24, 2000
11
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
*JEFFREY S. GORMAN President, Principal Executive
- ----------------------- Officer and Director
Jeffrey S. Gorman
*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
*THOMAS E. HOAGLIN Director
- -----------------------
Thomas E. Hoaglin
*PETER B. LAKE Director
- -----------------------
Peter B. Lake
*W. WAYNE WALSTON Director
- -----------------------
W. Wayne Walston
*JOHN A. WALTER Director
- -----------------------
John A. Walter
*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 24, 2000
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, 1999
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 1999 Annual Report
to Shareholders 14
(21) Subsidiaries of the Company 26
(23) Consent of Independent Auditors 27
(24) Powers of Attorney 28
(27) Financial Data Schedule 31
- --------------------------------------------------------------------------------
* 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, 1998.
** Incorporated herein by this reference from Exhibit (10) of the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.
13
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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 1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net sales $ 179,284 $ 171,245 $ 164,862
Other income 881 1,001 706
---------- ---------- ----------
TOTAL INCOME 180,165 172,246 165,568
Deductions from income:
Cost of products sold 132,937 127,532 123,898
Selling, general and administrative expenses 25,687 25,562 24,718
---------- ---------- ----------
158,624 153,094 148,616
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 21,541 19,152 16,952
Income taxes 8,460 7,400 6,340
---------- ---------- ----------
NET INCOME $ 13,081 $ 11,752 $ 10,612
========== ========== ==========
BASIC AND DILUTED EARNINGS PER SHARE $ 1.52 $ 1.37 $ 1.23
========== ========== ==========
Average number of shares outstanding 8,585,877 8,599,713 8,609,479
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY ACCUMULATED
OTHER
COMMON RETAINED COMPREHENSIVE
SHARES EARNINGS INCOME (LOSS) TOTAL
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
BALANCES DECEMBER 31, 1996 $ 5,141 $ 68,502 $ (906) $ 72,737
Comprehensive income:
Net income 10,612 10,612
Foreign currency translation adjustments (312) (312)
--------
Total comprehensive income 10,300
Sale of 11,768 common shares from treasury 8 211 219
Purchase of 20,783 common shares for treasury (14) (361) (375)
Cash dividends - $.56 a share (4,821) (4,821)
---------- ---------- ---------- --------
BALANCES DECEMBER 31, 1997 5,135 74,143 (1,218) 78,060
Comprehensive income:
Net income 11,752 11,752
Foreign currency translation adjustments (506) (506)
--------
Total comprehensive income 11,246
Sale of 59,848 common shares from treasury 39 1,027 1,066
Purchase of 87,980 common shares for treasury (58) (1,625) (1,683)
Cash dividends - $.58 a share (4,983) (4,983)
---------- ---------- ---------- --------
BALANCES DECEMBER 31, 1998 5,116 80,314 (1,724) 83,706
Comprehensive income:
Net income 13,081 13,081
Foreign currency translation adjustments 487 487
--------
Total comprehensive income 13,568
Sale of 35,813 common shares from treasury 23 550 573
Purchase of 25,000 common shares for treasury (16) (384) (400)
Cash dividends - $.60 a share (5,152) (5,152)
---------- ---------- ---------- --------
BALANCES DECEMBER 31, 1999 $ 5,123 $ 88,409 $ (1,237) $ 92,295
========== ========== ========== ========
</TABLE>
22 See notes to consolidated financial statements.
<PAGE> 2
- --------------------------------------------------------------------------------
The Gorman-Rupp Company and Subsidiaries
CONSOLIDATED
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Thousands of dollars) DECEMBER 31,
ASSETS 1999 1998
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,114 $ 2,359
Short-term investments 3,225 6,306
Accounts receivable 27,898 26,282
Inventories 36,189 38,323
Deferred income taxes 5,198 4,214
Other current assets 1,561 1,072
--------- ---------
TOTAL CURRENT ASSETS 78,185 78,556
OTHER ASSETS 715 632
DEFERRED INCOME TAXES 4,366 4,373
PROPERTY,PLANT AND EQUIPMENT
Land 1,594 1,611
Buildings 41,002 28,093
Machinery and equipment 65,366 63,659
--------- ---------
107,962 93,363
Less allowances for depreciation 54,353 49,447
--------- ---------
PROPERTY, PLANT AND EQUIPMENT - NET 53,609 43,916
--------- ---------
$ 136,875 $ 127,477
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,805 $ 8,666
Payrolls and related liabilities 2,943 2,925
Commissions payable 2,668 2,055
Accrued expenses 2,166 2,203
Income taxes 693 543
Accrued medical benefits 2,135 1,039
--------- ---------
TOTAL CURRENT LIABILITIES 16,410 17,431
LONG-TERM DEBT 3,107 783
POSTRETIREMENT BENEFITS 25,063 25,557
SHAREHOLDERS' EQUITY
Common Shares, without par value: Authorized - 14,000,000 shares;
Outstanding - 8,592,049 shares in 1999 and 8,581,236 shares in
1998 (after deducting treasury shares of 273,127 in 1999 and
283,940 in 1998) at stated capital amount 5,123 5,116
Retained earnings 88,409 80,314
Accumulated other comprehensive income (translation adjustments) (1,237) (1,724)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 92,295 83,706
--------- ---------
$ 136,875 $ 127,477
========= =========
</TABLE>
23 See notes to consolidated financial statements.
<PAGE> 3
- --------------------------------------------------------------------------------
The Gorman-Rupp Company and Subsidiaries
CONSOLIDATED STATEMENTS
OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(Thousands of dollars) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,081 $ 11,752 $ 10,612
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,489 6,330 5,959
Deferred income taxes (977) (2,084) 972
Changes in operating assets and liabilities:
Accounts receivable (1,616) 4,981 (1,369)
Inventories 2,134 1,438 (6,140)
Accounts payable (2,861) 997 1,010
Postretirement benefits (494) (523) 162
Other 1,755 (989) 660
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 17,511 21,902 11,866
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital additions, net (16,182) (9,327) (6,329)
Purchases of short-term investments (13,502) (18,193) (25,689)
Proceeds from short-term investments 16,583 18,788 18,788
Other - (141) -
-------- -------- --------
NET CASH USED FOR INVESTING ACTIVITIES (13,101) (8,873) (13,230)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends (5,152) (4,983) (4,821)
Net borrowings from (payments to) banks 2,324 (5,906) 2,893
Sale of common shares from treasury 573 1,066 219
Purchase of common shares for treasury (400) (1,683) (375)
-------- -------- --------
NET CASH USED FOR FINANCING ACTIVITIES (2,655) (11,506) (2,084)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,755 1,523 (3,448)
CASH AND CASH EQUIVALENTS:
Beginning of year 2,359 836 4,284
-------- -------- --------
END OF YEAR $ 4,114 $ 2,359 $ 836
======== ======== ========
</TABLE>
24 See notes to consolidated financial statements.
<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 deposit 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. The cost for
approximately 96% and 97% of inventories at December 31, 1999 and 1998,
respectively, is determined using the last-in, first-out (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. Long-lived assets are
reviewed for impairment losses whenever events or changes in circumstances
indicate the carrying amount may not be recovered through future net cash flows
generated by the assets.
CONCENTRATION OF CREDIT RISK:
The Company 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.
ADVERTISING:
The Company expenses all advertising costs as incurred which, for the years
ended December 31, 1999, 1998 and 1997, totaled $2,748,000, $2,861,000 and
$2,295,000, respectively.
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.
NOTE B - INVENTORIES:
The major components of inventories are as follows:
- -----------------------------------------------------
(Thousands of dollars) 1999 1998
- -----------------------------------------------------
Raw materials and in-process $24,040 $21,335
Finished parts 9,266 13,617
Finished products 2,883 3,371
------- -------
$36,189 $38,323
======= =======
- -----------------------------------------------------
The excess of replacement cost over LIFO cost is approximately $23,207,000 and
$22,369,000 at December 31, 1999 and 1998, respectively.
NOTE C - FINANCING ARRANGEMENTS:
Under unsecured demand lines of credit with banks, the Company may borrow up to
$10.3 million with interest at LIBOR plus .75% or at alternative rates as
selected by the Company. At December 31, 1999, $10.3 million is available for
borrowing.
In 1999, the Company negotiated an additional unsecured $20.0 million credit
facility at a fixed rate of interest of 6.0%, to finance the construction of a
new manufacturing complex. The note permits the Company to draw funds and
requires interest-only payments through March 31, 2001 and then converts to a
term loan requiring interest and principal payments through March 31, 2006. At
December 31, 1999, $20.0 million was available for borrowing.
The Company also has an $8.0 million unsecured revolving loan agreement which
matures in May 2001. At December 31, 1999, $3.6 million is available for
borrowing after deducting $3.1 million of outstanding borrowings due in 2001 and
$1.3 million of outstanding letters of credit. Interest is payable quarterly at
LIBOR plus .55% or at alternative rates as selected by the Company
(weighted-average interest rate 7.0% and 6.1% at December 31, 1999 and 1998,
respectively).
Although the $20 million credit facility and the $8.0 million revolving loan
agreements contain restrictive covenants including limits on additional
borrowings and maintenance of certain operating and financial ratios, the
Company significantly exceeds the requirements.
Interest expense was $55,000 (net of $100,000 capitalized interest), $188,000
and $238,000 in 1999, 1998 and 1997, respectively.
25
<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:
- --------------------------------------------------------------------
(Thousands of dollars) 1999 1998 1997
- --------------------------------------------------------------------
United States $21,480 $18,315 $16,021
Foreign 61 837 931
------- ------- -------
$21,541 $19,152 $16,952
======= ======= =======
- --------------------------------------------------------------------
The components of income tax expense are as follows:
- --------------------------------------------------------------------
(Thousands of dollars) 1999 1998 1997
- --------------------------------------------------------------------
Current:
Federal $ 7,861 $ 8,386 $ 4,301
Canadian 259 409 454
State and local 1,317 689 613
------- ------- -------
9,437 9,484 5,368
Deferred (977) (2,084) 972
------- ------- -------
$ 8,460 $ 7,400 $ 6,340
======= ======= =======
- --------------------------------------------------------------------
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:
- --------------------------------------------------------------------
(Thousands of dollars) 1999 1998 1997
- --------------------------------------------------------------------
Income taxes at
statutory rate $ 7,539 $ 6,703 $ 5,933
State and local income taxes,
net of federal tax benefit 798 448 399
Other 123 249 8
------- ------- -------
$ 8,460 $ 7,400 $ 6,340
======= ======= =======
- --------------------------------------------------------------------
Deferred tax assets (liabilities) consist of the following:
- --------------------------------------------------------------------
(Thousands of dollars) 1999 1998 1997
- --------------------------------------------------------------------
Current:
Inventories $ 2,445 $ 1,957 $ 64
Accrued liabilities 2,753 2,257 2,004
------- ------- -------
5,198 4,214 2,068
Non-current:
Depreciation (5,439) (5,399) (5,217)
Postretirement health
benefits obligation 9,846 9,820 9,815
Other (41) (48) (163)
------- ------- -------
4,366 4,373 4,435
------- ------- -------
$ 9,564 $ 8,587 $ 6,503
======= ======= =======
- --------------------------------------------------------------------
The Company made income tax payments of $9,300,000, $10,400,000 and $5,000,000
in 1999, 1998 and 1997, respectively.
NOTE E - PENSIONS AND OTHER POSTRETIREMENT BENEFITS:
The Company sponsors a defined benefit pension plan covering substantially all
employees. The Company's policy is to fund the maximum tax deductible
contribution. The Company also 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 plans' funded status reconciled with amounts
recognized in the Company's balance sheets:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
PENSION BENEFITS OTHER BENEFITS
- ---------------------------------------------------------------------------------------------
(Thousands of dollars) 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation
at beginning of year $ 27,704 $ 25,867 $ 16,675 $ 17,815
Service cost 1,481 1,377 681 642
Interest cost 1,847 1,784 1,140 1,113
Amendments -- -- -- (2,093)
Actuarial losses (gains) (3,608) 1,124 (1,823) (48)
Benefits paid (3,689) (2,448) (779) (754)
-------- -------- -------- --------
Benefit obligation at end of year 23,735 27,704 15,894 16,675
CHANGE IN PLAN ASSETS
Fair value of plan assets
at beginning of year 26,183 24,300 -- --
Actual return on plan assets 3,381 2,621 -- --
Company contributions 1,691 1,710 779 754
Benefits paid (3,689) (2,448) (779) (754)
-------- -------- -------- --------
Fair value of plan assets
at end of year 27,566 26,183 -- --
-------- -------- -------- --------
Funded status of the plan
(underfunded) 3,831 (1,521) (15,894) (16,675)
Unrecognized net actuarial
(loss) gain (3,656) 1,274 (5,082) (3,477)
Unrecognized net transition asset (521) (695) -- --
Unrecognized prior service cost 22 56 (3,763) (4,519)
-------- -------- -------- --------
ACCRUED BENEFIT COST $ (324) $ (886) $(24,739) $(24,671)
======== ======== ======== ========
WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate 8.00% 7.00% 8.00% 7.00%
Expected rate of return
on plan assets 8.00% 8.00% -- --
Rate of compensation increase 4.00% 4.00% -- --
- ---------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 6
- --------------------------------------------------------------------------------
The Gorman-Rupp Company and Subsidiaries
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For measurement purposes, a 6.5 - 7.0 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 2000. The rate was
assumed to decrease gradually to 4.5 percent by 2005 and remain at that level
thereafter.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
PENSION BENEFITS OTHER BENEFITS
- ---------------------------------------------------------------------------------------------------------------------
(Thousands of dollars) 1999 1998 1997 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
COMPONENTS OF NET PERIODIC BENEFIT COST
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 1,481 $ 1,377 $ 1,312 $ 681 $ 642 $ 974
Interest cost 1,847 1,784 1,678 1,140 1,113 1,099
Expected return on plan assets (2,059) (1,844) (1,657) -- -- --
Amortization of prior service cost 34 35 34 (756) (756) (524)
Recognized net actuarial loss (174) (174) (173) (182) (208) (241)
------- ------- ------- ------- ------- -------
BENEFIT COST $ 1,129 $ 1,178 $ 1,194 $ 883 $ 791 $ 1,308
======= ======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The assumed health care trend rate has a significant effect on the amounts
reported for other postretirement benefits. A one-percentage point change in the
assumed health care cost trend rate would have the following effects:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
ONE-PERCENTAGE POINT
- --------------------------------------------------------------------------------------------------------
(Thousands of dollars) INCREASE DECREASE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and interest cost components in 1999 $ 168 $ (135)
Effect on accumulated postretirement benefit obligation as of December 31, 1999 $ 1,288 $(1,172)
- --------------------------------------------------------------------------------------------------------
</TABLE>
NOTE F - BUSINESS SEGMENT INFORMATION:
The Company operates principally in one business segment, the manufacture and
sale of pumps and related fluid control equipment for water, wastewater,
construction, industrial, petroleum, original equipment, agricultural, fire and
military applications. 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. Export sales are
principally made through foreign distributors and manufacturers'
representatives. The Company exports to more than 75 countries located around
the world. The components of customer sales, determined based on the location of
customers, are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
(Thousands of dollars) 1999 % 1998 % 1997 %
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $149,284 83 $144,261 84 $140,040 85
Exports to foreign countries 30,000 17 26,984 16 24,822 15
-------- --- -------- --- -------- ---
$179,284 100 $171,245 100 $164,862 100
======== === ======== === ======== ===
- -----------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 7
- --------------------------------------------------------------------------------
The Gorman-Rupp Company and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
1999 COMPARED TO 1998
The Company achieved record net sales and net income in 1999, marking the
thirteenth consecutive year for such accomplishments. Net sales in 1999 were
$179.3 million compared to $171.2 million in 1998, an increase of 4.7%. Double
digit growth resulted in the wastewater, fire protection and original equipment
markets, including demand for fabricated components used in the gas turbine
industry. This growth, coupled with general price increases ranging from two to
four percent, was somewhat offset by declines in the construction market. Export
shipments accounted for approximately 17.0% of total net sales. Other income
amounted to $881,000 in 1999 compared to $1.0 million in 1998 and results
principally from interest income earned on the investment of funds.
Cost of products sold in 1999 was $132.9 million equal to 74.1% of net sales
compared to $127.5 million or 74.5% in 1998. Gross profit margins were $46.3 in
1999 compared to $43.7 million in 1998. As a percent of net sales, gross profit
margins were 25.9% and 25.5% in 1999 and 1998, respectively. These amounts are
principally the result of product mix, cost control, continued improvement in
plant resource utilization, and continued operating efficiencies associated with
investment in current technology and machinery.
Selling, general and administrative (SG&A) expenses for 1999 were $25.7 million
compared to $25.6 million in 1998. SG&A expenses as a percent of net sales
amounted to 14.3% in 1999 and 14.9% in 1998. Cost control efforts in
advertising, travel and general administrative operating expenses, together with
an improved ratio of fixed SG&A expenses incurred toward generating product
sales, principally accounted for the improvement. Interest expense amounted to
$55,000 (net of $100,000 capitalized interest expense associated with the new
facility construction project) in 1999 compared to $188,000 in 1998.
The effective income tax rate was 39.3% in 1999, compared to 38.6% in 1998. The
increase was principally the result of increased state and local taxes. (See
Note D to the financial statements.)
Net income, a record for the 13th consecutive year, increased 11.3% to $13.1
million compared to $11.8 million in 1998. Net income as a percent of net sales
was 7.3% in 1999 compared to 6.9% in 1998. Earnings per share increased 15 cents
to $1.52 compared to $1.37 in 1998.
The 1999 annual dividend of 60 cents per common share represented the 27th
consecutive year cash dividends have increased. The yield at December 31, 1999
was 3.4%.
1998 COMPARED TO 1997
1998 marked the 12th consecutive year the Company achieved record net sales and
net income. Net sales amounted to $171.2 million in 1998 compared to $164.9
million in 1997, an increase of 3.9%. This growth was largely the result of
shipments in the wastewater, construction and fire markets, approximating
increases of $6.7 million or 11.0%. Export shipments also increased $2.2 million
or 8.7% and represented approximately 16% of total sales in 1998 compared to 15%
in 1997. These results were, however, somewhat offset by an estimated $6 million
decline in business directly associated with the deteriorated economy in Asia.
Other income amounted to $1.0 million in 1998 compared to $706,000 in 1997 and
results principally from interest income earned on the investment of funds.
Cost of products sold for 1998 was $127.5 million compared to $123.9 million in
1997, an increase of $3.6 million or 2.9%. The increase was reflective of
increased sales. As a percent of net sales, cost of products sold was 74.5% and
75.2% in 1998 and 1997, respectively. Gross profit margins of 25.5% in 1998 and
24.8% in 1997 have improved and are principally the result of product mix,
utilization of capacity, cost control and manufacturing efficiencies resulting
from continued investment in manufacturing technology and machinery.
28
<PAGE> 8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Selling, general and administrative (SG&A) expenses for 1998 were $25.6 million
compared to $24.7 million in 1997. As a percent of net sales, SG&A expenses were
14.9% in 1998 and 15.0% in 1997. The reduction in 1998 SG&A expenses as a
percent to net sales principally resulted from increased sales volume and
continued efficiencies associated with the design and implementation of upgraded
information management systems during the mid-1990's. Interest expense was
$188,000 in 1998 compared to $238,000 in 1997, principally the reflection of
lower average borrowings.
The effective income tax rate was 38.6% in 1998, compared to 37.4% in 1997. (See
Note D to the financial statements.)
Net income increased 10.7% to a record $11.8 million in 1998 compared to $10.6
million in 1997. Net income as a percent of net sales was 6.9% and 6.4% in 1998
and 1997, respectively. Earnings per share increased 14 cents to $1.37 compared
to $1.23 in 1997.
The 1998 dividend of 58 cents per share represented the 26th consecutive year of
increased cash dividends. The quarterly dividend increase to 15 cents per share
approved by the Board of Directors in July 1998 represented an increase of
7.1%. The yield at December 31, 1998 was 3.6%.
LIQUIDITY AND SOURCES OF CAPITAL
Cash and cash equivalents and short-term investments totaled $7.3 million as of
December 31, 1999. In addition, the Company has $10.3 million in bank short-term
lines of credit and a new arrangement established in 1999 to provide an
unsecured $20.0 million term loan credit facility to finance the construction of
a new manufacturing complex, all of which were unused at December 31, 1999.
The Company also maintains an unsecured revolving credit facility, expiring in
2001, which provides for maximum borrowings of $8.0 million, $3.6 million of
which is available. As of December 31, 1999, $3.1 million had been borrowed and
$1.3 covered outstanding letters of credit.
Although the $20.0 million credit facility and the $8.0 million facility contain
restrictive covenants, including limits on additional borrowings and maintenance
of certain operating and financial ratios, the Company significantly exceeds the
requirements.
During 1999, the Company financed its capital improvements and working capital
requirements through internally generated funds and line of credit arrangements
with banks. Capital expenditures for 2000, estimated to be $20.0 to $22.0
million, are expected to be financed through internally generated funds,
existing credit arrangements and the term loan credit facility described above.
The Company started construction of the first phase of a new manufacturing
complex in 1999 that will eventually house the manufacturing, warehousing and
office facilities of the Mansfield Division and IPT Pumps Division.
Approximately $15.0 of the $30.0 million phase one project was expended in 1999
with the remainder anticipated to be paid in 2000. Phase one is projected to be
completed in the second quarter of 2000 and move-in is scheduled to follow in
the third quarter. While much of the design and development work has occurred
for the second phase, a date or plan to begin construction has not been
established.
The ratio of current assets to current liabilities was 4.8 to 1 at December 31,
1999, compared to 4.5 to 1 at December 31, 1998. Management believes that it has
adequate working capital and a healthy liquidity position.
IMPACT OF YEAR 2000
The Company completed all Year 2000 readiness work prior to December 31, 1999
and, as a result, to date has not experienced any significant problems with its
operating activities or supplier and customer service. Furthermore, management
is aware of no unresolved Year 2000 issue that could have a future material
impact on the Company's operations or financial position.
29
<PAGE> 9
- --------------------------------------------------------------------------------
The Gorman-Rupp Company and Subsidiaries
TEN YEAR SUMMARY OF
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
(Thousands of dollars,except per share amounts)
<TABLE>
<CAPTION>
1999 1998 1997 1996
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
OPERATING RESULTS:
Net sales $ 179,284 $ 171,245 $ 164,862 $ 155,187
Gross profit 46,347 43,713 40,964 39,127
Income taxes 8,460 7,400 6,340 5,735
Income (1) 13,081 11,752 10,612 9,928
EBITDA (2) 28,085 25,670 23,149 21,668
Depreciation and amortization 6,489 6,330 5,959 5,675
Interest expense 55 188 238 330
Return on net sales (%) 7.3 6.9 6.4 6.4
Sales dollars per employee 174.7 167.6 161.0 159.3
Income dollars per employee 12.7 11.5 10.4 10.2
FINANCIAL POSITION:
Current assets $ 78,185 $ 78,556 $ 81,695 $ 71,926
Current liabilities 16,410 17,431 17,036 15,199
Working capital 61,775 61,125 64,659 56,727
Current ratio 4.8 4.5 4.8 4.7
Property, plant and equipment - net 53,609 43,916 40,919 40,549
Capital additions 16,182 9,327 6,329 4,036
Total assets 136,875 127,477 127,865 117,650
Long-term debt 3,107 783 6,689 3,796
Shareholders' equity 92,295 83,706 78,060 72,737
Dividends paid 5,152 4,983 4,821 4,567
Average number of employees 1,026 1,022 1,024 974
SHAREHOLDER INFORMATION:
Basic and diluted earnings per share (1) $ 1.52 $ 1.37 $ 1.23 $ 1.15
Cash dividends per share .60 .58 .56 .53
EBITDA per share (2) 3.27 2.98 2.69 2.51
Shareholders' equity per share at December 31, 10.74 9.75 9.07 8.44
Average number of shares outstanding 8,585,877 8,599,713 8,609,479 8,617,168
</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.
(2) EBITDA is earnings before interest, taxes, depreciation and amortization.
- --------------------------------------------------------------------------------
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS
The following is a summary of unaudited quarterly results of operations for the
years ended December 31, 1999 and 1998.
(Thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
QUARTER ENDED 1999 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 TOTAL
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales $ 43,184 $ 45,118 $ 46,898 $ 44,084 $179,284
Gross profit 11,294 11,503 13,069 10,481 46,347
Net income 2,861 3,381 3,903 2,936 13,081
Basic and diluted earnings per share 0.33 0.40 0.45 0.34 1.52
QUARTER ENDED 1998 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 TOTAL
-------- -------- -------- -------- --------
Net sales $ 43,703 $ 42,535 $ 44,535 $ 40,472 $171,245
Gross profit 11,107 11,063 12,040 9,503 43,713
Net income 3,251 3,027 3,384 2,090 11,752
Basic and diluted earnings per share .38 .35 .39 .25 1.37
</TABLE>
30
<PAGE> 10
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Net sales $ 149,489 $ 137,508 $ 131,535 $ 126,019 $ 123,442 $ 119,715
Gross profit 36,516 35,763 32,699 30,975 29,872 28,602
Income taxes 5,590 5,625 5,063 4,693 4,664 4,888
Income (1) 9,461 9,327 8,795 7,966 7,689 7,342
EBITDA (2) 20,826 19,681 18,190 16,897 16,564 16,506
Depreciation and amortization 5,173 4,534 4,274 4,025 3,874 3,709
Interest expense 602 195 58 213 337 567
Return on net sales (%) 6.3 6.8 6.7 6.3 6.2 6.1
Sales dollars per employee 153.8 138.5 133.9 125.6 120.0 120.7
Income dollars per employee 9.7 9.4 9.0 7.9 7.5 7.4
FINANCIAL POSITION:
Current assets $ 71,401 $ 60,070 $ 55,746 $ 50,152 $ 53,642 $ 50,531
Current liabilities 19,727 16,391 14,382 12,380 14,471 14,805
Working capital 51,674 43,679 41,364 37,772 39,171 35,726
Current ratio 3.6 3.7 3.9 4.1 3.7 3.4
Property, plant and equipment - net 42,163 40,879 36,835 30,807 30,838 26,134
Capital additions 8,229 8,553 10,277 4,496 8,224 4,962
Total assets 119,816 107,100 98,706 86,434 85,131 77,643
Long-term debt 7,188 4,715 5,338 668 6,238 2,437
Shareholders' equity 67,240 61,608 56,911 52,759 61,256 57,310
Dividends paid 4,466 4,209 4,122 3,923 3,820 3,743
Average number of employees 972 993 982 1,003 1,029 992
SHAREHOLDER INFORMATION:
Basic and diluted earnings
per share (1) $ 1.10 $ 1.09 $ 1.02 $ .92 $ .89 $ .85
Cash dividends per share .52 .49 .48 .46 .45 .44
EBITDA per share (2) 2.43 2.29 2.12 1.97 1.93 1.92
Shareholders' equity per share
at December 31, 7.81 7.18 6.63 6.14 7.13 6.67
Average number of shares outstanding 8,587,466 8,579,633 8,588,493 8,594,255 8,594,255 8,594,255
</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, 1999 and 1998, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1999, appearing on pages 22
through 27. 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 auditing standards generally accepted
in the United States. 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 at 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, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Cleveland, Ohio
January 28, 2000
31
<PAGE> 11
- --------------------------------------------------------------------------------
The Gorman-Rupp Company and Subsidiaries
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:
SALES PRICE OF COMMON SHARES DIVIDENDS PER SHARE
1999 1998 1999 1998
---------------------- ---------------------- ---- ----
QUARTER HIGH LOW HIGH LOW
First $ 17.2500 $ 14.6875 $ 21.3750 $ 19.5000 $ .15 $ .14
Second 16.7500 14.4375 21.5000 17.5000 .15 .14
Third 16.7500 15.5000 19.2500 15.7500 .15 .15
Fourth 18.0000 14.2500 17.5000 13.2500 .15 .15
- --------------------------------------------------------------------------------
Shareholder information reported by Transfer Agent and Registrar, National City
Bank, February 16, 2000.
Holders Shares
------- ---------
Individuals 1,432 2,387,695
Nominees, Brokers and Others 30 6,204,354
------ ---------
TOTAL 1,462 8,592,049
====== =========
An additional 273,127 Common Shares are held in Treasury.
- --------------------------------------------------------------------------------
34
<PAGE> 12
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) ongoing positive
transitions in connection with the Year 2000 issue.
35
<PAGE> 1
EXHIBIT (21)
SUBSIDIARIES OF THE COMPANY
The Company has four 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; (iii) Patterson Pump Company, organized under the laws of the State of
Ohio; and (iv) Gorman-Rupp Foreign Sales Corporation, organized under the laws
of Barbados. The Company has one indirect, majority-owned subsidiary: Patterson
Pump Ireland Limited, a majority-owned subsidiary of Patterson Pump Company,
organized under the laws of the Republic of Ireland. The consolidated financial
statements of the Company, filed as a part of this Form 10-K, include the
account of each such subsidiary.
26
<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 28, 2000, included in the
1999 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. 333-92793) 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, 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 28, 2000, 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, 1999.
/s/ Ernst & Young LLP
Cleveland, Ohio
March 24, 2000
27
<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
February 24, 2000 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 1999 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 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 1999 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 24th
day of March, 2000.
/s/ROBERT E. KIRKENDALL
-----------------------
Robert E. Kirkendall
Corporate Secretary
28
<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
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
1999 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 24th day of March 2000.
THE GORMAN-RUPP COMPANY
BY: /s/ROBERT E. KIRKENDALL
-----------------------
Robert E. Kirkendall
Corporate Secretary
29
<PAGE> 3
Exhibit (24)
POWER OF ATTORNEY
The undersigned Officers and Directors of The Gorman-Rupp Company (the
"Company") hereby appoint 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 1999 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 24th day of February, 2000.
/s/JEFFREY S. GORMAN President, Principal Executive Officer
- --------------------------- and Director
Jeffrey S. Gorman
/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/THOMAS E. HOAGLIN Director
- ---------------------------
Thomas E. Hoaglin
/s/PETER B. LAKE Director
- ---------------------------
Peter B. Lake
/s/W. WAYNE WALSTON Director
- ---------------------------
W. Wayne Walston
/s/JOHN A. WALTER Director
- ---------------------------
John A. Walter
/s/JAMES R. WATSON Director
- ---------------------------
James R. Watson
30
<TABLE> <S> <C>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ART. 5 FDS
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