FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period
from.............to..............
Commission file number 0-684
GOULDS PUMPS, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 15-0321120
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
240 Fall Street, Seneca Falls, New York 13148
(Address of principal executive offices)
(Zip Code)
(315) 568-2811
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
As of April 29, 1994, 21,173,613 shares of $1 par value common
stock were outstanding.
Page 1 of 19
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GOULDS PUMPS, INCORPORATED
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets -
March 31, 1994 and December 31, 1993.............. 3
Condensed Consolidated Statements of Earnings -
Three Months Ended March 31, 1994 and 1993........ 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1994 and 1993........ 5
Notes to Condensed Consolidated Financial
Statements........................................ 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..... 8-12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................ 13-15
Item 4. Submission of Matters to a Vote of Security
Holders........................................ 16
Item 5. Other Information................................ 17
Item 6. Exhibits and Reports on Form 8-K................. 17-18
Signature......................................... 19
Page 2 of 19
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Condensed Consolidated Balance Sheets
Goulds Pumps, Incorporated March 31, December 31,
(In thousands) 1994 1993
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 11,097 $ 7,153
Receivables - net 117,492 109,637
Inventories 112,096 106,185
Deferred tax asset 13,598 13,557
Prepaid expenses and other current assets 12,818 11,115
Total current assets 267,101 247,647
Property, plant and equipment - net 144,958 148,973
Investments, including investments in
affiliates 18,625 18,848
Deferred tax asset 4,873 5,031
Other assets 18,915 18,003
$454,472 $438,502
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 33,256 $ 41,571
Current portion of long-term debt 32,531 6,922
Trade payables 39,846 34,726
Compensation and commissions 13,822 16,519
Income taxes payable 2,091 21
Dividends payable 4,235 4,231
Deferred tax liability 1,147 1,257
Other 27,270 32,686
Total current liabilities 154,198 137,933
Long-term debt 38,843 38,859
Pension 16,850 16,905
Other postretirement benefit obligation 53,986 53,418
Deferred tax liability and other 4,226 4,186
SHAREHOLDERS' EQUITY:
Common stock - $1.00 par value; authorized
90,000,000; issued and outstanding
21,173,613 and 21,153,966 shares,
respectively 21,174 21,154
Additional paid-in capital 57,336 57,044
Retained earnings 121,513 120,415
Cumulative translation adjustments and other (13,654) (11,412)
Total shareholders' equity 186,369 187,201
$454,472 $438,502
See Accompanying Notes to Condensed Consolidated Financial Statements.
Page 3 of 19
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Condensed Consolidated Statements of Earnings (Unaudited)
Goulds Pumps, Incorporated
(In thousands except per share data)
Three Months Ended March 31,
1994 1993(1)
Net sales $139,205 $124,402
Cost and expenses
Cost of sales 99,231 88,834
Selling, general and
administrative expenses 27,466 28,611
Research and development expenses 2,235 1,676
Earnings from investments and
affiliates (475) (659)
Interest expense 1,462 1,070
Interest income (424) (361)
Other (income) expense - net 1,039 (307)
Earnings before income taxes
and cumulative effect of accounting
change 8,671 5,538
Income taxes 3,338 2,132
Earnings before cumulative effect
of accounting change 5,333 3,406
Cumulative effect of accounting
change, net of income tax benefit -- (1,026)
Net earnings $ 5,333 $ 2,380
Net earnings per share
Earnings before cumulative
effect of accounting change $ .25 $ .16
Cumulative effect of accounting change -- (.05)
Net earnings per common share $ .25 $ .11
Dividends per common share $ .20 $ .20
Weighted average shares
outstanding (in thousands) 21,164 21,094
See Accompanying Notes to Condensed Consolidated Financial Statements.
(1) Restated for adoption of SFAS 112 as of January 1, 1993.
Page 4 of 19
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Condensed Consolidated Statements of Cash Flows (Unaudited)
Goulds Pumps, Incorporated Three Months Ended March 31,
(In Thousands) 1994 1993 (1)
OPERATING ACTIVITIES:
Net earnings $ 5,333 $ 2,380
Adjustments to reconcile net earnings to net cash
applied to operations:
Depreciation 6,480 6,026
Amortization 277 248
Cumulative effect of change in accounting principle -- 1,579
Earnings from affiliates (475) (659)
Increase (decrease) in deferred tax liability 158 (800)
Decrease (increase) in deferred tax asset 44 (735)
Increase in receivables-net (9,038) (8,224)
Increase in inventories (7,201) (10,068)
Increase (decrease) in trade payables, accrued
expenses and other (2,166) 990
Other - net 1,465 128
Net cash applied to operating activities (5,123) (9,135)
INVESTING ACTIVITIES:
Capital additions (3,348) (5,987)
Purchases of other assets (1,680) (889)
Net cash applied to investing activities (5,028) (6,876)
FINANCING ACTIVITIES:
Proceeds from long-term debt 2,131 15,823
Payments on long-term debt (273) (564)
Increase in short-term borrowings 16,343 8,231
Proceeds from issuance of common stock 312 659
Dividends paid (4,231) (4,215)
Net cash provided by financing activities 14,282 19,934
Effect of exchange rate changes on cash (187) (709)
Increase in cash and cash equivalents 3,944 3,214
Cash and cash equivalents:
Beginning of period 7,153 13,681
End of period $11,097 $16,895
See Accompanying Notes to Condensed Consolidated Financial Statements.
(1) Restated for adoption of SFAS 112 as of January 1, 1993.
Page 5 of 19
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Goulds Pumps, Incorporated Form 10-Q
Part I, Item 1
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments necessary to fairly present the Company's financial
position as of March 31, 1994 and the results of operations and
cash flows for the three months ended March 31, 1994 and 1993.
All such adjustments are of a normal recurring nature. The
results of operations for the three month period ended March 31,
1994 are not necessarily indicative of the results to be
expected for the entire year of 1994.
The accounting policies followed by the Company are set forth
in Note 1 to the Company's financial statements in the 1993
Annual Report on Form 10-K which is incorporated by reference.
2. Four lawsuits were filed against the Company in April and May
of 1994 arising from the sales of submersible pumps with brass
or bronze components. See Part II, Item 1. "Legal Proceedings"
on pages 13 through 15 of this report for a detailed discussion
of these suits. Based on the Company's assessment of these
lawsuits which are currently in very early stages, no provision
has been made for any losses in the accompanying financial
statements.
3. The consolidated financial statements for the first three
quarters of 1993 have been restated to reflect the adoption as
of January 1, 1993, of Statement of Financial Accounting
Standards (SFAS) 112, Employers' Accounting for Postemployment
Benefits.
SFAS 112 requires employers to recognize the cost of certain
postemployment benefits using the accrual method of accounting.
The cumulative effect of this accounting change decreased 1993
earnings after taxes by $1.0 million or $.05 per share. The
annual incremental cost of adopting SFAS 112 is immaterial on
an ongoing basis.
4. Supplemental Schedule of Cash Flow Information (in thousands):
For the three months ended,
March 31, 1994 March 31, 1993
Interest paid $1,829 $ 922
Income taxes paid 976 3,017
Page 6 of 19
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part I, Item 1
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Net income per share of common stock is based upon the weighted
average number of shares of common stock outstanding during the
period. No effect has been given to options outstanding under
the Company's Stock Option Plans as no significant dilutive
effect would result from the exercise of these options. See
Exhibit XI on page 18 of 19.
6. Inventories were as follows (in thousands):
March 31, December 31,
1994 1993
(Unaudited) (Audited)
Raw Materials $ 33,356 $ 31,927
Work-in-Process 51,257 49,062
Finished Goods 58,363 55,863
Inventories Valued at FIFO 142,976 136,852
LIFO Allowance (30,880) (30,667)
Inventories Less LIFO Allowance $112,096 $106,185
7. Summarized unaudited financial information for Oil Dynamics,
Inc., a 50%-owned joint venture which has a fiscal year ended
October 31, and hence is recorded with a two-month reporting
lag, is as follows (in thousands):
For the three months ended,
January 29, January 30,
1994 1993
Net Sales $14,279 $12,888
Gross Profit 4,102 4,246
Net Earnings 935 1,292
Page 7 of 19
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part I, Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company's first quarter 1994 results reflected record
first quarter shipments, an orders increase of 7.3% and a 56.6%
increase in net earnings compared to the first quarter of 1993
before an accounting change.
First quarter net sales were a record $139.2 million, up
11.9% from $124.4 million for the first quarter of 1993. This
increase was due to record first quarter shipment levels at the
Water Technologies Group (WTG) and the Engineered Products
Division (EPD), the Company's largest division. Earnings per
share for the quarter were $.25 compared to $.16 in 1993, before
the cumulative effect of a change in accounting principle. After
the cumulative effect of the change in accounting principle,
earnings per share were $.11 in the first quarter of 1993.
Total orders received for the first quarter were $135.8
million versus $126.5 million last year, an increase of 7.3%.
WTG reported an 18.1% increase in orders over the first quarter
of last year while EPD repair parts orders levels, traditionally
an indicator of positive trends in future business activity,
increased 14.6%. Backlog decreased to $96.0 million from $100.0
million at December 31, 1993, and also decreased compared to
backlog of $100.2 million at the end of the first quarter of
1993. This slight decrease in backlog is due to the record first
quarter shipments levels.
In other areas of significance, four lawsuits were filed
against the Company in April and May of 1994 arising from the
sales of submersible pumps with brass or bronze components. See
Part II, Item 1. "Legal Proceedings" on pages 13 through 15 of
this report for a detailed discussion of these suits. In
addition to the referenced discussion, it is still possible that
second quarter sales revenues of submersible pumps and the
earnings of the division could be affected, although the Company
expects high demand for its new stainless steel pumps which were
introduced nationally during the first week of May, one month
earlier than previously scheduled.
The improving economy and capital spending trends have
increased quotation activity and create a positive outlook for
orders. These factors when combined with the Company's internal
initiatives --- such as the introduction of new products,
productivity gains from CATS II, and the cost reductions --- have
yielded increased sales and earnings in the first quarter of
1994. The Company expects that the operational initiatives noted
will continue throughout 1994. Additionally, order trends
continue to be strong in April and early May of 1994.
Page 8 of 19
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part I, Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations
The following table indicates the percentage relationships
of earnings and expense items included in the Condensed
Consolidated Statements of Earnings for the quarters ended March
31, 1994 and 1993 and the related percentage change in those
items.
As a Percentage of Total Net Sales Percentage Change
1994 1993(1) 1994 vs. 1993(1)
100.0% 100.0% Net sales 11.9%
71.3 71.4 Cost of sales 11.7
19.7 23.0 SG&A expenses (4.0)
1.6 1.3 R&D expenses 33.4
Earnings from investments
(.3) (.5) and affiliates (27.9)
1.1 .9 Interest expense 36.6
(.3) (.3) Interest income 17.5
.7 (.2) Other (income) expense - net N.M.
Earnings before income taxes
and cumulative effect of
6.2 4.4 accounting change 9.8
2.4 1.7 Income taxes 56.6
Earnings before cumulative
3.8 2.7 effect of accounting change 56.6
Cumulative effect of change
-- (.8) in accounting principle (100.0)
3.8% 1.9% Net earnings 124.1%
(N.M. = Not Meaningful)
(1) Restated for adoption of SFAS 112 as of January 1, 1993.
The increase in sales of $14.8 million in the first quarter
as compared to the prior year is composed of a $3.9 million or a
5.3% increase in Industrial Products Group sales and a $10.9
million or 21.7% increase in Water Technologies Group sales. The
Industrial Products Group (IPG) sales increase was the result of
record first quarter EPD shipments level as EPD was able to drive
down the delinquencies that resulted from the fourth quarter 1993
systems implementation, demonstrating that many of these issues
have been resolved. For Water Technologies Group, sales at
WTG-America (Water Systems Division) increased 34.3% while sales
at WTG-Europe (Lowara S.p.A.) reflected a 3.7% increase on a
Page 9 of 19
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part I, Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
translated basis when compared to first quarter 1993 results. On
a local currency basis, WTG - Europe's sales increased 23.3% over
1993 first quarter results. Increased WTG business activity
levels have resulted from the introduction of new products with
related market share gains; the weaker lire making Italian
products more price attractive in other European countries;
marketing initiatives and a stronger economy in the United
States.
Gross margin as a percentage of sales remained relatively
constant at 28.7% for the first quarter of 1994 compared to 28.6%
for the first quarter of 1993. The Industrial Products Group
gross profit percentage increased slightly to 29.1% in 1994 from
29.0% for the first quarter 1993. While the gross margin
percentage at our largest division, the Engineered Products
Division, remained relatively stable, decreases were noted at the
Vertical Products Division in California as the sales mix shifted
to a lower proportion of higher margin parts. This decline was
offset by margin improvements at the Slurry Pump Division, due to
favorable product mix and increased volume. The Water
Technologies Group's gross profit percentage also increased
slightly from 28.0% for the first quarter of 1993 to 28.2% for
the first quarter of 1994. This increase is largely attributable
to improved performance by the Texas Turbine Division offsetting
declines in WTG-America's gross profit percentage due to
unfavorable product mix.
As a percentage to sales, SG&A expenses were 19.7% for the
first three months of 1994 compared to 23.0% for the same period
a year ago, reflecting the Company's efforts to contain costs
through workforce reductions and the restructuring program
implemented during 1993. Also reducing reported SG&A in 1994 is
the favorability associated with the translation of WTG-Europe
expenses.
Research and development (R&D) expenses increased 33.4% when
compared to the first quarter of 1993. The higher level of R&D
expenses in the first quarter of 1994 relates primarily to the
acquisition of Environamics whose patented hermetically sealed
pump will be introduced later in 1994. In May 1994, the Company
introduced the Model GS stainless steel submersible pump,
produced by WTG, one month earlier than previously scheduled. In
1994, the Company expects to continue to invest in new product
development as well as in enhancements to existing products at a
higher level than last year in order to improve its competitive
position in the industry.
Page 10 of 19
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part I, Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Interest expense increased $.4 million in the first three
months of 1994 as compared to the first quarter 1993. This
increase was anticipated and resulted from the drawdown of a
previously arranged long-term financing agreement at a higher
interest rate (see Liquidity and Capital Resources) and overall
higher debt levels. Interest income remained relatively constant
period over period.
Earnings from investments and affiliates decreased $.2
million for the first quarter of 1994 compared to the same period
in 1993. This decrease is primarily due to Goulds' share of the
1994 earnings of Oil Dynamics, Inc. (ODI), a 50%-owned joint
venture. ODI's financial results in the second quarter and the
remainder of the year will be significantly impacted by the lack
of Russian financing availability which occurred near the end of
the quarter and currently remains in that status.
Liquidity and Capital Resources
As reflected on the Condensed Consolidated Statements of
Cash Flows, $14.3 million of cash generated by net financing
activities combined with a $.2 million negative translation
effect was utilized to fund $5.0 million of net investing
activities and $5.1 million of net operating activities while
increasing cash and cash equivalents by $3.9 million.
Significant items impacting cash flow from operating
activities in 1994 include a $9.0 million increase in
receivables-net due to the high level of first quarter shipments
and extended payment terms on certain international shipments;
and a $7.2 million increase in inventories primarily at WTG
Divisions to support new product introductions such as the Model
GS series introduced in May 1994.
In the first three months of 1994, capital additions were
$3.3 million. Significant projects included equipment additions
and upgrades at domestic and international locations. The
Company expects to spend approximately $25 - $30 million in total
capital expenditures for the year.
The Company expects that debt levels by the end of 1994 will
be consistent with those at December 31, 1993. Based on a
financing agreement entered into in December 1992, the Company
borrowed $20.0 million on August 3, 1993 at a fixed interest rate
of 7.18% payable semi-annually. Principal payments are required
in equal annual installments at the end of the third through
seventh years. Proceeds from this loan were used to refinance a
Page 11 of 19
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part I, Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
$10.0 million Term Loan due in August 1993 and other short-term
debt. Additionally, the Company intends to replace its $30.0
million Revolving Credit Agreement, which will expire on October
31, 1994. The Company believes cash from operations and
available credit facilities are sufficient to meet its liquidity
needs during 1994.
Cumulative translation adjustments on the accompanying
consolidated balance sheet at March 31, 1994 were $13.7 million
compared to $11.4 million at December 31, 1993, reflecting the
continued weakening of the Italian lira and the Canadian dollar
against the U.S. dollar experienced since the fourth quarter of
1992.
Orders and Backlog
For the first quarter of 1994 orders were a record $135.8
million, a 7.3% increase when compared to orders for the first
quarter of 1993 of $126.5 million. This increase in orders is
composed of a $9.3 million or 18.1% increase in WTG orders while
IPG orders remained relatively constant year over year. EPD
orders for the first quarter 1994 increased 6.1%, with repairs
parts orders increasing 14.6% over first quarter 1993. Repair
parts orders have traditionally served as a barometer of future
business activity. The Water Technologies Group orders level
increases have resulted from the introduction of new products
with related market share gains, improvements at the Texas
Turbine division and WTG-Asia/Pacific, and a stronger U.S.
economy.
Backlog has decreased from $100.2 million at March 31, 1993
to $96.0 million at March 31, 1994. Industrial Products Group
backlog decreased $4.2 million to a total backlog of $90.9
million at the end of the first quarter while Water Technologies
Group backlog levels were consistent with last year. Backlog
decreased $4.0 million from the December 31, 1993 level of $100.0
million.
Page 12 of 19
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part II, Item 1
PART II. Other Information
Item 1. Legal Proceedings
The following is a description of the current status of
several legal actions affecting the Company that relate to
submersible water pumps which contain some brass or bronze
components (the "Subject Pumps").
As reported in the Company's Annual Report on Form 10-K for
its fiscal year ended December 31, 1993, on February 22, 1994,
the Company was served with a copy of a sixty day notice given by
the Environmental Defense Fund ("EDF") and the Natural Resources
Defense Council ("NRDC") to the Attorney General of California
and other California officials, alleging that the Company and
certain other submersible pump manufacturers were in violation of
a California statute known as Proposition 65, which prohibits the
knowing discharge, into sources of drinking water, of chemicals
(including lead) known to the State of California to cause cancer
or reproductive toxicity and requires a warning if individuals
there are being knowingly and intentionally exposed to such
chemicals. Under Proposition 65, EDF and NRDC were permitted to
commence litigation if the California officials did not do so
within 60 days after such notice.
On April 15, 1994, the Company entered into a Stipulation
with the California Attorney General pursuant to which, among
other things, the action commenced by the Attorney General
(described below) is to be consolidated with an action commenced
by EDF and NRDC (described below). In addition, under the
Stipulation, the Company undertook not to ship for sale in
California or permit the sale in California of any Subject Pumps
that are within its possession or control, unless warnings of
possible lead exposure are provided in a manner to be agreed upon
with the Attorney General.
On April 18, 1994, both the Attorney General of California
and EDF and NRDC filed separate complaints in the Superior Court
of the State of California for Alameda County against the Company
and certain other submersible pump manufacturers, alleging the
unlawful discharge of lead into sources of drinking water through
leaching from Subject Pumps manufactured by the Company and such
other manufacturers, as well as failure to warn consumers of
potential exposures to lead. The complaint filed by the State of
California by its Attorney General alleges that the Company and
the other defendants have violated Proposition 65 and
California's Unfair Competition Act. The complaint filed by EDF
and NRDC, on their own behalf and on behalf of their members and
the general public, alleges that, acting in concert with the
Page 13 of 19
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part II, Item 1
PART II. Other Information (continued)
other defendants, the Company has violated the California Unfair
Competition Act by violating Proposition 65 and other California
statutes. The claims asserted in the complaints cover various
periods of time, the earliest of which commences on February 27,
1988. The complaints seek, among other remedies, civil
penalties, restitution to customers, disgorgement of revenues and
establishment of a fund for medical monitoring of persons
allegedly exposed to lead by the defendants' Subject Pumps, as
well as a preliminary and permanent injunction against
manufacturing, distributing, selling or advertising for sale in
California the Subject Pumps and requiring the provision of
warnings to consumers and users. The California statutes alleged
to have been violated may result in maximum civil penalties of
$2,500 per day for each violation.
Also on April 18, 1994, the U.S. Environmental Protection
Agency (the "EPA"), issued a statement advising homeowners
utilizing Subject Pumps to have their drinking water tested for
lead content. The EPA also advised that, if the pump had been
installed within the last year, bottled water should be drunk
while waiting for test results.
On April 19, 1994, the Company temporarily suspended all
sales of its Subject Pumps. The Company subsequently determined
to permanently cease sales of Subject Pumps in California,
although the Company has resumed sales of its Subject Pumps
outside of California.
The complaints filed by EDF, NRDC and the California
Attorney General and the EPA's statement referred to the above
are based upon laboratory testing commissioned by EDF and NRDC.
The pump model manufactured by the Company that was tested
contained brass or bronze components which have lead as an
ingredient. The Company no longer manufactures any submersible
pumps with components containing lead as an ingredient although
inventories of previously manufactured pumps continue to be sold
(except in California). The Company does not believe that the
laboratory testing reflects actual well conditions, and it is not
aware of any field studies demonstrating that any of its pumps
leach lead into drinking water in amounts that would exceed the
Federal standards applicable to public water systems.
On April 28, 1994, a complaint was filed against the Company
and its President in Federal District Court for the Western
District of New York, alleging violations of U.S. securities laws
and common law fraud. The complaint seeks certification of a
class of plaintiffs consisting of all purchasers of the Company's
Page 14 of 19
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Goulds Pumps, Incorporated Form 10-Q
Part II, Item 1
PART II. Other Information (continued)
common stock during the period March 29, 1993, through April 20,
1994, inclusive. The complaint alleges that the Company and
its President made false and misleading statements during such
period regarding the Company's compliance with environmental laws
and its financial prospects, inflating the price of the Company's
common stock. The complaint seeks, among other remedies, damages
in an unspecified amount allegedly suffered by members of the
putative class from a decrease in the market price of the
Company's common stock on April 20, 1994, after the filing of the
Proposition 65 actions and the EPA announcement described above.
On May 3, 1994, a complaint was filed against the Company in
the Superior Court of Washington for King County, alleging a
class action against the Company on behalf of all persons who
have purchased and currently own Subject Pumps manufactured by
the Company that are used in wells. The complaint seeks
certification of two plaintiff classes, a nationwide class and a
State of Washington class; not included within the class
definition are persons who may seek recovery for personal injury.
The complaint alleges that the Company's Subject Pumps discharge
lead into residential drinking water in breach of various express
and implied warranties, as well as claims based on theories of
strict liability and violation of Washington's statute concerning
unfair business practices. The complaint seeks, among other
remedies, a preliminary and permanent injunction forbidding the
discharge or release of chemicals known to cause cancer and
reproductive toxicity into a source of drinking water and
prohibiting exposure to the Company's products without providing
warnings, restitution to customers, the other remedial actions by
the Company, civil penalties and damages in unspecified amount.
In view of the publicity surrounding the Proposition 65
litigation and the EPA's statement on April 18, 1994, and the
ensuing litigation recently commenced against the Company,
additional litigation may be commenced against the Company based
on allegations similar to those described above. The Company
intends to vigorously defend all of the pending litigation
described above, as well as any additional lead-related
litigation that may be commenced, but no assurance can be given
as to the ultimate outcome of such litigation or its impact on
the Company. If the Company were ultimately determined to be
liable for the damages alleged in such litigation, the claims
against the Company could be very substantial. However, all
pending lead-related litigation is at a very preliminary stage
and it is not possible at this time for the Company to quantify
any potential civil penalties, damages and other relief sought by
the various plaintiffs or to determine the extent of its
liability, if any.
Page 15 of 19
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part II, Item 4
PART II. Other Information (continued)
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on May 4, 1994.
Stockholders elected ten Directors nominated in the March 31,
1994 Proxy Statement, incorporated herein by reference, to hold
office until the next Annual Meeting of stockholders.
Additionally, stockholders ratified the appointment of Deloitte
& Touche as the Company's independent certified public
accountants for the next year, approved the 1994 Incentive Plan
to Increase Stockholder Value, and the 1994 Incentive Plan for
Non-Employee Directors. Results of stockholder voting are as
follows:
1. Election of Directors Votes For Votes Withheld
Stephen V. Ardia 18,332,220 480,879
William R. Fenoglio 18,519,169 293,930
William W. Goessel 18,508,568 304,531
Melvin Howard 18,430,749 382,350
Barbara B. Lucas 18,516,548 296,551
Thomas C. McDermott 18,504,413 308,686
James C. Miller III 18,520,372 292,727
Peter Oddleifson 18,509,813 303,286
Arthur M. Richardson 18,502,498 310,601
Robert L. Tarnow 18,513,728 299,371
2. Proposal to Approve the 1994 Incentive Plan to Increase
Stockholder Value:
Votes Votes Votes Broker
For Against Abstaining Non-votes
14,913,308 2,550,895 124,241 1,224,655
3. Proposal to Approve the 1994 Incentive Plan for Non-Employee
Directors:
Votes Votes Votes Broker
For Against Abstaining Non-votes
15,388,522 2,053,282 211,068 1,160,227
4. Proposal to Ratify the Appointment of Deloitte & Touche as
Independent Certified Public Accountants for 1994:
Votes Votes Votes Broker
For Against Abstaining Non-votes
18,679,338 47,218 86,543 N/A
Page 16 of 19
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part II, Items 5 and 6
PART II. Other Information (continued)
Item 5. Other Information
As disclosed in previous SEC filings, the Company recorded
a $2.0 million provision in the fourth quarter of 1991 for
estimated environmental costs. This charge reflects anticipated
costs to monitor and remediate an inactive Company landfill site
in Seneca Falls, New York. At March 31, 1994, the remaining
reserve was $1.7 million. The remediation is expected to occur
through late 1995 or early 1996 and the Company does not
currently expect any additional material expenses in future years
associated with this site.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit XI. (Earnings Per Share Computation)
(b) No reports on Form 8-K were filed for the three
months ended March 31, 1994.
<F50>
EXHIBIT XI
GOULDS PUMPS, INCORPORATED AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
March 31, March 31,
1994 1993 (3)
a. Net earnings $ 5,333 $ 2,380
b. Decrease in interest expense (net of tax benefit)
based upon issuance of all shares of common stock
under Deferred Common Stock Agreement $ -- $ --
c. Restated net earnings (a + b) $ 5,333 $ 2,380
d. Actual weighted average number of shares outstanding 21,164 21,094
e. Primary earnings per share based on actual average
shares outstanding (c / d) (1) $ .25 $ .11
f. Shares exercisable under outstanding options 1,052 813
g. Proceeds assuming exercise of outstanding options $23,465 $16,825
Reinvestment of proceeds under "Treasury Stock Method":
h. Average market price per share during each quarter or
market price at quarter-end (whichever is higher) $ 25.04 $ 24.57
i. Shares to be acquired (g / h) 937 685
j. Net increase in outstanding shares relative to stock
options (f - i) 115 128
k. Adjusted weighted average shares outstanding (d + j) 21,279 21,222
l. Earnings per share assuming exercise of outstanding
options (c / k) $ .25 $ .11
m. Dilutive (Anti-dilutive) effect on earnings per
share (e - l) (2) $ -- $ --
(1)Earnings per share information is based on weighted average number of
shares of common stock outstanding during each period. No effect has been
given to options outstanding under the Company's Stock Option Plans as no
material dilutive effect would result from the exercise of these options.
(2)This calculation is submitted in accordance with Securities Exchange Act
of 1934 Release No. 9038 although not required by APB Opinion No. 15 since
no material dilutive effect would result from the exercise of these
options.
(3)Restated for adoption of SFAS 112 as of January 1, 1993.
Page 18 of 19
<F50>
SIGNATURE
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.
GOULDS PUMPS, INCORPORATED
(Registrant)
Date: May 12, 1994
S/John P. Murphy
Vice President - Finance
(Mr. Murphy is the Chief
Financial Officer and has
been duly authorized to sign
on behalf of the registrant.)
Page 19 of 19
