- - - -- TRANSMITTAL LETTER --
March 30, 1994
Securities and Exchange Commission
500 North Capital Street
Washington, DC 20549
Gentlemen:
Following this transmittal letter is our 10-K electronic filing for
the fiscal year ending December 31, 1993.
As discussed in Note 11 to the Consolidated Financial Statements,
the Company changed its methods of accounting for postretirement
benefits other than pensions (effective January 1, 1992) and
postemployment benefits (effective January 1, 1993).
Very truly yours,
GOULDS PUMPS, INC.
s/J. P. Murphy
J. P. Murphy
Vice President and
Chief Financial Officer
10ktrans(1ca)/mgd
<F50>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 Identification No.)
incorporation or organization)
240 Fall Street, Seneca Falls, New York 13148
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (315) 568-2811
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 Par Value Per Share
(Title of Class)
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 definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
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 last 90 days. Yes X No
As of February 28, 1994, 21,171,509 common shares were outstanding, and the
aggregate market value of the common shares of Goulds Pumps, Inc. held by
non-affiliates was approximately $549 million.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting of Shareholders to be held on
May 4, 1994 (Proxy Statement). See Part III of this Form 10-K Annual Report
for portions incorporated by reference.
Page 1 of 54
<F50>
GOULDS PUMPS, INCORPORATED
TABLE OF CONTENTS
Page
PART I
Item 1. Business............................................. 3-9
Executive Officers................................... 10
Item 2. Properties........................................... 11
Item 3. Legal Proceedings.................................... 11
Item 4. Submission of Matters to a Vote of Security Holders.. 11
PART II
Item 5. Market for the Registrant's Common Equity Securities
and Related Stockholder Matters.................... 12
Item 6. Selected Financial Data.............................. 13-14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 15-21
Item 8. Financial Statements and Supplementary Data.......... 22-40
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 41
PART III
Item 10. Directors and Executive Officers of the Registrant.... 41
Item 11. Executive Compensation................................ 41
Item 12. Security Ownership of Certain Beneficial Owners
and Management..................................... 41
Item 13. Certain Relationships and Related Transactions....... 41
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K............................... 41-52
Signatures........................................ 53-54
Page 2 of 54
<F50>
PART I
ITEM 1. BUSINESS
(A) General Development of Business
The Company started business in 1848 and was incorporated 20 years
later in 1864 under the laws of New York State as Downs & Co.
Manufacturing Company. In 1869, the Company's name was changed to
The Goulds Manufacturing Company and in 1926 the name was changed
to Goulds Pumps, Incorporated. Effective December 31, 1984, the
Company was reincorporated under the laws of the State of Delaware
by virtue of a merger transaction.
Goulds Pumps, Incorporated designs, manufactures and services
pumps, motors and accessories for industrial, agricultural,
commercial and consumer markets. Industrial markets account for
approximately 57 percent of the Company's sales. These include:
chemical, petrochemical, refining, pulp and paper, utilities,
mining and municipal, including waste water treatment systems.
The remaining sales, representing approximately 43 percent of the
Company's business, include pumps, motors and accessories for home
water and sewage systems, agricultural irrigation and commercial
uses.
1993 was a year in which the pump industry as a whole continued to
be impacted by weak economic conditions and increased competitive
pricing pressures. Goulds Pumps' 1993 sales were slightly below
1992 levels, and earnings for the year of $1.12 from continuing
operations were 8.2% lower than last year's $1.22 from continuing
operations, exclusive of 1992 restructuring charges ($.19 per
share) and 7.7% above last year's $1.04 in earnings before the
cumulative effect of the accounting changes. The decrease from
1992's $1.22 earnings level is attributable to a consolidated
gross margin decline of nearly three percentage points caused by
stiff price competition in key markets and lower fourth quarter
sales at EPD due to the implementation of CATS II, a new systems-
driven manufacturing process. These declines were partially
offset by a decrease in selling, general and administrative costs
resulting from cost control measures and favorability in the
translation of WTG-Europe's (Lowara) expenses, an outstanding
performance by our joint venture, Oil Dynamics, Inc., and the tax
benefits of the European corporate restructuring and other tax
strategies. Reported 1993 earnings per share of $1.07 reflect the
recording as of January 1, 1993 of the cumulative effect of the
adoption of Financial Accounting Standard No. 112 (SFAS No. 112),
"Employers' Accounting for Postemployment Benefits," which
decreased earnings by $.05.
1993 highlights included:
* The acquisition of Environamics Corporation. Goulds'
investment in Environamics reflects the Company's continuing
commitment to be the leader in advancing state-of-the-art pump
design. The Company believes the Environamics pumps will
qualify as the best available technology to control chemical
emissions and expects demand for the pumps to increase as
manufacturing plants respond to requirements of OSHA and the
Clean Air Act. Sales of the Environamics product line could
reach $40 million by the late 1990s.
* During 1993, the Company's two largest divisions, the
Engineered Products Division (EPD) and WTG-America implemented
phase II of CATS - Competitive Advantage Through
Simplification. This is a systems-driven overhaul of how the
Company operates, from customer inquiries to order entry to
shipment. While it will take several months for all aspects of
Page 3 of 54
<F50>
these newest introductions of CATS to fully benefit operations,
significant improvements are expected in the Company's ability
to deliver products efficiently to customers in 1994 and
beyond.
* The outstanding performance of the 50%-owned joint venture, Oil
Dynamics, Inc. (ODI), had a major impact on 1993's results.
ODI benefitted from the strength of significant Russian
business during 1993.
(B) Financial Information About Industry/Market Segments
Financial information about market segments contained in Note 12
(Major Market Segment Information) on page 39 of this Annual
Report on Form 10-K.
(C) Narrative Description of Business
Overview
The Company designs, manufactures and services pumps for the
industrial, agricultural, commercial and consumer markets. The
Company's pumps are manufactured for a broad range of uses in the
chemical, petrochemical, refining, pulp and paper, utilities and
mining industries, home water and sewage systems, agricultural
irrigation and office building and other commercial applications.
The Company is organized into two groups: the Industrial Products
Group ("IPG") and the Water Technologies Group ("WTG"). Prior to
1993, the Ag Turbine portion of the Vertical Products Division in
Texas was part of the Industrial Products Group. In 1993, under
the Company's restructuring plan, it became part of the Water
Technologies Group.
Industrial Products Group
The Industrial Products Group represented approximately 57% of the
Company's sales and 47% of operating earnings for 1993. The types
of pumps manufactured for customers served by the Industrial
Products Group include end-suction, double-suction, multistage,
axial flow, vertical turbine, sump and slurry pumps to meet a wide
variety of needs in the industrial and municipal markets including
pumps designed for API and ANSI standards. The Company
manufactures pumps from nonmetallic materials for applications
where metal alloys are unsatisfactory or prohibitively expensive.
The Company's vertical industrial turbine pumps are used
throughout industries where space limitations or unsatisfactory
suction conditions make the use of horizontal pumps impractical.
The Company's slurry pumps serve the alumina and phosphate mining
and minerals markets. Abrasion resistant pumps are manufactured
for mining, utility and steel mill applications. The Company's
Pump Repair and Overhaul (PRO) Service Centers play a role in
customer service by rebuilding and repairing pumps and other
rotating equipment produced by any manufacturer. The Company
currently operates nine PRO Service Centers domestically and three
in Canada.
The Company has a repair parts service organization to assist
customers in its key industrial areas of the United States.
Service representatives provide emergency service and technical
advice on a 24-hour basis.
In 1993, IPG posted sales of $316.1 million, a decrease of $6.0
million or 1.9% compared to 1992 results restated for the Texas Ag
Turbine restructuring noted above. Without restatement of 1992
results, IPG sales decreased $21.2 million or 6.3% below 1992
Page 4 of 54
<F50>
results. IPG sales were impacted by shipment delays early in the
fourth quarter of 1993, caused by the implementation of CATS II at
the Engineered Products Division. IPG experienced a softening of
pump order activity in 1993 as customers in key core markets
continued to defer spending for major projects. IPG repair parts
activity increased slightly over 1992 levels due largely to
energy-industry repair business offsetting the negative impact of
selective union strikes against coal producers of 1993 which
affected the demand for slurry product repair parts during most of
1993.
In 1994, IPG expects sales growth internationally and through its
increased presence in the $3 billion worldwide energy market due
to the 1992 acquisition of energy pump lines from the IDP joint
venture which are now produced by EPD. The introduction of the
Environamics product lines in late 1994 will further strengthen
the Company's position in the chemical market.
The Company's industrial sales organization markets pumps for U.S.
industrial users through 26 branch sales offices and approximately
100 independent sales representatives and distributors. The
services of the independent representatives and distributors are
used in geographic areas where it is not economical to maintain a
direct branch office and in some of the large metropolitan areas
where they supplement branch personnel in servicing specialized
markets. The Company employs approximately 60 sales engineers
nationwide in its branch sales offices.
Water Technologies Group
The Water Technologies Group represented approximately 43% of the
Company's sales and 53% of operating earnings for 1993. The Group
manufactures and sells water pump systems, which include pumps,
motors, pressure tanks and related accessories, used to supply
water for farms, single and multiple family residences, office
buildings, restaurants and other commercial uses, and municipal
water supply and sewage treatment facilities. Larger submersible
pumps are used to supply water for commercial and municipal
customers. A commercial line of pumps is manufactured and sold
for light industrial application. Submersible and deep-well
turbine pumps are used for irrigation and other agricultural
services. The Company believes it is the largest manufacturer of
home water pump systems in the world.
The home water systems market presently accounts for 60% of Water
Technologies Group sales. This market is cyclical, however,
because it is tied to general economic conditions and the weather.
In 1993, WTG posted sales of $239.6 million, an increase of $2.8
million or 1.2% above 1992 results restated for the Texas Ag
Turbine restructuring noted above. Without restatement, the WTG
sales increase was $18.0 million or 8.1% above 1992 results.
WTG-America sales increased 10.0% for 1993 compared to 1992 as new
products and dry U.S. weather conditions in the Northeast and
South boosted sales. WTG-Europe (Lowara) sales for 1993 were
10.3% below 1992 on a translated basis. On a local currency
basis, sales for the year increased 14.4% over 1992 due to the
shipment of new products and marketing initiatives, as well as the
weakening of the lira, which makes Italian products more price
competitive. Although affecting Lowara's translated results, the
weakening of the lira does not negatively impact overall WTG
profitability due to a natural hedge that exists since U.S.
division imports of Lowara product equal or exceed Lowara's
profitability.
Page 5 of 54
<F50>
In 1994, WTG will continue to focus on the development and
introduction of new products and expanding and improving existing
product lines. Additionally, WTG-Europe is continuing to expand
its European presence by establishing a subsidiary in France and
other European locations. These expansions are expected to result
in sales growth in the future and increased market penetration in
key regions. WTG-America (WTG-A) expects to introduce new
products during the second and third quarters of 1994 in an effort
to gain additional market share. Sales growth is therefore
expected for 1994.
The Company's agricultural pumps and domestic water systems pumps
manufactured by WTG are marketed in the United States through the
WTG-America sales force. The Company employs approximately 50
WTG-A field sales force persons to call on approximately 500
distributors throughout the country. These distributors,
primarily plumbing, heating and pump specialty wholesalers, sell
to and service nearly 7,300 Goulds Pumps Dealers Association
members.
Joint Ventures
Oil Dynamics, Inc., of Tulsa, Oklahoma, is a 50% owned joint
venture with Franklin Electric Co. which manufactures and
distributes a line of high performance submersible pumps used in
secondary oil recovery and provides the necessary sales and
service network. This joint venture posted a $3.8 million
earnings increase when compared to 1992 results, reflecting the
strength of significant Russian business that will continue into
the first quarter of 1994. Currently, due to the suspension of
Russian financing availability, further ODI shipments to Russia
have been halted. Though prior suspensions have been relatively
short in duration, the end date cannot be predicted.
International joint ventures are discussed on page 7 of this
report under "International Operations".
(D) General
Competition
The Company is one of the largest manufacturers of pumps in the
United States. There are few competitors in the industrial sector
in the United States who carry a diversified product line with a
broad service network comparable to that of the Company.
The Company competes principally on the basis of product
performance, quality, service and price. The Company enjoys the
reputation as a "quality" pump manufacturer with a complete repair
parts service. It believes it can maintain and strengthen its
present competitive position by continuing to improve its customer
service levels and manufacturing equipment and processes, by
designing and developing new and improved products, by maintaining
strategically located parts distribution centers and PRO Service
Centers and by promoting the efforts of its sales force in the
world market.
The pump industry is highly competitive with numerous competitors
in the field. Some competitors are divisions of large
corporations while others are companies with a limited product
line.
Page 6 of 54
<F50>
Product Development
The Company is committed to the ongoing development of new
products and improvement of existing products. Product
development and research activities are carried out at the
Company's various manufacturing facilities. Research and
development expenditures amounted to $7.2 million, $7.9 million,
and $6.1 million for the years ended December 31, 1993, 1992, and
1991, respectively. The higher level of R&D expenses in 1992
relates to the introduction of the SSV vertical multi-stage
product line during the second quarter of 1992 by WTG-Europe. In
1994, the Company expects to increase its investment in new
product development as well as in enhancements to existing
products in order to improve its competitive position in the
industry. The acquisition of Environamics Corporation and the
expansion into the energy market provide the Company with new
products to offer customers in the chemical and energy
marketplaces.
International Operations
The Company has wholly-owned subsidiaries in Italy, Canada,
Mexico, Singapore, South Korea, Venezuela, the Netherlands and the
Philippines. Sales by foreign affiliates were approximately $152
million, $161 million, and $159 million for 1993, 1992 and 1991,
respectively. The decrease noted in 1993 is a result of the
currency exchange impact of the weaker lire on translated results.
Our largest international subsidiary, Lowara S.p.A. (WTG-Europe)
located in Italy, also has wholly-owned subsidiaries in Italy,
France, Belgium and the Netherlands, and 90% owned subsidiaries in
the United Kingdom and Germany. Lowara fabricates stainless-steel
pumps which are sold worldwide and has recently introduced several
key new products with significant growth potential. The Canadian
operation includes a new manufacturing facility in Cambridge,
Ontario, for water systems products and for industrial products,
as well as sales offices in Montreal and Calgary. The Philippines
subsidiary manufactures residential and agricultural water systems
pumps. The Mexican operation manufactures various pumps for
industrial and agricultural applications. The Venezuelan
subsidiary produces and markets certain industrial and water
systems pumps primarily in Venezuelan markets. The Korean
operation is an assembly and testing facility opened in May 1992
to provide support to customers in the Asia-Pacific region. The
Netherlands operation is an assembly, testing and distribution
site for industrial products. The Singapore operation is an
assembly and distribution site for both IPG and WTG products
serving the Asia-Pacific region.
The international sales efforts of the Company's employees are
supplemented by local sales representatives. Offices to support
foreign sales have been established in Fort Lauderdale, Florida;
Singapore, Republic of Singapore; Cairo, Egypt; Athens, Greece;
IJmuiden, Netherlands; Dammam, Saudi Arabia; Southhampton,
England; Beijing, China; Taipei, Taiwan; Lima, Peru and Seoul,
South Korea. In addition, the foreign operations maintain sales
personnel to market their respective products.
Export sales from the United States were $62 million in 1993, $58
million in 1992, and $53 million in 1991. The Company's export
sales are distributed throughout the world without concentration
in any one geographic region.
The Company also has a joint venture agreement with Nanjing Deep
Well Pump Works of Nanjing, China to produce agricultural vertical
turbine pumps for sale worldwide. Lowara participates in a joint
Page 7 of 54
<F50>
venture marketing agreement with Tsurumi Company of Japan to
market the highly sophisticated Lowara fabricated stainless steel
pump line.
Raw Materials
The principal raw materials essential to manufacturing pumps are
nickel, iron, bronze and stainless steel. These are used more
specifically in the manufacture of castings produced in the
Company's three foundries. These internal foundries supply most
stainless steel and hard iron castings to the Company's machining
locations, thus reducing the need to purchase these products from
external suppliers.
In addition, sheets of stainless steel are used in various
stamping processes. Other components such as drivers, ball
bearings and mechanical seals, along with bar stock for shafts,
are purchased from several suppliers.
Raw materials for the Company's products are in adequate supply
from a number of alternative suppliers and, at present, the
Company has the ability to select and apportion among vendors
based on price, quality and delivery capability. The Company has
entered into several quality alliances with selected vendors in
order to focus on improving the quality, delivery and costs
related to purchased material. This Total Quality emphasis on
vendor performance will continue on an ongoing basis.
The Company purchases motors for its domestic water systems pumps
primarily from Franklin Electric Company. The Company expects
that it will continue to purchase motors from Franklin, but if the
Company were required to establish a relationship with another
supplier, its manufacturing business could be temporarily
disrupted.
Employee Relations
The Company presently employs approximately 4,100 persons.
Approximately 1,200 employees are covered under union contracts
stipulating rates of pay, hours of employment and other conditions
of employment. During 1993, the Company successfully extended its
contract for one year with approximately 80 union employees at the
Vertical Products Division, located in City of Industry,
California. Including California, contracts with four unions
covering approximately 430 employees expire in 1994. An early
settlement was reached recently with the International Association
of Machinists at the Municipal Business Unit in Baldwinsville, New
York, the smallest of the four unions; another proposed early
settlement was turned down by the 285-member United Steelworkers
Union located at the Slurry Pump Division (SPD) in Ashland,
Pennsylvania. The Company believes, however, that settlements
will be reached in all cases before the contract expiration dates.
The Company considers that its overall labor relations are good
with active labor-management committees operating at all
locations. Approximately 2,800 persons are employed domestically
while approximately 1,300 persons work at foreign affiliate
locations.
Seasonal Business
The Company operates at its lowest level during the first and last
quarter of each calendar year due primarily to the Water
Page 8 of 54
<F50>
Technologies Group market decline in winter months. The
Industrial Products Group of the Company is not a seasonal
business.
Environmental Considerations
On February 22, 1994, the Company was served with a copy of a
sixty day notice given by the Environmental Defense Fund and the
National Resources Defense Fund to the Attorney General and other
California officials alleging that the Company and other
submersible pump manufacturers were in violation of the
Proposition 65.
The law prohibits the discharge, into sources of drinking water,
of chemicals (including lead) known to the State of California to
cause cancer or reproduction toxicity and requires a warning if
individuals there are being exposed to such chemicals through the
normal and intended use of the product. The notifying parties are
permitted to commence litigation within sixty days in the event
the officials do not so proceed. Violations of the law may result
in a maximum civil penalty of $2,500 per day for each violation.
The Company has retained counsel in California and will vigorously
defend any law suit that may be instituted. It is not possible to
determine the extent of liability at this time, if any, or to
quantify the cost of settlement or civil penalty that may be
imposed.
In 1991, the Company recorded a $2.0 million provision for
estimated environmental costs. This charge reflects anticipated
costs to monitor and remediate a previously disclosed inactive
Company landfill site in Seneca Falls, New York. At December 31,
1993, 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.
Although the Company is unable to predict what legislation or
regulations may be adopted or enacted in the future with respect
to environmental protection and waste disposal, existing
legislation and regulations have had no material adverse effect on
its capital expenditures, earnings or competitive position.
Capital expenditures for property, plant and equipment for
environmental control were not material during 1993 and are not
anticipated to be material in 1994 or 1995.
Patents and Trademarks
Although the Company owns several beneficial patents, none are
considered to be material to its operations. The Company believes
its trademark "Goulds" is of importance worldwide, since its
products have been sold and used for almost 150 years.
Backlog
Backlog is primarily in the Industrial Products Group as the Water
Technologies Group maintains minimal backlog levels since their
products are normally shipped within two weeks from receipt of a
customer order. The backlog of orders was $98.6 million at
February 28, 1994, a decrease of $1.4 million from December 31,
1993 levels.
Page 9 of 54
<F50>
EXECUTIVE OFFICERS
Name Age Present Office and Experience
S. V. Ardia 52 President and Chief Executive Officer since
1985; President and Chief Operating Officer
1984-1985; Vice President-Corporate Sales
1982-1984; Vice President-International
Operations 1979-1982; General Manager of
Standard Pump Division of Worthington Pump Co.
1976-1979; Director of Goulds Pumps
International Sales 1974-1976; Director since
1984.
E. B. Bradshaw 55 Vice President since 1979; Secretary since 1974;
General Counsel since 1969.
M. A. Lambertsen 54 Vice President - Human Resources since December,
1991; Previously Vice President of Human
Resources of Fisher-Price, Inc., 1978-1991.
J. M. Morphy 46 Group Vice President - Industrial Products Group
since October 1992; Vice President and Chief
Financial Officer 1986-1993; Controller
1985-1986; Previously Vice-President and
Controller, Computer Consoles, Inc., Rochester,
NY.
J. P. Murphy 47 Vice President and Chief Financial Officer since
August 1993; Previously Executive Vice President
and Chief Financial Officer of Westcan
Chromalox, Inc., in Toronto, Canada, 1991-1993;
Vice President-Finance and Administration and
Chief Financial Officer of Hamilton Beach, Inc.,
of Waterbury, CT, 1986-1991.
F. J. Zonarich 48 Group Vice President - Water Technologies Group
since December, 1989; Vice President Sales and
Marketing-Industrial Products Group 1986-1989;
Commercial Manager, Engineered Products Division
1985-1986; Director of Marketing 1982-1985.
No family relationship exists between any of the above executive officers.
The term of office for all executive officers listed above runs from one
annual meeting to the next, or approximately one year.
There were no arrangements or understandings between any of the above
executive officers and any other person pursuant to which they were selected
as an executive officer.
Page 10 of 54
<F50>
ITEM 2. PROPERTIES
The Company's Corporate headquarters and primary manufacturing facilities are
located in Seneca Falls, New York. Other domestic manufacturing facilities
are also located in Baldwinsville, New York; Ashland, Pennsylvania; Lubbock,
Texas; Hudson, New Hampshire; and City of Industry, California. An assembly,
shipping, and receiving facility for water systems is maintained in Auburn,
New York. International manufacturing facilities are currently located in
Italy, Canada, Mexico, Venezuela, South Korea and the Philippines. Lowara
maintains subsidiaries outside of Italy which are located in Germany, Belgium,
France, the Netherlands, and the United Kingdom.
Substantially all manufacturing sites are owned, and most sales offices,
warehouses and service facilities are leased. The Company maintains
warehouses or distribution centers in Chicago, Illinois; Houston, Texas;
Portland, Oregon; Savannah, Georgia; Baton Rouge, Louisiana; and IJmuiden, the
Netherlands, which carry inventories of pumps and parts sold to industrial
users. The Company maintains regional warehouses to keep inventories of water
pump systems and/or deep-well turbine components readily available in the
vicinities of Chicago, Illinois; Orlando, Florida; Fresno, California;
Memphis, Tennessee; Melbourne, Australia, and Singapore.
During the five years ended December 31, 1993, the Company invested
approximately $153 million in capital improvements, primarily relating to
upgrades in machinery and equipment. Management believes that the Company's
facilities are well maintained and adequate for its operations.
ITEM 3. LEGAL PROCEEDINGS
On February 22, 1994, the Company was served with a copy of a sixty day notice
given by the Environmental Defense Fund and the National Resources Defense
Fund to the Attorney General and other California officials alleging that the
Company and other submersible pump manufacturers were in violation of the
Proposition 65.
The law prohibits the discharge, into sources of drinking water, of chemicals
(including lead) known to the State of California to cause cancer or
reproduction toxicity and requires a warning if individuals there are being
exposed to such chemicals through the normal and intended use of the product.
The notifying parties are permitted to commence litigation within sixty days
in the event the officials do not so proceed. Violations of the law may
result in a maximum civil penalty of $2,500 per day for each violation.
The Company has retained counsel in California and will vigorously defend any
law suit that may be instituted. It is not possible to determine the extent
of liability at this time, if any, or to quantify the cost of settlement or
civil penalty that may be imposed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the fourth quarter
of 1993.
Page 11 of 54
<F50>
Part II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY SECURITIES AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded in the NASDAQ National Market System
under the symbol GULD. Quarterly high and low sales prices reported by NASDAQ
National Markets and related dividend information for the past two years is
set forth below:
Market value per share
1993 1992
Quarter High Low Quarter High Low
1st $25.75 $21.25 1st $28.63 $22.75
2nd $25.63 $22.38 2nd $29.38 $22.13
3rd $26.50 $23.38 3rd $24.38 $21.63
4th $26.75 $23.13 4th $25.00 $20.00
Year $26.75 $21.25 Year $29.38 $20.00
Dividend paid per common share
Quarter 1993 1992
1st $.20 $.20
2nd $.20 $.20
3rd $.20 $.20
4th $.20 $.20
Year $.80 $.80
The approximate number of record holders of the Company's common stock as of
February 28, 1994 was 5,484.
The Company's policy is to pay cash dividends quarterly. A quarterly cash
dividend has been paid without interruption since 1948. The amount of
dividends is within the discretion of the Board of Directors and depends,
among other factors, on earnings, capital requirements and the operating and
financial condition of the Company.
There are no dividend restrictions which materially limit the Company's
current ability to pay dividends.
Page 12 of 27
<F50>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
Five-Year Summary of Financial Data
Goulds Pumps, Incorporated
(Dollars in millions except per share data)
<CAPTION>
OPERATIONS: 1993 1992 1991 1990 1989 1
<S> <C> <C> <C> <C> <C>
Net sales $555.7 $558.9 $566.6 $554.7 $507.0
Gross profit 156.3 173.3 175.9 168.1 151.6
Interest expense 5.4 5.0 6.4 9.4 9.7
Earnings from continuing operations before
income taxes, extraordinary charge, and
cumulative effect of accounting changes 34.4 35.8 51.3 48.6 46.1
Earnings from continuing operations before
extraordinary charge and cumulative effect
of accounting changes 23.5 21.8 31.3 30.6 28.8
Loss from discontinued operations -- -- -- -- (30.1)
Extraordinary charge -- -- (.6) -- --
Cumulative effect of accounting changes (1.0) (29.7) -- -- --
Net earnings (loss) 22.5 (7.9) 30.7 30.6 (1.3)
Earnings from continuing operations before
extraordinary charge, cumulative effect
of accounting changes, and restructuring
charge 23.5 25.7 31.3 30.6 28.8
COMMON STOCK:
Number of shareholders at year-end 5,555 5,902 6,461 6,600 6,462
Average shares outstanding
(in thousands) 21,126 21,027 20,781 20,589 20,446
Net earnings (loss) per share:
Continuing operations before extraordinary
charge and cumulative effect of accounting
changes 1.12 1.04 1.51 1.49 1.41
Discontinued operations -- -- -- -- (1.47)
Extraordinary charge -- -- (.03) -- --
Cumulative effect of accounting changes (.05) (1.42) -- -- --
Net earnings (loss) per share 1.07 (.38) 1.48 1.49 (.06)
Net earnings per share from continuing
operations before extraordinary charge,
cumulative effect of accounting changes,
and restructuring charge 1.12 1.22 1.51 1.49 1.41
Dividends per share .80 .80 .80 .76 .76
Shareholders' equity per share 8.85 9.15 10.51 10.00 8.86
Market value per share-low 21.25 20.00 18.00 15.13 16.50
-high 26.75 29.38 26.00 28.50 24.63
</TABLE>
Page 13 of 54
<F50>
<TABLE>
Five-Year Summary of Financial Data (Cont'd.)
Dollars in millions except per share data
<CAPTION>
FINANCIAL DATA: 1993 1992 1991 1990 1989 1
<S> <C> <C> <C> <C> <C>
Capital additions 24.7 40.0 38.8 28.0 21.3
Depreciation 24.8 23.8 22.8 20.4 19.9
Property, plant and equipment-net 149.0 154.6 140.8 128.5 117.4
Working capital 109.7 122.1 122.1 127.3 126.7
Debt (including short-term) 87.4 65.3 64.2 96.6 98.3
Total assets 438.5 418.8 395.9 424.9 394.5
Shareholders' equity 187.2 192.8 219.3 206.5 181.7
Debt to equity % 46.7 33.9 29.3 46.8 54.1
Continuing operations before extraordinary
charge and cumulative effect of accounting
changes:
Return on average shareholders' equity % 12.4 9.6 14.6 15.8 14.3
Return on average capital % 9.7 8.0 11.2 11.3 10.9
Continuing operations before extraordinary
charge, cumulative effect of accounting
changes, and restructuring charge:
Return on average shareholders' equity % 12.4 11.1 14.6 15.8 14.3
Return on average capital % 9.7 9.1 11.2 11.3 10.9
Number of employees at year-end 4,100 4,300 4,350 4,300 4,200
<F54>
1 All information restated to reflect discontinued operations of the investment in Raytec Watergroup Company,
L.P.
</TABLE>
Page 14 of 54
<F50>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis reviews the Company's operating results for
each of the three years in the period ended December 31, 1993, and its financial
condition at December 31, 1993. The focus of this review is on the underlying
business reasons for significant changes and trends affecting our sales, net
earnings, and financial condition. This review should be read in conjunction
with the accompanying consolidated financial statements, the related Notes to
Consolidated Financial Statements and the Five-Year Summary of Financial Data.
OVERVIEW
1993 was a year in which the pump industry as a whole continued to be impacted
by weak economic conditions and increased competitive pricing pressures. Goulds
Pumps' 1993 sales were slightly below 1992 levels, and earnings for the year of
$1.12 from continuing operations were 8.2% lower than last year's $1.22 from
continuing operations, exclusive of 1992 restructuring charges ($.19 per share)
and 7.7% above last year's $1.04 in earnings before the cumulative effect of the
accounting changes. The decrease from 1992's $1.22 earnings level is
attributable to a consolidated gross margin decline of nearly three percentage
points caused by stiff price competition in key markets and lower fourth quarter
sales at EPD due to the implementation of CATS II, a new systems-driven
manufacturing process. These declines were partially offset by a decrease in
selling, general and administrative costs resulting from cost control measures
and favorability in the translation of WTG-Europe's (Lowara) expenses, an
outstanding performance by our joint venture, Oil Dynamics, Inc., and the tax
benefits of the European corporate restructuring and other tax strategies.
Reported 1993 earnings per share of $1.07 reflect the recording as of January 1,
1993 of the cumulative effect of the adoption of Financial Accounting Standard
No. 112 (SFAS No. 112), "Employers' Accounting for Postemployment Benefits,"
which had a $.05 impact.
1993 orders of $558.4 million were down slightly from 1992's record orders level
of $560.1 million. Industrial Products Group (IPG) orders decreased 2.4% while
Water Technologies Group (WTG) orders increased 2.6%. Fourth quarter 1993 order
activity was 8.6% above 1992's fourth quarter, as both IPG and WTG experienced
order level upturns. The Company is hopeful that the fourth quarter results are
an indication of the beginning of a stronger orders trend into 1994.
IPG experienced a softening of pump order activity in 1993 as customers in key
core markets continued to defer spending for major projects. IPG repair parts
activity increased slightly over 1992 levels due largely to energy-industry
repair business offsetting the negative impact of selective union strikes
against coal producers which affected the demand for slurry product repair
parts during most of 1993. These strikes were settled during the fourth quarter
of 1993.
Within WTG, WTG-America's (WTG-A) 1993 orders levels increased 12.2% compared to
1992, while orders at WTG-Europe declined 10.3% on a translated basis. On a
local currency basis, WTG-Europe's 1993 orders increased 14.4% over 1992,
primarily due to new product introductions, marketing initiatives, and the
impact of the weaker lira, which makes Lowara's products more price competitive.
WTG-A orders increased due the impact of new product promotions and to dry U.S.
weather conditions in the Northeast and South.
1993 was a year of many challenges as well as many accomplishments. Highlights
of the year include:
* The acquisition of Environamics Corporation. Goulds' investment in
Environamics reflects the Company's continuing commitment to be the
leader in advancing state-of-the-art pump design. The Company believes
the Environamics pumps will qualify as the best available technology to
control chemical emissions and expects demand for the pumps to increase
as manufacturing plants respond to requirements of OSHA and the Clean
Air Act. Sales of the Environamics product line could reach $40 million
by the late 1990s.
* During 1993, the Company's two largest divisions, the Engineered
Products Division (EPD) and WTG-America implemented phase II of CATS -
Competitive Advantage Through Simplification. This is a systems-driven
Page 15 of 54
<F50>
overhaul of how the Company operates, from customer inquiries to order
entry to shipment. While it will take several months for all aspects
of these newest introductions of CATS to fully significant improvements
are expected in the Company's ability to deliver products efficiently
to customers in 1994 and beyond.
* During the fourth quarter of 1993, the Company substantially completed
personnel reductions in IPG and on the Corporate staff that will result
in future cost savings in excess of $4.0 million annually. The Company
recognized approximately $1.3 million in severance costs associated with
this downsizing in 1993.
* The Company continued to expand its international focus and presence as
WTG-Europe (Lowara) has established a new subsidiary in France, and will
look to add locations during 1994. In 1994, the Company expects to
continue the trend toward international growth through increased sales
presence in the Asia-Pacific region, South America, and Europe.
* The Company implemented several tax planning strategies which resulted
in a decreased effective tax rate in 1993. A significant one-time
adjustment due to tax code changes and the application of SFAS No. 109
as well as the implementation of the European corporate tax
restructuring, were primarily responsible for the rate decrease in 1993.
Several of the strategies put in place in 1993 are expected to yield
future tax benefits.
* The energy-industry product line, which the Company acquired in 1992,
exceeded 1993 expectations in terms of profitability, primarily due to
strong repair parts shipment activity and cost containment measures.
The Company anticipates the commencement of energy pump shipments during
1994.
* The outstanding performance of the 50%-owned joint venture, Oil
Dynamics, Inc. (ODI), had a major impact on 1993's results. ODI
benefitted from the strength of significant Russian business during
1993.
* Safety performance in 1993 again showed continuous improvement as the
Company's employees incurred the lowest number of accidents on record
within Goulds in a one-year period. Safety improvements over the
past two years have resulted in lower Worker's Compensation insurance
premiums for 1994.
Page 16 of 54
<F50>
Analysis of Operations
The following table indicates the percentage relationships of earnings and
expense items included in the Consolidated Statements of Earnings for each of
the three years ended December 31, 1993 and the percentage change in those items
or such years.
As a Percentage of Total Percentage Change
Net Sales
1993 vs 1992 vs
1993 1992 1991 1992 1991
100.0% 100.0% 100.0% Net Sales (0.6)% (1.4)%
71.9 69.0 69.0 Cost of sales 3.6 (1.3)
20.7 21.4 20.4 SG&A expenses (3.8) 3.5
1.3 1.4 1.0 R&D expenses (9.6) 29.5
-- 1.1 -- Restructuring charge (100.0) --
-- -- 0.4 Environmental provision -- (100.0)
Earnings from investments
(0.8) (0.1) (0.4) and affiliates 542.6 (71.3)
1.0 0.9 1.1 Interest expense 8.1 (21.3)
(0.4) (0.2) (0.4) Interest income 35.7 (36.8)
0.1 0.1 (0.1) Other (income) expense-net 1.9 (175.8)
Earnings before income
taxes, extraordinary charge
and cumulative effect of
6.2 6.4 9.0 accounting changes (3.9) (30.1)
1.9 2.5 3.5 Income taxes (22.4) (30.1)
Earnings before extraordinary
charge and cumulative effect
4.3 3.9 5.5 of accounting changes 7.9 (30.2)
-- -- (0.1) Extraordinary charge -- (100.0)
Cumulative effect of
(0.2) (5.3) -- accounting changes (96.6) --
4.1% (1.4)% 5.4% Net earnings (loss) N.M. N.M.
N.M. - Not meaningful
Net Sales
The decrease in total sales of $3.2 million in 1993 compared to 1992 is
primarily composed of a $6.0 million or 1.9% decrease in Industrial Products
Group sales while Water Technologies Group sales increased $2.8 million or
1.2%. IPG sales were impacted by shipment delays early in the fourth quarter
of 1993, caused by the implementation of CATS II at the Engineered Products
Division (EPD). We expect that it will take a number of months before we are
able to reduce this current shipment backlog. For WTG, WTG-America sales
increased 10.0% for 1993 compared to 1992 as new products and dry U.S. weather
conditions in the Northeast and South boosted sales. WTG-Europe (Lowara)
sales for 1993 were 10.3% below 1992 on a translated basis. On a local
currency basis, sales for the year increased 14.4% over 1992 due to the
shipment of new products and marketing initiatives, as well as the weakening
of the lira, which makes Italian products more price competitive. Although
affecting Lowara's translated results, the weakening of the lira does not
negatively impact overall WTG profitability due to a natural hedge that exists
since U.S. division imports of Lowara product equal or exceed Lowara's
profitability.
In 1994, IPG expects sales growth internationally and through our increased
presence in the $3 billion worldwide energy market due to the 1992 acquisition
of energy pump lines from the IDP joint venture, which are now produced by
EPD. The introduction of the Environamics product lines in late 1994 will
further strengthen the Company's competitive position in the chemical market.
WTG will continue to focus on the development and introduction of new products
and expanding and improving existing product lines. Additionally, WTG-Europe
is continuing to expand its European presence by establishing a subsidiary in
France and other European locations. These expansions are expected to result
in sales growth in the future and increased market penetration in key regions.
WTG-America expects to introduce new products during the second and third
quarters of 1994 in an effort to gain additional market share. Sales growth
is therefore expected for 1994.
Page 17 of 54
<F50>
During 1992, net sales of $558.9 million represented a decrease of $7.7
million or 1.4% compared to 1991. In 1992, IPG sales decreased due to lower
repair parts order activity while WTG sales increased $1.0 million primarily
due to translation favorability at WTG-Europe.
Costs and Expenses
Gross profit as a percentage of net sales was 28.1% for 1993, compared to
31.0% for 1992. The Industrial Products Group gross profit percentage for
1993 decreased to 27.5% from 31.0% a year ago. This decrease is largely
attributable to the continued competitive pricing environment in the U.S. and
certain international markets and a shipments delay of approximately $9
million early in the fourth quarter at EPD due to the implementation of CATS
II. We expect that it will take a number of months before we are able to
reduce this current shipment backlog. The Water Technologies Group gross
profit percentage decreased to 29.6% in 1993, compared to 32.0% for 1992.
This decrease is due in large part to pricing pressure and unfavorable product
shipment mix.
Selling, general and administrative (SG&A) expenses were 20.7%, 21.4%, and
20.4% of net sales in 1993, 1992, and 1991, respectively. The decrease in
1993 was a result of cost containment measures implemented by the Company,
which included restructuring and workforce reductions. Also reducing reported
SG&A in 1993 is the favorability associated with the translation of WTG-Europe
expenses.
During 1993, the Company's investment in research and development (R&D) was
$7.2 million, compared to $7.9 million in 1992, and $6.1 million in 1991. The
higher level of R&D expenses in 1992 relates to the introduction of the SSV
vertical multi-stage product line during the second quarter of 1992 by WTG-
Europe. In 1994, the Company expects to increase its investment in new
product development as well as in enhancements to existing products in order
to improve its competitive position in the industry. The acquisition of
Environamics Corporation and the expansion into the energy market provide the
Company with new products to offer customers in the chemical and energy
marketplaces.
Other Income and Expenses
Interest expense increased $.4 million due to the higher levels of short-term
and long-term debt being maintained in 1993 in comparison to 1992. Interest
expense in 1994 is anticipated to be higher as the Company has drawn down on
a previously arranged long-term financing agreement at a higher interest rate
(see Liquidity and Capital Resources).
Earnings from investments and affiliates increased $3.9 million in 1993
compared to the same period in 1992. This increase is due to Goulds' share
of the 1993 earnings of Oil Dynamics, Inc. (ODI), a 50%-owned joint venture,
which posted a $3.8 million increase when compared to 1992 results, reflecting
the strength of significant Russian business that will continue into the first
quarter of 1994. Currently, due to the suspension of Russian financing
availability, further ODI shipments to Russia have been halted. Though prior
suspensions have been relatively short in duration, the end date of this
suspension cannot be predicted.
The variations in other (income) expense-net in 1992 as compared to 1991 were
primarily the result of non-recurring income in 1991 from the receipt of
government subsidies related to prior year capital expenditures by WTG-Europe.
The provision for income taxes represents 31.5%, 39.0%, and 39.0% of earnings
from continuing operations before income taxes in 1993, 1992, and 1991,
respectively. In 1993, our effective tax rate decreased due to a third
quarter cumulative adjustment associated with recent tax code changes and new
accounting rules for income taxes (SFAS No. 109) and the implementation of the
corporate European tax restructuring in the fourth quarter. The effective tax
rate in 1994 is expected to be 38.5%, reflecting the higher marginal tax rates
enacted, less other tax reduction strategies put into place.
Page 18 of 54
<F50>
Return on Equity
The percentage return on average shareholders' equity in 1993 increased to
12.4% from 9.6% in 1992. The percentage in 1992 reflects the impact of
restructuring charges. Excluding the after-tax effects of the restructuring
charge, the 1992 return on average shareholders' equity would have been 11.1%.
The increase in 1993 reflects the reductions in shareholders' equity caused
by the $12.3 million decrease in cumulative translation adjustments on the
consolidated balance sheet and an increase in the level of after-tax earnings
from continuing operations, primarily due to the tax restructuring strategy.
Non-recurring Charges
* Restructuring Charge. During 1992, the Company recorded the impact of
a restructuring program designed to reduce costs, improve operating
efficiencies, and increase shareholder value. The program included
$2.9 million related to the early retirement of employees. In
addition, $3.4 million resulted from the relocation of certain product
lines and the centralization of contract engineering for high-
specification products to better meet customer requirements. The
aggregate restructuring program costs are shown as a separate line item
in the accompanying consolidated statement of earnings and resulted in
an after-tax charge of $3.9 million ($.19 per share) in 1992. The
actions considered in the restructuring charge were essentially
completed during 1993. The Company began in 1993 to realize the
benefits associated with this restructuring through reduced payroll-
related costs and improved operating efficiencies. A successful
transfer of the industrial sump pump line (Model 3171) from the
Lubbock, Texas, facility to the Slurry Pump Division in Ashland,
Pennsylvania, was also accomplished.
* Environmental Provision. In 1991, the Company recorded a $2.0 million
provision for estimated environmental costs. This charge reflects
anticipated costs to monitor and remediate an inactive Company landfill
site in Seneca Falls, New York. At December 31, 1993, 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.
* Extraordinary Charge. In 1991, an extraordinary charge net of tax
benefits of $.6 million was recognized for the early retirement of the
Company's Convertible Subordinated Debentures. The $25.0 million of
Debentures carried an interest rate of 9- 7/8% and were due in the year
2006. This one-time charge was fully recovered during 1992 as we
refinanced the debt at substantially lower interest rates.
Orders and Backlog
In 1993, orders received were $558.4 million, less than 1% below the record
1992 orders level of $560.1 million. Backlog levels at December 31, 1993,
increased from 1992 by $3.2 million or 3.3% to $100.0 million, primarily due
to the high level of fourth quarter orders activity and the delays in EPD
shipments caused by the CATS II implementation. Backlog exists primarily in
the Industrial Products Group as the Water Technologies Group maintains
minimal backlog levels since its products are normally shipped within two
weeks from receipt of a customer order.
Liquidity and Capital Resources
As reflected in the Consolidated Statements of Cash Flows, the $20.9 million
of cash generated by operating activities and $10.9 million of cash provided
by net financing activities in 1993, combined with a negative $2.0 million
translation effect, was utilized to fund $36.3 million of net investing
activities, while decreasing cash and cash equivalents by $6.5 million.
Page 19 of 54
<F50>
Significant items impacting cash flows from operating activities in 1993
include an $18.3 million increase in trade receivables due largely to
increased December shipments volume over 1992 at both IPG and WTG and a $12.5
million increase in inventories primarily at WTG-America and WTG-Europe to
support higher shipment levels and the promotion of new products.
Capital additions in 1993 were $24.7 million, which approximated depreciation
of $24.8 million. Significant projects included investments in the CATS II
business systems hardware and software upgrades at EPD and equipment additions
at domestic locations. In 1994, the Company expects to spend approximately
$25-30 million in capital additions. The 1994 spending level includes
continued major investments in upgrades of machinery and equipment and product
development related expenditures that include the new Environamics technology.
In the third quarter of 1993, WTG-Europe entered into an agreement whereby 10
billion lire ($6.1 million) of proceeds from short-term loans were invested
in insurance certificates. The net effect of this transaction is to increase
WTG-Europe's interest expense and interest income, resulting in increased
profit after taxes due to tax rate differentials on these items.
Cash flows from investing activities in 1992 reflected the availability of
sinking funds, previously restricted and classified as other long-term assets
related to Industrial Revenue Bond proceeds.
Debt levels at the end of 1993 increased significantly compared to those at
December 31, 1992 primarily due to higher levels of inventory and other
working capital items. 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 $10.0 million Term Loan due
in August 1993 and other short-term debt. Additionally, the Company currently
intends to replace its $30 million Revolving Credit Agreement, which will
expire on October 31, 1994. The Company believes cash from operations and the
$56.1 million of available credit facilities at December 31, 1993, will be
sufficient to meet its liquidity needs during 1994.
Cumulative translation adjustments on the consolidated balance sheet at
December 31, 1993 decreased shareholders' equity by $12.3 million from
December 31, 1992 reflecting the weakening of the devalued Italian lira and
the Canadian dollar against the U.S. dollar since the fourth quarter of 1992.
In 1993, the Company redeemed the rights issued under the Stockholder Rights
Plan instituted in 1988. The Company paid shareholders a redemption price of
$.01 per share outstanding or approximately $200,000.
Inflation
The market price of a number of the Company's product lines decreased in 1993
due to worldwide competitive pressures in the pump industry. At the same
time, material cost increases from our vendors have been minimal. The Company
continues to monitor the impact of inflation in order to minimize its effects
in future years through pricing strategies, productivity improvements, and
cost reductions.
Events Impacting Future Operating Results
During 1993, the Company successfully extended its contract for one year with
approximately 80 union employees at the Vertical Products Division, located
in City of Industry, California. Including California, contracts with four
unions covering approximately 430 employees expire in 1994, the largest being
the 285-member United Steelworkers located at the Slurry Pump Division (SPD)
in Ashland, Pennsylvania. The Company considers that its overall labor
relations are good with active labor-management committees operating at all
locations.
During the fourth quarter of 1993, the Company announced it acquired
Environamics Corporation, a privately held company whose patented hermetically
sealed pump technology will greatly expand Goulds' ability to help the
Page 20 of 54
<F50>
chemical processing industry lower production costs and also meet increasingly
stringent environmental regulations. Environamics is operating as an
autonomous subsidiary, augmenting Goulds' current industry distribution
channels used by IPG. Shipments of Environamics products are expected to
begin near the end of the third quarter of 1994.
Sean P. Murphy joined the Company in August 1993 as Vice President and Chief
Financial Officer (CFO). Mr. Murphy assumed the CFO duties from John M.
Morphy, who continues as Group Vice President of the Industrial Products
Group.
Earnings of our WTG-Europe (Lowara) subsidiary continue to be impacted by
unfavorable currency exchange. Offsetting this negative impact is the natural
hedge which exists through the transfer of Lowara products to WTG-America.
We will continue to monitor exchange rate fluctuations and where appropriate,
consider forward contracts for lira purchases to control the impact of these
fluctuations.
Accounting Standards
Effective in the first quarter of 1993, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." See Note 11 for a
detailed discussion of the impact of this change on the Company's consolidated
financial statements.
Effective in the first quarter of 1992, the Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"; SFAS
No. 107, "Disclosures About Fair Value of Financial Instruments"; and SFAS No.
109, "Accounting for Income Taxes." See Notes 11, 8, and 10, respectively,
for a detailed discussion of the impact of these standards on the Company's
consolidated financial statements.
In Conclusion
The Company is encouraged that it has taken important steps in 1993 that will
yield improved results in 1994 and beyond. One milestone achieved this year
was the implementation of CATS II and related manufacturing process
improvements, which will translate into increased productivity and better
customer service. Other important steps have been the acquisition of
Environamics Corporation, the Company's expansion in the energy-industry
business, and cost containment measures that included reducing the workforce.
These actions, when combined with signs of a stronger orders trend, give the
Company solid reasons for expecting improvement next year in both sales and
profitability.
Page 21 of 54
<F50>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
Page
Independent Auditors' Report 23
Consolidated Statements of Earnings 24
Consolidated Balance Sheets 25
Consolidated Statements of Shareholders' Equity 26
Consolidated Statements of Cash Flows 27
Notes to Consolidated Financial Statements 28-39
Supplementary Data
Quarterly Financial Data 40
Page 22 of 54
<F50>
Independent Auditors' Report
To the Board of Directors and Shareholders of Goulds Pumps, Incorporated:
We have audited the accompanying consolidated balance sheets of Goulds Pumps,
Incorporated, and its subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1993.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Goulds Pumps, Incorporated, and
its subsidiaries at December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1993, in conformity with generally accepted accounting
principles.
As discussed in Note 11 to the consolidated financial statements, the Company
changed its methods of accounting for postretirement benefits other than
pensions (effective January 1, 1992) and postemployment benefits (effective
January 1, 1993).
DELOITTE & TOUCHE
Rochester, New York
January 26, 1994
Page 23 of 54
<F50>
<TABLE>
Consolidated Statements of Earnings
Goulds Pumps, Incorporated
(Dollars in thousands except per share data)
<CAPTION>
For the years ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Net sales $555,692 $558,903 $566,566
Costs and expenses
Cost of sales 399,374 385,567 390,664
Selling, general and administrative expenses 115,153 119,752 115,673
Research and development expenses 7,177 7,939 6,129
Restructuring charge -- 6,300 --
Environmental provision -- -- 2,000
Earnings from investments and affiliates (4,569) (711) (2,479)
Interest expense 5,403 4,998 6,351
Interest income (1,909) (1,407) (2,225)
Other (income) expense-net 648 636 (839)
521,277 523,074 515,274
Earnings before income taxes, extraordinary
charge, and cumulative effect of accounting
changes 34,415 35,829 51,292
Income taxes 10,841 13,976 20,004
Earnings before extraordinary charge and
cumulative effect of accounting changes 23,574 21,853 31,288
Extraordinary charge from early
extinguishment of debt, net of income
tax benefit -- -- (557)
Cumulative effect of accounting changes,
net of income tax benefit:
Postretirement benefits -- (29,746) --
Postemployment benefits (1,026) -- --
Net earnings (loss) $ 22,548 $ (7,893) $ 30,731
Net earnings (loss) per common share
Earnings before extraordinary charge and
cumulative effect of accounting changes $ 1.12 $ 1.04 $ 1.51
Extraordinary charge -- -- (.03)
Cumulative effect of accounting changes:
Postretirement benefits -- (1.42) --
Postemployment benefits (.05) -- --
Net earnings (loss) per common share $ 1.07 $ (.38) $ 1.48
<F54>
See Notes to Consolidated Financial Statements.
</TABLE>
Page 24 of 54
<F50>
<TABLE>
Consolidated Balance Sheets
Goulds Pumps, Incorporated
(Dollars in thousands)
<CAPTION>
December 31, 1993 1992
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 7,153 $ 13,681
Receivables-net 109,637 98,349
Inventories 106,185 102,031
Deferred tax asset 13,557 13,498
Prepaid expenses and other current assets 11,115 9,171
Total current assets 247,647 236,730
Property, plant and equipment-net 148,973 154,586
Investments, including investments in affiliates 18,848 12,735
Deferred tax asset 5,031 2,221
Other assets 18,003 12,485
$438,502 $418,757
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of debt $ 48,493 $ 24,379
Trade payables 34,726 40,244
Compensation and commissions 16,519 20,733
Income taxes payable 21 1,438
Pension 6,191 444
Progress payments 2,443 3,288
Warranty reserves 3,947 3,466
Dividends payable 4,231 4,216
Deferred tax liability 1,257 1,257
Restructuring accrual 199 3,204
Other 19,906 11,973
Total current liabilities 137,933 114,642
Long-term debt 38,859 40,887
Pension 16,905 15,344
Other postretirement benefit obligation 53,418 50,864
Deferred tax liability 4,186 4,235
Shareholders' equity:
Preferred stock - $20.00 par value: shares-authorized:
750,000; issued and outstanding: none -- --
Common stock - $1.00 par value: shares-authorized:
90,000,000; issued and outstanding: 1993-21,153,966
1992-21,079,968 21,154 21,080
Additional paid-in capital 57,044 55,784
Retained earnings 120,415 114,988
Cumulative translation adjustments and other (11,412) 933
Total shareholders' equity 187,201 192,785
$438,502 $418,757
<F54>
See Notes to Consolidated Financial Statements.
</TABLE>
Page 25 of 54
<F50>
<TABLE>
Consolidated Statements of Shareholders' Equity
Goulds Pumps, Incorporated
(Dollars in thousands)
<CAPTION>
Cumulative
Additional Translation Total
Common Paid-In Retained Adjustments Shareholders'
Stock Capital Earnings and Other Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1991 $20,657 $48,979 $125,727 $11,142 $206,505
Net earnings -- -- 30,731 -- 30,731
Dividends declared -- -- (16,645) -- (16,645)
Common stock issued 207 3,433 -- -- 3,640
Foreign currency translation -- -- -- (4,963) (4,963)
Pension adjustment -- -- -- (13) (13)
Balance, December 31, 1991 20,864 52,412 139,813 6,166 219,255
Net earnings (loss) -- -- (7,893) -- (7,893)
Dividends declared -- -- (16,932) -- (16,932)
Common stock issued 216 3,372 -- -- 3,588
Foreign currency translation -- -- -- (5,192) (5,192)
Pension adjustment -- -- -- (41) (41)
Balance, December 31, 1992 21,080 55,784 114,988 933 192,785
Net earnings -- -- 22,548 -- 22,548
Dividends declared -- -- (17,121) -- (17,121)
Common stock issued 74 1,260 -- -- 1,334
Foreign currency translation -- -- -- (11,853) (11,853)
Pension adjustment (492) (492)
Balance, December 31, 1993 $21,154 $57,044 $120,415 $(11,412) $187,201
<F54>
See Notes to Consolidated Financial Statements.
</TABLE>
Page 26 of 54
<F50>
<TABLE>
Consolidated Statements of Cash Flows
Goulds Pumps, Incorporated
(Dollars in thousands)
<CAPTION>
For the years ended December 31, 1993 1992 1991
Operating activities:
<S> <C> <S> <C> <C> <C>
Earnings (loss) from operations $22,548 $(7,893) $31,288
Adjustments to reconcile earnings (loss) from operations to
net cash provided by operations:
Depreciation 24,788 23,819 22,818
Amortization 1,170 1,161 1,162
Cumulative effect of accounting changes 1,579 47,978 --
Restructuring charge -- 6,300 --
Earnings from affiliates (4,569) (711) (2,052)
Dividends received from affiliates 4,425 1,197 2,119
Increase (decrease) in deferred tax liability 1,110 (15,985) (2,574)
Decrease (increase) in deferred tax asset (2,869) (7,607) 403
Decrease (increase) in receivables-net (18,312) 217 5,286
Increase in inventories (12,493) (12,583) (157)
Increase (decrease) in trade payables, accrued expenses and
other 4,939 7,145 (2,672)
Other-net (1,441) 5,379 872
Net cash provided by operating activities 20,875 48,417 56,493
Investing activities:
Decrease in marketable securities -- 1,019 21,714
Capital additions (24,650) (40,004) (38,757)
Investments in and advances to affiliates -- -- 6,388
Investment in insurance certificates (6,317) -- --
Decrease in investments of unexpended revenue bond
funds included in other assets -- 6,045 3,603
Purchases of other assets (5,340) (5,541) (3,362)
Other-net 41 73 123
Net cash applied to investing activities (36,266) (38,408) (10,291)
Financing activities:
Proceeds from long-term debt 30,099 11,513 19,616
Payments on long-term debt (13,172) (15,704) (43,508)
Increase (decrease) in short-term borrowings 9,752 6,713 (5,123)
Extraordinary charge from the extinguishment
of debt -- -- (870)
Proceeds from issuance of common stock 1,334 3,588 3,640
Dividends paid (17,106) (16,889) (16,397)
Net cash provided by (applied to) financing activities 10,907 (10,779) (42,642)
Effect of exchange rate changes on cash (2,044) (1,921) (1,322)
Increase (decrease) in cash and cash equivalents (6,528) (2,691) 2,238
Cash and cash equivalents, beginning of year 13,681 16,372 14,134
Cash and cash equivalents, end of year $ 7,153 $13,681 $16,372
Supplemental Cash Flow Information:
Interest paid $ 4,721 $ 4,890 $ 6,814
Income taxes paid 13,437 21,151 21,242
Noncash investing and financing activities:
Investment in WPV Holdings, Inc., exchanged for
promissory note due from Wheatley TXT Corporation -- -- 6,000
Additional minimum pension liability 5,005 125 44
<F54>
See Notes to Consolidated Financial Statements.
</TABLE>
Page 27 of 54
<F50>
Notes To Consolidated Financial Statements
(Dollars in thousands except per share data)
1. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of all wholly owned
and majority-owned subsidiaries after elimination of all significant
intercompany transactions. Investments in affiliates and corporate joint
ventures, representing 20% to 50% of the ownership of such companies, are
accounted for under the equity method.
The majority of the foreign subsidiaries have fiscal year-ends of October 31
or November 30 to facilitate consolidation of the subsidiaries' financial
statements.
Foreign Currency
The Company accounts for its foreign operations in accordance with Statement
of Financial Accounting Standards (SFAS) No. 52, "Foreign Currency
Translation." For subsidiaries where the local currency is the functional
currency, assets and liabilities are translated at current exchange rates.
Earnings and expense items are translated using average exchange rates during
the year. Translation adjustments are not included in determining net
earnings but are accumulated and reported as a separate component of
shareholders' equity.
For subsidiaries located in highly inflationary economies, balance sheet items
are translated using current exchange rates, and average exchange rates are
used for statement of earnings items except for inventory, property, and their
related statement of earnings accounts, which are translated using historical
exchange rates. Resultant translation gains and losses are included in
earnings.
Cash and Cash Equivalents
Cash and cash equivalents include all cash balances and highly liquid
investments with original maturities of three months or less. The carrying
values of cash and cash equivalents approximate fair values due to the short
maturities of these financial instruments.
Inventories
Domestic inventories are stated at the lower of cost or market, with cost
generally determined by the last-in, first-out (LIFO) method. Inventories of
foreign subsidiaries are stated at the lower of cost or market, with cost
being determined by the first-in, first-out (FIFO) method, or average cost
method.
Property, Plant and Equipment
Property, plant and equipment is stated at cost, less accumulated
depreciation. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets ranging from 15 to 50 years for
buildings and 3 to 12 years for machinery and equipment.
Income Taxes
In February 1992, the Financial Accounting Standards Board issued SFAS No.
109, "Accounting for Income Taxes," which requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
Page 28 of 54
<F50>
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Effective January 1, 1992, the Company
adopted SFAS No. 109. The cumulative effect of this accounting change for
income taxes was not significant.
Prior to 1992, the provision for income taxes, computed under APB Opinion 11,
was based on earnings and expenses included in the accompanying consolidated
statements of earnings. Deferred taxes were provided to reflect the tax
effects of reporting earnings, expenses, and tax credits in different periods
for financial accounting purposes than for income tax purposes.
The aggregate undistributed earnings of certain foreign subsidiaries which,
under existing law, will not be subject to U.S. tax until distributed as
dividends was $55,001 on December 31, 1993. Since the earnings have been or
are intended to be indefinitely reinvested in foreign operations, no provision
has been made for any U.S. taxes that may be applicable thereto. Any taxes
paid to foreign governments on those earnings may be used, in whole or in
part, as credits against U.S. tax on any dividends distributed from such
earnings.
Net Earnings (Loss) Per Share
Net earnings (loss) per share of common stock is based upon the weighted
average number of shares of common stock outstanding during the year (21,126
in 1993, 21,027 in 1992 and 20,781 in 1991). No effect has been given to
options outstanding under the Company's Stock Option Plans since no material
dilutive effect would result from the exercise of these items.
Financial Presentation Changes
Certain prior year amounts have been reclassified to conform to the current-
year presentation.
2. Inventories
Inventories are summarized as follows:
December 31, 1993 1992
Raw materials $ 31,927 $36,764
Work-in-process 49,062 46,434
Finished goods 55,863 48,800
Inventories valued at FIFO 136,852 131,998
LIFO allowance (30,667) (29,967)
$106,185 $102,031
Inventories of foreign subsidiaries, valued at FIFO or average cost, are
$49,252 and $48,774 at December 31, 1993 and 1992, respectively.
3. Investments, Including Investments in Affiliates
Investments, including investments in affiliates, are summarized below:
December 31, 1993 1992
Investment in Oil Dynamics, Inc. $11,706 $11,696
Investments in insurance certificates 6,074 --
Other investments 1,068 1,039
$18,848 $12,735
Page 29 of 54
<F50>
The Company has a 50%-owned joint venture, Oil Dynamics, Inc. (ODI), which
manufactures submersible pumps utilized principally in secondary oil recovery.
For 1993, 1992, and 1991, the Company recognized earnings of $4,385, $558, and
$1,957, respectively. The Company's investment in ODI approximates the
Company's share of the underlying equity in the net assets of that Company.
Dividends received were $4,375, $1,050, and $1,983, in 1993, 1992, and 1991,
respectively.
Summarized financial information for Oil Dynamics, Inc., is as follows:
October 30, October 31,
(In thousands) 1993 1992
Current assets $26,579 $19,387
Non-current assets 12,808 11,777
TOTAL ASSETS $39,387 $31,164
Current liabilities $14,444 $ 6,127
Non-current liabilities 1,497 1,704
Total shareholders' equity 23,446 23,333
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $39,387 $31,164
For the years ended,
October 30, October 31, November 2,
(In thousands) 1993 1992 1991
Net sales $71,672 $30,424 $39,796
Gross profit 25,408 10,176 13,783
Net earnings 8,770 1,115 3,914
The Company's Italian subsidiary, Lowara S.p.A., entered into a financial
contract with a major Italian insurance company. The proceeds from short-term
loans were invested in long-term insurance certificates to take advantage of tax
rate differentials. At December 31, 1993, carrying value approximates fair
value.
4. Property, Plant and Equipment
Major classes of property, plant and equipment consist of the following:
December 31, 1993 1992
Land and buildings $ 51,605 $ 52,049
Machinery and equipment 310,460 301,715
362,065 353,764
Less accumulated depreciation 213,092 199,178
$148,973 $154,586
5. Stock Option Plans
The Company has two stock option plans from which key employees may be granted
options to purchase shares of the Company's common stock at 100% of the market
price on the date of grant.
A maximum of 1,500,000 shares was authorized to be granted under the 1988 Stock
Incentive Plan during the period ending May 1998. Grants for 678,947 shares
were outstanding at December 31, 1993, of which 172,226 shares were exercisable
at that date. An additional 153,481 shares were granted in January 1994.
A maximum of 1,000,000 shares was authorized to be granted under the 1981
Incentive Stock Option Plan during the period ended April 1992. Grants for
251,022 shares were outstanding at December 31, 1993, of which 214,320 were
exercisable at that date.
Page 30 of 54
<F50>
The following table summarizes stock option activity for the three years ended
December 31, 1993:
Price Range
Shares Per Share
Outstanding, January 1, 1991 940,529 $15.00 - 24.63
Granted 210,433 $15.50 - 23.88
Exercised (205,864) $15.00 - 19.88
Cancelled (45,854) $15.50 - 24.13
Outstanding, December 31, 1991 899,244 $15.00 - 24.63
Granted 236,330 $23.25 - 24.63
Exercised (225,607) $15.00 - 24.63
Cancelled (34,972) $15.50 - 24.13
Outstanding, December 31, 1992 874,995 $15.00 - 24.63
Granted 233,579 $23.63 - 25.00
Exercised (78,740) $15.00 - 24.13
Cancelled (99,865) $18.13 - 24.88
Outstanding, December 31, 1993 929,969 $15.00 - 25.00
Page 31 of 54
<F50>
6. Debt and Credit Agreements
Debt consists of the following:
December 31, 1993 1992
Foreign overdrafts and short-term loans
4.19%-13.50%, due currently $26,911 $9,795
Foreign notes payable
4.0%-9.0%, due 1994-2006 8,671 7,822
Unsecured committed line of credit
Variable, due 1994 (3.75% at
December 31, 1993) 9,520 7,647
Industrial revenue bonds
5.0%, due 1994-2006 1,632 1,769
Variable, due 2009 (3.1%
at December 31, 1993) 1,850 2,587
Revolving credit agreement
Variable, expires 1994 (3.39%
at December 31, 1993) 5,000 20,000
Unsecured committed credit facility
3.39%, due 1995 7,869 --
Term loans
7.18%, due 1996-2000 20,000 --
4.125%, due 1993 -- 10,000
Other borrowings
4.18% (weighted average), due 1994-2007 5,447 4,480
Capital leases
10.51% (weighted average), due 1994-1996 452 1,166
Total 87,352 65,266
Less payments due within one year 48,493 24,379
$38,859 $40,887
The Company has $25,480 of unused short-term committed credit lines available
with U.S. banks at money market rates of interest. Foreign subsidiaries have
unused short-term credit lines available at prevailing interest rates in the
amount of $30,591.
The Company obtained Industrial Development Revenue Bond Financing to
purchase, renovate, and expand certain facilities. Additionally, the bonds
are collateralized by certain property.
The Revolving Credit Agreement permits borrowing up to $30,000, at the
Company's election, under several interest rate options, which are reflective
of current rates. The highest level of revolving credit borrowings during
1993 was $30,000; 1992 - $27,500; 1991 - $12,000. Borrowings under this
agreement averaged $22,927 for 1993, with a weighted average interest rate of
3.45%; 1992 - $16,400, at 4.1%; 1991 - $3,000, at 6.41%.
The Company borrowed funds through a $10,000 unsecured committed credit
facility in 1993 to finance the import of product from its Italian subsidiary.
At December 31, 1993, the Company had borrowed $7,869, which is to be repaid
in 1995.
The $10,000 Term Loan came due and was repaid in 1993. On August 3, 1993 the
Company borrowed $20,000 on a long-term note. The balance of the note has
Page 32 of 54
<F50>
been classified as long-term debt in the accompanying consolidated balance
sheets since principal repayment commences in 1996.
The Company's borrowing agreements impose certain financial restrictions. The
Company was in compliance with these restrictions at December 31, 1993.
Debt maturities during the next five years are $48,493 in 1994, $9,405 in
1995, $5,533 in 1996, $4,384 in 1997, and $4,933 in 1998.
7. Commitments
The Company has various noncancellable lease agreements for sales offices,
warehouses, computers, and other equipment. Total rental expense for the
years ended December 31, 1993, 1992, and 1991 was $5,010, $4,913, and $5,188,
respectively. Future minimum rental payments at December 31, 1993, are as
follows:
1994 $3,046 1997 $ 997
1995 1,992 1998 814
1996 1,217 1999 and after 1,755
8. Financial Instruments
Off-Balance-Sheet Risk. As part of its currency hedging, the Company utilizes
forward exchange and option contracts to minimize the impact of currency
fluctuations on transactions. The Company and its subsidiaries held contracts
for $10,042 and $7,966 at December 31, 1993 and 1992, respectively, for the
purchase or sale of Canadian and other currencies. The fair value of these
financial instruments is estimated based on quoted market prices for similar
contracts at December 31, 1993 and 1992, respectively. The unrealized gain
on these contracts at December 31, 1993 and 1992, is $96 and $214,
respectively.
At December 31, 1993 and 1992, the Company has letters of credit outstanding
totalling $5,356 and $4,899, respectively, which guarantee various trade
activities. The contract amount of the letters of credit is a reasonable
estimate of the fair value since the value for each is fixed over the life of
the commitment.
No material loss is anticipated due to nonperformance by counterparties to
these agreements.
Concentrations of Credit Risk. Financial instruments that potentially subject
the Company to concentrations of credit risk, as defined by SFAS No. 105,
consist principally of temporary cash investments and trade receivables. The
Company places its temporary cash investments with credit-worthy financial
institutions and limits the amount of credit exposure to any one financial
institution. The Company actively evaluates the credit worthiness of the
financial institutions with which it invests. Concentrations of credit risk
with respect to trade receivables are limited due to the large number of
customers constituting the Company's customer base and their dispersion across
different businesses and geographic areas. Letters of credit are the
principal security obtained to support lines of credit or negotiated contracts
when the financial strength of a customer is not considered sufficient. At
December 31, 1993 and 1992, the Company had no significant concentrations of
credit risks.
Fair Value. At December 31, 1993 and 1992, the Company's long-term debt
carrying value is a reasonable estimate of its fair value since interest rates
are based on prevailing market rates.
At December 31, 1993 and 1992, the Company held a note receivable from
Wheatley TXT Corporation for $4,000, and $5,000, respectively. The non-
current portion of the note receivable is included in other assets. The
carrying amount at December 31, 1993 and 1992, respectively, which represents
the face value of the note receivable, is a reasonable estimate of its fair
value. The interest rate is variable and during 1993 and 1992, the Company
recognized $248 and $310, respectively, of interest income on this note.
Page 33 of 54
<F50>
9. Non-recurring Charges
Restructuring Charge. During 1992, the Company recorded the impact of a
restructuring program designed to reduce costs, improve operating
efficiencies, and increase shareholder value. The program included $2,940
related to the early retirement of employees. In addition, $3,360 resulted
from the relocation of certain product lines and the centralization of
contract engineering for high-specification products to better meet customer
requirements. The aggregate restructuring program costs are shown as a
separate line item in the accompanying consolidated statement of earnings and
resulted in an after-tax charge of $3,900 ($.19 per share) in 1992. During
1993, the restructuring program was substantially completed.
Environmental Provision. In 1991, the Company recorded a $2,000 provision for
estimated environmental costs. This charge reflects anticipated costs to
monitor and remediate an inactive Company landfill site in Seneca Falls, New
York. At December 31, 1993, the balance of this reserve was $1,735. 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.
Extraordinary Charge. During December 1991, the Company called for the early
redemption of the $25,000 - 9.875% Convertible Subordinated Debentures, which
had been due in 2006. Of this amount, $24,895 was redeemed at the call price
of 103.292%, and the remaining amount of $105 was converted into 3,923 shares
of common stock at the conversion price of $26.75 per share. The redemption
premium (net of applicable income tax benefit of $313) has been classified as
an extraordinary charge of $557, in the accompanying consolidated statements
of earnings.
10. Income Taxes
The components of the provision for income taxes are as follows:
1993 1992 1991
Current:
Federal (U.S.) $ 6,049 $11,363 $13,760
State 1,565 2,544 2,843
Foreign 4,825 6,375 5,992
Deferred:
Federal (U.S.) (2,548) (6,119) (3,243)
State (5) (905) (644)
Foreign 955 718 1,296
Provision for income taxes $10,841 $13,976 $20,004
Reconciliations of the U.S. statutory tax rate with the effective tax rates
reported for continuing operations are as follows:
1993 1992 1991
U.S. statutory rate 35.0% 34.0% 34.0%
Foreign taxes in excess of U.S. statutory
rate 6.1 7.6 3.9
State taxes-net 2.9 3.0 3.3
U.S. benefits of foreign sales corporation (2.0) (1.5) (.5)
Deferred income tax rate changes (2.2) -- --
International tax restructuring and
recapitalization (4.1) -- --
Other-net (4.2) (4.1) (1.7)
Effective tax rate 31.5% 39.0% 39.0%
Page 34 of 54
<F50>
The components of the total net deferred tax asset at December 31, 1993 and
1992 under SFAS No. 109 are as follows:
1993 1992
Deferred tax assets:
Postretirement benefits other than pensions $19,517 $17,986
Other nondeductible liabilities and reserves 4,054 3,195
Tax credit carryforwards 2,589 905
Workers' compensation and other claims 2,488 1,439
Accrued vacation pay 2,191 2,162
Deferrals under state jurisdictions-net 1,839 1,880
Deferrals under foreign jurisdictions 1,448 1,925
Pension benefits 1,240 1,326
Miscellaneous 384 662
Inventories 775 1,444
Gross deferred tax assets 36,525 32,924
Valuation allowance for deferred tax assets (1,782) (905)
Deferred tax liabilities:
Property, plant and equipment (10,895) (10,334)
Deferrals under foreign jurisdictions (5,701) (6,951)
Other assets and miscellaneous (4,111) (3,307)
Deferred gain on Wheatley Gaso transactions (748) (909)
Gross deferred tax liabilities (21,455) (21,501)
Net deferred tax asset $13,288 $10,518
The components of the deferred tax provision (benefit) under APB11 from
continuing operations for 1991 are as follows:
1991
Depreciation and amortization $(1,616)
Reserves and accruals (1,061)
Deferred gain on Wheatley Gaso transactions (1,090)
Deferrals under foreign jurisdictions 1,296
Other-net (120)
Deferred income tax provision (benefit) $(2,591)
Earnings before income taxes resulting from non-U.S. operations for 1993,
1992, and 1991 are $10,359, $13,412, and $15,745, respectively.
As discussed in Note 1, the Company adopted SFAS No. 109 as of January 1,
1992. The cumulative effect of this accounting change for income taxes is not
significant and hence, prior years' financial statements have not been
restated to apply the provisions of SFAS No. 109.
The Company and its domestic subsidiaries file a consolidated U.S. federal
income tax return. Such returns have been audited and settled through the
year 1989.
The valuation allowance for deferred tax assets increased by $877 in 1993.
At December 31, 1993, the Company has foreign tax credit carryforwards of
$2,589 that will expire at the end of the following years if not otherwise
utilized: $174 -1995, $216 - 1996, $354 - 1997, and $1,845 - 1998.
11. Employee Benefit Plans
Pension Plans
The Company has several defined benefit pension plans covering substantially
all domestic employees. Plans covering salaried exempt employees provide
pension benefits based upon final average salary and years of service.
Page 35 of 54
<F50>
Benefits to other employees are based on a fixed amount for each year of
service. During the fourth quarter of 1992, the Company offered an early
retirement program to employees meeting certain age and service requirements.
The additional expense has been recorded as part of the 1992 net pension cost
shown below. The cost of this program is included in the restructuring costs
recorded by the Company (see Note 9). The Company's funding policy is to
contribute annually an amount that falls within the range determined to be
deductible for federal income tax purposes. Plan assets consist primarily of
listed stocks and bonds.
Net pension cost for 1993, 1992, and 1991 includes the following components:
1993 1992 1991
Service cost $ 3,668 $2,815 $2,189
Interest cost 6,968 5,965 5,294
Actual return on plan assets (11,447) (6,442) (11,822)
Net amortization and deferral 4,562 (128) 6,210
Early retirement plan -- 2,940 --
Net pension cost $ 3,751 $5,150 $1,871
The following table sets forth the plans' funded status and the amounts
recognized in the Company's consolidated financial statements:
<TABLE>
<CAPTION>
Plans where Plans where
assets exceed accumulated
accumulated benefits
benefits exceed assets
December 31, 1993 1992 1993 1992
Actuarial present value of
benefit obligations:
<S> <C> <C> <C> <C>
Vested benefit obligation $43,344 $51,761 $38,196 $14,704
Accumulated benefit obligation $44,898 $53,862 $41,374 $16,073
Projected benefit obligation $56,012 $67,485 $42,343 $16,929
Plan assets at fair value 52,019 65,824 35,608 14,782
Plan assets less than projected
benefit obligation 3,993 1,661 6,735 2,147
Unrecognized net gain or (loss) 2,607 3,970 (2,746) (309)
Unrecognized prior service cost (534) (4,305) (5,976) (2,640)
Unrecognized net asset 934 2,864 2,316 780
Adjustment required to recognize
minimum liability -- -- 6,410 1,405
Accrued pension liabilities $ 7,000 $ 4,190 $6,739 $1,383
</TABLE>
In determining the actuarial present value of the projected benefit
obligation, the weighted average discount rate was 7.5% and 8.5% as of
December 31, 1993, and 1992, respectively; the rate of increase in future
compensation levels was 5% as of December 31, 1993, and 6% as of December 31,
1992; and the expected long-term rate of return on assets was 9% as of
December 31, 1993 and 1992.
As is required by SFAS No. 87, "Employers' Accounting for Pensions," for plans
where the accumulated benefit obligation exceeds the fair value of plan
assets, the Company has recognized in the accompanying consolidated balance
sheets the minimum liability of the unfunded accumulated benefit obligation
as a long-term liability with an offsetting intangible asset and equity
adjustment, net of tax impact. As of December 31, 1993 and 1992, this minimum
Page 36 of 54
<F50>
liability amounted to $6,410 and $1,405, respectively. The adoption of these
provisions had no impact on net earnings or cash flow.
The Company's wholly owned subsidiary, Lowara S.p.A., is required by Italian
law to provide a lump sum severance payment to personnel upon termination of
employment. The amounts are subject to annual revaluation on the basis of
indices. The provision for employee severance amounted to $1,873 in 1993,
$2,059 in 1992, and $1,905 in 1991, resulting in total reserve balances of
$7,772 at December 31, 1993, $8,334 at December 31, 1992, and $7,666 at
December 31, 1991. This reserve reflects the amounts accrued at year-end for
each employee in accordance with the law and labor contracts.
Postretirement Benefits Other Than Pensions
In addition to providing pension benefits, the Company and its subsidiaries
provide certain health care and life insurance benefits for retired employees.
Certain domestic employees may become eligible for these benefits if they
retire from the Company with 10 years of service and have reached age 55. The
benefit amount is determined based on the age and length of service of the
employee at retirement. The plan is currently unfunded, and the Company has
the right to modify or terminate the plan in the future.
In the fourth quarter of 1992, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions," requiring the
accrual method of accounting for these benefits effective January 1, 1992.
As permitted by SFAS No. 106, the Company elected to recognize the transition
obligation as of the adoption date. The Company restated 1992 first quarter
operations to record a pre-tax charge of $47,978 ($29,746 after-tax or $1.42
per share) as a cumulative effect of an accounting change at that date.
Net postretirement benefit cost for 1993 and 1992 includes the following
components:
1993 1992
Service cost on benefits earned during the period $1,440 $2,073
Interest cost on accumulated benefit obligation 4,026 4,251
Amortization of plan amendments (598) --
Net postretirement benefit cost $4,868 $6,324
Retirement medical costs decreased primarily due to cost reductions resulting
from amendments to Company-sponsored medical plans. The unamortized amounts
for plan amendments, set forth in the table below, represent the accumulated
cost reductions resulting from these amendments. The amortization of these
amounts will reduce retirement medical costs over the next 14 years. Under
the prior accounting method, 1991 retirement medical costs were $1,047.
The accumulated postretirement benefit obligation, included in the
accompanying consolidated balance sheets, is comprised of the following:
1993 1992
Retirees $25,869 $17,579
Active, eligible employees 5,434 9,606
Active, non-eligible employees 19,132 25,639
Unrecognized gain (loss) (3,007) 76
Unrecognized prior service cost 8,362 --
Accrued postretirement benefit obligation $55,790 $52,900
The December 31, 1992, accrued postretirement benefit obligation was
remeasured effective January 1, 1993, to reflect actual experience for 1992
and a plan amendment that was not known at the beginning of 1992. The accrued
postretirement benefit obligation was determined using a weighted average
discount rate of 8.75% and a medical care cost trend rate of 13%. In
determining the accrued postretirement benefit obligation as of December 31,
1993, a weighted average discount rate of 7.75% and a medical care cost trend
rate of 12% were used. The medical care cost trend rates used in the
Page 37 of 54
<F50>
actuarial computations were reduced by 1% per year to 5% and 5.5% by 2001 as
of December 31, 1993, and 1992, respectively. The effect of a one percentage
point increase in the assumed medical care cost trend rate would have
increased the 1993 and 1992 net postretirement benefit cost by $925 and
$1,162, respectively, and the accrued postretirement benefit obligation at
December 31, 1993 and 1992, by $6,400 and $7,261, respectively.
Postemployment Benefits
In the fourth quarter of 1993, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," requiring the accrual method of
accounting for certain of these benefits effective January 1, 1993. The
Company restated 1993 first quarter operations to record a pre-tax charge of
$1,579 ($1,026 after-tax or $.05 per share) as a cumulative effect of
accounting change at that date. Previously, the Company recognized
postemployment benefit costs when paid. The annual incremental cost of
adopting SFAS No.112 is immaterial on an on-going basis.
Page 38 of 54
<F50>
12. Major Market Segment Information
The Company operates in two major market segments, Industrial Products and
Water Technologies. The Industrial Products segment produces and sells pumps
used in various industries including pulp and paper, chemical processing,
petrochemical, food and beverage, oil, mining, municipal, and electric utility
and provides parts and repair services for various types of pumps and other
rotating equipment. The Water Technologies segment produces and sells pumps
for residential, farm, irrigation, and commercial/light industrial use.
Intersegment sales and sales between geographic areas are not material.
<TABLE>
<CAPTION>
1993 1 1992 1991
Net sales:
<S> <C> <C> <C>
Industrial Products $316,125 $337,317 $346,013
Water Technologies 239,567 221,586 220,553
Total net sales $555,692 $558,903 $566,566
Operating earnings:
Industrial Products $ 18,497 $ 23,847 $36,102
Water Technologies 21,122 21,369 23,803
Total operating earnings 39,619 45,216 59,905
General corporate expenses 5,631 5,871 5,805
Interest expense-net 3,494 3,591 4,126
Other (income)-net (3,921) (75) (1,318)
Earnings before income taxes,
extraordinary charge, and cumulative
effect of accounting changes $ 34,415 $ 35,829 $ 51,292
Identifiable assets:
Industrial Products $219,129 $223,533 $214,282
Water Technologies 186,991 161,720 153,858
Investments, including investments in affiliates 12,774 12,735 13,572
General corporate assets 19,608 20,769 14,153
Total assets $438,502 $418,757 $395,865
Geographic Areas:
Net sales:
United States $404,014 $398,252 $407,911
Europe 95,569 105,642 106,696
Other foreign 56,109 55,009 51,959
Total net sales $555,692 $558,903 $566,566
Operating earnings:
United States $ 28,575 $ 29,101 $ 43,498
Europe 7,196 9,273 10,495
Other foreign 3,848 6,842 5,912
Total operating earnings 39,619 45,216 59,905
General corporate expenses 5,631 5,871 5,805
Interest expense-net 3,494 3,591 4,126
Other (income)-net (3,921) (75) (1,318)
Earnings before income taxes,
extraordinary charge, and cumulative
effect of accounting changes $ 34,415 $ 35,829 $ 51,292
Identifiable assets:
United States $258,780 $238,879 $235,532
Europe 108,918 107,717 99,916
Other foreign 38,422 38,657 32,692
Investments, including investments in affiliates 12,774 12,735 13,572
General corporate assets 19,608 20,769 14,153
Total assets $438,502 $418,757 $395,865
</TABLE>
<TABLE>
<CAPTION>
Other Information Depreciation Property Additions Export Sales
1993 (1) 1992 1991 1993 (1) 1992 1991 1993 (1) 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Industrial Products $14,474 $14,630 $14,044 $11,414 $25,818 $29,156 $51,894 $48,290 $46,192
Water Technologies 9,952 8,842 8,488 13,100 13,433 9,352 10,316 9,914 6,571
Corporate 362 347 286 136 753 249 -- -- --
$24,788 $23,819 $22,818 $24,650 $40,004 $38,757 $62,210 (2)$58,204 $52,763
<F54>
1 Prior to 1993, the Ag Turbine portion of the Vertical Products Division in Texas was part of the Industrial Products
Group. In 1993, it became part of the Water Technologies Group.
2 Represents sales from the United States to external customers in Europe, the Middle East, and Africa of $21,521;
Latin America of $19,903; Asia-Pacific of $18,882; and other foreign locations of $1,904.
</TABLE>
Page 39 of 54
<F50>
13. Quarterly Financial Data
(Unaudited)
<TABLE>
<CAPTION>
Quarter ending 3/31/93 6/30/93 9/30/93 12/31/93 Year
<S> <C> <C> <C> <C> <C>
Net sales $124,402 $152,424 $149,895 $128,971 $555,692
Gross profit 35,568 44,524 43,161 33,065 156,318
Earnings before cumulative
effect of accounting
change 3,406 8,208 8,591 3,369 23,574
Cumulative effect of
accounting change (1,026) -- -- -- (1,026)
Net earnings 2,380 8,208 8,591 3,369 22,548
Net earnings (loss) per share:
Earnings before cumulative
effect of accounting
change .16 .39 .41 .16 1.12
Cumulative effect of
accounting change (.05) -- -- -- (.05)
Net earnings per share .11 .39 .41 .16 1.07
Dividends per share .20 .20 .20 .20 .80
Quarter Ending 3/31/92 6/30/92 9/30/92 12/31/92 Year
Net sales $134,911 $147,550 $147,479 $128,963 $558,903
Gross profit 42,495 46,186 45,014 39,641 173,336
Earnings before cumulative
effect of accounting
change 7,017 7,598 7,611 (373) 21,853
Cumulative effect of
accounting change (29,746) -- -- -- (29,746)
Net earnings (loss) (22,729) 7,598 7,611 (373) (7,893)
Net earnings (loss) per share:
Earnings before cumulative
effect of accounting
change .34 .36 .36 (.02) 1.04
Cumulative effect of
in accounting change (1.42) -- -- -- (1.42)
Net earnings (loss)
per share (1.08) .36 .36 (.02) (.38)
Dividends per share .20 .20 .20 .20 .80
</TABLE>
Page 40 of 54
<F50>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
FINANCIAL DISCLOSURE
None.
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pages 1 through 3 of the Proxy Statement contain information concerning
directors which is incorporated herein by reference. Information concerning
executive officers is included in Part I of this Form 10-K Annual Report,
following Item 1.
ITEM 11. EXECUTIVE COMPENSATION
Pages 3, 4, and 8 through 14 of the Proxy Statement contain information
concerning executive compensation which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pages 2, 3, and 8 of the Proxy Statement contain information concerning
ownership of the Company's common stock which is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Page 9 of the Proxy Statement contains information concerning transactions
with directors and others which is incorporated herein by reference.
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements:
The financial statements of the Company are included in Part II,
Item 8.
Page in
Form 10-K
(2) Independent Auditors' Report on Financial
Statement Schedules 44
The following schedules are included in this
Form 10-K Annual Report:
V - Property, Plant and Equipment 45
VI - Accumulated Depreciation of Property,
Plant and Equipment 46
VIII - Valuation and Qualifying Accounts 47
IX - Short-term Borrowings 48
X - Supplementary Income Statement Information 49
Page 41 of 54
<F50>
All other Financial Statement Schedules are omitted because they are
not applicable or the required information is shown in the
Consolidated Financial Statements.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1993.
(c) Exhibits:
Exhibit Number Description of Exhibits
(3) Articles of Incorporation and By-Laws:
* Restated Certificate of Incorporation filed May 6, 1985.
Incorporated by reference to Exhibit 19 to Form 10-Q for the period
ending June 30, 1985.
* By-Laws. Incorporated by reference to Appendix C of the 1984 Proxy
Statement.
* Amendment to the Certificates of Incorporation, incorporated by
reference from the Company's definitive Proxy Statement for its
Annual Meeting of Stockholders held on May 4, 1988, copies of which
were filed with the Commission on April 11, 1988, wherein said
amendment is identified as exhibit (B).
* Amendment to the Certificate of Incorporation as filed by the
Delaware Secretary of State on May 31, 1989 (Exhibit (a), Form 10-Q
for the quarter ended June 30, 1989).
* Amendment to the Company's By-Laws, incorporated by reference from
the Company's definitive Proxy Statement for its Annual Meeting of
Stockholders held on May 4, 1988, copies of which were filed with the
Commission on April 11, 1988, wherein said amendment is identified as
exhibit (C).
(10) Material Contracts:
(iii) Compensatory Plans for Officers:
* Goulds Pumps, Incorporated 1994 Incentive Plan to Increase
Stockholder Value, effective on date approved by Stockholders of the
Company (filed as Exhibit A on page 19 of Proxy Statement dated March
31, 1994).
* Goulds Pumps, Incorporated 1994 Stock Option Plan for Non-Employee
Directors, effective on date approved by Stockholders of the Company
(filed as Exhibit B on page 35 of Proxy Statement dated March 31,
1994).
* Goulds Pumps, Incorporated Supplemental Executive Pension Plan,
effective January 1, 1992 (filed as Exhibit 10 on page 29 of Form
10-K for year ended December 31, 1991).
* Goulds Pumps, Incorporated Senior Executive Severance Agreement,
effective May 12, 1983 (Exhibit 19, Form 10-Q for quarter ended June
30, 1983).
* Goulds Pumps, Incorporated Investment and Stock Ownership Plan (filed
on May 8, 1984, Form S-8, Registration Statement No. 2-90969).
* Goulds Pumps, Incorporated Revised Incentive Stock Option Plan,
effective March 19, 1987 (Form S-8 Registration Statement No.
2-78145, filed on June 25, 1982. Appendices No. 1 and No. 2 to the
prospectus filed with SEC on June 8, 1983 and May 8, 1987
respectively).
Page 42 of 54
<F50>
* Goulds Pumps, Incorporated Stock Purchase Plan for Employees (Form
S-8 Registration Statement No. 2-64530, filed on May 21, 1979).
* Goulds Pumps, Incorporated 1988 Stock Incentive Plan (Form S-8
Registration Statement No. 33-22902 filed on July 5, 1988).
(11) Computation of Earnings Per Share:
See page 50 of this Annual Report on Form 10-K.
(22) Subsidiaries of the Registrant:
See page 51 of this Annual Report on Form 10-K.
(23) Consents of Experts and Counsel:
For Consent of Independent Auditors see page 52 of this Annual
Report on Form 10-K.
All other exhibits are omitted because they are not applicable or the
required information is shown elsewhere in this Annual Report on Form
10-K.
* Incorporated herein by reference as indicated.
UNDERTAKINGS
The Company, being the registrant under Registration Statement Nos.
2-64847, 2-64530, 2-78145, 2-90969, and 33-22902 on Form S-8, currently
on file with the Securities and Exchange Commission, hereby undertakes as
follows, which undertaking shall be incorporated by reference into such
Registration Statements:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant, the registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Page 43 of 54
<F50>
INDEPENDENT AUDITORS' REPORT
Goulds Pumps, Incorporated:
We have audited the consolidated balance sheets of Goulds Pumps, Incorporated
and its subsidiaries as of December 31, 1993 and 1992 and the related
consolidated statements of earnings, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1993, and have issued
our report thereon dated January 26, 1994; such report is included elsewhere
in this Form 10-K. Our audits also included the financial statement schedules
of Goulds Pumps, Incorporated and its subsidiaries, listed in Item 14(a)2.
These financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
s/Deloitte & Touche
Deloitte & Touche
Rochester, New York
January 26, 1994
Page 44 of 54
<F50>
<TABLE>
Schedule V
GOULDS PUMPS, INCORPORATED AND CONSOLIDATED SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
(IN THOUSANDS)
<CAPTION>
BALANCE ADDITIONS OTHER CHANGES- BALANCE
AT BEGINNING AT RETIREMENTS ADD (DEDUCT) AT END
CLASSIFICATION OF YEAR COST (1) OF YEAR
1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Land......... $ 6,559 $ 0 $ 0 $ (726) $ 5,833
Buildings.... 45,490 1,774 195 (1,297) 45,772
Machinery and
Equipment... 301,715 22,876 2,807 (11,324) 310,460
TOTAL $353,764 $24,650 $3,002 $(13,347) $362,065
1992
Land......... $ 6,533 $ 354 $ 26 $ (302) $ 6,559
Buildings.... 41,978 3,053 107 566 45,490
Machinery and
Equipment... 274,179 36,598 4,768 (4,294) 301,715
TOTAL $322,690 $40,005 $4,901 $(4,030) $353,764
1991
Land......... $ 5,841 $ 1,132 $ 9 $ (431) $ 6,533
Buildings.... 38,195 4,208 110 (315) 41,978
Machinery and
Equipment... 250,893 33,417 8,016 (2,115) 274,179
TOTAL $294,929 $38,757 $8,135 $(2,861) $322,690
</TABLE>
<TABLE>
<CAPTION>
(1) Represents the following:
1993 1992 1991
<S> <C> <C> <C>
Currency translation effect $(13,347) $(4,030) $(6,147)
Amortization of Lowara Purchase
Adjustment -0- -0- 3,286
$(13,347) $(4,030) $(2,861)
</TABLE>
Page 45 of 54
<F50>
<TABLE>
Schedule VI
GOULDS PUMPS, INCORPORATED AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
(IN THOUSANDS)
<CAPTION>
BALANCE ADDITIONS OTHER CHANGES- BALANCE
AT BEGINNING CHARGED TO RETIREMENTS ADD (DEDUCT) AT END
CLASSIFICATION OF YEAR INCOME (1) OF YEAR
1993
<S> <C> <C> <C> <C> <C> <C> <C>
Buildings..... $ 15,752 $ 1,622 $ 157 $ (769) $ 16,448
Machinery and
Equipment.... 183,426 23,166 2,640 (7,308) 196,644
TOTAL $199,178 $24,788 $ 2,797 $(8,077) $213,092
1992
Buildings..... $ 14,306 $ 1,512 $ 61 $ (5) $ 15,752
Machinery and
Equipment.... 167,617 22,307 4,051 (2,447) 183,426
TOTAL $181,923 $23,819 $ 4,112 $(2,452) $199,178
1991
Buildings..... $ 12,835 $ 1,401 $ 52 $ 122 $ 14,306
Machinery and
Equipment.... 153,603 21,417 7,001 (402) 167,617
TOTAL $166,438 $22,818 $ 7,053 $ (280) $181,923
(1) Represents the following:
1993 1992 1991
Currency translation effect $(8,077) $(2,452) $(3,566)
Amortization of Lowara Purchase Adjustment -0- -0- 3,286
$(8,077) $(2,452) $ (280)
</TABLE>
Page 46 of 54
<F50>
Schedule VIII
GOULDS PUMPS, INCORPORATED AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
BALANCE ADDITIONS BALANCE
AT BEGINNING CHARGED TO DEDUCTIONS AT END
OF YEAR INCOME (2) (1) OF YEAR
Allowance for Doubtful
Accounts, Deducted from
Trade Receivables:
1993........... $2,408 $ 814 $1,045 $2,177
1992........... $3,009 $ 472 $1,073 $2,408
1991........... $2,815 $1,110 $ 916 $3,009
(1) Accounts written off, less recoveries.
(2) Includes impact of foreign currency translations.
Page 47 of 54
<F50>
<TABLE>
Schedule IX
GOULDS PUMPS, INCORPORATED AND CONSOLIDATED SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS (1)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
(IN THOUSANDS)
<CAPTION>
WEIGHTED AVERAGE WEIGHTED
CATEGORY OF AVERAGE OUTSTANDING AVERAGE
AGGREGATE BALANCE INTEREST HIGHEST BALANCE INTEREST
SHORT-TERM AT END RATE AT MONTH-END DURING RATE DURING
BORROWINGS OF YEAR END OF YEAR BALANCE THE YEAR THE YEAR
(4) (2) (3)(4)
Year 1993
Notes Due:
<S><C> <C> <C> <C> <C> <C>
U.S. $14,520 3.6% $21,297 $14,551 3.6%
Non-U.S. $26,911 7.9% $26,911 $17,797 7.8%
Year 1992
Notes Due:
U.S. $7,647 4.0% $14,766 $7,957 4.7%
Non-U.S. $9,795 13.9% $ 9,795 $6,248 10.5%
Year 1991
Notes Due:
U.S. $5,176 5.0% $ 9,808 $3,093 6.5%
Non-U.S. $5,274 11.0% $17,662 $9,916 10.9%
<F54>
(1) Short-term borrowings include unsecured committed lines of credit, foreign
overdrafts and short-term loans.
(2) Computed by multiplying month-end principal balances by the number of days in
each month and dividing by the number of days in the year.
(3) Computed by dividing the actual short-term interest expense by the average
short-term debt outstanding.
(4) Excludes the effect of short-term borrowings in the highly inflationary economy
of Venezuela.
</TABLE>
Page 48 of 54
<F50>
Schedule X
GOULDS PUMPS, INCORPORATED AND CONSOLIDATED SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE YEARS ENDED DECEMBER 31, 1993, 1992, and 1991
(IN THOUSANDS)
Charged to Costs and Expenses
Item 1993 1992 1991
Maintenance and Repairs $15,128 $12,517 $14,302
Depreciation and Amortization
of intangible assets,
pre-operating costs and
similar deferrals * * *
Taxes, other than payroll and
income taxes * * *
Royalties * * *
Advertising costs * * *
* Less than 1% of total sales.
Page 49 of 54
<F50>
<TABLE>
EXHIBIT 11
GOULDS PUMPS, INCORPORATED AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
1993 1992 1991
<S> <C> <C> <S> <C> <C> <C> <C>
a. Net earnings (loss) - as reported...................................... $22,548 $(7,893) $30,731
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 (loss) (a + b)................................... $22,548 $(7,893) $30,731
d. Actual weighted average number of shares outstanding................... 21,126 21,027 20,781
e. Primary earnings (loss) per share based on actual average shares
outstanding (c / d) (1)................................................ $ 1.07 $ (.38) $ 1.48
f. Shares exercisable under outstanding dilutive options.................. 925 495 725
g. Proceeds assuming exercise of outstanding dilutive options............. $20,164 $ 9,070 $12,969
Reinvestment of proceeds under "Treasury Stock Method":
h. Average market price per share during each year or market price at
year-end (whichever is higher)......................................... $ 24.88 $ 24.63 $ 23.25
i. Shares to be acquired (g / h).......................................... 810 368 558
j. Net increase in outstanding shares relative to stock options (f - i)... 115 127 167
k. Adjusted weighted average shares outstanding (d + j)................... 21,241 21,154 20,948
l. Earnings (loss) per share assuming exercise of
outstanding options (c / k)............................................ $ 1.06 $ (.37) $ 1.47
m. Dilutive (Anti-dilutive) effect on earnings (loss) per share (e - l) (2) $ .01 $ (.01) $ .01
<F54>
(1)Earnings per share information is based on weighted average number of shares of common stock outstanding during
each year. 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.
</TABLE>
Page 50 of 54
<F50>
EXHIBIT 22
All subsidiaries of Goulds Pumps, Incorporated listed below are included in
the consolidated financial statements.
State or Country
Ownership Incorporated
Subsidiary Percentage or Organized
Bombas Goulds de Mexico, S.A. de C.V........ 100 Mexico
Bombas Goulds de Venezuela, C.A............. 100 Venezuela
Environamics Corp........................... 100 Delaware
Goulds Pumps Ag............................. 96 Switzerland
Goulds Pumps (Asia), Ltd.................... 100 Hong Kong
Goulds Pumps Australia...................... 100 Australia
Goulds Pumps B.V............................ 100 Netherlands
Goulds Pumps Canada, Inc.................... 100 Canada
Goulds Pumps DISC, Inc...................... 100 New York
Goulds Pumps Delaware, Inc.................. 100 Delaware
Goulds Pumps Europe B.V..................... 100 Netherlands
Goulds Pumps Financial Services............. 100 Ireland
Goulds Pumps International, Inc. (a DISC)... 100 Delaware
Goulds Pumps Korea Co. Ltd.................. 100 South Korea
Goulds Pumps (N.Y.), Inc.................... 100 New York
Goulds Pumps (Phil.), Inc................... 100 Philippines
Goulds Pumps (Singapore) PTE, Ltd........... 100 Singapore
Goulds Pumps (Taiwan) Co. Ltd............... 100 Taiwan
Goulds Pumps Trading Corp................... 100 Delaware
Goulds Pumps World Sales, Ltd. (a FSC)...... 100 Guam
Goulds Pumps World Sales (V.I.) Ltd......... 100 U.S. Virgin Islands
Goulds Pumps Worldwide, Inc................. 100 Delaware
Lowara B.V.................................. 100 Netherlands
Lowara Belgium, S.A......................... 100 Belgium
Lowara France S.A........................... 100 France
Lowara, Gmbh................................ 90 Germany
Lowara S.p.A................................ 100 Italy
Lowara UK Ltd............................... 90 United Kingdom
Marka S.p.A................................. 100 Italy
Morris Pumps International, Inc. (a DISC)... 100 New York
West Virginia Pump and Supply............... 100 West Virginia
World Pump, Srl............................. 100 Italy
World Pump Slovenia DoO..................... 100 Slovenia
The Company also has equity investments in Oil Dynamics, Inc., a 50 percent
owned corporation incorporated in Oklahoma and Nanjing Goulds Pumps Limited
Co., of China, a 45 percent owned joint venture. Lowara Co., Ltd. of Osaka,
Japan is a 54.8% owned joint venture which Lowara S.p.A. maintains with
Tsurumi Company of Japan.
Page 51 of 54
<F50>
EXHIBIT 23
Independent Auditors' Consent
Goulds Pumps, Incorporated:
We consent to the incorporation by reference in Registration Statement No.s'
2-64847, 2-64530, 2-78145, 2-90969 and 33-22902 of Goulds Pumps, Incorporated
and its subsidiaries on Forms S-8 of our reports dated January 26, 1994,
appearing in this Annual Report on Form 10-K of Goulds Pumps, Incorporated and
its subsidiaries for the year ended December 31, 1993.
s/Deloitte & Touche
Deloitte & Touche
Rochester, New York
March 30, 1994
Page 52 of 54
<F50>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Goulds Pumps, Inc., has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GOULDS PUMPS, INCORPORATED
By: s/Stephen V. Ardia
Stephen V. Ardia
(President, Chief Executive Officer
and Director)
Date: March 18, 1994
Page 53 of 54
<F50>
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 indicated.
s/Robert L. Tarnow March 18, 1994
Robert L. Tarnow Date
(Chairman of the Board and Director)
s/Stephen V. Ardia March 18, 1994
Stephen V. Ardia Date
(President, Chief Executive Officer
and Director)
s/John P. Murphy March 18, 1994
John P. Murphy Date
(Vice President and
Chief Financial Officer)
s/Peter Oddleifson March 18, 1994
Peter Oddleifson Date
(Director)
s/Melvin Howard March 18, 1994
Melvin Howard Date
(Director)
s/Arthur M. Richardson March 18, 1994
Arthur M. Richardson Date
(Director)
s/William R. Fenoglio March 18, 1994
William R. Fenoglio Date
(Director)
Listed below are those directors not mentioned above:
William W. Goessel
Barbara B. Lucas
Thomas C. McDermott
James C. Miller
Page 54 of 54
