FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from..............to..............
Commission file number 0-684
GOULDS PUMPS, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 15-0321120
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
240 Fall Street, Seneca Falls, New York 13148
(Address of principal executive offices)
(Zip Code)
(315) 568-2811
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
As of October 31, 1994, 21,181,158 shares of $1 par value
common stock were outstanding.
Page 1 of 18
<F50>
GOULDS PUMPS, INCORPORATED
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets -
September 30, 1994 and December 31, 1993............ 3
Condensed Consolidated Statements of Earnings -
Three Months Ended September 30, 1994 and 1993
Nine Months Ended September 30, 1994 and 1993....... 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1994 and 1993....... 5
Notes to Condensed Consolidated Financial
Statements.......................................... 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 9-15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................... 16
Item 5. Other Information................................... 16
Item 6. Exhibits and Reports on Form 8-K.................... 16-17
Signature........................................... 18
Page 2 of 18
<F50>
Condensed Consolidated Balance Sheets
Goulds Pumps, Incorporated
September 30, December 31,
1994 1993
(In Thousands) (Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 8,578 $ 7,153
Receivables - net 126,730 109,637
Inventories 115,773 106,185
Deferred tax asset 14,178 13,557
Prepaid expenses and other current assets 12,388 11,115
Total current assets 277,647 247,647
Property, plant and equipment - net 145,497 148,973
Investments in affiliates 12,955 12,774
Other investments 6,297 6,074
Deferred tax asset 4,221 5,031
Other assets 13,927 18,003
$460,544 $438,502
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 28,565 $ 41,571
Current portion of long-term debt 25,077 6,922
Trade payables 48,224 34,726
Compensation and commissions 17,756 16,519
Income taxes payable 835 21
Dividends payable 4,236 4,231
Deferred tax liability 1,217 1,257
Other 29,285 32,686
Total current liabilities 155,195 137,933
Long-term debt 34,650 38,859
Pension 18,102 16,905
Other postretirement benefit obligation 55,068 53,418
Deferred tax liability and other 4,252 4,186
SHAREHOLDERS' EQUITY:
Common stock - $1.00 par value; authorized
90,000,000; issued and outstanding
21,181,158 and 21,153,966 shares,
respectively 21,181 21,154
Additional paid-in capital 57,448 57,044
Retained earnings 124,586 120,415
Cumulative translation adjustments and other (9,938) (11,412)
Total shareholders' equity 193,277 187,201
$460,544 $438,502
See Accompanying Notes to Condensed Consolidated Financial Statements.
Page 3 of 18
<F50>
Condensed Consolidated Statements of Earnings (Unaudited)
Goulds Pumps, Incorporated
(In thousands except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993(1)
Net sales $154,343 $149,895 $443,739 $426,721
Cost and expenses:
Cost of sales 109,893 106,734 314,209 303,468
Selling, general and
administrative
expenses 27,981 28,408 86,222 86,711
Research and
development expenses 2,894 1,893 7,951 5,276
Provision for
environmental
litigation fees 3,304 -- 3,454 --
(Earnings) losses from
affiliates 96 (1,872) (606) (4,061)
Interest expense 1,665 1,259 4,794 3,889
Interest income (1,989) (269) (2,762) (1,333)
Other expense 2,091 718 3,247 863
Earnings before income
taxes and cumulative
effect of accounting
change 8,408 13,024 27,230 31,908
Income taxes 3,178 4,433 10,353 11,703
Earnings before
cumulative effect
of accounting
change 5,230 8,591 16,877 20,205
Cumulative effect of
accounting change,
net of income tax
benefit -- -- -- (1,026)
Net earnings $ 5,230 $ 8,591 $ 16,877 $ 19,179
Net earnings
per common share:
Earnings before
cumulative effect
of accounting
change $ .25 $ .41 $ .80 $ .96
Cumulative effect
of accounting
change -- -- -- (.05)
Net earnings
per common share $ .25 $ .41 $ .80 $ .91
Dividends per
common share $ .20 $ .20 $ .60 $ .60
Weighted Average
Shares Outstanding
(in thousands) 21,176 21,140 21,171 21,118
(1) Restated for adoption of SFAS 112 as of January 1, 1993.
See Accompanying Notes to Condensed Consolidated Financial
Statements.
Page 4 of 18
<F50>
Condensed Consolidated Statements of Cash Flows (Unaudited)
Goulds Pumps, Incorporated
<TABLE>
Nine Months Ended September 30,
(In Thousands) 1994 1993(1)
<CAPTION>
OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings $16,877 $19,179
Adjustments to reconcile net earnings to
net cash provided by operations:
Depreciation 18,829 18,584
Amortization 1,000 824
Cumulative effect of change in accounting principle -- 1,579
Earnings from affiliates (606) (4,061)
Dividends received from affiliates -- 3,500
Increase (decrease) in deferred tax liability 127 (1,078)
Decrease (increase) in deferred tax asset 213 (1,260)
Increase in accrued taxes 790 6,990
Increase in receivables-net (15,519) (24,374)
Increase in inventories (8,194) (9,579)
Increase in prepaid expenses and other (1,064) (5,320)
Increase in trade payables, accrued
expenses and other 4,901 7,960
Other - net 4,124 3,189
Net cash provided by operating activities 21,478 16,133
INVESTING ACTIVITIES:
Capital additions (15,121) (17,150)
Investment in insurance certificate -- (6,636)
Collection of long-term note receivable 3,024 1,021
Purchase of other assets (3,136) (6,466)
Decrease in investment of unexpended revenue bond
funds included in other assets 2,014 --
Other - net 166 4
Net cash applied to investing activities (13,053) (29,227)
FINANCING ACTIVITIES:
Proceeds from long-term debt 2,469 26,039
Payments on long-term debt (829) (11,858)
Increase in short-term borrowings 3,704 14,683
Proceeds from issuance of common stock 431 1,180
Dividends paid (12,701) (12,877)
Net cash provided by (applied to) financing activities (6,926) 17,167
Effect of exchange rate changes on cash (74) (1,831)
Increase in cash and cash equivalents 1,425 2,242
Cash and cash equivalents:
Beginning of period 7,153 13,681
End of period $ 8,578 $15,923
<F54>
See Accompanying Notes to Condensed Consolidated Financial Statements.
(1) Restated for adoption of SFAS 112 as of January 1, 1993.
</TABLE>
Page 5 of 18
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part I, Item 1
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments necessary to fairly present the Company's financial
position as of September 30, 1994 and the results of operations
for the three and nine month periods ended September 30, 1994
and 1993 and cash flows for the nine month periods ended
September 30, 1994 and 1993. All such adjustments are of a
normal recurring nature. The results of operations for the
three and nine month periods ended September 30, 1994 are not
necessarily indicative of the results to be expected for the
entire year 1994.
The accounting policies followed by the Company are set forth in
Note 1 to the Company's consolidated financial statements in the
1993 Goulds Pumps, Incorporated Annual Report on Form 10-K,
which is incorporated by reference. Additional significant
accounting policies are:
Financial Instruments With Off-Balance Sheet Risk
Gains and losses on forward exchange contracts designated as
hedges of known or anticipated contractual obligations and
export sales revenues, are deferred and included in the
settlement of related transactions. At September 30, 1994, the
Company held fixed foreign exchange contracts to hedge
designated transactions to manage the Company's exposure to
changes in foreign currency exchange rates. These contracts are
with large, high-quality and well capitalized financial
institutions.
The Company issues letters of credit 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 contract is fixed over the life of the commitment. The
Company recognizes losses on these commitments as incurred. No
material losses have been incurred or are anticipated relating
to these commitments.
Environmental Policy
The Company's environmental expenditures that relate to current
operations are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past
operations, and that do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable,
and the costs can be reasonably estimated. Generally, the
timing of these accruals coincides with completion of a
feasibility study or the Company's commitment to a formal plan
of action.
Page 6 of 18
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2. Four lawsuits were filed against the Company in April and May of
1994 arising from the sales of submersible pumps with brass or
bronze components (see Part II, Item 1. "Legal Proceedings" on
page 16 of this report). Based on the Company's assessment of
estimated legal and other fees resulting from these lawsuits, a
charge of $3.3 million ($.10 per share) was recorded in the
third quarter of 1994.
This charge includes legal and other fees incurred during the
quarter related to the Company's vigorous defense of the
lawsuits in California alleging leaching of lead from
submersible pumps in violation of that state's statutes. It
also includes the establishment of a $2.2 million reserve
classified as a current liability in the accompanying balance
sheet to cover revised estimates of future legal costs to pursue
that defense. Although the Company believes the reserve is
adequate based upon reasonable estimates, it is reasonably
possible that such costs and related expenses in the additional
amount of approximately $1.0 million could be incurred.
The Company intends to vigorously defend all of the pending
litigation as described in the Company's Form 10-Q for the
quarterly period ended March 31, 1994, as well as any additional
lead-related litigation that may be commenced, but no assurance
can be given as to the ultimate outcome of such litigation or
its impact on the Company. If the Company were ultimately
determined to be liable for the damages alleged in such
litigation, the claims against the Company could be very
substantial. However, all pending lead-related litigation is at
a very preliminary stage and it is not possible at this time for
the Company to quantify any potential civil penalties, damages
and other relief sought by the various plaintiffs or to
determine the extent of its liability, if any.
3. The consolidated financial statements for the first three
quarters of 1993 have been restated to reflect the adoption as
of January 1, 1993, of Statement of Financial Accounting
Standards (SFAS) 112, Employers' Accounting for Postemployment
Benefits.
SFAS 112 requires employers to recognize the cost of certain
postemployment benefits using the accrual method of accounting.
The cumulative effect of this accounting change decreased 1993
earnings after taxes by $1.0 million or $.05 per share. The
annual incremental cost of adopting SFAS 112 is immaterial on an
ongoing basis.
4. Debt Information
At September 30, 1994 and December 31, 1993, "Notes payable" on
the accompanying consolidated balance sheets included $21.6
million and $26.9 million, respectively, of foreign short-term
lines of credit.
The Company's debt agreements impose certain financial
restrictions on the Company relating to leverage, interest
coverage, and tangible net worth. At September 30, 1994, the
Company was in compliance with these restrictions.
Page 7 of 18
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Goulds Pumps, Incorporated Form 10-Q
Part I, Item 1 (continued)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. Supplemental Schedule of Cash Flow Information (in thousands):
For the nine months ended
Sept. 30, 1994 Sept. 30, 1993
Interest paid $5,064 $3,474
Income taxes paid 9,281 9,051
6. Net income per share of common stock is based upon the weighted
average number of shares of common stock and common stock
equivalents outstanding during the period. No effect has been
given to options outstanding under the Company's Stock Option
Plans as no significant dilutive effect would result from the
exercise of these options. See Exhibit XI on page 17 of 18.
7. Inventories were as follows (in thousands):
September 30, December 31,
1994 1993
(Unaudited) (Audited)
Raw Materials $ 34,354 $ 31,927
Work-in-Process 52,791 49,062
Finished Goods 60,109 55,863
Inventories Valued at FIFO 147,254 136,852
LIFO Allowance (31,481) (30,667)
Inventories Valued at LIFO $115,773 $106,185
8. Summarized unaudited financial information for Oil Dynamics,
Inc., a 50%-owned joint venture which has a 52 - 53 week fiscal
year ended October 31, and hence is recorded with a two-month
reporting lag, is as follows (in thousands):
For the nine months ended
July 31, 1994 July 31, 1993
Net Sales $32,001 $57,807
Gross Profit 8,078 20,443
Net Earnings 1,064 7,855
Page 8 of 18
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part I, Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company's third quarter 1994 results reflected record
sales and orders, and improved operating earnings over third
quarter 1993 results. Net earnings were lower than expected due to
a non-recurring charge for legal and other fees related to
environmental litigation.
Although operating earnings were stronger than previously
anticipated, this improvement was more than offset by a $3.3
million ($.10 per share) charge recorded in the third quarter.
This charge includes legal and other fees incurred during the
quarter related to the Company's vigorous defense of the lawsuits
in California alleging leaching of lead from submersible pumps in
violation of that state's statutes. It also includes the
establishment of a $2.2 million reserve to cover revised estimates
of future legal costs to pursue that defense. Although the Company
believes the reserve is adequate based upon reasonable estimates,
it is reasonably possible that such costs and related expenses in
the additional amount of approximately $1.0 million could be
incurred. There has not been, nor does the Company currently
anticipate any material impact on sales or inventories resulting
from these lawsuits.
Third quarter 1994 sales of $154.3 million increased 2.9% over
1993 third quarter sales of $149.9 million. Net earnings decreased
39.1% to $5.2 million from $8.6 million for the same quarter last
year. Earnings per share for the quarter were $.25 compared to
$.41 for the third quarter of 1993.
Net sales for the nine months ended September 30, 1994 were
$443.7 million, up 4.0% from $426.7 million a year ago. Net
earnings were $16.9 million or $.80 per share, compared to $20.2
million or $.96 per share for the first nine months of last year
(before restatement for the cumulative effect of the change of
accounting principle associated with the adoption of SFAS 112 as of
January 1, 1993).
Orders of $160.9 million received during the third quarter
1994 were the best in any quarter in the Company's history and 8.2%
above the 1993 third quarter orders level of $148.7 million.
Orders for the Industrial Products Group (IPG) increased to a
record $84.6 million or 12.2% over third quarter 1993 orders of
$75.4 million. Orders at the Water Technologies Group (WTG) were
also at record levels, increasing 5.0% compared to the same quarter
a year ago. Total backlog, which is primarily composed of
Industrial Product Group orders, increased 14.5% to $97.7 million
from $85.3 million at September 30, 1993.
Page 9 of 18
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part I, Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Continued weak performance from the Company's joint venture,
Oil Dynamics, Inc. (ODI) and a tax credit of $.6 million in the
third quarter of 1993 arising from accounting rule changes under
Financial Accounting Standard No. 109, also contributed to the
decline in earnings per share to $.25 compared to $.41 in the same
quarter last year. Earnings from our investment in ODI for the
third quarter 1994 decreased by $1.9 million from the third quarter
of 1993 mainly because of the non-recurrence of shipments to Russia
and also by a downturn in the domestic market.
On July 13, 1994, the Company announced the signing of a
letter of intent to acquire the outstanding shares of Pumpenfabrik
Ernst Vogel G.m.b.H. (Vogel), a leading pump manufacturer in
Austria. The Company is currently in the process of consummating
this transaction with closing expected by the end of November 1994.
Since Vogel's fiscal year-end will be October 31, their results
will not be reflected in the Company's consolidated financial
statements until January 1995.
Although the Company anticipates improvement in operating
earnings in the fourth quarter of 1994 compared to the same period
in 1993, it also expects that the continued decline in ODI's
performance and higher development costs related to the
introduction of the new hermetically sealed pumps at the
Environamics Division, will reduce reported results. Also, fourth
quarter 1994 results will not reflect the benefit of a significant
non-recurring tax credit which occurred in the fourth quarter of
last year. Despite these factors, the Company expects fourth
quarter 1994 earnings before fourth quarter restructuring reserves,
if any, to be in the same range as the fourth quarter 1993 earnings
per share of $.16. Fourth quarter 1994 results may be impacted by
the establishment of non-recurring restructuring reserves which
the Company is currently considering in relation to several of its
operating units.
Page 10 of 18
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Goulds Pumps, Incorporated Form 10-Q
Part I, Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations
The following table indicates the percentage relationships of
income and expense items included in the Condensed Consolidated
Statements of Earnings for the nine months ended September 30, 1994
and 1993 and the related percentage change in those items.
As a Percentage of Total Net Sales Percentage Change
1994 1993(1) 1994 vs. 1993(1)
100.0% 100.0% Net sales 4.0%
70.8 71.1 Cost of goods sold 3.5
19.4 20.3 SG&A expenses (.6)
1.8 1.2 R&D expenses 50.7
.8 -- Provision for legal expenses N.M.
(.1) (.9) Earnings from affiliates (85.1)
1.1 .9 Interest expense 23.3
(.6) (.3) Interest income 107.2
.7 .2 Other expense-net 276.2
Earnings before income taxes
and cumulative effect of
6.1 7.5 accounting change (14.7)
2.3 2.8 Income taxes (11.5)
3.8 4.7 Earnings before cumulative (16.5)
effect of accounting change
Cumulative effect of change
-- .2 in accounting principle - net (100.0)
3.8% 4.5% Net earnings (12.0)%
N.M. = Not Meaningful
(1) Restated for adoption of SFAS 112 as of January 1, 1993.
The increase in total sales of $17.0 million in the first nine
months of 1994 compared to the prior year is primarily composed of
a $17.8 million or 9.7% increase in Water Technologies Group sales
while Industrial Products Group sales remained relatively constant.
Third quarter 1994 net sales were a record $154.3 million,
increasing 2.9% over third quarter 1993 net sales of $149.9
million. Water Technologies Group sales increased 6.5% to $75.5
million for the third quarter of 1994, compared to third quarter
1993 sales of $70.9 million while IPG sales for the quarter
approximated 1993 results. Specifically at WTG, WTG-America (WTG-
A) sales increased 5.8%, while at the Texas Turbine Division, sales
jumped 22.2% versus the third quarter of 1993. These increases
resulted from favorable weather conditions and new product
introductions.
Page 11 of 18
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part I, Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Sales at WTG-A have not been materially impacted by the April
1994 EPA announcement regarding pumps containing some bronze
components. On a lire basis, WTG-Europe sales for the quarter
increased 6.3% over third quarter 1993.
Gross profit as a percentage of sales was 29.2% for the first
nine months of 1994 compared to 28.9% for the first nine months of
1993. The Industrial Products Group gross profit percentage
increased slightly for the first nine months of 1994 to 28.4% from
28.2% a year ago. Water Technologies Group gross profit percentage
increased to 30.0% in 1994 compared to 29.7% for the first nine
months of 1993. Margin increases at WTG would have been somewhat
greater had it not been for additional costs incurred largely in
the second quarter in connection with the accelerated launch of the
new stainless steel GS submersible pump line, introduced as a
substitute for pumps containing some bronze components.
Selling, general and administrative (SG&A) expenses as a
percentage of sales decreased to 19.4% for the first nine months of
1994 compared to 20.3% for the same period a year ago, reflecting
the Company's efforts to contain costs through workforce reductions
and the restructuring program implemented during 1993. SG&A
reductions in 1994 would have been even greater had it not been for
a management restructuring charge of $1.5 million recorded in June
1994 related to the resignation of Stephen V. Ardia as President
and C.E.O. and subsequent appointment of Thomas C. McDermott to
that position.
Research and development (R&D) expenses increased 50.7%
compared to the first nine months of 1993. The higher level of R&D
expenses in the first nine months of 1994 relates primarily to the
acquisition of Environamics whose patented hermetically sealed pump
line is currently scheduled to be shipped late in 1994. Thus far,
distributor orders in excess of $2.0 million have been received for
this product line. In May 1994, the Company introduced the Model
GS stainless steel submersible pump, produced by WTG, one month
earlier than previously scheduled. The GS pump has received strong
market acceptance and sales to date have been at expected levels.
The Company anticipates that it will continue to invest in new
product development as well as in enhancements to existing products
at a higher level than last year to improve its competitive
position in the industry.
In the third quarter of 1994, a non-recurring charge of $3.3
million was recorded for legal and other fees related to the
Company's vigorous defense of the lawsuits in California alleging
leaching of lead from submersible pumps in violation of that
state's statutes. It also includes the establishment of a $2.2
million reserve to cover revised estimates of future legal costs to
Page 12 of 18
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part I, Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
pursue that defense. Although the Company believes the reserve is
adequate based upon reasonable estimates, it is reasonably possible
that such costs and related expenses in the additional amount of
approximately $1.0 million could be incurred. There has not been
nor does the Company currently anticipate any material impact on
sales or inventories resulting from these lawsuits.
The Company intends to vigorously defend all of the pending
litigation as described in the Company's Form 10-Q for the
quarterly period ended March 31, 1994, as well as any additional
lead-related litigation that may be commenced, but no assurance can
be given as to the ultimate outcome of such litigation or its
impact on the Company. If the Company were ultimately determined
to be liable for the damages alleged in such litigation, the claims
against the Company could be very substantial. However, all
pending lead-related litigation is at a very preliminary stage and
it is not possible at this time for the Company to quantify any
potential civil penalties, damages and other relief sought by the
various plaintiffs or to determine the extent of its liability, if
any.
Apart from issues for which reserves have been established in
respect of environmental matters, the Company is not currently
aware of other environmental matters which would have any material
impact on recurring costs, capital expenditures, or mandated
expenditures.
During the second and third quarter 1994, WTG-Europe entered
into and completed a short-term investment agreement whereby 8.3
billion lire were invested in Brazil. The net effect of this
transaction was to increase WTG-Europe's "other expense" due to
transaction losses on the foreign exchange of $1.7 million and
increase interest income due to earnings from the investment of
$1.4 million. This transaction resulted in increased profit after
taxes due to tax credits available in Italy.
Excluding WTG-Europe investment interest income discussed
above, interest income in the first nine months of 1994 remained
relatively constant with 1993. Interest expense increased $.9
million in the first nine months of 1994 compared to the same
period in 1993. This increase was anticipated and resulted from
the drawdown of a previously arranged long-term financing agreement
at a higher interest rate, higher short-term interest rates, and
overall higher debt levels.
Earnings from investments decreased $3.5 million for the first
nine months of 1994 compared to the same period in 1993. This
decrease is primarily due to Goulds' share of the 1994 earnings of
ODI. ODI's financial results in 1994 have been significantly
impacted by the lack of Russian financing availability which
Page 13 of 18
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part I, Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
occurred near the end of the first quarter and currently remains in
that status. A substantial year over year downturn at ODI will
therefore continue for the balance of 1994.
Excluding the impact of exchange losses on the WTG-E Brazilian
investment discussed above, other expense for the first nine months
of 1994 increased $0.7 million compared to the first nine months of
1993 due to net transaction losses which resulted from a
significant devaluation of the Venezuelan bolivar in May of 1994.
The Venezuelan government has instituted a "fixed" exchange rate
system and it is anticipated that it will remain in place through
year end. As such, it does not currently appear that additional
devaluation will occur in 1994.
Liquidity and Capital Resources
As reflected on the Condensed Consolidated Statements of Cash
Flows, $21.5 million of cash generated by net operating activities
combined with a $0.1 million negative translation effect were
utilized to fund $13.1 million of net investing activities and $6.9
million of net financing activities while increasing cash and cash
equivalents by $1.4 million.
Significant items impacting cash flow from operating
activities in 1994 include a $15.5 million increase in trade
receivables due to record third quarter shipments at WTG which
generally operates at higher activity levels in the second and
third quarters of the year combined with an increase in days sales
outstanding at WTG-Europe; and an $8.2 million increase in
inventories primarily at WTG divisions again due to seasonal
business fluctuations and to support new product introductions such
as the new stainless steel GS submersible pump line. Since this
new product introduction had been planned, the Company has not
experienced material losses on WTG-A inventory of submersible pumps
containing some bronze parts nor do they expect material losses in
the future.
In the first nine months of 1994, capital additions were $15.1
million. Significant 1994 projects include equipment additions and
upgrades at domestic and international locations. The Company
expects to spend approximately $20 - $25 million in total capital
expenditures for the year.
Additionally, cash flows from investing activities were
impacted by $3.0 million in cash received to repay in full a long-
term note receivable not due to expire until June 1997, and the
receipt of $2.0 million of cash from sinking funds, previously
restricted and classified as other long-term assets, related to
Industrial Revenue Bond Proceeds.
Assuming consummation of the Vogel acquisition later this
Page 14 of 18
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part I, Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
year, the Company expects that debt levels by the end of 1994 will
be significantly higher than at December 31, 1993. Additionally,
the Company replaced its $30.0 million Revolving Credit Agreement
which expired on October 31, 1994 with a $55.0 million Revolving
Credit Agreement expiring October 31, 1999. The Company believes
cash from operations and available credit facilities are sufficient
to meet its liquidity needs during 1994.
A natural hedge exists for the Company in relation to
transactions involving the Italian lire. To the extent that
translated WTG-Europe operating earnings after tax approximate
intercompany purchases of WTG-Europe inventory at spot translation
rates, exchange rate impacts are neutralized. Since 1993, as a
result of increased levels of intercompany purchases of WTG-Europe
product in excess of WTG-Europe after-tax earnings, foreign
exchange contracts have been established to minimize the effects of
unfavorable movements in the lire-to-U.S. dollar exchange rate on
this exposure.
Cumulative translation adjustments on the accompanying
consolidated balance sheet at September 30, 1994, increased $1.5
million from December 31, 1993 reflecting a slight strengthening of
the Italian lira against the U.S. dollar during the second and
third quarters of 1994.
Orders and Backlog
For the first nine months of 1994, orders were $442.6 million,
an increase of 6.7% compared to orders for the first nine months of
1993 of $414.7 million. This increase in orders of $27.9 million
is composed of a $10.4 million or 4.6% increase in Industrial
Products Group orders and a $17.5 million or 9.6% increase in Water
Technologies Group orders.
Total orders received for the third quarter were a record
$160.9 million, an increase of $12.2 million or 8.2% over orders of
$148.7 million a year ago. Orders at WTG increased 4.7% while
orders at IPG increased 11.6% compared to the third quarter of
1993. Orders at IPG for the third quarter of 1994 increased 10.7%
over the second quarter of 1994, reflecting strengthening of the
Company's core markets especially in the chemical and pulp and
paper sectors. WTG orders level increases have resulted from the
introduction of new products with related market share gains and
improvements at the Texas Turbine Division.
Total backlog has increased from $85.3 million at September
30, 1993 to $97.7 million at September 30, 1994. Industrial
Products Group backlog increased $11.3 million to a total backlog
of $91.0 million at September 30, 1994. Water Technologies Group
backlog increased slightly from September 30, 1993 levels.
Consolidated backlog decreased $2.3 million from the December 31,
1993 level of $100.0 million.
Page 15 of 18
<F50>
Goulds Pumps, Incorporated Form 10-Q
Part II, Items 1, 5 and 6
PART II. Other Information
Item 1. Legal Proceedings
Disclosures regarding legal proceedings are set forth in Part
II, item 1 of the Company's Form 10-Q for the quarterly period
ended March 31, 1994, which is incorporated herein by reference.
The complaint filed against the Company on May 3, 1994 in the
Superior Court of Washington for King County, disclosed on page 15
of the first quarter Form 10-Q, has been dismissed without
prejudice. No other significant developments have occurred since
the aforementioned Form 10-Q was filed on May 16, 1994.
Item 5. Other Information
As disclosed in previous SEC filings, the Company recorded a
$2.0 million provision in the fourth quarter of 1991 for estimated
environmental costs. This charge reflects anticipated costs to
monitor and remediate an inactive Company landfill site in Seneca
Falls, New York. At September 30, 1994, the remaining reserve was
$1.6 million. No third party recoveries have been included in the
determination of this reserve, nor are any expected. The
remediation is expected to occur through late 1995 or early 1996
and the Company does not currently expect any additional material
expenses in future years associated with this site.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit XI (Earnings Per Share Computation)
(b) Exhibit XXVII (Financial Data Schedule) filed
electronically only.
(c) No reports on Form 8-K were filed for the three months ended
September 30, 1994.
Page 16 of 18
<F50>
EXHIBIT XI
GOULDS PUMPS, INCORPORATED AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(IN THOUSANDS, September 30, September 30,
EXCEPT PER SHARE DATA) 1994 1993(3) 1994 1993(3)
<S> <C> <S> <C> <C> <C> <C>
a. Net earnings - as reported $ 5,230 $ 8,591 $16,877 $19,179
b. Decrease in interest expense (net of tax benefit) based upon issuance
of all shares of common stock under Deferred Common Stock Agreement $ -- $ -- $ -- $ --
c. Restated net earnings (a + b) $ 5,230 $ 8,591 $16,877 $19,179
d. Actual weighted average number of shares outstanding 21,176 21,140 21,171 21,118
e. Primary earnings per share based on actual average shares
outstanding (c / d) (1) $ .25 $ .41 $ .80 $ .91
f. Shares exercisable under outstanding options 412 954 435 954
g. Proceeds assuming exercise of outstanding options $ 7,736 $20,768 $ 8,259 $20,768
Reinvestment of proceeds under "Treasury Stock Method":
h. Average market price per share during each period or market price
at period-end (whichever is higher) $ 22.00 $ 25.75 $ 22.74 $ 25.75
i. Shares to be acquired (g / h) 352 807 363 807
j. Net increase in outstanding shares relative to stock options (f - i) 60 147 72 147
k. Adjusted weighted average shares outstanding (d + j) 21,236 21,287 21,243 21,265
l. Earnings per share assuming exercise of outstanding
options (c / k) $ .25 $ .40 $ .79 $ .90
m. Dilutive (Anti-dilutive) effect on earnings 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
period presented. 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 items.
(3) Restated for adoption of SFAS 112 as of January 1, 1993.
</TABLE>
Page 17 of 18
<F50>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GOULDS PUMPS, INCORPORATED
(Registrant)
Date: November 11, 1994 s/John P. Murphy
John P. Murphy
Vice President and
Chief Financial Officer
(Mr. Murphy is the Chief
Financial Officer and has
been duly authorized to
sign on behalf of the
Registrant.)
Page 18 of 18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Article 5 Fin. Data Schedule for 3rd Qtr 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> $8,578
<SECURITIES> 0
<RECEIVABLES> 126,730
<ALLOWANCES> 0
<INVENTORY> 115,773
<CURRENT-ASSETS> 277,647
<PP&E> 145,497
<DEPRECIATION> 18,829
<TOTAL-ASSETS> 460,544
<CURRENT-LIABILITIES> 155,195
<BONDS> 0
<COMMON> 21,181
0
0
<OTHER-SE> 172,096
<TOTAL-LIABILITY-AND-EQUITY> 460,544
<SALES> 443,739
<TOTAL-REVENUES> 443,739
<CGS> 314,209
<TOTAL-COSTS> 314,209
<OTHER-EXPENSES> 94,173
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,032
<INCOME-PRETAX> 27,230
<INCOME-TAX> 10,353
<INCOME-CONTINUING> 16,877
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,877
<EPS-PRIMARY> .80
<EPS-DILUTED> .79
</TABLE>
