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, 1995
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)
300 WillowBrook Office Park, Fairport, New York 14450-4285
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 387-6600
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 29, 1996, 21,292,612 common shares were outstanding, and the
aggregate market value of the common shares of Goulds Pumps, Incorporated held
by non-affiliates was approximately $460 million, based upon figures reported
in the Company s Proxy Statement.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting of Stockholders to be held on May 1, 1996
(Proxy Statement). See Part III of this Form 10-K Annual Report for portions
incorporated by reference.
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GOULDS PUMPS, INCORPORATED
TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business............................. 3 - 8
Executive Officers................................... 9
Item 2. Description of Properties............................ 10
Item 3. Legal Proceedings.................................... 10
Item 4. Submission of Matters to a Vote of Security Holders.. 10
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters......................... 11
Item 6. Selected Financial Data.............................. 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 13 - 20
Item 8. Financial Statements.................................. 21 - 44
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................... 45
PART III
Item 10. Directors and Executive Officers of the Registrant.... 45
Item 11. Executive Compensation................................ 45
Item 12. Security Ownership of Certain Beneficial Owners
and Management.......................................... 45
Item 13. Certain Relationships and Related Transactions........ 45
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.................................. 45 - 66
Signatures........................................... 67 - 68
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
(A) General Development of Business
Goulds Pumps, Incorporated (the Company ) started business in 1848
and was later incorporated 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. In December 1994, the
Company moved its Corporate headquarters from Seneca Falls, New
York, to Fairport, a suburb of Rochester, New York.
Goulds Pumps, Incorporated designs, manufactures and services pumps,
motors and accessories for industrial, agricultural, commercial and
consumer markets. Industrial markets account for approximately 53%
of the Company's sales. These include: chemical, petrochemical,
energy, refining, pulp and paper, utilities, mining and municipal,
including waste water treatment systems. The remaining sales,
representing approximately 47% of the Company's business, include
pumps, motors and accessories for home water and sewage systems,
agricultural irrigation and commercial uses.
(B) Financial Information About Industry/Market Segments
Financial information about market segments is contained
in Note 15 (Major Market Segment Information) on page 43
of this Annual Report on Form 10-K.
(C) Narrative Description of Business
Overview
The Company designs, manufactures and services pumps,
motors and accessories for the industrial, agricultural,
commercial and consumer markets. The Company's pumps
are manufactured for a broad range of uses in the
chemical, petrochemical, energy, refining, pulp and
paper, utilities, mining, and municipal industries, home
water and sewage systems, agricultural irrigation and
other commercial applications.
The Company is organized into two sectors: Industrial
Products ("IP") and Water Technologies ("WT").
Industrial Products
The Industrial Products sector represented approximately
53% of the Company's sales and 23% of operating earnings
for 1995 after recording a restructuring charge of $19.2
million for the transfer of Environamics and the wind
down of manufacturing at the Company's Venezuelan
location. Excluding these restructuring charges, the
Industrial Products sector would have represented 48% of
the Company s operating earnings for 1995. The types of
pumps manufactured for customers served by the
Industrial Products sector 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 five PRO Service Centers
domestically, three in Canada, one in Thailand, and one
in Venezuela.
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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 1995 IP posted sales of $377.4 million, an increase of
$54.1 million or 16.7% compared to 1994 results. IP sales
improvements were attributable principally to the December
1994 acquisition of Pumpenfabrik Ernst Vogel AG (Vogel), which
added $29.7 million in sales in 1995, and higher shipments at
the Engineered Products, Canadian, and Vertical Products
business units. These increased shipments resulted primarily
from strong demand in the pulp and paper and chemical markets.
The Company's industrial sales organization markets pumps for
U.S. industrial users through direct sales offices, 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 65 sales engineers
nationwide in its branch sales offices and has 41 distributors
and representatives.
Water Technologies
The Water Technologies sector represented approximately
47% of the Company's sales and 77% of operating earnings
for 1995. This disproportionate amount of operating
earnings is attributable to the Industrial Products
sector's 1995 restructuring charges. Excluding the
restructuring charges, Water Technologies would have
represented 52% of the Company's operating earnings for
1995. The WT sector 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. A
commercial line of pumps is manufactured and sold for
light industrial applications and OEM applications.
In addition, sump, effluent and sewer pumps (SES) are
manufactured and used in de-watering and sewage ejection
applications. 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 45%
of WT sales. This market is influenced by general
economic conditions and the weather.
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In 1995, WT posted sales of $341.4 million, an increase
of $79.2 million or 30.2% above 1994 results. WT sales
were at record levels for the year and for the fourth
quarter of 1995. Sales in the WT sector rose as a
result of the Vogel acquisition, which accounted for
$33.5 million of the increase, and generally increased
sales in Europe and North America. Excluding Vogel, WT
sales in Europe rose $22.2 million primarily as a result
of an increased sales presence and new products. Sales
of WT products in North America increased $7.8 million
in 1995 mainly due to the growing market acceptance of
recently introduced products.
The Company's agricultural pumps and domestic water
systems pumps manufactured by WT are marketed in the
United States through the WT-America sales force. The
Company employs approximately 50 WT-America 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 8,000 Goulds Pumps Dealers
Association members.
Joint Ventures
The Company as of December 31, 1995 had a joint venture
agreement with Nanjing Deep Well Pump Works of Nanjing, China
to produce agricultural vertical turbine pumps in China,
through a separate corporation, Nanjing Goulds Pumps Limited,
Co., for sale worldwide. In January 1996, the Company gained
a controlling interest in this company by investing an
additional $1.4 million. This investment increased the
Company's ownership from 45% to 62%. The Company will begin
to consolidate the financial results for this affiliate in
1996.
(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 which 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 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.
Product Development
The Company is committed to the ongoing development of
new products and improvement of existing products.
Research and development expenditures amounted to $8.2
million, $10.6 million, and $7.2 million for the years
ended December 31, 1995, 1994, and 1993, respectively.
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Research and development ( R&D ) expenses in 1995
decreased 22.1% compared to 1994 spending levels. In
1994, the higher level of R&D expenses was related to
Environamics, where all costs were charged to R&D prior
to the first product shipments in late 1994.
International Operations
Financial information about foreign operations and export
sales is included in Note 15 (Major Market Segment
Information) on page 43 of this Annual Report on Form 10-K.
The Company has manufacturing or assembly operations in
Italy, Austria, Canada, Mexico, Singapore, South Korea,
Venezuela, the Philippines and China. Sales by foreign
affiliates were approximately $253 million, $157
million, and $152 million for 1995, 1994 and 1993,
respectively. The largest international subsidiary,
Goulds Pumps Europe B.V. has wholly-owned subsidiaries
in Italy, the United Kingdom, Austria, France, Belgium,
Ireland, Slovenia, and The Netherlands, and majority-
owned subsidiaries in Denmark, Portugal, and Germany.
The Italian subsidiary, Lowara S.p.A., fabricates
stainless-steel pumps which are sold worldwide and has
recently introduced several key new products with
significant growth potential. Vogel, the Company's
Austrian operation, produces pumps for medium- and
heavy-duty water systems and industrial applications.
The Canadian operation includes a manufacturing facility
in Cambridge, Ontario, for water systems products and
for industrial products, as well as sales offices in
Montreal, Vancouver and Calgary. The Philippines
subsidiary manufactures residential and agricultural
water systems pumps. The Mexican operation manufactures
various pumps for industrial and agricultural
applications. The Korean operation is an assembly and
testing facility which provides support to customers in
the Asia Pacific region. The Netherlands operation is a
distribution site for industrial products. The
Singapore operation is an assembly and distribution site
for both IP and WT products serving the Asia Pacific
region. The China operation manufactures agricultural
vertical turbine pumps for sale worldwide.
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;
Waardenburg, Netherlands; Dammam, Saudi Arabia; Bombay,
India; Santiago, Chile; Southampton, England; Beijing,
China; Taipei, Taiwan; Lima, Peru; Tokyo, Japan; Seoul,
South Korea and Hong Kong. In addition, the foreign
operations maintain sales personnel to market their
respective products.
Export sales from the United States were $69 million in
1995, $58 million in 1994, and $62 million in 1993. The
Company's export sales are distributed throughout the
world without concentration in any one geographic
region.
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.
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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 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 4,900 people.
Approximately 1,260 employees are covered under union
contracts stipulating rates of pay, hours of employment and
other conditions of employment. During the second quarter of
1995, the Company successfully negotiated an early settlement
of new four-year contracts with the 800-member United
Steelworkers Local Union #3298 covering the Company s two
largest business units located in Seneca Falls, New York.
Approximately 2,800 persons are employed domestically
while approximately 2,100 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 Technologies market decline in
winter months. The Industrial Products sector of the
Company is not a seasonal business.
Environmental Considerations
In 1995, a legal action was filed against the Company and 21 other
defendants in the United States District Court for the Western
District of New York (Rochester) by two plaintiffs seeking damages
for environmental contamination at or near an inactive landfill site
in Seneca Falls, New York. The Company's investigation into the
allegations in these actions is in its preliminary phases. The
Company believes that under applicable laws it should not bear any
liability to one of the claimants, the current landfill owner, who
purchased the property with full knowledge of its prior use and
continued to operate it thereafter. In addition, the Company
believes that there is little reasonable likelihood of material
liability to the other claimant at this stage of investigation,
based upon considerations of the damages claimed, nature of
contamination and the existence of other financially viable co-
defendants, and after reviewing applicable legal principles. The
Company has answered the complaint by denying the material
allegations and asserting various affirmative defenses, cross-claims
and counter-claims. The Company intends to vigorously defend this
litigation, but no assurance can be given as to the ultimate outcome
of such litigation or its impact on the Company.
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In 1994, complaints were filed against the Company in California and
Washington alleging unlawful discharge of lead into drinking water
sources. Additionally in 1994, a class action complaint was filed
principally alleging violations of federal securities laws. As a
result of these complaints, a pre-tax charge of $3.5 million was
recorded by the Company in that year for legal and other fees
related to these lawsuits. During 1995, all litigation related to
these complaints was resolved, and the Company reversed the
remaining reserve of $0.9 million.
The Company recorded a $2.0 million provision in 1991 for estimated
costs to monitor and remediate an inactive Company landfill site in
Seneca Falls, New York. At December 31, 1995, the remaining reserve
was $1.7 million. The remediation plan has been approved by the New
York State Department of Environmental Conservation and is expected
to be completed by the end of 1996. The Company currently believes
that the reserve associated with this site is sufficient to absorb
any future costs.
Apart from issues discussed above, the Company is not currently
aware of any other environmental matters which would be reasonably
likely to have a material impact on recurring costs, capital
expenditures, or mandated expenditures.
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 1995 and are not anticipated to be
material in 1996 or 1997.
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 exists primarily in the Industrial Products
sector. The Water Technologies sector maintains minimal
backlog levels since products are normally shipped
within two weeks after receipt of a customer order. The
backlog of orders was $140.3 million at February 29,
1996, an increase of $18.6 million from February 28,
1995 levels. This increase is due principally to the
Vogel Acquisition.
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EXECUTIVE OFFICERS
Name Age Present Office and Experience
M. A. Lambertsen 56 Vice President - Human Resources since December
1991; previously Vice President of Human Resources
of Fisher-Price, Inc., 1978-1991.
T. C. McDermott 59 Chairman of the Board since 1995 and Chief
Executive Officer and President since June 1994;
Director since 1988; previously, a Director and
President and Chief Operating Officer of Bausch &
Lomb, Inc. 1986-1993.
J. P. Murphy 49 Vice President - Finance and Chief Financial
Officer since August 1993; previously Executive
Vice President and Chief Financial Officer of
Westcan Chromalox, Inc., 1991-1993; Vice President-
Finance and Administration and Chief Financial
Officer of Hamilton Beach, Inc., 1986-1991.
J. J. Scanlon 61 Vice President and President - Asia Pacific
effective January 1, 1996; previously Vice
President - Asia Pacific. Joined the Company in
1959.
E. L. Steenburgh 54 Senior Vice President and President - Industrial
Products since September 1995; previously,
President and Chief Operating Officer of Ricoh
Corporation, 1992 - 1995. Before joining Ricoh,
he spent 27 years with Xerox Corporation, and held
several senior management positions including
having responsibility for all manufacturing
operations worldwide.
M. T. Tomaino 58 Vice President, General Counsel and Secretary
since July 1995; previously a Partner of the law
firm Nixon, Hargrave, Devans & Doyle, 1971 - 1995.
F. J. Zonarich 50 Vice President and President - Water Technologies
since December 1989.
No family relationship exists between any of the above executive officers. The
normal term of office for all executive officers listed above runs from one
Annual Meeting of Stockholders of the Company to the next, or approximately one
year
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ITEM 2. DESCRIPTION OF PROPERTIES
The Company leases its Corporate headquarters in Fairport, New York. The two
largest domestic manufacturing facilities are located in Seneca Falls,
New York. Other domestic manufacturing facilities are also located in
Baldwinsville, NewYork; Ashland, Pennsylvania; Lubbock and Slayton, Texas; and
City of Industry, California. An assembly, shipping, and receiving facility for
water systems is maintained in Auburn, New York. The Company s largest
internationalmanufacturing plant is located in Italy. Other international
manufacturing facilities are currently located in Austria, Canada, Mexico,
Singapore, South Korea, China and the Philippines. Goulds Pumps Europe maintains
subsidiaries which are located in Italy, Germany, Belgium, Denmark, Portugal,
France, Ireland, 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 for inventories of pumps and parts sold to industrial
users in Chicago, Illinois; Memphis, Tennessee; Houston, Texas; Baton Rouge,
Louisiana; Fairfield, New Jersey; Huntington, and West Virginia. The Company
maintains regional warehouses to keep inventories of water pump systems and
deep-well turbine components readily available in the vicinities of Chicago,
Illinois; Orlando, Florida; Fresno, California; Memphis, Tennessee; Melbourne,
Australia; Waardenburg, the Netherlands and Singapore, Republic of Singapore.
During the five years ended December 31, 1995, the Company invested
approximately$165 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
In 1995, a legal action was filed against the Company and 21 other defendants
in the United States District Court for the Western District of New York
(Rochester) by two plaintiffs seeking damages for environmental contamination
at or near an inactive landfill site in Seneca Falls, New York. The Company's
investigation into the allegations in these actions is in its preliminary
phases. The Company believes that under applicable laws it should not bear any
liability to one of the claimants, the current landfill owner, who purchased the
property with full knowledge of its prior use and continued to operate it
thereafter. In addition, the Company believes that there is little reasonable
likelihood of material liability to the other claimant at this stage of
investigation, based upon considerations of the damages claimed, nature of
contamination and the existence of other financially viable co-defendants, and
after reviewing applicable legal principles. The Company has answered the
complaint by denying the material allegations and asserting various affirmative
defenses, cross-claims and counter-claims. The Company intends to vigorously
defend this litigation, but no assurance can be given as to the ultimate outcome
of such litigation or its impact on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of stockholders during the fourth quarter
of 1995.
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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 bid information reported by NASDAQ
National Markets System and related dividend information for the past two years
of the Company is set forth below:
Market value per share
1995 1994
Quarter High Low Quarter High Low
1st $24.25 $19.63 1st $26.50 $22.00
2nd $25.50 $20.38 2nd $24.38 $19.38
3rd $23.63 $21.00 3rd $22.75 $19.38
4th $26.00 $22.63 4th $23.38 $19.13
Year $26.00 $19.63 Year $26.50 $19.13
Dividend paid per common share
Quarter 1995 1994
1st $.20 $.20
2nd $.20 $.20
3rd $.20 $.20
4th $.20 $.20
Year $.80 $.80
The approximate number of holders of the Company's common stock as of February
29, 1996 was 4,988.
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.
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ITEM 6. SELECTED FINANCIAL DATA
Five-Year Summary of Financial Data
Goulds Pumps, Incorporated
(Dollars in millions except per share data)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
OPERATIONS 1995 1994 1993 1992 1991
Net sales $718.8 $585.5 $555.7 $558.9 $566.6
Gross profit 204.7 167.1 156.3 173.3 175.9
Interest expense 11.4 6.6 5.4 5.0 6.4
Earnings from continuing operations before
income taxes, extraordinary charge, and
cumulative effect of accounting changes 25.1 29.6 34.4 35.8 51.3
Earnings from continuing operations before
extraordinary charge and cumulative effect
of accounting changes 18.1 18.2 23.5 21.8 31.3
Extraordinary charge -- -- -- -- (.6)
Cumulative effect of accounting changes -- -- (1.0) (29.7) --
Net earnings (loss) 18.1 18.2 22.5 (7.9) 30.7
COMMON STOCK
Number of stockholders at year-end 4,988 5,276 5,555 5,902 6,461
Average shares outstanding
(in thousands) 21,240 21,175 21,126 21,027 20,781
Net earnings (loss) per share:
Continuing operations before extraordinary
charge and cumulative effect of accounting
changes $ .85 $ .86 $ 1.12 $ 1.04 $ 1.51
Extraordinary charge -- -- -- -- (.03)
Cumulative effect of accounting changes -- -- (.05) (1.42) --
Net earnings (loss) per share .85 .86 1.07 (.38) 1.48
Dividends per share .80 .80 .80 .80 .80
Stockholders' equity per share 8.94 9.03 8.85 9.15 10.51
Market value per share-low 19.63 19.13 21.25 20.00 18.00
-high 26.00 26.50 26.75 29.38 26.00
Five-Year Summary of Financial Data (Cont'd.)
(Dollars in millions except per share data)
FINANCIAL DATA 1995 1994 1993 1992 1991
Capital additions $ 33.5 $ 28.1 $ 24.7 $ 40.0 $ 38.8
Depreciation 26.0 24.9 24.8 23.8 22.8
Property, plant and equipment
- -net 173.3 152.8 149.0 154.6 140.8
Working capital 106.9 116.8 109.7 122.1 122.1
Debt (including short-term) 133.1 89.1 87.4 65.3 64.2
Total assets 554.0 457.2 438.5 418.8 395.9
Stockholders' equity 190.3 191.3 187.2 192.8 219.3
Debt to equity % 69.9 46.6 46.7 33.9 29.3
Continuing operations before extraordinary
charge and cumulative effect of accounting
changes:
Return on average stockholders'
equity % 9.3 9.5 12.4 9.6 14.6
Return on average capital % 7.7 7.6 9.7 8.0 11.2
Number of employees at year-end 4,900 4,200 4,100 4,300 4,350
</TABLE>
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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, 1995, and
its financial condition at December 31, 1995. 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.
In an effort to give investors a well-rounded view of the Company's current
condition and future opportunities, this Annual Report on Form 10-K includes
forecasts by the Company's management about future performance and results.
Because they are forward-looking, these forecasts involve uncertainties. They
include risks of increases in manufacturing costs; market acceptance of or
preference for the Company's products; competitive forces; the impact of, and
changes in, government regulations, such as trade restrictions or prohibitions,
import and other charges or taxes; changes in global demand for pumps and pump-
related products; availability of the Company's products; cyclicality of
industries to which the Company markets certain of its products; general
economic factors in markets where the Company's products are sold, manufactured
or marketed; technological factors; and other factors discussed in the Company's
filings with the Securities and Exchange Commission.
OVERVIEW
The financial results for Goulds Pumps in 1995 reflected solid growth with
a continuing focus on businesses that are strategic and can enhance
profitability. Strong demand in domestic markets that resulted from core
market strength and impressive growth in the Asia Pacific markets served to
improve the Company's profitability from continuing operations in 1995.
Consolidated sales rose 22.8% to a record $718.8 million for the year which
included first year results from Austria s leading pump manufacturer,
Pumpenfabrik Ernst Vogel GmbH (Vogel), which the Company acquired late in 1994.
Both the Industrial Products (IP) and Water Technologies (WT) sectors showed
strong sales growth during the year. Orders in 1995 set a record at $729.2
million, an increase of 21.8% over 1994 orders of $598.6 million. Net income
was $18.1 million, down 0.7% from 1994's net income of $18.2 million. Reported
earnings per share were $.85 for 1995, down slightly from 1994's reported
results of $.86. Included in the 1995 results was a one-time restructuring
charge of $10.6 million after taxes, or $.50 per share, that primarily reflected
the Company's decision to transfer ownership of its 100%-owned subsidiary,
Environamics Corporation, and to wind down its Venezuelan manufacturing
activities. Excluding restructuring charges in both years, earnings per share
would have been $1.35 in 1995 compared with $.96 in 1994, or an increase of
40.6%.
Several key events occurred during 1995 that significantly impacted the
Company, both organizationally and financially. These events are highlighted
below:
. During 1995, the Company's management team was strengthened with the
addition of several key people. In particular, Eric L. Steenburgh,
who came with 27 years of experience at Xerox Corporation and had most
recently been President and Chief Operating Officer for Ricoh
Corporation (USA), joined the Company as Senior Vice President and
President - Industrial Products; Richard White, previously Managing
Director for Marley Cooling Tower Company in Australia, was brought
on as Managing Director - Asia Pacific; Douglas Bingler, with over
20 years of pump industry experience, was hired as President - Water
Technologies-America; R. Scott Myers was appointed as General Manager
- Industrial Products-Canada, coming from Foulis Group Ltd. where he
<F50>
was President; William Murff, formerly with Empresas Lanzagorta, S.A.
de C.V. in Mexico, joined the Goulds team as President - Goulds Pumps
Latin America; Richard C. Duffy was named Staff Vice President -
Corporate Development after having been with the Company for several
years in other capacities, most recently as Vice President, Marketing
and R&D; Cary G. Schmiedel, formerly Director - Corporate Financing,
International and Domestic Treasury Operations at Eastman Kodak
Company, was appointed as Corporate Treasurer; and Michael T. Tomaino
was elected as Vice President, General Counsel and Secretary,
previously a partner at the law firm of Nixon, Hargrave, Devans &
Doyle. In January 1996, J. Kevin Kilbane, formerly President -
Engineered Pump Group with Ingersoll Dresser Pump Company, rejoined
Goulds Pumps as President - Goulds Pumps Europe. Management believes
that the Company's ability to succeed in the years ahead will be
significantly enhanced with the addition of these individuals.
. The Company continued to develop a regional management structure
during 1995. This regionalization focused on enhancing the Company's
presence in the Asia/Pacific region, and also resulted in the
formation of a Latin American region headquartered in Mexico.
. In December 1995, the Company decided to close its manufacturing
activities in Venezuela and write off a significant portion of its
related investment. This decision was driven by the operation's lack
of profitability over the last several years, compounded by uncertain
economic conditions in the country. The Company will continue to
maintain a strategic presence in Venezuela by operating a pump repair
and overhaul (PRO) Service Center, as well as certain sales offices.
. Also in December 1995, the Company transferred the ownership of its
100%-owned subsidiary, Environamics Corporation, to that company's
then current management. Environamics, which had been expected to
break even in 1994 and 1995, posted a pre-tax loss of approximately
$3.0 million in each year, primarily due to a later than expected
product introduction in 1994 and lower than expected sales in 1995.
The Company anticipated that these lower sales levels would have
continued and that significant additional investment would have been
required. This action resulted in a $13.7 million pre-tax charge,
or $8.9 million after taxes.
Analysis of Operations
(Dollars in millions)
% Change
1995 vs. 1994 vs.
1995 1994 1993 1994 1993
Net sales $718.8 $585.5 $555.7 22.8% 5.4%
Net Sales
The increase in total net sales of $133.3 million in 1995 compared with
1994 is composed of a $79.2 million increase, or 30.2%, in Water Technologies
sales while Industrial Products sales increased $54.1 million, or 16.7%. Over
the past several years, the Company s net sales have reflected an increasing
proportion of WT products. This is evidenced by the fact that the WT sector
comprised 47% of total net sales in 1995, compared with 38% in 1990.
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IP sales increased $54.1 million due to the recently acquired Vogel
business, which added $29.7 million in 1995, and higher shipments at the
Engineered Products, Canadian, and Vertical Products business units. These
increased shipments resulted primarily from strong demand in the pulp and paper
and chemical markets.
WT sales were at record levels for 1995 totaling $341.4 million, a 30.2%
increase over 1994 s sales of $262.2 million. Sales in the WT sector rose as
a result of the Vogel acquisition, which accounted for $33.5 million of the
increase, and generally increased sales in Europe and North America. Excluding
Vogel, WT sales in Europe rose $22.2 million primarily as a result of an
increased sales presence and new products. Sales of WT products in North
America increased $7.8 million in 1995 mainly due to the growing market
acceptance of recently introduced products.
In 1994, consolidated net sales of $585.5 million represented an increase
of $29.8 million, or 5.4%, compared with 1993. IP sales increased $7.2 million
in 1994 over 1993 led by higher sales activity at the Engineered Products
business unit. WT's 1994 sales increased $22.6 million compared with 1993 as a
result of increases in all WT operating units.
Costs and Expenses
As a % of Net Sales
1995 1994 1993
Gross profit 28.5% 28.5% 28.1%
Selling, general and
administrative expenses 20.1% 20.1% 20.7%
Research and development expenses 1.1% 1.8% 1.3%
Consolidated gross profit as a percentage of net sales in 1995 remained
constant with 1994 at 28.5%, despite higher raw material costs in Europe and
manufacturing issues in the Industrial Products sector that were offset by
general price increases and manufacturing efficiencies in Water Technologies.
IP's gross profit percentage for 1995 decreased slightly to 27.3% from 27.5% a
year ago. This decrease was the result of competitive pricing pressures and
manufacturing issues that temporarily affected throughput and lead times
adversely during the year. WT's gross profit percentage improved slightly to
29.9% in 1995, compared with 29.7% for 1994. This improvement resulted mainly
from margin increases in WT s North American operations, primarily related to a
shift in product mix and benefits gained from manufacturing efficiencies.
Selling, general and administrative (SG&A) expenses in 1995 as a percentage
of net sales were unchanged from the prior year. Higher SG&A expenses at Vogel,
as well as other European operations, prevented the overall percentage from
decreasing. Without Vogel, SG&A expenses as a percentage of net sales would
have been 19.7% in 1995. The 1994 costs included a charge of $1.5 million
primarily related to the resignation of the Company s former President and Chief
Executive Officer.
Research and development (R&D) expenses in 1995 were $8.2 million, a
decrease of 22.1% from 1994. In 1994, the higher level of R&D expenses was
related to Environamics, where all costs were charged to R&D prior to the first
product shipments in late 1994.
Restructuring Charges
In December 1995, the Company recorded a pre-tax restructuring charge of
$18.5 million. This charge resulted from the Company's decision to transfer its
ownership interest in Environamics Corporation to that company's management and
to wind down the manufacturing operation in Venezuela, impacting the Company's
investment in this subsidiary. The charges associated with these items amounted
to $19.7 million and were offset in part by a $1.2 million reversal of a portion
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of the previous year s restructuring charge. This reversal was due to lower
than expected severance costs in California and the Netherlands. Environamics
was transferred to two senior managers from whom the business had been
purchased, resulting in a $13.7 million pre-tax charge. The decision to dispose
of Environamics came after losses of approximately $3.0 million pre-tax were
recorded in both 1994 and 1995. The Company believed that further losses were
likely to occur in 1996, and that substantial additional investment would be
required. Net sales for Environamics in 1995 were $3.1 million.
The decision to close the manufacturing activities in Venezuela resulted
in a $6.0 million pre-tax charge in 1995. The Company had sustained losses in
almost every year since 1990, when it took ownership of the operation, including
a 1995 pre-tax loss of $3.1 million. These losses, coupled with an uncertain
economic climate in Venezuela greatly exacerbated by high inflation and a
significant devaluation of its local currency, prompted the Company to wind down
this operation. Once current orders are completed in the first half of 1996,
this significantly downsized business unit will operate as a PRO Service
Center. The Company will also maintain its presence in the country with certain
sales offices. Shipments will continue to be made into Venezuela from the
Company's other manufacturing facilities. The termination of approximately 50
employees was included in the restructuring charge. Of the total $19.7 million
of restructuring charges related to Environamics and Venezuela in 1995, $18.3
million related to other exit costs (including the write-off of previous
investments) and $1.4 million related to termination benefits.
In the fourth quarter of 1994, the Company recorded an initial pre-tax
restructuring charge of $3.5 million and a related liability for such costs.
The restructuring plan included the downsizing of the Company's California,
Netherlands, and Mexican based operations, and the consolidation of sales
offices, PRO Service Centers, and other Company facilities. As stated above,
$1.2 million of the 1994 restructuring charge was reversed in the fourth quarter
of 1995 due to lower than expected outsourcing in California and the transfer of
certain Netherlands employees to other Goulds Pumps European operations. The
restructuring included the termination of 126 employees. Net of the 1995
reversal, the related costs to exit facilities were $1.1 million and termination
benefits were $1.2 million. Through year-end 1995, the Company has recorded
$0.7 million in exit costs and $0.9 million in termination costs against the
liability. The balance in the restructuring reserve at December 31, 1995 was
$0.7 million. The restructuring plan has resulted in savings of approximately
$1.5 million to $2.0 million pre-tax in 1995, with a similar level of savings
estimated to be realized in 1996.
Other Income and Expenses
(Dollars in millions)
% Change
1995 vs. 1994 vs.
1995 1994 1993 1994 1993
Earnings from affiliates $ -- $(0.5) $(4.6) (100.0)% (89.1)%
Interest expense 11.4 6.6 5.4 72.7 % 22.2 %
Interest income (1.8) (3.0) (1.9) (40.0)% 57.9 %
Other (income) expense
- net (0.4) (0.7) 0.6 (42.9)% 216.7 %
Earnings from affiliates decreased $0.5 million in 1995 from 1994 due to
the shift in control of Oil Dynamics, Inc. (ODI) to Franklin Electric Co. in
late 1994. This affiliate had formerly been a 50%-owned joint venture with
Franklin Electric. The Company's investment, which was reduced to a 3%
ownership interest, is now recorded under the cost method of accounting. Prior
to this change in control, the Company's proportionate share of ODI's earnings
had been reflected as income. The Company's share of ODI's earnings in 1994
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declined by $4.0 million due mainly to a substantial decrease in ODI's 1994
sales to Russia that resulted from a lack of financing availability in Russia.
Interest expense rose $4.8 million in 1995 mainly as a result of bank and
capital lease debt assumed or incurred in connection with the Vogel
acquisition. In addition, WT-Europe debt levels increased in order to fund
higher working capital needs. The $1.2 million increase in interest expense in
1994 from 1993 was due to higher interest rates and overall higher debt levels.
Interest income in 1995 decreased $1.2 million from 1994, while 1994's
interest income reflected a $1.1 million increase over 1993. These changes
resulted primarily from a short-term investment arrangement in 1994 which
increased interest income in that year by $1.4 million.
Year-over-year comparisons of other (income) expense - net are affected
by a 1994 pre-tax curtailment gain of $4.2 million resulting from the revision
to the Company's non-union eligibility requirements for certain employee
benefits (see Note 9 in Notes to Consolidated Financial Statements for
additional information) and a $1.7 million charge in 1994 due to foreign
currency transaction losses on 1994 short-term investment arrangements
entered into by WT-Europe. Excluding these items, other (income)
expense - net improved $2.2 million in 1995 over 1994 mainly as a result of
transaction and translation losses that occurred in 1994 resulting from
significant devaluations of the Venezuelan bolivar.
Income Taxes
1995 1994 1993
Effective tax rate 28.0% 38.6% 31.5%
In 1995, the effective tax rate decreased significantly as a result of a
fourth quarter international tax restructuring strategy and tax benefits
associated with the Venezuelan restructuring charge. The low 1993 effective tax
rate was due to a non-recurring cumulative adjustment to deferred taxes
associated with tax code changes and the implementation of the corporate
European tax restructuring.
Return on Equity
The return on average stockholders' equity in 1995 decreased to 9.3% from
9.5% in 1994 and 12.4% in 1993. The decreases in both years are primarily a
result of lower net earnings, which were significantly impacted by the
restructuring and environmental litigation charges. Excluding restructuring
charges, the returns on average stockholders equity were 14.7%, 10.6% and 12.4%
in 1995, 1994 and 1993, respectively.
Liquidity and Capital Resources
As reflected in the consolidated statements of cash flows for 1995, the
$46.0 million of cash generated by operating activities combined with a negative
$3.4 million translation effect were used to fund $35.4 million of net investing
activities and $8.1 million of financing activities, thus decreasing cash and
cash equivalents by $1.0 million. A significant increase in trade receivables
due to higher shipments near year-end had an adverse impact on cash provided by
operating activities in 1995.
Capital additions in 1995 were $33.5 million, exceeding depreciation of
$26.0 million. Significant projects included equipment and building additions,
primarily at WT-Europe.
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Total debt at the end of 1995 increased $44.0 million compared with year-
end 1994, primarily due to the Vogel acquisition and increases at WT-Europe
that were required to finance working capital needs. Debt assumed in connection
with the Vogel acquisition in December 1994 of $34.5 million was netted in the
Investment in Vogel line in the 1994 consolidated balance sheet. In 1994, 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's ongoing emphasis on asset management during 1995 resulted
in significant improvements in the effective utilization of financial resources
when compared with 1994. Accounts receivable measurements based on the average
number of days that sales were outstanding improved 8.6% in 1995 compared with
1994. Inventory turnover, which measures the effectiveness of efforts to
minimize inventory levels, improved 20.0% in 1995 over 1994.
The Company operates internationally, giving rise to exposure to market
risks from changes in interest and foreign currency exchange rates. Foreign
exchange contracts are used to minimize the cash flow effects of unfavorable
movements in foreign exchange rates. Derivative financial instruments are also
used by the Company to reduce those risks. The Company does not hold or issue
financial or derivative financial instruments for trading purposes.
Cumulative translation adjustments on the accompanying consolidated balance
sheets at December 31, 1995, were $12.9 million, compared with $9.2 million on
December 31, 1994, reflecting the weakening of the Italian lira and the Mexican
peso against the U.S. dollar.
Orders and Backlog
In 1995, orders received were a record $729.2 million, an increase of 21.8%
over the 1994 orders level of $598.6 million. Excluding Vogel orders, which
amounted to $64.0 million in 1995, consolidated orders would have been $665.2
million, an increase of $66.6 million, or 11.1%, over 1994. IP orders rose
11.0% without Vogel, while WT orders increased 11.3%, also without Vogel. The IP
sector posted solid increases in both pump and repair order activity in 1995,
while the industrial core markets remained strong throughout the year. The
Company experienced an interruption in orders momentum at the Engineered
Products business unit during the middle of 1995 when lead times were
temporarily lengthened. However, most of these lead times were reduced to
competitive levels by year-end. Within the WT sector, the increase in 1995
orders activity was led by the European and Asia Pacific regions.
Backlog levels at December 31, 1995 totaled $151.2 million, an increase
of 32.9% from 1994. Without Vogel, backlog at year-end 1995 would have been
$121.7 million, or an increase of 9.1% over 1994, primarily due to strong fourth
quarter order activity at the IP sector. Backlog exists primarily at the IP
sector, as the WT sector maintains small backlog levels since its products are
normally shipped within two weeks from receipt of a customer order.
Inflation
Generally, increases in material costs have been offset by productivity
improvements and sales price increases. Beginning in mid-1995 in Europe,
however, increases in raw material costs, due mainly to the weakness of the
Italian lira compared to other European currencies, have outpaced price
increases and productivity gains. The Company continues to monitor the impact
of inflation in order to minimize its effects through pricing strategies,
productivity improvements, and cost reductions.
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Environmental Matters
In 1995, a legal action was filed against the Company and 21 other
defendants in the United States District Court for the Western District of New
York (Rochester) by two plaintiffs seeking damages for environmental
contamination at or near an inactive landfill site in Seneca Falls, New York.
The Company s investigation into the allegations in these actions is in its
preliminary phases. The Company believes that under applicable laws it should
not bear any liability to one of the claimants, the current landfill owner, who
purchased the property with full knowledge of its prior use and continued to
operate it thereafter. In addition, the Company believes that there is little
reasonable likelihood of material liability to the other claimant at this stage
of investigation, based upon considerations of the damages claimed, nature of
contamination and the existence of other financially viable co-defendants, and
after reviewing applicable legal principles. The Company has answered the
complaint by denying the material allegations and asserting various affirmative
defenses, cross-claims and counter-claims. The Company intends to vigorously
defend this litigation, but no assurance can be given as to the ultimate outcome
of such litigation or its impact on the Company.
In 1994, complaints were filed against the Company in California and
Washington alleging unlawful discharge of lead into drinking water sources.
Additionally in 1994, a class action complaint was filed principally alleging
violations of federal securities laws. As a result of these complaints, a pre-
tax charge of $3.5 million was recorded by the Company in that year for legal
and other fees related to these lawsuits. During 1995, all litigation related
to these complaints was resolved, and the Company reversed the remaining reserve
of $0.9 million.
The Company recorded a $2.0 million provision in 1991 for estimated costs
to monitor and remediate an inactive Company landfill site in Seneca Falls, New
York. At December 31, 1995, the remaining reserve was $1.7 million. The
remediation plan has been approved by the New York State DEC and is expected to
be completed by the end of 1996. The Company currently believes that the
reserve associated with this site is sufficient to absorb any future costs.
Apart from issues discussed above, the Company is not currently aware of
any other environmental matters which would be reasonably likely to have a
material impact on recurring costs, capital expenditures, or mandated
expenditures.
Outlook
As the new year begins, initial order activity and a significant backlog
at year-end provide indications that 1996 will be another strong year for
overall sales growth. Growth by regions will vary, but will likely be in line
with the overall growth experienced in 1995, as long as the demand from the
Company's core markets remains strong.
In February 1996, the Company sold certain product lines from its Municipal
Business Unit (MBU) in Baldwinsville, New York to Yeomans Chicago Corporation of
Melrose Park, Illinois. The Company has been in the municipal wastewater and
sewerage business since 1981. These product lines were not considered to be a
core business for the Company, and the investments necessary to create a viable
market in these products were not in keeping with the Company's corporate
strategy. Net sales associated with these product lines in 1995 amounted to
$5.5 million.
During the third quarter of 1995, the Company successfully negotiated an
early settlement of new four-year contracts with the 800-member United
Steelworkers Local Union #3298 covering the Company s Engineered Products and
Water Systems business units located in Seneca Falls, New York.
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Management continues to place a strong emphasis on improving gross
margins and controlling its SG&A and R&D expenses. Overall, gross margins are
expected to improve in 1996 due to efficiencies gained from focused factories
and, in general, a better use of resources. Gross margins in the Company's
European operations, however, are expected to decline somewhat in 1996 due to
raw material cost increases. For R&D expenses in 1996, the Company plans to
continue to invest in new product development, as well as in enhancements to
existing products, at approximately the same percentage of sales as in 1995. The
Company expects its effective tax rate in 1996 will be in the range of 36%.
The Company expects to spend approximately $35-$40 million for capital
additions during 1996. This spending level includes continued major investments
in upgrades of machinery and equipment, facilities improvements, product
development related expenditures, and manufacturing facility construction for
the Water Systems business unit in New York.
The Company believes cash generated from operations and the $160 million
of available (committed and uncommitted) credit facilities at December 31, 1995
will be sufficient to meet its liquidity needs during 1996.
It is possible that future currency devaluations may occur at several of
the Company's international locations. The Company continually evaluates
methods to minimize the impact of devaluations on operations and reported
operating results.
Accounting Standards
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, which requires adoption no later than fiscal years beginning
after December 15, 1995. SFAS No. 123 defines a fair value method of accounting
for stock options and similar equity instruments. Pursuant to this new standard,
companies are encouraged, but not required, to adopt the fair value method of
accounting for employee stock-based transactions. Alternatively, companies are
also permitted to continue to account for such transactions under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, but
would be required to disclose in a note to the financial statements certain pro
forma information as if the company had applied the new method of accounting.
The Company has not yet determined if it will elect to change to the fair value
method, nor has it determined the effect the new standard will have on net
income and earnings per share should it elect to make such a change.
Adoption of SFAS No. 123 will have no effect on the Company s cash flows.
All other applicable standards issued in 1995 are not expected to have a
significant impact on the Company's consolidated financial statements.
In Conclusion
Overall, 1995 was a strong year for Goulds Pumps which resulted in
substantial growth in the level of profitability from continuing operations. The
Company has strengthened its management team and further developed its regional
organizations, which will be the springboards for continued worldwide growth.
Throughout 1995, the Company was focused very clearly on the five strategic
imperatives that were established a year ago, namely, improving profitability,
driving internal growth opportunities, driving external growth opportunities,
improving asset utilization, and creating a new corporate culture focused on
quality, profitability and improved stockholder value. As the momentum
generated in 1995 is carried forward, 1996 is expected to be another strong
year.
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ITEM 8. FINANCIAL STATEMENTS
Financial Statements
Page
Independent Auditors Report 22
Consolidated Statements of Earnings 23
Consolidated Balance Sheets 24
Consolidated Statements of Cash Flows 25
Consolidated Statements of Stockholders Equity 26
Notes to Consolidated Financial Statements 27 - 44
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Independent Auditors' Report
To the Board of Directors and Stockholders of Goulds Pumps, Incorporated:
We have audited the accompanying consolidated balance sheets of Goulds Pumps,
Incorporated and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1995. 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
subsidiaries at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
As discussed in Note 9 to the consolidated financial statements, the Company
changed its method of accounting for postemployment benefits effective January
1, 1993.
DELOITTE & TOUCHE LLP
Rochester, New York
January 25, 1996
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Consolidated Statements of Earnings
Goulds Pumps, Incorporated
(Dollars in thousands except per share data)
For the years ended December 31, 1995 1994 1993
Net sales $718,763 $585,476 $555,692
Costs and expenses
Cost of sales 514,050 418,386 399,374
Selling, general and
administrative expenses 144,603 117,572 115,153
Research and development expenses 8,227 10,564 7,177
Restructuring charges 18,513 3,463 --
Provision (credit) for environmental
litigation (890) 3,454 --
Earnings from affiliates (23) (451) (4,569)
Interest expense 11,373 6,553 5,403
Interest income (1,825) (3,038) (1,909)
Other (income) expense--net (361) (670) 648
693,667 555,833 521,277
Earnings before income taxes and
cumulative effect of accounting
change 25,096 29,643 34,415
Income taxes 7,024 11,442 10,841
Earnings before cumulative effect
of accounting change 18,072 18,201 23,574
Cumulative effect of accounting change,
net of income tax benefit:
Post employment benefits -- -- (1,026)
Net earnings $ 18,072 $ 18,201 $ 22,548
Net earnings per common share
Earnings before cumulative effect of
accounting change $ .85 $ .86 $ 1.12
Cumulative effect of accounting change:
Postemployment benefits -- -- (.05)
Net earnings per common share $ .85 $ .86 $ 1.07
See Notes to Consolidated Financial Statements.
<F50>
Consolidated Balance Sheets
Goulds Pumps, Incorporated
(Dollars in thousands except per share data)
December 31, 1995 1994
ASSETS
Current assets:
Cash and cash equivalents $ 6,383 $ 7,374
Receivables--net 143,819 113,777
Inventories 131,693 111,508
Deferred tax asset 18,972 12,494
Prepaid expenses and other current assets 16,598 10,898
Total current assets 317,465 256,051
Property, plant and equipment-net 173,304 152,789
Investment in Vogel -- 17,800
Investments in affiliates 1,207 1,178
Other investments 9,046 6,498
Deferred tax asset 8,834 8,125
Goodwill--net 29,858 1,656
Other assets 14,272 13,144
$553,986 $457,241
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 37,904 $ 10,418
Current portion of long-term debt 21,716 24,886
Trade payables 71,406 47,382
Compensation and commissions 24,265 17,552
Income taxes payable 839 266
Pension 4,515 2,228
Progress payments 8,793 3,170
Warranty reserves 4,555 3,937
Dividends payable 4,257 4,239
Deferred tax liability 1,514 391
Restructuring accrual 7,701 3,224
Other current liabilities 23,071 21,510
Total current liabilities 210,536 139,203
Long-term debt 73,454 53,756
Pension 26,302 16,992
Other postretirement benefit obligation 50,903 51,681
Deferred tax liability 2,477 4,322
Stockholders' 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: 1995 - 21,283,496;
1994 - 21,193,054 21,283 21,193
Additional paid-in capital 59,175 57,622
Retained earnings 122,741 121,671
Cumulative translation adjustments and other (12,885) (9,199)
Total stockholders' equity 190,314 191,287
$553,986 $457,241
See Notes to Consolidated Financial Statements.
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Consolidated Statements of Cash Flows
Goulds Pumps, Incorporated
(Dollars in thousands)
For the years ended December 31, 1995 1994 1993
Operating activities:
Net earnings $18,072 $18,201 $22,548
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation 26,016 24,925 24,788
Amortization 2,100 1,428 1,170
Cumulative effect of accounting change -- -- 1,579
Restructuring charges 18,513 3,463 --
Earnings from affiliates (23) (451) (4,569)
Dividends received from affiliates -- 11,622 4,425
Changes in assets and liabilities, net
of effects from acquisition:
Increase (decrease) in deferred tax
liability (1,371) (1,008) 1,110
Increase in deferred tax asset (6,339) (1,852) (2,869)
Increase in receivables -- net (22,584) (6,295) (18,312)
Increase in inventories (7,098) (4,566) (12,493)
Increase in trade payables, accrued
expenses and other 16,754 10,808 4,939
Other -- net 1,951 4,755 (2,474)
Net cash provided by operating
activities 45,991 61,030 19,842
Investing activities:
Capital additions (33,468) (28,080) (24,650)
Investment in Vogel -- (17,800) --
Investment in insurance certificates -- -- (6,317)
Collection of long-term note receivable -- 3,033 1,033
Decrease in investments of unexpended revenue bond
funds included in other assets -- 2,015 --
Purchases of other assets (1,263) (5,376) (5,340)
Other -- net (712) 427 41
Net cash applied to investing activities (35,443) (45,781) (35,233)
Financing activities:
Proceeds from long-term debt 36,191 12,446 30,099
Payments on long-term debt (20,894) (2,319) (13,172)
Increase (decrease) in short-term
borrowings (8,063) (9,776) 9,752
Proceeds from issuance of common stock 1,643 617 1,334
Dividends paid (16,984) (16,937) (17,106)
Net cash provided by (applied to)
financing activities (8,107) (15,969) 10,907
Effect of exchange rate changes on cash
and cash equivalents (3,432) 941 (2,044)
Increase (decrease) in cash and cash
equivalents (991) 221 (6,528)
Cash and cash equivalents, beginning
of year 7,374 7,153 13,681
Cash and cash equivalents, end of year $ 6,383 $ 7,374 $ 7,153
Supplemental Cash Flow Information:
Interest paid $10,588 $ 6,479 $ 4,721
Income taxes paid 16,750 13,956 13,437
Noncash investing and financing activity:
Change in additional minimum pension
liability 5,170 (3,753) 5,005
See Notes to Consolidated Financial Statements.
<F50>
Consolidated Statements of Stockholders' Equity
Goulds Pumps, Incorporated
(Dollars in thousands)
<TABLE>
<CAPTION>
Cumulative
Additional Translation Total
Common Paid-In Retained Adjustments Stockholders
Stock Capital Earnings and Other Equity
<S> <C> <C> <C> <C> <C> <S> <C> <C>
Balance, January 1, 1993 $ 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
Net earnings -- -- 18,201 -- 18,201
Dividends declared -- -- (16,945) -- (16,945)
Common stock issued 39 578 -- -- 617
Foreign currency translation -- -- -- 1,758 1,758
Pension adjustment -- -- -- 455 455
Balance, December 31, 1994 21,193 57,622 121,671 (9,199) 191,287
Net earnings -- -- 18,072 -- 18,072
Dividends declared -- -- (17,002) -- (17,002)
Common stock issued 90 1,553 -- -- 1,643
Foreign currency translation -- -- -- (3,344) (3,344)
Pension adjustment -- -- -- (342) (342)
Balance, December 31, 1995 $ 21,283 $ 59,175 $122,741 $(12,885) $190,314
</TABLE>
See Notes to Consolidated Financial Statements.
<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 with the exception in 1994 of an advance of funds to
the Company's European subsidiary, which is more fully explained in Note 2.
Investments in affiliates, representing 20% to 50% of the ownership of such
companies, are accounted for under the equity method. Investments in affiliates,
representing less than 20% of the ownership of such companies, are accounted for
under the cost 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 currency denominated transactions and
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
accumulated and reported as a separate component of stockholders' 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, plant
and equipment, 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.
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 the 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 14 years for machinery and equipment.
<F50>
Intangible Assets
The excess of the cost over the fair value of net tangible assets of
purchased businesses is recorded as goodwill and is amortized on a straight-line
basis over periods of 30 years or less. The cost of other acquired intangibles
is amortized on a straight-line basis over their estimated useful lives. The
Company continually evaluates the carrying value of goodwill and other
intangible assets. Any impairments would be recognized when the expected future
operating cash flows derived from such intangible assets are less than their
carrying value.
Derivative Financial Instruments
The Company uses derivative financial instruments for purposes other than
trading and does so to reduce its exposure to fluctuations in interest rates and
foreign currency exchange rates. Gains and losses on hedges of existing assets
or liabilities are included in the carrying amounts of those assets or
liabilities and are ultimately recognized in income. Gains and losses related
to qualifying hedges of firm commitments or anticipated transactions are
deferred and are recognized in income or as adjustments of carrying amounts when
the hedged transaction occurs. Gains and losses on interest rate futures
contracts that do not qualify as hedges are recognized as other income or
expense.
Litigation and Environmental Expenditures Policy
The Company is a party to various legal and environmental actions which have
arisen in the ordinary course of its business. The Company records liabilities
and insurance recoveries when they are probable and can be estimated. 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 on a gross
basis when environmental assessments and/or remedial efforts become 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.
Income Taxes
The Company accounts for deferred income taxes by the 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
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.
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 $62,598 on December 31, 1995. 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 Per Common Share
Net earnings per share of common stock is based upon the weighted average
number of shares of common stock outstanding during the year (21,240,000 in
1995, 21,175,000 in 1994, and 21,126,000 in 1993). No effect has been given to
options and awards outstanding under the Company's Stock Option and Award Plans
since no material dilutive effect would result from the exercise of these
items.
<F50>
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the related revenues and expenses during the reporting
period. Actual amounts could differ from those estimated.
2. Investment in Vogel
During December 1994, which is subsequent to the year-end of the Company's
subsidiary, Goulds Pumps Europe, B.V. (GPE), GPE acquired all of the outstanding
common stock of Pumpenfabrik Ernst Vogel AG (Vogel) for $17,800, and the
assumption of bank and capital lease debt totaling $34,548. The excess of the
allocated purchase price over the fair value of net tangible assets acquired is
recorded as goodwill in the amount of $26,899 and is being amortized over
periods of 30 years or less. The Company borrowed $17,800 in December 1994, and
loaned the funds to GPE for this purchase. For reporting purposes, Vogel has an
October 31 year-end, like that of its direct parent, GPE. Although this
acquisition occurred subsequent to GPE's 1994 year-end, the investment in Vogel
was recorded as a line item on the accompanying December 31, 1994 consolidated
balance sheet since the borrowing for the acquisition had been completed,
together with the corresponding advance to the Company's subsidiary. The
acquisition was accounted for under the purchase accounting method. Assuming
the acquisition of Vogel as of the beginning of 1994, the Company's pro forma
unaudited net sales would have increased by approximately $62,000 and net
earnings and net earnings per share would have decreased by approximately $1,200
and $.06, respectively, for the year ended December 31, 1994. Adjustments made
in arriving at pro forma unaudited results of operations included additional
interest expense related to acquisition debt, related income tax adjustments,
and amortization of goodwill over 30 years. Consolidating the purchase
transaction amounts would have affected the financial position of the Company at
December 31, 1994 by increasing total assets and liabilities each by $59,711.
The unaudited pro forma results of operations are not necessarily indicative
of the results that would have been attained had the Vogel business been
acquired at the beginning of the period nor are they consistent with
management's expectations of performance in the future. Established in 1909 as
a family-owned business, Vogel has a leading market share of pump sales in
Austria, with established sales channels in Germany, Poland, and Hungary.
3. Inventories
Inventories are summarized as follows:
December 31, 1995 1994
Raw materials $ 38,962 $ 40,608
Work in process 58,097 39,895
Finished goods 66,613 61,895
Inventories valued at FIFO/average cost 163,672 142,398
LIFO allowance (31,979) (30,890)
$131,693 $111,508
<F50>
Inventories of foreign subsidiaries, valued at FIFO or average cost, are
$82,715 and $58,018 at December 31, 1995 and 1994, respectively.
4. Property, Plant and Equipment
Major classes of property, plant and equipment consist of the following:
December 31, 1995 1994
Land and buildings $ 69,676 $ 55,168
Machinery and equipment 369,276 330,008
438,952 385,176
Less accumulated depreciation 265,648 232,387
$173,304 $152,789
5. Investments in Affiliates
Investments in affiliates are summarized below:
December 31, 1995 1994
Investment in Oil Dynamics, Inc. $ 392 $ 392
Equity investment in Nanjing Goulds Pumps Limited Co. 815 786
$ 1,207 $ 1,178
In November 1994, the Company announced that control of Oil Dynamics, Inc.
(ODI) had been assumed by Franklin Electric Co., Inc. (Franklin). Previously,
ODI was owned and controlled equally by the Company and Franklin. The change
in control resulted from the Company's election to receive a cash dividend in
the amount of $11,700 in lieu of a stock dividend declared by ODI, without a
gain or loss on the transaction to the Company or Franklin. In 1995, the
Company continued to own 3% of ODI's voting stock and accounts for its
investment on a cost basis. ODI manufactures submersible pumps used principally
in secondary oil recovery. For 1995, 1994, and 1993, the Company recognized
earnings of $0, $386, and $4,385, respectively. Cash dividends received were
$0, $11,700, and $4,375, in 1995, 1994, and 1993, respectively.
<F50>
Summarized financial information for Oil Dynamics, Inc. is as follows:
October 31,
1994
Current assets $21,902
Non-current assets 12,590
Total assets $34,492
Current liabilities $ 8,713
Non-current liabilities 1,765
Total stockholders' equity 24,014
Total liabilities and stockholders'
equity $34,492
For the years ended
October 31, October 30,
1994 1993
Net sales $44,043 $71,672
Gross profit 10,735 25,408
Net earnings 773 8,770
6. Other Investments
Other investments are summarized below:
December 31, 1995 1994
Insurance certificates
Variable, $2,490 due 1998, $1,878 due 2003,
$1,882 due 2008 $ 6,250 $ 6,498
Austrian bank certificates
7.29% weighted average,
due 1996 - 2002 1,939 -
Italian government VAT bond
9.50% stated rate, due 1999 857 -
$ 9,046 $ 6,498
The Company's management has the ability and intent to hold all of its
other investments until maturity. All of the investments are stated at
amortized cost.
<F50>
7. Goodwill
Goodwill is summarized below:
December 31, 1995 1994
Goodwill $ 31,797 $ 2,541
Less accumulated amortization 1,939 885
$ 29,858 $ 1,656
The increase in goodwill in 1995 is due primarily to the acquisition of
Vogel. See Note 2 for additional information.
8. Debt and Credit Agreements
Debt consists of the following:
December 31, 1995 1994
Foreign unsecured short-term loans
8.94% weighted average
at December 31, 1995, due 1996 $35,481 $ 9,859
Unsecured committed lines of credit
6.11% at December 31, 1995,
due 1996 2,423 559
Foreign unsecured long-term note payable -- 15,315
Foreign long-term notes payable
4.0%-12.35%, due 1996-2014 36,837 21,520
Industrial revenue bonds
5.0%, due 1996-2006 1,430 1,534
5.45% at December 31, 1995,
variable, due 2009 1,850 1,850
Revolving credit agreement
5.97% at December 31, 1995,
expires 1999 11,000 --
Unsecured committed credit facilities
3.39%, due 1996 2,131 10,000
3.54%, due 1996-1997 10,000 8,083
5.76%, due 1997 5,686 --
Term loans
7.18%, due 1996-2000 20,000 20,000
Other borrowings -- 82
Capital leases
7.58% weighted average at
December 31, 1995, due 1996-2012 6,236 258
133,074 89,060
Less payments due within one year 59,620 35,304
$73,454 $53,756
<F50>
The Company has $56,577 of short and long-term unused 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 $59,698. The weighted average interest rate on
short-term borrowings at December 31, 1995 and 1994 was 8.76% and 9.64%,
respectively.
The Company's Canadian subsidiary borrowed $15,315 in December 1994 from a
Canadian financial institution under an unsecured long-term agreement to finance
a portion of the purchase of Vogel. During January 1995, the Company paid the
balance of the borrowing mostly from available cash resources and a smaller
portion from short-term committed credit lines; therefore, the balance was
classified as current portion of long-term debt in the accompanying 1994
consolidated balance sheet.
Two separate long-term borrowing agreements were entered into subsequent
to Lowara S.p.A.'s 1994 year-end. Short-term financing for the purchase of an
investment in insurance certificates was converted to long-term variable rate
debt, in the amount of $6,498, in order to more closely match the maturity of
the debt with that of the investment. The Company's subsidiary also obtained
$5,199 long-term variable rate debt for expansion of plant and equipment. At
December 31, 1994, short-term borrowings of $11,697 were reclassified as long-
term debt in the accompanying consolidated balance sheet, and included in the
balance of foreign long-term notes payable.
The Company's European subsidiaries have $22,069 in long-term notes payable
for which certain of the subsidiaries' fixed assets and investments are pledged
as collateral. The investment in insurance certificates is guaranteed as
collateral for the related debt financing of the investment. Vogel has pledged
$1,165 of its investments in Austrian bank certificates as collateral for
related bank debt. The Company's Industrial Development Revenue Bond financing
is collateralized by certain property.
The Company has a revolving credit agreement that permits borrowings up to
$55,000, at the Company's election, under several interest rate options which
are reflective of current rates.
The Company's borrowing agreements impose certain financial restrictions
on the Company relative to leverage, interest coverage, working capital, and
tangible net worth. The Company was in compliance with these restrictions at
December 31, 1995.
Debt maturities, excluding maturities of capital lease obligations, during
the next five years are $58,944 in 1996, $16,068 in 1997, $9,810 in 1998,
$20,069 in 1999, and $6,023 in 2000. See Note 14 for future minimum payments on
capital lease obligations.
9. 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.
Benefits to other employees are based on a fixed amount for each year of
service. 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.
<F50>
Net pension cost includes the following components:
1995 1994 1993
Service cost $3,000 $3,855 $3,668
Interest cost 7,589 7,194 6,968
Actual return on plan assets (18,567) 1,825 (11,447)
Net amortization and deferral 9,763 (9,854) 4,562
Net pension cost $1,785 $3,020 $3,751
The following table sets forth the plans' funded status and the amounts
recognized in the Company's consolidated balance sheets:
Plans where Plans where
assets exceed accumulated
accumulated benefits
benefits exceed assets
December 31, 1995 1994 1995 1994
Actuarial present value of
benefit obligations:
Vested benefit obligation $51,439 $53,073 $45,966 $22,629
Accumulated benefit obligation $52,035 $54,182 $47,115 $22,855
Projected benefit obligation $63,609 $63,768 $47,457 $23,074
Plan assets at fair value 60,127 65,070 39,302 21,038
Projected benefit obligation in excess
of (less than) plan assets 3,482 (1,302) 8,155 2,036
Unrecognized net gain or (loss) 2,808 7,240 (2,227) 975
Unrecognized prior service cost (589) (2,315) (7,399) (4,548)
Unrecognized net asset 729 1,937 1,735 920
Adjustment required to recognize
minimum liability -- -- 7,549 2,657
Accrued pension liabilities $ 6,430 $ 5,560 $7,813 $2,040
In determining the actuarial present value of the projected benefit
obligation, the weighted average discount rate was 7.46% and 9.0% as of
December 31, 1995 and 1994, respectively; the rate of increase in future
compensation levels was 4.5% and 5.0% as of December 31, 1995 and 1994, and the
expected long-term rate of return on assets was 9.5% and 9.0% for 1995 and
1994, respectively.
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, 1995 and 1994, this minimum
liability amounted to $7,549 and $2,657, respectively.
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 $2,174 in 1995, $1,898 in 1994, and $1,873 in 1993, and
the reserve balance at December 31, 1995 and 1994 was $10,406 and $9,504,
respectively. This reserve reflects the amounts accrued at year-end for each
employee in accordance with the law and labor contracts.
<F50>
Vogel is required by Austrian law to provide certain actuarially
determined benefits to personnel upon termination of employment. For 1995, the
expense provision was $493 and indemnities paid were $615. At December 31,
1995, the liability for these benefits was $4,187.
Postretirement Benefits Other Than Pensions
In addition to providing pension benefits, the Company and its domestic
subsidiaries provide certain medical and life insurance benefits for eligible
retired employees. The benefit amount is determined based on the age and/or
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.
Net postretirement benefit cost includes the following components:
1995 1994 1993
Service cost on benefits earned during the period $ 767 $1,335 $1,440
Interest cost on accumulated benefit obligation 2,369 3,819 4,026
Amortization of plan amendments (2,105) (645) (598)
Net postretirement benefit cost $1,031 $4,509 $4,868
The accumulated postretirement benefit obligation, included in the
accompanying consolidated balance sheets, is comprised of the following:
December 31, 1995 1994
Retirees $18,698 $21,821
Active, eligible employees 5,205 4,344
Active, non-eligible employees 11,907 11,925
Unrecognized gain 10,565 8,504
Unrecognized prior service gain 6,677 7,319
Accrued postretirement benefit obligation $53,052 $53,913
In determining the accrued postretirement benefit obligation as of
December 31, 1995 and 1994, weighted average discount rates of 7.46% and 9.25%
and medical care cost trend rates for under-65 premiums of 10.0% and 11.0% and
medical care cost trend rates for over-65 premiums of 5.0% and 11.0%,
respectively, were used. The under-65 medical care cost trend rates used in
the actuarial computations were gradually reduced to 4.5% and 5.0% by 2001 as
of December 31, 1995 and 1994, respectively. As of December 31, 1995, the
over-65 medical care cost trend rate used in the actuarial computations was
assumed to remain level until the year 2001, where it would decrease to 4.5%
and remain at that level thereafter. As of December 31, 1994, the over-65
premium medical care cost trend rate in the actuarial computations was
gradually reduced to 5.0% by 2001, to remain at that level thereafter. The
effect of a one percentage point increase in the assumed medical care cost
trend rate would have increased the 1995 and 1994 service and interest
components of the net postretirement benefit cost by $364 and $713,
respectively, and the accrued postretirement benefit obligation at December 31,
1995 and 1994, by $3,581 and $3,920, respectively.
The net effect of decreasing the discount rate of 9.25% to 7.46% was an
increase in the accumulated postretirement benefit obligation of $6,367 as of
December 31, 1995. A change in the financial arrangements of the plan
decreased the accumulated postretirement benefit obligation by $11,391 as of
the beginning of the year, which is being amortized over the average remaining
service period of active plan participants.
In 1994, the Company revised the non-union eligibility requirements for
postretirement medical and life insurance coverage from the attainment of age
55 and 10 years of service, to attainment of age 55 and 10 years of service
after attaining age 45. This change reduced the December 31, 1994 accumulated
postretirement benefit obligation by $3,794.
<F50>
The 1994 plan amendment also meets the definition of a curtailment because
non-union employees under age 45 are not considered active plan participants.
This resulted in a curtailment gain of $4,191 in 1994, accelerating the
recognition of the remaining unrecognized prior service gain related to those
employees' future years of service. This curtailment gain is reflected in the
consolidated statement of earnings as a component of Other (income) expense-
net.
Postemployment Benefits
Effective January 1, 1993, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," requiring the accrual method of
accounting for certain of these benefits. In 1993, the Company recorded a pre-
tax charge of $1,579 ($1,026 after-tax or $.05 per share) as a cumulative
effect of accounting change. Previously, the Company recognized postemployment
benefit costs when paid. The annual cost related to SFAS No. 112 is not
material.
10. Income Taxes
The components of the provision for income taxes are as follows:
1995 1994 1993
Current:
Federal (U.S.) $10,060 $11,199 $6,049
State 1,541 2,225 1,565
Foreign 4,254 3,658 4,825
Deferred:
Federal (U.S.) (8,458) (4,700) (2,548)
State 167 (488) (5)
Foreign (540) (452) 955
Provision for income taxes $ 7,024 $11,442 $10,841
Reconciliations of the U.S. statutory tax rate with the effective tax rates
reported for earnings before income taxes and the cumulative effect of
accounting change are as follows:
1995 1994 1993
U.S. statutory rate 35.0% 35.0% 35.0%
Foreign taxes in excess of U.S. statutory
rate, net of U.S. credits 7.4 4.5 2.0
State taxes--net 4.3 3.8 2.9
International tax restructuring and recapitalization (6.3) -- (4.1)
Excess tax basis on restructuring charges (6.1) -- --
U.S. benefits of foreign sales corporation (3.1) (2.3) (2.0)
Other--net (3.2) (2.4) (2.3)
Effective tax rate 28.0% 38.6% 31.5%
<F50>
The net deferred tax asset components are as follows:
December 31, 1995 1994 1993
Deferred tax assets:
Postretirement benefits other than pensions $18,530 $18,870 $19,517
Restructuring reserves 8,440 -- --
Deferrals under foreign jurisdictions 5,416 4,375 1,448
Other nondeductible liabilities and reserves 3,500 4,502 4,054
Tax credit carryforwards 2,587 1,738 2,589
Pension benefits 2,341 1,729 1,240
Workers' compensation and other claims 2,206 2,506 2,488
Deferrals under state jurisdictions--net 1,826 1,948 1,839
Miscellaneous 1,076 366 384
Accrued vacation pay 965 901 2,191
Deferred gain on Energy Products transaction 76 -- --
Inventories -- 327 775
Gross deferred tax assets 46,963 37,262 36,525
Valuation allowance for deferred tax assets (4,786) (2,955) (1,782)
Deferred tax liabilities:
Property, plant and equipment (10,809) (10,298) (10,895)
Deferrals under foreign jurisdictions (4,091) (5,112) (5,701)
Other assets and miscellaneous (2,462) (2,430) (4,111)
Inventories (1,000) -- --
Deferred gain on Wheatley Gaso transactions -- (561) (748)
Gross deferred tax liabilities (18,362) (18,401) (21,455)
Net deferred tax asset $23,815 $15,906 $13,288
Earnings before income taxes resulting from non-U.S. operations for 1995,
1994, and 1993 are $5,860, $1,315, and $10,359, respectively.
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 $1,831 and
$1,173 in 1995 and 1994, respectively.
At December 31, 1995, the Company had foreign tax credit carryforwards of
$2,587 that will expire at the end of the following years if not otherwise
used: $294 - 1997, $1,457 - 1998, and $836 - 2000.
11. Stock Option and Award Plans
The Company has four active stock option plans under which the exercise
price for stock options granted may not be less than 100% of the fair market
value on the date of grant.
The 1994 Incentive Plan to Increase Stockholder Value provides up to
1,000,000 shares to be granted for options, stock appreciation rights,
restricted stock, and performance units and/or shares to officers and other
key employees of the Company until May 2004. Stock option grants for
261,200 shares were outstanding at December 31, 1995, of which 900 shares were
exercisable at that date.
<F50>
The 1994 Incentive Plan for Non-Employee Directors provides up to 175,000
shares to be granted until May 2004, or the day after the 2004 Annual
Meeting, to Directors of the Company who are not employees of the Company or any
affiliate. This Plan replaces the portion of the 1988 Stock Incentive Plan that
related to non-employee Directors. Beginning in 1994, each non-employee
Director will receive an annual Nonstatutory Option of 1,500 shares. Grants for
22,500 shares were outstanding at December 31, 1995, of which 13,500 shares
were exercisable at that date.
The 1988 Stock Incentive Plan provides up to 1,500,000 shares to be granted
to key employees during the period ending in May 1998. Grants for 1,101,757
shares were outstanding at December 31, 1995, of which 506,594 shares were
exercisable at that date.
The 1981 Incentive Stock Option Plan provides up to 1,000,000 shares to be
granted to key employees during the period ended April 1992. Grants for 139,853
shares were outstanding at December 31, 1995, all of which were exercisable at
that date.
The following table summarizes stock option activity for the three years
ended December 31, 1995:
Stock
Options Price Range
Outstanding, January 1, 1993 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
Granted 339,165 $20.50 - 24.88
Exercised (42,681) $15.00 - 24.13
Cancelled (33,272) $21.00 - 24.88
Outstanding, December 31, 1994 1,193,181 $15.50 - 25.00
Granted 526,900 $21.00 - 23.00
Exercised (101,187) $15.50 - 23.75
Cancelled (93,584) $16.13 - 24.88
Outstanding, December 31, 1995 1,525,310 $15.50 - 25.00
In 1995, the Board of Directors authorized performance-based restricted
stock awards to be made to key executives subject to the achievement of pre-
established levels of Company earnings per share over a three-year period. The
value of the awards will vary based on the degree to which earnings per share
goals are attained over the three-year cycle. During the performance period,
dividends on the performance-based shares are accrued currently in stock. At
December 31, 1995, 28,541 of restricted shares had been granted and 206 in
restricted shares had been accrued as dividends.
12. Financial Instruments and Derivative Financial Instruments
Concentrations of Credit Risk. Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of
temporary cash investments, trade receivables and other investments. The Company
places its temporary cash investments and other investments with creditworthy
financial institutions and limits the amount of credit exposure to any one
financial institution. The Company actively evaluates the creditworthiness of
the financial institutions with which it invests. Concentrations of credit risk
with respect to trade receivables are limited due to a large diversified
customer base. 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, 1995 and 1994, the
Company had no significant concentrations of credit risks.
<F50>
Letters of Credit. At December 31, 1995 and 1994, the Company had
performance letters of credit outstanding totaling $9,754 and $5,212,
respectively, primarily which guarantee various trade activities. The contract
amount of the letters of credit is fixed over the life of the commitment and is
the amount at which settlement of the obligation would occur with the
counterparty. The Company recognizes losses on these commitments as incurred.
No material losses on these commitments have been incurred, nor are any
anticipated.
Derivative Financial Instruments and Risk Management. The Company operates
internationally, giving rise to exposure to market risks from changes in
interest rates and foreign exchange rates. Derivative financial instruments are
used by the Company to reduce those risks. The Company does not hold or issue
financial or derivative financial instruments for trading purposes.
Notional Amounts and Credit Exposures of Derivative Financial Instruments.
The notional amounts of derivatives summarized in this note do not represent
amounts exchanged by the parties and, thus, are not a measure of the exposure
of the Company through its use of derivatives. The amounts exchanged during the
term of the derivatives are calculated on the basis of the notional amounts and
the other terms of the derivatives, which relate to interest rates or indices
and foreign currency exchange rates.
The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to financial instruments, but it does not
expect any counterparties to fail to meet their obligations. The credit
exposure of interest rate and foreign exchange contracts is represented by the
fair value of contracts with a positive fair value at December 31, 1995 and
1994.
Interest Rate Risk Management. In late December 1995, the Company entered
into several one-year interest rate derivative financial instruments. All
interest rate derivatives have been designated by management as hedges of the
Company's variable rate borrowings. The amounts receivable and payable, as well
as the gains or losses, if any, that are not deferred on interest rate
derivatives are recognized as yield adjustments to interest expense.
The Company entered into an interest rate swap with a $15,000 notional
amount that allows the Company to raise borrowings at floating rates and
effectively swap them into fixed rates that are lower than those available to
the Company if fixed-rate borrowings were made directly. Under the interest
rate swap, the Company agreed with the counterparty to exchange, at quarterly
intervals, the difference between its fixed pay rate of 5.325% and the
counterparty's variable pay rate of three-month LIBOR. At December 31, 1995,
the counterparty's pay rate was 5.668% and the market value of the swap as
estimated by a dealer was a loss of $9.
The Company entered into five zero-cost collars with a notional amount of
$19,416, to reduce the impact of changes in interest rates on its floating-rate
borrowings. The weighted average ceiling and floor rate of the collars was
5.63% and 4.33%, respectively. At December 31, 1995, the fair market value of
the zero-cost collars as estimated by dealers was a loss of $9.
<F50>
Foreign Exchange Risk Management. The Company held foreign forward exchange
contracts for the notional amounts as follows:
December 31, 1995 1994
Buy Sell Buy Sell
Canadian dollars $ 225 $17,581 $15,729 $12,518
Italian lire 9,758 130 10,071 274
United States dollars 3,929 -- -- --
Australian dollars -- 1,440 -- --
Other 431 -- 90 --
$14,343 $19,151 $25,890 $12,792
Fair Value $14,699 $19,298 $25,501 $12,515
The Company entered into these foreign exchange forward contracts to hedge
certain firm purchase, sale, and financing commitments denominated in foreign
currencies. The term of the derivatives are less than or equal to one year.
At December 31, 1995 and 1994, the Company had deferred unrealized gains
and (losses) of $398 and $(189), and $361 and $(472), respectively, which are
amortized within one year. The Company had neither deferred realized gains or
(losses) at December 31, 1995 and 1994. At December 31, 1995 and 1994, the fair
value of the foreign exchange forward contracts are estimated based on dealer-
quoted prices. Fair Value of Financial Instruments. The carrying amounts
and estimated fair values of the Company's financial instruments are summarized
as follows:
December 31, 1995 1994
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
Assets:
Other investments $ 9,046 $ 9,002 $ 6,498 $6,498
Liabilities:
Short-term borrowings 37,904 37,904 10,418 10,418
Long-term debt 88,934 89,652 78,384 76,508
The methods and assumptions used to estimate the fair values of financial
instruments are summarized as follows:
Other investments: The carrying value of the investments in insurance
certificates approximates fair value since the certificates are redeemable at
any time for carrying value, plus accrued interest. The fair value of the
Austrian bank certificates was determined based on current market values for
similar instruments with similar terms and remaining maturities. The Italian
government VAT bond was estimated by discounting cash flows using rates
currently available for instruments with similar terms and remaining maturities.
Short-term borrowings: The carrying value of short-term borrowings
approximates fair value due to the short-term maturities of these instruments.
Long-term debt: The carrying value of long-term debt excludes $6,236 and
$258 of obligations under capital leases at December 31, 1995 and 1994,
respectively. The carrying values of credit facilities with variable rates of
interest approximate fair values. The fair value of fixed rate debt was
estimated by discounting cash flows using rates currently available for debt of
similar terms and remaining maturities.
<F50>
13. Unusual Charges
Provision for Environmental Litigation. A charge of $3,454 pre-tax was
recorded in 1994 for legal and other fees related to the Company's vigorous
defense of lawsuits commenced in California and Washington in that year alleging
unlawful discharge of lead into drinking water sources, and a class action
complaint principally alleging violations of federal securities laws. In 1995,
after all litigation was resolved, the Company reversed into income the
remaining accrual of $890.
Restructuring Charges. In December 1995, the Company implemented a
restructuring plan to transfer its ownership interest in Environamics to that
company'smanagement and wind down its Venezuelan manufacturin activities,
which will impact the Company's investment in this subsidiary. As a result, a
restructuring charge of $19,698 was recorded in the Company's consolidated
financial statements in December 1995. The Environamics portion of
the restructuring was $13,658 for exit costs (including the write-off of
previous investments), and at December 31, 1995, the remaining reserve was
$5,091. The Venezuelan portion of the restructuring plan was $6,040, which
includes the termination of approximately 50 employees, and provides severance
benefits of $1,365 and other exit costs of $4,675. At December 31, 1995, the
reserve for the Venezuelan restructuring was $1,865, with $1,365 for severance
benefits and $500 for other exit costs. The restructuring plan is expected to
be completed by the end of 1996.
In 1994, the Company recorded a restructuring charge of $3,463 and a related
liability for such costs. The restructuring plan included the downsizing of the
Company's California, Netherlands, and Mexican based operations and the
consolidation of sales offices, PRO Service Center, and other Company
facilities. As a result, the related cost to exit owned and leased facilities
was $1,036 and the related termination benefits for 126 employees was $2,427.
During the fourth quarter of 1995, the Company reversed $1,185 for excess
severance benefits reserves since fewer employees were terminated in the United
States than originally planned, and foreign termination benefits were less than
originally estimated. The reserve for the 1994 restructuring at December 31,
1995 was $745, with $411 for remaining severance benefits and $334 for remaining
other exit costs. The reserve is expected to be completely used by the end of
1996.
14. Commitments and Contingencies
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, 1995
and 1994, the remaining reserve, classified as a current liability, was $1,667
and $1,795, respectively. No third party recoveries have been included in the
determination of this reserve, nor are any expected. The remediation is expected
to be completed in 1996, and the Company does not currently expect any
additional material costs in future years associated with this site beyond that
amount accrued.
<F50>
The Company has various noncancellable lease agreements for sales offices,
warehouses, computers, and other equipment. Total rental expense for the years
ended December 31, 1995, 1994, and 1993 was $6,225, $5,088, and $5,010,
respectively. Future minimum payments, by year and in the aggregate, under
noncancellable capital leases and operating leases with initial or remaining
terms of one year or more consisted of the following at December 31, 1995:
Capital Operating
Leases Leases
1996 $ 1,116 $ 5,654
1997 960 4,246
1998 786 2,810
1999 693 2,090
2000 693 1,138
Future years 5,119 660
Total minimum lease payments 9,367
Amounts representing interest 3,131
Present value of net minimum
payments 6,236
Current portion 676
Long-term portion $ 5,560
<F50>
15. 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 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/industrial use. Intersegment sales and sales between
geographic areas are not material.
<TABLE>
<CAPTION>
<C> <C> <C>
1995(4) 1994 1993
Net sales:
Industrial Products $377,399 $323,254 $316,125
Water Technologies 341,364 262,222 239,567
Total net sales $718,763 $585,476 $555,692
Operating earnings:
Industrial Products $ 9,258(3) $ 18,224(1) $ 18,497
Water Technologies 31,195(3) 20,896(1) 21,122
Total operating earnings 40,453 39,120 39,619
General corporate expenses 6,193 7,083 5,631
Interest expense-net 9,548 3,515 3,494
Other income-net (384) (1,121) (3,921)
Earnings before income taxes
and cumulative effect of
accounting change $ 25,096 $ 29,643 $ 34,415
Identifiable assets:
Industrial Products $243,186 $205,079 $219,129
Water Technologies 278,241 214,356 186,991
Investments in affiliates 1,207 1,178 12,774
Investment in Vogel -- 17,800 --
General corporate assets 31,352 18,828 19,608
Total assets $553,986 $457,241 $438,502
Geographic Areas
Net sales:
United States $466,234 $428,002 $404,014
Europe 183,336 99,613 95,569
Other foreign 69,193 57,861 56,109
Total net sales $718,763 $585,476 $555,692
Operating earnings:
United States $ 30,343 $ 36,181 $ 28,575
Europe 9,616 5,390 7,196
Other foreign 494 (2,451) 3,848
Total operating earnings 40,453 39,120 39,619
General corporate expenses 6,193 7,083 5,631
Interest expense-net 9,548 3,515 3,494
Other income-net (384) (1,121) (3,921)
Earnings before income taxes
and cumulative effect of
accounting change $ 25,096 $ 29,643 $ 34,415
Identifiable assets:
United States $252,905 $243,220 $258,780
Europe 233,821 137,540 108,918
Other foreign 34,701 38,675 38,422
Investments in affiliates 1,207 1,178 12,774
Investment in Vogel -- 17,800 --
General corporate assets 31,352 18,828 19,608
Total assets $553,986 $457,241 $438,502
</TABLE>
<TABLE>
<CAPTION>
Other Information Depreciation Property Additions Export Sales
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1995(4) 1994 1993 1995(4) 1994 1993 1995(4) 1994 1993
Industrial Products $14,142 $14,901 $14,474 $17,416 $11,893 $11,414 $52,137 $45,328 $51,894
Water Technologies 11,605 9,698 9,952 15,463 15,456 13,100 16,923 12,851 10,316
Corporate 269 326 362 589 731 136 -- -- --
$26,016 $24,925 $24,788 $33,468 $28,080 $24,650 $69,060(2) $58,179 $62,210
<F54>
1 Includes the impact of the restructuring charge (IP - $3,332; WT - $127) and the provision for
environmental litigation (WT - $3,454).
2 Represents sales from the United States to external customers in Europe, the Middle East, and Africa of
$21,805; Latin America of $25,095; and Asia Pacific of $22,160.
3 Includes the impact of the restructuring charge (reversal) (IP - $19,217; WT - ($704)) and the reversal
of a provision for environmental litigation (WT - ($890)). WT s reversal for restructuring specifically
relates to Goulds Pumps, B.V.
4 Prior to 1995, Goulds Pumps B.V. was part of Industrial Products. In 1995, it became part of Water
Technologies.
</TABLE>
<F50>
16. Quarterly Financial Data
(Unaudited)
Quarter ending 3/31/95 6/30/95 9/30/95 12/31/95
Net sales $160,052 $180,693 $191,474 $186,544
Gross profit 45,491 51,822 55,536 51,864
Net earnings (loss) 5,434 8,274 8,924 (4,560)
Net earnings (loss) per share .26 .39 .42 (.21)
Dividends per share .20 .20 .20 .20
Quarter ending 3/31/94 6/30/94 9/30/94 12/31/94
Net sales $136,645 $150,128 $154,858 $143,845
Gross profit 37,848 44,289 44,359 40,594
Net earnings 3,817 5,497 5,139 3,748
Net earnings per share .18 .26 .24 .18
Dividends per share .20 .20 .20 .20
<F50>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pages 1 through 6 of the Proxy Statement dated March 28, 1996, for the Company's
Annual Meeting of Stockholders, contain information concerning directors which
is incorporated herein by reference. Information concerning executive officers
is included in Part I of this on Annual Report Form 10-K, following Item 1.
ITEM 11. EXECUTIVE COMPENSATION
Pages 6 through 10, and 12 through 15 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
Page 5 of the Proxy Statement contains information concerning ownership of the
Company's common stock which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pages 3 and 11 of the Proxy Statement contain 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 48
The following schedules are included in this
Annual Report on Form 10-K:
II - Valuation and Qualifying Accounts 49
All other Financial Statement Schedules are omitted because they are not
applicable or the required information is shown in the consolidated
financial statements.
<F50>
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1995.
(c) Exhibits:
Exhibit Number Description of Exhibits
(3) Articles of Incorporation and By-Laws:
* Restated Certificate of Incorporation filed May 6, 1985 (Exhibit 19
to Form 10-Q for the period ending June 30, 1985).
* Amendment to the Certificate of Incorporation, (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).
* By-Laws (Appendix C of the 1984 Proxy Statement).
* Amendment to the Company's By-Laws (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)).
By-Laws as amended on December 15, 1995 (filed as Exhibit 3 on
page 50 of the Annual Report on Form 10-K).
(10) Material Contracts:
(iii) Compensatory Plans for Officers and Directors:
* Severance Agreement dated August 23, 1994 between Goulds Pumps,
Incorporated, and Stephen V. Ardia (filed as Exhibit 10(A) on page
57 of Form 10-K for year ended December 31, 1994).
* Memorandum of Understanding dated June 27, 1994 between Goulds
Pumps, Incorporated, and Thomas C. McDermott (filed as Exhibit 10(B)
on page 61 of Form 10-K for year ended December 31, 1994).
* Goulds Pumps, Incorporated Supplemental Benefit Plan for Non-
Employee Directors and Goulds Pumps, Incorporated Retirement Plan
for Non-employee Directors, both effective June 21, 1994 (filed as
Exhibits 10(C) and 10(D) on pages 64 and 71, respectively, of Form
10-K for year ended December 31, 1994).
* Goulds Pumps, Incorporated 1994 Incentive Plan to Increase
Stockholder Value, effective on May 4, 1994 (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 May 4, 1994 (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).
<F50>
* 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).
* 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 64 of this Annual Report on Form 10-K.
(21) Subsidiaries of the Registrant:
See page 65 of this Annual Report on Form 10-K.
(23) Consents of Experts and Counsel:
For Independent Auditors Consent see page 66 of this Annual Report
on Form 10-K.
(27) Financial Data Schedule (filed electronically only).
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 to the filed document indicated in
parenthesis.
<F50>
INDEPENDENT AUDITORS' REPORT
Goulds Pumps, Incorporated:
We have audited the consolidated balance sheets of Goulds Pumps, Incorporated
and subsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of earnings, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1995, and have issued our report
thereon dated January 25, 1996; such report is included elsewhere in this Annual
Report on Form 10-K. Our audits also included the financial statement schedule
of Goulds Pumps, Incorporated and subsidiaries, listed in Item 14(a)2. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
s/Deloitte & Touche LLP
Deloitte & Touche LLP
Rochester, New York
January 25, 1996
<F50>
Schedule II
GOULDS PUMPS, INCORPORATED AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
BALANCE ADDITIONS BALANCE
AT BEGINNING CHARGED TO DEDUCTIONS AT END
OF YEAR INCOME (1) OF YEAR
Allowance for Doubtful
Accounts, Deducted from
Trade Receivables:
1995........... $2,838(2) $2,209 $2,040 $3,007
1994........... $2,177 $1,172 $ 956 $2,393
1993........... $2,408 $ 814 $1,045 $2,177
(1) Accounts written off, less recoveries.
(2) Includes opening balance of Vogel which was acquired in 1995.
<F50>
EXHIIT 3
The following pages comprise the
Goulds Pumps, Inc.
By-Laws, as amended on December 15, 1995
<F50>
BY-LAWS
of
GOULDS PUMPS, INCORPORATED
(Incorporated under the Laws of the State of Delaware)
Article 1
LOCATION
BY-LAW 1.1 The principal business office of the Corporation shall be in
the Village of Seneca Falls, State of New York. The registered office
of the Corporation in the State of Delaware shall be at 100 West Tenth Street,
in the City of Wilmington, County of New Castle, and the registered agent in
charge thereof shall be The Corporation Trust Company.
BY-LAW 1.2 The Corporation may also have offices in such other places as
the Board of Directors may designate.
Article 2
STOCKHOLDERS
BY-LAW 2.1 The Annual Meeting of the stockholders of this corporation
shall be held at 10:00 a.m. on April 22, 1992, and on such date and
time in succeeding years as the Board shall designate for the election
of Directors and such other business as may properly come before the meeting.
The meeting shall be held at the office of the Corporation in the
Village of Seneca Falls, State of New York or at such other location as may
by the Board of Directors. Written notice of the time, place and purpose of
such meeting shall be served, either personally or by mail, not less than
ten days nor more than sixty days before the meeting, upon each
stockholder of record entitled to vote at such meeting, and if mailed,
such notice shall be directed to the stockholder at his address
books of the Corporation. All business pertaining to the affairs of
the Corporation which the stockholders have the right and power to transact
may be transacted at the Annual Meeting regardless of whether notice
thereof is included in the notice of the meeting, except business of
which stockholders must have formal notice by statutory requirement.
BY-LAW 2.2 Special meetings of stockholders may be called at any time by the
Board of Directors, by the President or by the vote of the stockholders
assembled in any annual or special meeting, and shall be held at the
principal business office of the Corporation at Seneca Falls, New York
or at such other location as may be determined by the Board of
Directors, President or stockholders. Notice of every special stockholder's
meeting, stating the time, place and object thereof, shall be given by
mailing, postage prepaid, at least ten days and not more than sixty days
before such meeting, a copy of said notice addressed to each stockholder
at his post office address as the same appears on the books of the
Corporation. No business other than that stated in such notice shall be
transacted at any such meeting.
<F50>
BY-LAW 2.3 At all meetings of stockholders there shall be present,
either in person or by proxy, stockholders holding at least one-third
of the shares entitled to vote in order to constitute a quorum, except where
otherwise provided by law.
BY-LAW 2.4 Stockholders entitled to notice of and to vote at any
regular or special meeting shall be those who are stockholders
of record on the books of the Corporation at a time to be determined by the
Board of Directors, which time shall be not more than sixty nor less
than ten days prior to the date of such meeting. At any regular or special
meeting each stockholder entitled to vote shall have one vote for each share
of stock standing in his name on the books of the Corporation and may cast
such vote in person or by proxy.
BY-LAW 2.5 At all meetings of stockholders all questions except
those the manner of disposing of which is especially regulated by
the Certificate of Incorporation or by law, shall be determined by vote
of a majority of shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter. The voting shall be by
written ballot or as the chairman of the meeting shall otherwise determine.
BY-LAW 2.6 Either the Board of Directors or, in the absence of
a designation of inspectors by the Board, the chairman of any meeting
of stockholders may, in its or such person's discretion, appoint two or
more inspectors to act at any meeting of stockholders. Such inspectors shall
perform such duties as shall be specified by the Board or the Chairman
of the meeting. Inspectors need not be stockholders. No Director or nominee
for the office of Director shall be appointed such inspector.
BY-LAW 2.7 The order of business at the Annual Meeting of Stockholders
shall be as determined by the Chairman of the Board and/or the President
in conformance with applicable laws.
BY-LAW 2.8 The Corporation shall keep at its principal business
office in Seneca Falls, N.Y. or at the office of its transfer agent or
registrar in New York State, a record containing the names and addresses
of all stockholders, the number and class of shares held
by each and the dates when they respectively became the owners of record thereof
in written form or in any other form capable of being converted into
written form within a reasonable time. The Corporation shall be fully
protected in treating the persons in whose names shares stand on the record
of stockholders as the owners thereof for all purposes.
BY-LAW 2.9 A list of stockholders as of the record date, certified by
the Secretary,or by the transfer agent, shall be prepared at least ten days
before every meeting of stockholders. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any
stockholder who is present. If the right to vote at any meeting is challenged,
the inspectors of election, or person presiding thereat, shall require such list
of stockholders to be produced as evidence of the right of the persons
challenged to vote at such meeting, and all persons who appear
from such list to be stockholders entitled to vote thereat may vote at such
meeting.
<F50>
Article 3
DIRECTORS
BY-LAW 3.1 The Directors of this Corporation, of whom at least
one shall be a resident of the State of New York, shall be elected by
ballot for the term of one year at the Annual Meeting of the stockholders,
except as hereinafter provided. The number of directors shall be between six
and ten, as determined by the Board of Directors. The Directors
shall be chosen by a plurality vote of the stockholders, voting either in person
by proxy, at each annual election. No person shall be a Director unless it
shall appear upon the books of the Corporation that he is the owner of at
least one share of the stock of the Corporation. In case a Director shall
during his term of office cease to be a stockholder, his office as a
Director shall thereupon become vacant and the Board of Directors may elect
his successor for the unexpired term.
BY-LAW 3.2 Newly created directorships resulting from an increase in the
number of directors and vacancies occurring in the Board of Directors
for any reason may be filled by vote of a majority of the Directors then
in office, although less than a quorum exists. A Director elected to fill a
vacancy shall be elected to hold office for the unexpired term of
his predecessor, and until his successor has been elected and qualified.
BY-LAW 3.3 In case of the death or resignation of all members of the
Board of Directors, a special meeting of the stockholders may be called
as provided by statute, for the election of Directors for the unexpired terms
of said deceased or resigned Directors. The manner of electing Directors at
such meeting shall be the same as that provided for their election at Annual
Meetings.
BY-LAW 3.4 The Board of Directors may appoint from among its members an
Executive Committee of not less than three in number, among whom shall be
included the Chairman of the Board and the President, and shall designate one
of such members as Chairman. The Board of Directors reserves to itself
alone the power to declare dividends, issue stock, recommend to
stockholders any action requiring their approval, amend or repeal
By-Laws, change the membership of any committee at any time, fill
vacancies therein or in the Board, and discharge any committee
either with or without cause at any time. Subject to the foregoing
limitations, the Executive Committee shall possess and exercise all other
powers of the Board of Directors during the intervals between meetings.
All action by the Executive Committee, or by any other Committee, shall be
reported to the Board at its meeting next succeeding such action and shall be
subject to confirmation, revision or alteration, except if there be a
revision or alteration, the rights of third parties shall not be
affected hereby.
BY-LAW 3.5 The Board of Directors may appoint any other committee or
committees for any purpose or purposes not inconsistent with their own powers,
which shall have such powers as shall be specified in the resolution
of appointment.
BY-LAW 3.6 The Board of Directors may adopt such rules and regulations
for the conduct of their meetings and the management of the affairs of the
Corporation as they may deem proper, coincident with the laws of the State
of Delaware and with these By-Laws.
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BY-LAW 3.7 Any Director or Directors may be removed at a special
meeting called for that purpose by the vote of a majority of the shares then
entitled to vote at an election of directors.
Article 4
MEETING OF DIRECTORS
BY-LAW 4.1 The Board of Directors shall meet whenever called together by
the Chairman of the Board or by the President upon four days notice to
each Director, exclusive of Sundays and legal holidays. On the written
request of any Director, the Secretary shall call a special meeting of the
Board. One-third of the total number of Directors shall constitute a quorum
for the transaction of business, except that at meetings called upon the
written request of any Director or Directors, a concurring majority vote of
the entire Board shall be necessary for taking any action. The Annual
Meeting of the Board shall be held immediately after the Annual
Meeting of the stockholders, or any adjournment thereof, and no notice
other than that herein contained shall be necessary.
BY-LAW 4.2 Meetings of the Board of Directors may be held at the
principal office of the Corporation in the Village of Seneca Falls, New York
or any other place designated in the notice calling the meeting.
BY-LAW 4.3 Any action required or permitted to be taken by the Board or
any committee thereof may be taken without a meeting if all members of the
Board or the committee thereof consent in writing to the adoption of a
resolution authorizing the action to be taken. The resolution and
written consent or written consents thereto by the members
of the Board or committee shall be filed with the minutes of the proceedings
of the Board or committee.
BY-LAW 4.4 Any one or more members of the Board or any committee thereof
may participate in a meeting of such Board or committee by means of
a conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.
Article 5
POWERS OF DIRECTORS
BY-LAW 5.1 The Board of Directors shall have the management of
the Business of the Corporation, and in addition to the
powers and authority of these By Laws expressly conferred upon them,
may exercise all such powers and do all such acts and things as may
be exercised or done by the Corporation, but subject, nevertheless,
to the provisions of the statutes, of the Certificate of Incorporation
and of these By-Laws, and to any regulations from time to time made by
the stockholders, provided that no regulations so made shall invalidate
any prior act of the Directors which would have been valid if not been made.
<F50>
BY-LAW 5.2 The Corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened
pending or completed action, suit or proceeding by reason of the
fact that he is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, to the full extent
permitted by law.
Article 6
OFFICERS
BY-LAW 6.1 At the Annual Meeting of Directors held immediately
following the Annual Meeting of Stockholders, the Board of Directors
shall elect from its members a Chairman of the Board and a President.
The offices of Chairman of the Board and President may be held by one
individual and if held by two individuals, the Board shall designate who
shall be the Chief Executive Officer. The Board shall also Vice-Presidents,
a Secretary, a Controller and a Treasurer, and may also officers as may in
their discretion be desirable, either from among its members The Board
shall specify the duties assigned to each officer. The Board may also designate
appropriate descriptive titles for the Vice Presidents and other Officers.
The Officers so elected shall serve as such until the next Annual Meeting
of the Board of Directors or until their respective successors are elected
and qualified or during the pleasure of the Board. The Chairman of the
Board shall preside at all meetings of the Board of Directors at which he
is present, and shall act as chairman of meetings of stockholders. All officers
shall also have such other powers and duties as may be assigned to them by the
Board of Directors. In the event the Chairman of the Board is also designated
as Chief Executive Officer, he shall have general charge and supervision of
the business and affairs of the Corporation and fulfill the instructions
of the Board. The President may make interim appointments of
Assistant Treasurers, Assistant Secretaries, and Assistant Controllers not
exceeding three of each and he may also remove them from office.
BY-LAW 6.2 The President in the absence of the Chairman of the Board,
shall preside at all meetings of the Board of Directors and shall act
as chairman of meetings of stockholders. He shall have, on behalf of
the Corporation, power to sign or counter-sign stock certificates, contracts,
documents and commercial papers necessary for the transfer of corporate
business as permitted by law and these By-Laws. He shall submit a complete
annual report of the operations and condition of the Corporation to the
stockholders at or prior to their annual meeting and from time to time shall
report to the Directors as to all matters within his knowledge which the
interests of the Corporation may require be brought to their notice. He shall
have the general powers and duties of supervision and management usually so
vested in the office of a president of a corporation. He shall discharge all
other duties and shall have such additional powers as may be imposed upon him by
law, these By-Laws or delegated to him by the Board of Directors
or by the Chairman of the Board if such Chairman is also the Chief
Executive Officer.
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BY-LAW 6.3 In the absence or incapacity of the President, the
Executive Vice-President, if there be one, shall perform the duties
and have the powers of the President. In the absence or incapacity of
both the President and Executive Vice-President, any Vice-President who
is at the main office of the Corporation during such absence and who is
both a stockholder and a member of the Board of Directors, shall perform
duties and have the powers of the President during such absence or
incapacity or until the Board shall otherwise determine. The Vice-Presidents
shall perform such other duties as may be assigned to them by the Board of
Directors or by the President.
BY-LAW 6.4 The Secretary shall keep the minutes of the Board of
Directors and the minutes of the meetings of stockholders. He
shall attend to the giving and serving of all notices of the
Corporation. He shall affix the seal of the Corporation to all certificates
of stock when signed by the President and Secretary. He shall have charge of
the certificate book and seal, and such other books as the
Board may direct. He shall attend to such correspondence as may be assigned
to him and perform all the duties incidental to his office.
He shall sign the certificates of stock signed by the President.
The Secretary shall exhibit at the proper time and during usual business
hours to a person legally entitled, and upon proper written demand, the
minutes of proceedings of the stockholders and the record
of stockholders. In the absence or incapacity of the Secretary, the Assistant
Secretaries or either of them, shall perform the duties and have the
powers of the Secretary.
BY-LAW 6.5 The Controller shall have charge of and jurisdiction over
all books and records pertaining to the accounts of the Corporation.
He will keep the general books of accounts of the Corporation in his office.
Upon proper written application he shall exhibit such records in his
office to any stockholder legally entitled at an appropriate time during
the usual business hours of the Corporation. In the absence or incapacity of
the Controller, the Assistant Controllers or either of them shall perform the
duties and have the powers of the Controller.
BY-LAW 6.6 The Treasurer will have the custody of all funds and
securities of the Corporation. In the absence or incapacity of the
Treasurer, the Assistant Treasurers, or either of them, shall perform the
duties and have the powers of the Treasurer. If required by the Board of
Directors, the Corporation shall obtain and carry a surety bond on the
Treasurer and Assistant Treasurers in such amount as the Board of Directors
shall fix for their integrity in the handling of its funds and securities
and the faithful performance of their duties.
BY-LAW 6.7 The Counsel of the Corporation shall prepare all such
contracts and agreements required in the business of the Corporation as
may be referred to him by the officers. He shall inspect and pass upon all
such instruments as may be presented to the Corporation and of sufficient
importance to justify such examination and shall advise with the officers
of the Corporation in such legal matters pertaining to the affairs of the
Corporation as may require his consideration.
BY-LAW 6.8 All checks, notes, drafts and such other commercial papers
as shall be necessary in the transaction of the business of the Corporation
shall bear the signatures of the President or any Vice-President, and the
Treasurer or any Assistant Treasurer, or of such other person or persons
as may be authorized by the Board of Directors.
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BY-LAW 6.9 The President, Vice-President, Secretary, Treasurer, Assistant
Secretaries, or Assistant Treasurers, or any one of them, is hereby
authorized and empowered, whenever such officer shall deem it necessary and
proper for the best interests of the Corporation, to execute in the name of the
Corporation, and under its Corporate Seal, the following:
A. Powers of Attorney and releases or other similar instruments to
facilitate the collection or compromise of debts due the
Corporation.
B. Powers of Attorney or similar instruments providing sales
authority to representatives to bind the Corporation.
C. Leases for a term not exceeding five years.
D. Assignments or discharges of mortgages or judgments belonging to
it upon payment of compromise settlement thereof.
Article 7
CAPITAL STOCK
BY-LAW 7.1 Certificates of stock shall be numbered in the order
in which they are issued, and shall be signed by the President and
the Secretary, and sealed with the seal of the Corporation. Such seal may be a
facsimile, engraved or printed. Where any such certificate is signed by a
Transfer Agent or Transfer Clerk and by a Registrar, the signatures
of such President and Secretary upon such certificates may be facsimiles,
engraved or printed. In case any such officer who has signed or whose
facsimile signature has been placed upon such certificate shall have
ceased to be such before such certificates is issued,it may be issued by
the Corporation with the same effect as if such officer had to be such at the
date of its issue.
The Certificates may or may not be bound in a book, and shall be issued in
consecutive order, and on the coupon or other record thereof, shall be entered
the name and address of the person owning the shares therein
represented, the number of shares, and the date of issuing thereof.
All Certificates exchanged or returned to the Corporation shall be marked
"cancelled", with the date of cancellation, by the Secretary, and shall be
immediately pasted in the Certificate Book opposite the memorandum of its
issue or filed in numerical order with cancelled certificates.
BY-LAW 7.2 The shares of the Corporation shall be transferable only upon
its books by the holders thereof in person or by their duly authorized
attorneys or legal representatives, and upon such transfer the old certificates
duly endorsed or accompanied by evidence of succession, assignment or authority
to transfer shall be surrendered to the Corporation by the delivery thereof
to the person in charge of the list of stockholders and the transfer books
and ledgers, or the transfer agent, or to such other person may designate,
by whom they shall be cancelled, and new certificates shall thereupon be
issued. In the case of a lost certificate, the Corporation may waive the
surrender thereof and accept satisfactory proof and attestation of the fact
and indemnity.
<F50>
Article 8
DIVIDENDS
BY-LAW 8.1 To the extent permitted by law, dividends shall be declared
and paid upon the capital stock of the Corporation as often, at such times
and in such amounts as the Board of Directors may determine.
Article 9
SEAL
BY-LAW 9.1 The seal of the Corporation shall be in the form of a circle
bearing the name of the Corporation.
Article 10
NOTICES
BY-LAW 10.1 Whenever under the provisions of these By-Laws notice is
required to be given to any Director, officer or stockholder, it shall not be
construed to mean that such notice must be served personally, but such
notice may be given in writing by depositing the same in the Post Office
or Letter Box in a postpaid wrapper addressed to each Director,
officer or stockholder at his home or business address as the same appears on
the books of the Corporation, and the date when the same shall be mailed shall
be deemed to be the date of the giving of such notice.
BY-LAW 10.2 The stockholders, officers, or Directors may waive in
writing any notice required to be given by these By-Laws or pursuant to any
statute of the State of Delaware.
Article 11
AMENDMENTS
BY-LAW 11.1 These By-Laws may be amended or repealed, and new By-Laws may
be made and adopted, by the stockholders or by the Board of Directors.
Article 12
INDEMNIFICATION
BY-LAW 12.1 The Corporation shall to the fullest extent permitted by
applicable laws then in effect indemnify any person (the "Indemnitee") who is or
was a director or officer of the Corporation and who is or was involved in any
manner (including, without limitation, as a party or a witness) or is
threatened to be made so involved in any threatened, pending or completed
investigation, claim action, suit or proceeding, whether civil, criminal,
administrative or investigative (including without limitation or proceeding
by or in the right of the Corporation to procure a judgment "Proceeding")
<F50>
by reason of the fact that such person is or was a director or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise (including, without limitation, any
employee benefit plan) against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such Proceeding; provided,
however, that, except as provided in BY-LAW 12.4(d), the foregoing
apply to a director or officer of the Corporation with respect to
a Proceeding that was commenced by such director or officer prior to a
Change in Control (as hereinafter defined). Such indemnification shall be
a contract right and shall include the right to receive payment
in advance of any expenses incurred by the Indemnitee in connection with
such Proceeding, consistent with the provisions of applicable law as then
in effect.
BY-LAW 12.2 The Corporation may purchase and maintain insurance to protect
itself and any person entitled to indemnification under this Article against
any expenses, judgments, fines and amounts paid in settlement as specified in
this article or incurred by any such person in connection with any Proceeding
referred to in this article, to the fullest extent permitted by applicable
law as then in effect. The Corporation may enter into contracts with any
person entitled to indemnification under this Article in furtherance of the
provisions of this Article and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of credit)
to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Article.
BY-LAW 12.3 The right of indemnification provided in this Article shall
not be exclusive of any other rights to which those seeking indemnification may
otherwise be entitled, and the provisions of this Article shall inure to the
benefit of the heirs and legal representatives of any person entitled to
indemnity under this Article and shall be applicable to Proceedings
commenced or continuing after the adoption of this Article, whether
from acts or omissions occurring before or after such adoption.
BY-LAW 12.4 In furtherance, but not in limitation of the foregoing
provisions, the following procedures, presumptions and remedies
shall, to the extent permitted by applicable law, apply with respect to
advancement of expenses and the right to indemnification under
this Article:
(a) Advancement of Expenses. All reasonable expenses incurred
by or on behalf of the Indemnitee in connection with any Proceeding shall
be advanced to the Indemnitee by the Corporation within 20 calendar days after
the receipt by the Corporation of a statement or statements from the Indemnitee
requesting such advance or advances from time to time, whether prior to or
after final disposition of such Proceeding. Such statement or statements shall
reasonably evidence the expenses incurred by the Indemnitee and, if required
by law at the time of such advance, shall include or be accompanied by an
undertaking by or on behalf of the Indemnitee to repay the amounts advanced
if it should ultimately be determined that the Indemnitee is not entitled to
be indemnified against such expenses pursuant to this Article.
<F50>
(b) Procedure for Determination of Entitlement to Indemnification.
(i) To obtain indemnification under this Article, an Indemnitee shall submit
to the Secretary of the Corporation a written request, including such
documentation and information as is reasonably available to the Indemnitee and
reasonably necessary to determine whether and to what extent the Indemnitee is
entitled to indemnification (the "Supporting Documentation"). The determination
of the Indemnitee's entitlement to indemnification shall be made not later
than 60 calendar days after receipt by the Corporation of the written
request for indemnification together with the Supporting Documentation.
The Secretary of the Corporation shall, promptly upon receipt of such a
request for indemnification, advise the Board of Directors in writing that the
Indemnitee has requested indemnification.
(ii) The Indemnitee's entitlement to indemnification
under this Article shall be determined in one of the following ways: (A) by
a majority vote of the Disinterested Directors (as hereinafter defined), if
they constitute a quorum of the Board of Directors;
(B) by a written opinion of Independent Counsel (as hereinafter defined)
if (x) a Change in Control (as hereinafter defined) shall have occurred and
the Indemnitee so requests or (y) a quorum of the Board of Directors consisting
of Disinterested Directors is not obtainable or, even if obtainable, a
majority of such Disinterested Directors so directs; (C) by the stockholders
of the Corporation (but only if a majority of the Disinterested
Directors, if they constitute a quorum of the Board of Directors, presents
the issue of entitlement to indemnification to the stockholders for their
determination); or (D) as provided in BY-LAW 12.4(c).
(iii) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to BY-LAW
12.4(b)(ii), a majority of the Disinterested Directors shall select
the Independent Counsel, but only an Independent Counsel to which the
Indemnitee does not reasonably object; provided, however, that if a
Change in Control shall have occurred, the Indemnitee shall select
such Independent Counsel, but only an Independent Counsel to which the Board
of Directors does not reasonably object.
(c) Presumptions and Effect of Certain Proceedings. Except as
otherwise expressly provided in this Article, the Indemnitee shall be presumed
to be entitled to indemnification under this Article upon submission of a
request for indemnification together with the Supporting Documentation in
accordance with BY-LAW 12.4(b)(i), and thereafter the Corporation shall have
the burden of proof to overcome that presumption in reaching a contrary
determination. In any event, if the person or persons empowered under
BY-LAW 12.4(b) to determine entitlement to indemnification shall not have been
appointed or shall not have made a determination within 60 calendar days after
receipt by the Corporation of the request therefor together with the Supporting
Documentation, the Indemnitee shall be deemed to be entitled to indemnification
and the Indemnitee shall be entitled to such indemnification unless (A) the
Indemnitee misrepresented or failed to disclose a material fact in making
the request for indemnification or in the Supporting
Documentation or (B) such indemnification is prohibited by law.
The termination of any Proceeding described in BY-LAW 12.1, or of any claim,
issue or matter therein, by judgment, order, settlement or conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, adversely
affect the right of the Indemnitee to indemnification or create a presumption
that the Indemnitee did not act in good faith and in a manner which the
Indemnitee reasonably believed to be in or not opposed to the best interests of
the corporation or, with respect to any criminal Proceeding, that the
Indemnitee had reasonable cause to believe that his conduct was unlawful.
<F50>
(d) Remedies of Indemnitee. (i) In the event that a
determination is made pursuant to BY-LAW 12.4(b) that the indemnitee is not
entitled to indemnification under this Article, (A) the Indemnitee shall be
entitled to seek an adjudication of his entitlement to such indemnification
either, at the Indemnitee's sole option, in (x) an appropriate court of the
State of Delaware or any other court of competent jurisdiction or (y) an
arbitration to be conducted by a single arbitrator pursuant to the rules of the
American Arbitration Association; (B) any such judicial proceeding or
arbitration shall be de novo and the Indemnitee shall not be prejudiced
by reason of such adverse determination; and (C) in any such judicial
proceeding or arbitration the Corporation shall have the burden on proving
that the Indemnitee is not entitled to indemnification under this Article.
(ii) If a determination shall have been made or deemed to have
been made, pursuant to BY-LAW 12.4(b) or (c), that the Indemnitee is entitled
to indemnification, the Corporation shall be obligated to pay the amounts
constituting such indemnification within five days after such determination
has been made or deemed to have been made and shall be conclusively bound by
such determination unless (A) the Indemnitee misrepresented or failed to
disclose a material fact in making the request for indemnification or in the
Supporting Documentation or (B) such indemnification is
prohibited by law. In the event that (x) advancement of expenses is not
timely made pursuant to BY-LAW 12.4(a) or (y) payment of indemnification is
not made within five calendar days after a determination of entitlement to
indemnification has been made or deemed to have been made pursuant to
BY-LAW 12.4(b) or (c), the Indemnitee shall be entitled to seek judicial
enforcement of the Corporation's obligation to pay to the Indemnitee such
advancement of expenses or indemnification. Notwithstanding the
foregoing, the Corporation may bring an action, in an appropriate court in the
State of Delaware or any other court of competent jurisdiction, contesting the
right of the Indemnitee to receive indemnification hereunder due to the
occurrence of an event described in subclause (A) or (B) of this clause (ii)
(a "Disqualifying Event"); provided, however, that in any such action the
Corporation shall have the burden of proving the occurrence of such
Disqualifying Event.
(iii) The Corporation shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this BY-LAW 12.4(d)
that the procedures and presumptions of this Article are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Corporation is bound by all the provisions of this Article.
(iv) In the event that the Indemnitee, pursuant to this BY-
LAW 12.4(d), seeks a judicial adjudication of or an award in arbitration to
enforce his rights under, or to recover damages for breach of, this Article,
the Indemnitee shall be entitled to recover from the Corporation, and shall be
indemnified by the Corporation against, any expenses actually and reasonably
incurred by the Indemnitee if the Indemnitee prevails in such judicial
adjudication or arbitration. If it shall be determined in such
adjudication or arbitration that the Indemnitee is entitled to receive
part but not all of the indemnification or advancement of expenses sought, the
expenses incurred by the Indemnitee in connection with such judicial
adjudication or arbitration shall be prorated accordingly.
(e) Definitions. For purposes of this BY-LAW 12.4:
<F50>
(i) "Change in Control" means a change in control of the
Corporation of a nature that would be required to be reported in response to
Item 6(a) (or any successor provision) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934 (the "Act"), whether or
not the Corporation is then subject to such reporting requirement; provided
that, without limitation, such a change in control shall have occurred if (A)
any "person" (as such term is used in Sections 13(d) and Act) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the
or indirectly, of securities of the Corporation representing 20% or more of
the combined voting power of the Corporation's then outstanding securities
without the prior approval of at least two-thirds of the members of the Board
of Directors in office immediately prior to such acquisition; (B) the
Corporation is a party to any merger or consolidation in which the
Corporation is not the continuing or surviving corporation or pursuant to which
shares of the Corporation's Common Stock would be converted into cash,
securities or other property, other than a merger of the Corporation in which
the holders of the Corporation's Common Stock immediately prior to the merger
have the same proportionate ownership of commonstock of the surviving
corporation immediately after the merger; (C) there is a sale, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, the assets of the Corporation, or a liquidation or
dissolution of the Corporation; or (D) during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Corporation's stockholders was approved by a
vote of at least a majority of the directors then still in office who were
directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board of Directors.
(ii) "Disinterested Director" means a director of the
Corporation who is not or was not a party to the Proceeding in respect of which
indemnification is sought by the Indemnitee.
(iii) "Independent Counsel" means a law firm or a member of a
law firm-that neither presently is, nor in the past five years has been,
retained to represent: (a) the Corporation or the Indemnitee in any
matter material to either such party or (b) any other party to the Proceeding
giving rise to a claim for indemnification under the Article.
Notwithstanding the foregoing, the term "Independent Counsel" shall not
include any person who, under the applicable standards of professional conduct
then prevailing under the law of the State of Delaware, would have a conflict
of interest in representing either the Corporation or the Indemnitee in an
action to determine the Indemnitee's rights under this Article.
BY-LAW 12.5 Neither the amendment or repeal of, nor the adoption of a
provision inconsistent with, any provision of this article (including, without
limitation, this BY-LAW 12.5) shall adversely affect the rights of any
director or officer under this Article (i) with respect to any Proceeding
commenced or threatened prior to such amendment,repeal or adoption of an
inconsistent provision, or (ii) after the occurrence of a Change in Control,
with respect to any Proceeding arising out of any action or omission occuring
prior to such amendment, repeal or adoption of an inconsistent provision, in
either case without the written consent of such director or officer.
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BY-LAW 12.6 If any provision or provisions of this Article shall be held
to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Article (including, without limitation, all portions of any section of this
Article containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; and (b) to the fullest
extent possible, the provisions of this Article (including, without limitation,
all portions of any section of this Article containing any such provision held
to be invalid, illegal or unenforceable) shall be construed
so as to give effect to the intent manifested by the provision held invalid,
illegal or unenforceable.
BY-LAW 12.7 Notwithstanding any other provision or provisions of this
Article, the Corporation may indemnify (including, without limitation, by direct
payment) any person (other than a director or officer of the Corporation) who is
or was involved in any manner (including, without limitation, as a party or a
witness) or is threatened to be made so involved in any Proceeding by reason of
the fact that such person is or was an employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise (including, without limitation, any employee benefit plan)
against any or all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement incurred in connection with such Proceeding.
<F50>
EXHIBIT 11
GOULDS PUMPS, INCORPORATED AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
<C> <C> <C>
1995 1994 1993
a. Net earnings - as reported............................................. $18,072 $18,201 $22,548
b. Actual weighted average number of shares outstanding................... 21,240 21,175 21,126
c. Primary earnings per share based on actual average shares
outstanding (a / b) (1)................................................ $ .85 $ .86 $ 1.07
d. Shares exercisable under outstanding dilutive options.................. 893 423 925
e. Proceeds assuming exercise of outstanding dilutive options............. $18,650 $ 8,073 $20,164
Reinvestment of proceeds under "Treasury Stock Method":
f. Average market price per share during each year or market price at
year-end (whichever is higher)......................................... $ 25.00 $ 22.34 $ 24.88
g. Shares to be acquired (e / f).......................................... 746 361 810
h. Net increase in outstanding shares relative to stock options (d - g)... 147 62 115
i. Adjusted weighted average shares outstanding (b + h)................... 21,387 21,237 21,241
j. Earnings per share assuming exercise of
outstanding options (a / l)............................................ $ .84 $ .86 $ 1.06
k. Dilutive effect on earnings per share (c - j) (2) ..................... $ .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>
EXHIBIT 21
All subsidiaries of Goulds Pumps, Incorporated listed below are included in the
consolidated financial statements.
Ownership State or Country
Percentage as of Incorporated
Subsidiary December 31, 1995 or Organized
AVIS Werbung Gmbh........................... 100 Austria
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 (Asia), Ltd.................... 100 Hong Kong
Goulds Pumps Australia...................... 100 Australia
Goulds Pumps (Barbados) Ltd................. 100 Barbados
Goulds Pumps B.V............................ 100 Netherlands
Goulds Pumps (Delaware)..................... 100 Delaware
Goulds Pumps Canada, Inc.................... 100 Canada
Goulds Pumps Delaware, Inc.................. 100 Delaware
Goulds Pumps Deutschland, Gmbh.............. 90 Germany
Goulds Pumps Europe B.V..................... 100 Netherlands
Goulds Pumps Financial Services............. 100 Ireland
Goulds Pumps Korea Co. Ltd.................. 100 South Korea
Goulds Pumps Ltd............................ 100 United Kingdom
Goulds Pumps Polska......................... 100 Poland
Goulds Pumps (N.Y.), Inc.................... 100 New York
Goulds Pumps (Phil.), Inc................... 100 Philippines
Goulds Pumps (Portugal) Comercio DeBombas,
LDA......................................... 75 Portugal
Goulds Pumps (Singapore) PTE, Ltd........... 100 Singapore
Goulds Pumps (Taiwan) Co. Ltd............... 100 Taiwan
Goulds Pumps Trading Corp................... 100 Delaware
Goulds Pumps World Sales (V.I.) Ltd......... 100 U.S. Virgin
Islands
Goulds Pumps World Sales, Ltd. (a FSC)...... 100 Guam
GP Investments, Inc......................... 100 Canada
Lowara Belgium, S.A......................... 100 Belgium
Lowara Denmark AS........................... 80 Denmark
Lowara France S.A........................... 100 France
Lowara Ireland Ltd.......................... 100 Ireland
Lowara Nederland B.V........................ 100 Netherlands
Lowara S.p.A................................ 100 Italy
Microtec Pump S.p.A......................... 100 Italy
Ochsner Gas and Compressor Gmbh............. 100 Austria
Ochsner Prozebtechnik Gmbh.................. 100 Austria
Ochsner Prozebtechnik KG.................... 76 Austria
Ochsner Pumpen Gmbh......................... 100 Germany
Pumpenfabrik Ernst Vogel Gmbh............... 100 Austria
Quality Industrial Technology Co., Ltd...... 100 Thailand
Thai Technical Engineered Services Co., Ltd. 100 Thailand
Vogel Export KG............................. 100 Austria
Vogelpumpen DRV Gmbh........................ 33 Hungary
World Pump D.O.O............................ 100 Slovenia
The Company also had equity investments in Nanjing Goulds Pumps Limited Co., of
China, a 45 percent owned joint venture at December 31, 1995. In January 1996,
the Company gained a controlling interest in this company by investing an
additional $1.4 million, increasing the Company s ownership to 62%. Lowara Co.,
Ltd. of Osaka, Japan is a 54.8% owned joint venture which Lowara S.p.A.
maintains with Tsurumi Company of Japan. The Company owns a 3% interest in Oil
Dynamics, Inc., of Oklahoma, which is currently carried on the cost method of
accounting.
<F50>
EXHIBIT 23
Independent Auditors' Consent
Goulds Pumps, Incorporated:
We consent to the incorporation by reference in Registration Statement Nos.
2-64847, 2-64530, 2-78145, 2-90969, 33-22902, 33-54419, and 33-54437 of Goulds
Pumps, Incorporated and its subsidiaries on Forms S-8 of our reports dated
January 25, 1996, appearing in this Annual Report on Form 10-K of Goulds Pumps,
Incorporated and its subsidiaries for the year ended December 31, 1995.
s/Deloitte & Touche LLP
Deloitte & Touche LLP
Rochester, New York
March 15, 1996
<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 behalf by the undersigned,
thereunto duly authorized
GOULDS PUMPS, INCORPORATED
By: /s/Thomas C. McDermott
Thomas C. McDermott
(Chairman, Chief Executive Officer
and President)
Date: March 6, 1996
<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/Thomas C. McDermott March 6, 1996
Thomas C. McDermott Date
(Chairman, Chief Executive Officer
and President)
/s/John P. Murphy March 6, 1996
John P. Murphy Date
(Vice President and
Chief Financial Officer)
/s/Peter Oddleifson March 6, 1996
Peter Oddleifson Date
(Director)
/s/Melvin Howard March 6, 1996
Melvin Howard Date
(Director)
/s/Arthur M. Richardson March 6, 1996
Arthur M. Richardson Date
(Director)
/s/James C. Miller March 6, 1996
James C. Miller Date
(Director)
Listed below are those directors not mentioned above:
William W. Goessel
Barbara B. Lucas
David P. Gruber
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