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
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from.....................to..............
Commission file number 0-684
GOULDS PUMPS, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 15-0321120
(State or other jurisdiction of (I.R.S. EmployerIdentification 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:
None
Title of each class Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 Par Value Per Share
(Title of Class)
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
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]
As of February 28, 1997, 21,376,093 common shares were outstanding,
and the aggregate market value of the common shares of Goulds Pumps,
Incorporated held by non-affiliates was approximately $502 million,
based upon figures reported in the Company's Proxy Statement.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Annual Report to Stockholders for fiscal
year ended December 31, 1996, as presented in Exhibit 13 of this Form
10-K, are incorporated by reference in Parts I and II of this Form 10-
K.
(2) Proxy Statement for Annual Meeting of Stockholders to be
held on May 7, 1997 (Proxy Statement). See Part III of this Form
10-K for portions incorporated by reference.
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GOULDS PUMPS, INCORPORATED
TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business................................ 3
Executive Officers..................................... 8
Item 2. Properties.............................................. 9
Item 3. Legal Proceedings....................................... 9
Item 4. Submission of Matters to a Vote of Security Holders.... 9
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters....................... 10
Item 6. Selected Financial Data................................. 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 13
Item 8. Financial Statements and Supplementary Data............ 13
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............. 13
PART III
Item 10. Directors and Executive Officers of the Registrant. 14
Item 11. Executive Compensation................................. 14
Item 12. Security Ownership of Certain Beneficial Owners
and Management...................................... 14
Item 13. Certain Relationships and Related Transactions........ 14
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K................................. 14
Signatures.......................................... 16
Financial Statement Schedules....................... 18
Exhibit Index....................................... 21
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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. The
Company's Corporate headquarters is in Fairport, New York,
a suburb of Rochester, New York.
(B) Financial Information About Industry/Market Segments
Financial information about market segments is
contained in Note 14 (Major Market Segment Information)
of Exhibit 13, Portions of the Annual Report to
Stockholders for 1996, which is incorporated herein
by reference.
(C) Narrative Description of Business
Overview
The Company designs, manufactures, sells and repairs
centrifugal pumps and accessories for diverse
applications. The Company's pumps are used in the
following worldwide markets: residential, chemical,
commercial, pulp and paper, general industry,
sewage/drainage, oil refining and gas processing,
agriculture/irrigation and power generation.
The Company is organized into two sectors:
Industrial Products ("IP") and Water Technologies ("WT").
Industrial Products
The Industrial Products sector represented 52% of
the Company's sales and 57% of operating earnings
for 1996 after recording a restructuring credit of $1.6
million. Excluding the restructuring credit, the
Industrial Products sector represented 54% of the Company's
operating earnings in 1996. 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
market including pumps designed for API and ANSI standards.
The Company also 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 seven PRO Service Centers in the
U.S., three in Canada, one in Thailand and one in Venezuela.
The Company has a repair parts service organization
to assist customers in key industrial areas of the
United States. Service representatives provide
emergency service and technical advice on a 24-hour basis.
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In 1996, IP posted record sales of $399.5 million,
an increase of $22.1 million, or 5.9%, compared to
1995 results. IP sales improvements were attributable
principally to growth in regions outside the U.S.,
particularly Asia Pacific and Latin America.
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 60
sales engineers nationwide in its branch sales offices and
has 40 distributors and representatives.
Water Technologies
The Water Technologies sector represented 48% of the
Company's sales and 43% of operating earnings for
1996 after recording a restructuring charge of $1.5
million. Excluding the restructuring charges, the Water
Technologies sector represented 46% of the Company's
operating earnings. The WT sector manufactures, sells and
repairs 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 sewage 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.
In 1996, WT posted sales of $374.9 million, an increase of
$33.5 million, or 9.8%, over 1995. WT sales were at record
levels for the year, and sales were up in all regions of
the world in this sector.
The Company's agricultural pumps and U.S. water systems
pumps manufactured by WT are marketed in the
U.S. through a field sales force of approximately 50 people
who call on approximately 500 distributors throughout the
country. These distributors, primarily plumbing, heating
and pump specialty wholesalers, sell to and service 20,000
dealers, including over 7,000 Goulds Professional Dealers
Association members.
Joint Venture
As of December 31, 1995, the Company had a 45% interest in
a joint venture with Nanjing Deep Well Pump Works of
Nanjing, China. The joint venture produces agricultural
vertical turbine pumps in China for sale worldwide, through
a separate corporation, Nanjing Goulds Pumps Limited Co.
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 began to consolidate the financial
results for this affiliate in 1996.
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(D) General
Competition
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.
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 of a "quality" pump
manufacturer with complete repair parts service. It
believes it can strengthen its present competitive position
in select markets 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.
Product Development
The Company is committed to the ongoing development
of new products and improvement of existing
products. Research and development ("R&D") expenses in
1996 were $9.4 million, an increase of 13.9% over 1995. On
a percentage to sales basis, R&D expenses were up 0.1
percentage point, reflecting a consistent effort in the
development of new products.
Non-U.S. Operations
Outside the U.S., the Company operates in four Regions
(Europe, Asia Pacific, Latin America, and Middle East)
and Canada. Sales generated by non-U.S. affiliates
amounted to $291 million, $253 million and $157
million for 1996, 1995 and 1994, respectively.
In Europe, manufacturing and assembly is performed
in Italy, Austria and the United Kingdom. Lowara
S.p.A., in Italy, fabricates stainless-steel pumps which
are sold worldwide. Vogel, the Company's Austrian
operation, produces pumps for medium- and heavy-duty water
systems and industrial applications. Other European
locations are maintained in Belgium, Denmark, France,
Germany, Ireland, the Netherlands, Poland and Portugal.
The Asia Pacific Region includes a joint venture
manufacturing operation in China, producing
agricultural vertical turbine pumps for sale worldwide. The
Philippines subsidiary assembles residential and
agricultural water systems pumps. A manufacturing and
testing facility is located in Korea, while Singapore is
the site of a distribution center. Thailand is the location
of a PRO service center. Offices to support sales within
the Region are in Melbourne, Australia; Beijing and
Nanjing, China; Hong Kong; Tokyo, Japan; Seoul, South
Korea; Singapore; Taipei, Taiwan; and Bangkok, Thailand.
In Latin America, the Mexican operation manufactures
various pumps for industrial and water applications,
while the Venezuelan operation serves primarily
as a PRO Service Center with light assembly. Sales
efforts in Latin America are supported by offices in
Miami, Florida; Santiago, Chile; Mexico City, Mexico; Lima,
Peru; and Caracas, Venezuela.
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Sales offices for the Middle East Region are located
in Cairo, Egypt; Surrey, England; Athens, Greece;
Dammam, Saudi Arabia; and Abu Dhabi, United Arab Emirates.
The Middle East Region has no manufacturing or assembly
locations.
Canada includes an assembly facility in Cambridge,
Ontario for water systems and industrial
products as well as sales offices in Calgary, Edmonton,
Montreal and Vancouver. Canadian PRO Service Centers are
located in Cambridge, Edmonton and Montreal.
Export sales from the United States were $90 million in
1996, $69 million in 1995 and $58 million in
1994. The Company's export sales are distributed
throughout the world without concentration in any one
geographic region.
Financial information about non-U.S. operations and export
sales is included in Note 14 (Major Market Segment
Information) of Exhibit 13, portions of the Annual Report
to Stockholders for 1996, which is incorporated herein by
reference.
Raw Materials
The principal raw materials essential to manufacturing
pumps are nickel, iron, bronze and stainless
steel. These materials are used to produce castings in the
Company's five foundries. These internal foundries supply
most stainless steel and hard iron castings to the
Company's machining locations, thus reducing the need to
purchase these products from external suppliers.
In addition, sheets of stainless steel are used in
various stamping processes. Other components such as
drivers, ball bearings and mechanical seals, along with
bar stock for shafts, are purchased from several suppliers.
Raw materials for the Company's products are in adequate
supply from a number of alternative suppliers and,
at present, the Company has the ability to select and
apportion among vendors based on price, quality and
delivery capability. The Company has entered into several
alliances with selected vendors in order to focus on
improving the quality, delivery and costs related to
purchased material.
The Company purchases motors for its U.S. water systems
submersible pump line 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, manufacturing of that product line could
be temporarily disrupted.
Employee Relations
The Company presently employs approximately 5,250 people.
Approximately 1,230 employees in the U.S. are covered
under union contracts stipulating rates of pay, hours
of employment and other conditions of employment. In
the U.S., four labor agreements covering 420 people expire
in 1997. Approximately 2,700 persons are employed in the
U.S. while approximately 2,550 persons work at non-U.S.
locations.
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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 counterclaims. 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.
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 1996 and are not anticipated to be
material in 1997 or 1998.
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 small backlog levels
since products are normally shipped within two weeks
from receipt of a customer order. The backlog of orders
was $130.3 million at February 28, 1997, a decrease
of $10.0 million from February 29, 1996 levels.
This decrease is due principally to the sale of certain
product lines of the Municipal Business Unit.
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EXECUTIVE OFFICERS
Name Age Present Office and Experience
Thomas C. McDermott 60 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, Incorporated 1986-
1993.
Douglas J. Bingler 50 Vice President and President - Water
Technologies North America since February,
1997; previously President - Water
Technologies Group, America, 1995-1997;
President of Keystone Railway Equipment
Company, 1993-1995; Corporate Vice President
and General Manager, Liquid Metronics and
Hartell Divisions of Milton-Roy Company, 1988-
1993.
William G. Kelley 50 Vice President - Human Resources since July
1996; previously, Vice-President - IPG Human
Resources, 1994-1996; Director of Human
Resources, 1992-1994. Joined the Company in
1992; previously, Director of International
Human Resources of Fisher-Price, Inc.,
1989-1992.
J. Kevin Kilbane 58 Vice President and President - Europe
effective February, 1997; previously President
- Europe, 1996-1997; President - Engineered
Pump Group of Ingersoll Dresser Pump Company,
1992-1995.
John P. Murphy 50 Vice President - Finance and Chief Financial
Officer since August 1993; previously
Executive Vice President and Chief Financial
Officer of Westcan Chromalox, Inc., 1991-
1993.
John J. Scanlon 62 Vice President - Worldwide Commercial
Strategies and President - Asia Pacific since
November, 1996; previously President - Asia
Pacific and Latin America, 1995-1996; Vice
President and General Manager Asia Pacific,
1991-1995.
Eric L. Steenburgh 56 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.
Michael T. Tomaino 59 Vice President, General Counsel and Secretary
since July 1995; previously a Partner of the
law firm Nixon, Hargrave, Devans & Doyle, 1971
- 1995.
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. PROPERTIES
The Company leases its Corporate headquarters in Fairport, New York.
The two largest U.S. manufacturing facilities are located in Seneca
Falls, New York and Auburn, New York. Other U.S. manufacturing
facilities are located in Baldwinsville and Penn Yan, New York;
Ashland, Pennsylvania; Lubbock and Slaton, Texas; and City of
Industry, California. The Company's largest non-U.S. manufacturing
plant is located in Italy. Other non-U.S. manufacturing facilities
are currently located in Austria, Canada, China, Mexico and South
Korea. Goulds Pumps Europe has subsidiaries which are located in
Austria, Belgium, Denmark, France, Germany, Ireland, Italy, the
Netherlands, Poland, Portugal 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; Portland, Oregon; and Huntington, 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.
During the five years ended December 31, 1996, the Company invested
approximately $163 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
counterclaims. 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 1996.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY 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 of the Company for the past two years is set forth below:
Market value per common share
1996 1995
Quarter High Low Quarter High Low
1st $25.13 $20.88 1st $24.25 $19.63
2nd $25.88 $20.00 2nd $25.50 $20.38
3rd $25.88 $21.13 3rd $23.63 $21.00
4th $25.00 $20.38 4th $26.00 $22.63
Year $25.88 $20.00 Year $26.00 $19.63
Dividend paid per common share
Quarter 1996 1995
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 28, 1997 was 4,726.
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.
<F50>
RECENT SALES OF UNREGISTERED SECURITIES
In December 1995, the Board of Directors of the Company approved an
arrangement whereby newly elected directors of the Company would
receive 50% of their annual $20,000 retainer in Company common stock
until the value of that Director's holdings of the Company common
stock reached 200% of the annual retainer, or $40,000. Under this
arrangement, shares of common stock were transferred by the Company
to Mr. David P. Gruber, a Director of the Company, in transactions
exempt from registration under Section 4(2) of the Securities Act of
1933 as follows:
Number of
Date shares transferred
March 8, 1996 21
May 5, 1996 102
May 8, 1996 91
October 9, 1996 112
December 16, 1996 109
<F50>
ITEM 6. SELECTED FINANCIAL DATA
Five-Year Summary of Financial Data
Goulds Pumps, Incorporated
(Dollars in millions except per share data)
OPERATIONS 1996 1995 1994 1993 1992
Net sales $774.4 $718.8 $585.5 $555.7 $558.9
Gross profit 227.0 204.7 167.1 156.3 173.3
Interest expense 11.2 11.4 6.6 5.4 5.0
Earnings from continuing operations before
income taxes, cumulative effect of
accounting changes 53.9 25.1 29.6 34.4 35.8
Earnings from continuing operations before
cumulative effect of accounting changes
34.7 18.1 18.2 23.5 21.8
Cumulative effect of accounting changes
-- -- -- (1.0) (29.7)
Net earnings (loss) 34.7 18.1 18.2 22.5 (7.9)
COMMON STOCK
Number of stockholders at
year-end 5,212 4,988 5,276 5,555 5,902
Average shares outstanding
(in thousands) 21,313 21,240 21,175 21,126 21,027
Net earnings (loss) per share:
Continuing operations before cumulative effect
of accounting changes $ 1.63 $ .85 $.86 $ 1.12 $ 1.04
Cumulative effect of accounting changes
-- -- -- (.05) (1.42)
Net earnings (loss) per share 1.63 .85 .86 1.07 (.38)
Dividends per share .80 .80 .80 .80 .80
Stockholders' equity per share 9.88 8.94 9.03 8.85 9.15
FINANCIAL DATA
Purchases of property, plant and
equipment $ 36.4 $ 33.5 $ 28.1 $ 24.7 $ 40.0
Depreciation expense 27.0 26.0 24.9 24.8 23.8
Property, plant and equipment
--net 183.5 173.3 152.8 149.0 154.6
Working capital 106.8 106.9 116.8 109.7 122.1
Debt (including short-term) 123.7 133.1 89.1 87.4 65.3
Total assets 554.9 554.0 457.2 438.5 418.8
Stockholders' equity 211.1 190.3 191.3 187.2 192.8
Debt to equity % 58.6 69.9 46.6 46.7 33.9
Continuing operations before cumulative effect
of accounting changes:
Return on average stockholders'
equity % 17.3 9.3 9.5 12.4 9.6
Return on average capital % 12.2 7.7 7.6 9.7 8.0
Number of employees at year-end 5,250 4,900 4,200 4,100 4,300
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this Item is presented in pages 52
through 58 of Exhibit 13 (Portions of the Annual Report to
Stockholders) of this Form 10-K, and is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is presented in pages 59
through 82 of Exhibit 13 (Portions of the Annual Report to
Stockholders) of this Form 10-K, and is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pages 1 through 5 of the Proxy Statement dated March 24, 1997 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 Form 10-K, following Item 1.
ITEM 11. EXECUTIVE COMPENSATION
Pages 6 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 12 of the Proxy Statement contain information concerning
transactions with management 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 for the years 1994-
1996 are included in Exhibit 13 of this Form 10-K as follows:
Page in
Exhibit 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 52
Independent Auditors' Report 59
Consolidated Statements of Earnings 60
Consolidated Balance Sheets 61
Consolidated Statements of Cash Flows 62
Consolidated Statements of Stockholders'
Equity 63
Notes to Consolidated Financial Statements 64 - 82
Page in
Form 10-K
(2) Financial Statement Schedules:
Independent Auditors' Report on
Financial Statement Schedules 19
The following schedule is included in this
Form 10-K:
II - Valuation and Qualifying Accounts 20
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All other Financial Statement Schedules are omitted because
they are not applicable or the required information is shown in
the consolidated financial statements.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of
the year ended December 31, 1996.
(c) Exhibits:
Those exhibits required to be filed by Item 601 of
Regulation S-K are listed in the Exhibit Index immediately
preceding the exhibits filed herewith and such listing is
incorporated herein by reference.
<F50>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Goulds Pumps, Incorporated, has duly caused
this report to be signed on its 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 27, 1997
<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 27, 1997
Thomas C. McDermott Date
(Chairman, Chief Executive Officer
and President)
/s/John P. Murphy March 27, 1997
John P. Murphy Date
(Vice President - Finance and
Chief Financial Officer)
/s/Diana R. Kurty March 27, 1997
Diana R. Kurty Date
(Vice President and
Corporate Controller)
/s/Jerry H. Ballengee March 21, 1997
Jerry H. Ballengee Date
(Director)
William W. Goessel Date
(Director)
/s/David P. Gruber March 12, 1997
David P. Gruber Date
(Director)
/s/Melvin Howard March 20, 1997
Melvin Howard Date
(Director)
/s/Barbara B. Lucas March 19, 1997
Barbara B. Lucas Date
(Director)
/s/James C. Miller III March 20, 1997
James C. Miller III Date
(Director)
/s/Peter Oddleifson March 13, 1997
Peter Oddleifson Date
(Director)
/s/Arthur M. Richardson March 12, 1997
Arthur M. Richardson Date
(Director)
<F50>
FINANCIAL STATEMENT SCHEDULE
<F50>
INDEPENDENT AUDITORS' REPORT
Goulds Pumps, Incorporated:
We have audited the consolidated financial statements of Goulds
Pumps, Incorporated and subsidiaries as of December 31, 1996 and
1995, and for each of the three years in the period ended December
31, 1996, and have issued our report thereon dated January 24, 1997;
such consolidated financial statements and report are included in
your 1996 Annual Report to Stockholders and are incorporated herein
by reference. Our audits also included the consolidated financial
statement schedule of Goulds Pumps, Incorporated and subsidiaries,
listed in Item 14(a)2. This consolidated 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
consolidated financial statement schedule, when considered in
relation to the basic consolidated 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 24, 1997
<F50>
Schedule II
GOULDS PUMPS, INCORPORATED AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(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:
1996........... $3,007 $2,017 $1,991 $3,033
1995........... $2,838(2) $2,209 $2,040 $3,007
1994........... $2,177 $1,172 $ 956 $2,393
(1) Accounts written off, less recoveries.
(2) Includes opening balance of Vogel.
<F50>
EXHIBIT INDEX
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 ended
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 period ended June 30,
1989).
* By-Laws of the Company, amended and restated as of
September 19, 1996 (Exhibit III (ii) to Form 10-Q for
the period ended September 30, 1996).
(10) Material Contracts:
(iii) Compensatory Plans for Officers and Directors:
* Agreement dated June 20, 1996 between Goulds Pumps, Incorporated
and Thomas C. McDermott (filed as Exhibit X on page 14
of Form 10-Q for the period ended June 30, 1996).
* 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).
* Goulds Pumps, Incorporated Senior Executive Severance
Agreement, effective May 12, 1983 (Exhibit 19,
Form 10-Q for period ended June 30, 1983).
* 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 1988 Stock Incentive
Plan (Form S-8 Registration Statement No. 33-22902
filed on July 5, 1988).
Goulds Pumps, Incorporated Executive Security Plan
Agreement (filed as Exhibit 10-A on page 23 of this
Form 10-K).
Goulds Pumps, Incorporated Severance Plan for
Executives (filed as Exhibit 10-B on page 27 of this Form
10-K).
Goulds Pumps, Incorporated Deferred Compensation Plan
for Directors (filed as Exhibit 10-C on page 37 of this Form 10-K).
Agreement, dated December 6, 1996, between Goulds Pumps,
Incorporated and Frank J. Zonarich (filed as
Exhibit 10-D on page 44 of this Form 10-K).
(11) Computation of Earnings Per Share (page 50 of this Form 10-K).
(13) Annual Report to Security Holders:
Portions of the 1996 Annual Report to
Stockholders (incorporated sections only in electronic
filing), filed herewith (page 51 of this Form 10-K).
(21) Subsidiaries of the Registrant (page 82 of this Form 10-K).
(23) Consents of Experts and Counsel (page 83 of this 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 Form 10-K.
* Incorporated herein by reference to the filed document
indicated in parenthesis.
<F50>
EXHIBIT 10-A
GOULDS PUMPS, INC.
EXECUTIVE SECURITY PLAN AGREEMENT
This Agreement is made and entered into as of the
_______________ day of _______________, _______________, by and
between Goulds Pumps, Inc., a Delaware Corporation (hereinafter
referred to as the "Company" and _______________ (hereinafter
referred to as the "Employee").
The Company and its subsidiaries are hereinafter collectively
referred to as the "Company."
In consideration of each other's undertakings in this Agreement,
the Employee and the Company agree as follows:
1. Death Benefits
(a) If Employee's death occurs before his 65th birthday
and while Employee is either actively employed by the
Company, or on an authorized leave of absence, or then
receiving disability benefits under a plan of the Company
or is retired from the active employ of the Company,
provided death was not due to suicide occurring within two
years of the date this agreement was first entered into,
the Company will pay to the Employee's Beneficiary, if any,
the following death benefit:
(1) For each of the first twelve months
(commencing with the first full month following the
month of death) an amount equal to 1/12 of the
Employee's annual base rate of compensation in effect
immediately preceding the Employee's death, disability
or retirement.
(2) Commencing with the thirteenth month, and
continuing thereafter through the month in which the
Employee would have attained age 65, an amount equal
to 1/24 of the Employee's annual base rate of
compensation in effect immediately preceding the
Employee's death, disability or retirement
(3) Provided, however, that no Employee's
beneficiary shall receive less than one and one-half
(1 1/2) times the Employee's annual base rate of
compensation as set forth above.
(4) All of the above benefits are subject to a
$100,000 deductible.
(EXAMPLE: For the purpose of illustrating
the limitations set forth above, if the deceased
Employee had an annual base rate of compensation of
$50,000, the $100,000 deductible provided herein would
be deemed to have been satisfied in the following
manner: In the first twelve months, $50,000, in the
next twenty-four months the remaining $50,000; so that
in this example, the first payment from the Company,
after the deductible, equal to 1/24 of the Employee's
annual base rate of compensation would commence only
on the thirty-seventh month following the date of
death.)
(b) If Employee's death occurs on or after his 65th
birthday, provided death was not due to suicide occurring
within two years of the date this agreement was first
entered into, and provided further that if the Employee is
actually employed by the Company, or is retired from the
active employ of the Company at the time of his death, and
if retired, that Employee's retirement had occurred while
this Agreement was in full force and effect, the Company
will pay to the Employee's Beneficiary, if any, the
following death benefit: The death benefit shall consist
of an amount equal to the difference, if any, between an
amount equal to one and one-half (1 1/2) times the Employee's
annual base rate of compensation in effect immediately
preceding the Employee's death or retirement less the
$100,000 deductible. The death benefit will be paid in a
single sum within 45 days of the Employee's date of death.
2. Beneficiary
The term "Beneficiary" as used in this Agreement shall mean the
person(s) named by the Employee as shown on the Executive
Security Plan Beneficiary Designation Form (Exhibit I of this
Agreement). If no person(s) are named, the beneficiary will be
the Estate of the Employee. The Beneficiary may be changed at
any time by giving written notice to the Corporate Benefits
Department. The change will take effect on entry in those
records.
3. Termination by Election
(a) The Company reserves the right to terminate this
Agreement by giving Employee not less than 30 days written
notice to such effect, provided, however, that the Company
shall not have the right to terminate this Agreement as to
any Employee's Beneficiaries who have become entitled to
benefits under this Plan prior to such 30-day written
notice, it being the intention hereof to vest in those
Beneficiaries all of the rights conferred under this
Agreement even if this Agreement, and the program
contemplated hereby, is modified or terminated by the
Company following the death of the subject employee.
(b) In the event of merger of the Company into another
Corporation, the purchase of all or a majority of the
Company's common stock by another Corporation or other
similar circumstances resulting in a change in the
ownership of the Company, and if this Agreement is
thereafter terminated, or the employment of any covered
Employee hereunder is thereafter terminated, the Company
agrees to provide or cause to be provided for each Employee
covered in this Plan at that time, the applicable death
benefit described in Section 1 hereof subject to the terms
of this Agreement, in the event of the covered Employee's
death occurring during the 60-month period commencing with
the month in which such change in ownership occurs, it
being the intention of this provision to vest in each
qualified covered Employee the benefits of this Agreement
for his Beneficiaries if said covered Employee dies within
the relevant 60-month period following the change of
ownership as set forth hereunder. In the event the covered
Employee dies after expiration of the relevant 60-month
period, said Employee's beneficiaries would still be
entitled to receive the minimum benefits as set forth in
Section 1, an amount equal to one and one-half (1 1/2) times
the covered Employee's annual base rate of compensation, as
defined, less than $100,000 deductible.
4. Administration
This Agreement shall be administered on behalf of the Company by
the Vice President-Human Resources. All matters relating to the
interpretation of the provisions of this Agreement, the
commencement and amount of benefit payments hereunder, the
allocation of benefit payments to be made to or among various
Beneficiaries, and all of the rights and obligations of the
parties hereunder shall be determined by the Human Resources
Committee as regularly appointed and constituted by the Board of
Directors of the Company from time to time, and the
determination of any and all matters relating to this agreement
by said Human Resources Committee shall be binding upon the
parties hereto and all other persons or parties having any
interest in or rising from this Agreement.
5. No Employment Obligation
This Agreement does not in any way require the Company to
continue the employment of the Employee with the Company or
limit the right of the Company to terminate the Employee's
employment with the Company at any time. Termination of the
Employee's employment with the Company for any reason prior to
retirement, whether by action of the Company or Employee, shall
immediately terminate this agreement and all further obligations
hereunder except as expressly provided otherwise in this
Agreement.
6. Other Benefits and Agreement
The benefits provided for the Employee or Beneficiary under this
Agreement are in addition to any other benefits available to the
Employee under any other plan or program of the Company for its
employees and except as otherwise expressly provided in this
Agreement, this Agreement shall supplement and shall not
supersede any other Agreement between the Company and Employee,
or any provision contained therein.
7. Notices
Any notice which shall be or may be given under this Agreement
shall be in writing and shall be mailed by United States
Certified Mail, return receipt requested, addressed as indicated
below:
(a) Notice to Employee:
______________________________
______________________________
______________________________
(Employee's name and last known address according to
the records of the Company)
(b) Notice to the Company:
Vice President - Human Resources
Goulds Pumps, Inc.
300 WillowBrook Office Park
Fairport, New York 14450-4285
Either party may, from time to time, change the address to which
notices shall be mailed by giving notice of such new address in
the manner provided herein.
8. Amendments
This Agreement sets forth the entire understanding between the
parties regarding the subject matter covered herein and it can
be amended or modified only by a written instrument signed by
the President of the Company and approved by the Human Resources
Committee of the Board of Directors.
9. Funding Not Required
The Company may undertake to provide any of the benefits made
available under this Agreement by any method it deems suitable,
and shall not be required to fund its obligations hereunder. It
is intended that an Employee and/or his Beneficiary, if any,
shall acquire no greater rights under this Agreement than those
of any other general creditor of the Company.
10. Medical History and Examination
It is agreed that this Agreement will become effective only upon
a determination by the insurance company which may issue a
policy of life insurance on the life of the Employee that the
Employee is in insurable health. Employee will furnish a
statement of age and medical history and will submit to one or
more physical examinations by a physician or physicians
designated by said insurance company for this purpose. The
effectiveness of this Agreement shall be evidenced by the
delivery to the Employee of a copy of this Agreement, bearing
the signature of the President of the Company. If the
Employee's statement of age or medical history contains a
material misrepresentation, the Company shall have the right to
terminate this Agreement, with no further obligation to the
Employee, Beneficiary or any other person, at any time within 60
days after discovering such material misrepresentation.
11. Cancellation of Insurance
If any issuer thereof cancels an insurance policy on the life of
an Employee which the Company may have acquired on the basis of
misrepresentation or omission of fact by the Employee, it shall
conclusively entitle the Company to so terminate this Agreement.
IN WITNESS WHEREOF, the Employee and the Company have executed this
Agreement as of the date first above set forth.
_____________________________________________________________________
Date Employee
______________________________ Goulds Pumps, Inc.
Date
by:____________________________
Goulds Pumps, Incorporated
<F50>
EXHIBIT 10-B
A Summary of the
Goulds Pumps, Inc.
Severance Plan for Executives
Effective January 1, 1996
<F50>
TABLE OF CONTENTS
PURPOSE Page 1
ELIGIBILITY Page 1
DEFINITIONS Page 1
PAYMENTS OF BENEFITS Page 3
Eligibility Page 3
Disqualifying Events Page 3
Payment of Benefits Page 4
CALCULATION OF SEVERANCE BENEFITS Page 4
Formula Page 4
Duration of Payments Page 4
OTHER BENEFITS Page 5
ADMINISTRATION Page 5
The Plan Administrator Page 5
Notification to Employees Page 5
Claims by Employees Page 6
Claims Appeals Page 6
AMENDMENT AND TERMINATION Page 7
MISCELLANEOUS Page 7
Right to Terminate Employment Page 7
Source of Benefits Page 7
Benefits Not to be Construed as Pension Benefits Page 7
No Assignment; Binding Effect Page 7
Gender and Number Page 8
<F50>
Goulds Pumps, Inc.
Severance Plan for Executives
Effective January 1, 1996
PURPOSE
The purpose of this Severance Plan for Executives (the "Plan") is
to provide financial support and continuation of some benefits, for a
limited time, to eligible Employees following a qualified involuntary
termination.
ELIGIBILITY
All employees who are specifically designated as eligible by the
Goulds Pumps, Inc. Human Resources Committee (the "Committee") of the
Board of Directors are covered by this Plan. Eligibility may also be
removed by the Committee under their discretion.
The Plan Administrator reserves the right to decide whether the
circumstances justify the application of the Plan in any particular
case, and the decision of the Plan Administrator is final.
DEFINITIONS
For purposes of this Plan, the following terms when capitalized
will have the following meanings:
a. Appeals Committee means the Chairman of the Board of
Directors of Goulds Pumps, Inc., and the General Counsel or the
designee(s) of such Appeals Committee.
b. Company means Goulds Pumps, Inc. and its subsidiaries,
divisions, subdivisions, plants and locations.
c. Comparable Employment means a position of equal pay and
benefits.
d. Compensation is the Employee's annualized base salary at
the time of termination.
e. Competitor is a company that competes with Goulds Pumps, as
determined by the Plan Administrator.
f. Employee is any full-time salaried individual employed by
the Company who:
(i) is not covered by a written employment contract
which over rides this Plan on the date of termination of
employment; and
(ii) has been designated as eligible for the Plan by
the Committee; and
(iii) is on active duty as of the time of
termination or has been on active duty within the six (6)
month period immediately preceding the Employee's
termination. To be considered to have been on active duty,
the Employee must have actually performed work for the
Company for which the Employee received W-2 earnings from
the Company.
g. Non-Competitor means a company that does not compete with
Goulds Pumps, as determined by the Plan Administrator.
h. Plan means the Goulds Pumps, Inc. Severance Plan for
Executives, as amended from time to time.
i. Plan Administrator means the Chairman of the Board of
Directors for Goulds Pumps, Inc. or his/her designee.
j. Plan Year means the 12 month period beginning on January 1
and ending on the following December 31.
PAYMENTS OF BENEFITS
Eligibility for Severance Benefits
An Employee is eligible for benefits from the Plan when the Company
involuntarily and permanently terminates the Employee's employment as
a result of
- permanent layoff;
- inherent inability to perform the duties of the position;
- economic reason, reduction in force, facility closing,
reorganization or consolidation other than a Change in Control
as defined in the Senior Executive Severance Plan.
Disqualifying Events
An Employee who might otherwise qualify for a severance pay benefit
under this Plan shall be disqualified if the Employee
(a) fails to continue in the employ of the Company
satisfactorily performing the Employee's assigned duties, until
the date actually set for the Employee's termination by the
Company;
(b) works for a subsidiary, division, subdivision, plant,
location, or other identifiable entity that is sold or otherwise
transferred to an owner other than the Company, whether or not
the Employee is offered employment by the new owner and whether
or not such employment as is offered by the new owner is
comparable to the employment engaged in by the Employee
immediately prior to the sale or transfer;
(c) refuses to sign or abide by the
- Employee Secrecy and Invention Agreement
which is Attachment A to this Plan;
(d) is terminated for reasonable cause, including but not
limited to insubordination, dishonesty, theft, willful
misconduct, improper and illegal harassment, or being under the
influence of illicit drugs or alcohol at work or on the
Company's premises;
(e) is terminated by retirement, resignation, death, permanent
or temporary disability (occupational or not);
(f) refuses to accept a transfer to Comparable Employment
within the Company within the Employee's geographic area;
(g) is receiving benefits under any other separation allowance
Plan sponsored or offered by the Company;
(h) is laid off and the Company expects to offer re-employment
within six months. If the Employee is not recalled within six
months of the lay off, the Employee is then entitled to receive
benefits under the Plan; or if
(i) the Plan Administrator determines that under the facts and
circumstances relating to the Employee's termination, or because
of the Employee's conduct subsequent to termination, it would be
inappropriate to commence or continue severance payments.
Payment of Benefits
Applicable federal, state, and local income taxes and Social
Security taxes are withheld from payments. Payments are made with
the same frequency as the Employee's pay while an active Employee.
No lump sum payments will be made, except if a person dies while
receiving severance pay, any unpaid balance will be paid in a lump
sum to the terminated Employee's estate.
CALCULATION OF SEVERANCE BENEFITS
Formula
Benefit level paid as outlined below, an employee who is eligible for
this plan is not eligible for any other severance plans offered by
the Company.
Benefit Level: 12 months Compensation
Duration of Payments
Severance payments will continue for the number of months stated
in the Formula, or until the terminated Employee obtains employment
with a Competitor, whichever occurs first.
If the terminated Employee obtains employment with a Non-
Competitor, severance payments will be offset by the base salary
received from the Non-Competitor.
Notifying the Company About Gaining Employment
If the terminated Employee gains employment during the period when
severance is being paid by the Company, the terminated Employee shall
so notify the Company. The terminated Employee's severance pay shall
cease immediately if employed by a Competitor and shall be offset as
stated above if employed by a Non-Competitor.
OTHER BENEFITS
Applicable medical, executive medical, dental, basic life,
supplemental life, and accidental death & dismemberment insurance
coverage will continue for the number of months calculated above, as
long as the Employee makes insurance premium contributions, if
required. Participation in all other benefit plans ends at the time
of termination unless specifically continued by approval of the
Committee.
Severance Plan payments do not extend the termination date for
benefits purposes, nor are payments included in the calculation of
pension plan benefits.
Terminated Employees may be eligible for COBRA continuation of
health insurance (Medical, Executive Medical, Dental, EAP and Health
Care Spending Account) benefits. The severance period time shall be
applied to reduce the benefit extension period required by the
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) or any
amendment thereto.
Any payroll deductions for previously approved payments, such as
the United Way and Credit Union, will continue unless canceled in
writing.
Reasonable outplacement services as determined by the Plan
Administrator will be provided.
Bonus or other long or short term incentive plans will be treated
per the provisions of their plan documents and/or agreements.
ADMINISTRATION
The Plan Administrator
The Plan Administrator shall administer this Plan, and furnish all
notices and do all filings, according to law, and shall have the
power to implement, operate and interpret this Plan and, further, to
take such other action as the Plan Administrator deems equitable
under the circumstances in light of the purpose of this Plan.
Notification to Employees
The Plan Administrator or his or her designee(s) shall notify
Employees when and if such Employees become eligible for a benefit
under the provisions of this Plan.
Claims by Employees
Any Employee covered by this Plan who believes that an event has
occurred which entitles such Employee to a benefit under this Plan
but who has not been advised of such benefit or who believes that the
calculation of the benefit is in error, shall file a claim with the
Plan Administrator. The claim must be filed within ten (10) calendar
days of the date on which the Employee was advised of the Employee's
scheduled termination or within ten (10) calendar days of the date
the Employee learned the amount of the benefit under this Plan, or
that there will be no benefit.
The claim shall be in writing and explain briefly the basis for the
claim. The claim must be dated and signed by the Employee.
The claim shall be mailed to the Plan Administrator by certified
mail or presented in person to the Plan Administrator. If the claim
is presented in person to the Plan Administrator, the Plan
Administrator must give the Employee an acknowledgment of receipt in
writing.
Within ten (10) work days of receipt of the claim the Plan
Administrator shall respond in writing to the Employee.
Claims Appeals
Any Employee not satisfied by the disposition of the claim by the
Plan Administrator shall have the right to appeal to the Appeals
Committee.
The appeal shall be in writing and shall include a copy of the
claim made to the Plan Administrator and the decision by the Plan
Administrator. The appeal shall explain briefly why the Employee
believes the decision of the Plan Administrator was in error.
The appeal shall be filed with the Appeals Committee, by certified
mail or in person. If the appeal is filed in person the member of
the Appeals Committee must give the Employee an acknowledgment of
receipt in writing.
Appeals must be decided by the Appeals Committee, and a written
response to the appeal sent to the Employee, within thirty (30)
calendar days of the date on which the notice of appeal was filed and
received by the members of the Appeals Committee.
AMENDMENT AND TERMINATION
The Goulds Pumps, Inc. Severance Plan for Executives is established
and maintained by Goulds Pumps, Inc. effective as of the date of its
adoption.
The Company reserves the right to amend this Plan from time to time
and to terminate this Plan at any time by resolution of the
Committee. The benefits provided for in this Plan are not vested
benefits. However, terminated Employees receiving benefits on the
Plan termination date will continue to receive them as provided in
the Plan.
MISCELLANEOUS
Right to Terminate Employment
The fact that a former Employee has failed to qualify for a benefit
under this Plan shall not nullify or otherwise affect in any manner
whatsoever the Employee's termination of employment from the Company,
and such failure to qualify for a benefit shall not establish any
right of any kind or description whatsoever (a) to a continuation or
reinstatement of employment with the Company or (b) to receive any
payment from the Company in lieu of such benefit.
Source of Benefits
All benefits paid to a terminated Employee under this Plan shall be
made from the general assets of the Company, and the status of the
claim of a person to any benefit shall be the same as the status of a
claim against the Company by any general and unsecured creditor. No
person shall look to, or have any claim against, any officer,
director, Employee or agent of the Company in his/her individual
capacity for the payment of any benefits under this Plan.
Benefits Not to be Construed as Pension Benefits
If the benefits provided for by this benefit plan, together with
other termination benefits (other than benefits provided for in a
qualified benefit plan) equal or exceed the equivalent of two years'
compensation, the Plan Administrator has the authority to reduce
payments payable under this Plan to that amount.
No Assignment; Binding Effect
No Employee shall have the right to alienate, assign, commute or
otherwise encumber his or her benefit under this Plan for any purpose
whatsoever, and any attempt to do so shall be disregarded completely
as null and void. The provisions of this Plan shall be binding on
each Employee (and on each person who claims a benefit under any such
Employee) and on the Company.
Gender and Number
Whenever applicable, the masculine gender, when used in this Plan,
shall include the feminine or neuter gender, and the singular shall
include the plural.
Goulds Pumps, Inc.
Date
Attest
<F50>
Plan Information
Name of Plan: Goulds Pumps, Inc. Severance Plan
for Executives
Name of Plan Sponsor: Goulds Pumps, Inc.
300 WillowBrook
Office Park
Fairport, NY 14450-4285
Name of Plan Administrator: Goulds Pumps, Inc.
300 WillowBrook Office Park
Fairport, NY 14450-4285
Business Telephone No.: 716-387-6600
Ending Date of Plan's Fiscal Year: Month 12 Day 31
<F50>
Goulds Pumps, Inc. Severance Plan for Executives
Attachment A
EMPLOYEE SECRECY AND INVENTION AGREEMENT
In consideration of my employment or continuing employment by Goulds
Pumps, Inc. herein after referred to as the COMPANY.
1. I will not disclose or use any confidential information relating
to the COMPANY or its business either during or after my employment,
except as required in my duties to the COMPANY. I understand that
confidential information includes matters of a technical nature such
as formulae, secret processes and machines, inventions, research
projects and know-how; matters of a business nature such as data,
costs, profits, products, product designs, product names, trademarks,
marketing information and plans form future developments; and any
other information pertaining to the COMPANY'S affairs or interests
which the COMPANY does not make available to the public.
2. I will not disclose to the COMPANY, or induce the COMPANY to
use, any confidential information belonging to others.
3. I acknowledge that all inventions, discoveries, improvements,
and other intellectual property relating to the COMPANY'S actual or
potential business conceived or made by me during my employment,
whether or not during working hours, are the property of the COMPANY
and I will promptly disclose them to the COMPANY.
4. During and after my employment, I will, at the COMPANY'S
request, sign all documents and do anything else (at the COMPANY'S
expense) that the COMPANY deems necessary to perfect its title to the
inventions, discoveries, improvements, and other intellectual
property disclosed pursuant to the preceding paragraph and to obtain
for the COMPANY domestic and foreign patents and other intellectual
property rights therein.
5. On termination of my employment, I will deliver to the COMPANY
all copies of confidential memoranda, notes, drawings, letters, data,
reports, and other records in my possession relating to the COMPANY
or its business.
6. I will report below any inventions, discoveries, improvements,
and other intellectual properties I have made or conceived prior to
my date of employment in order to exclude them from this agreement.
I will not describe them in such detail as will amount to a
disclosure, but rather merely to identify them by general
description.
7. I have read this Employee Secrecy and Invention Agreement and I
have listed above all inventions, discoveries, improvements, and
other intellectual properties which I have made or conceived prior to
the date of my employment with the COMPANY and which are excluded
from this agreement.
___________________________________ _____________________
Employee's Name (Print) Date
__________________________ __________________________
Employee's Signature Witnessed by
Form HR420.2
White (original) - Human Resource Copy Yellow - Employee's Copy
<F50>
Goulds Pumps, Inc. Severance Plan For Executives
Attachment B
General Release and Covenant Not to Sue
In consideration for the payments made to me by Goulds Pumps,
Inc. (the "Company") according to the Severance Plan for Executives
(the "Plan"), I hereby release and discharge the Company and its
successors, assigns, subsidiaries, owners, employees, officers,
directors and agents (hereinafter referred to as "the Company") from
all claims, liabilities, demands and causes of action, whether known
or unknown, which claims, demands or causes of action arise out of or
are in any way connected with or related to employment with or
termination from employment with the Company.
I further hereby covenant not to bring, maintain, prosecute, or
recover upon any lawsuit, charge, or claim asserting any such claims.
This includes, but is not limited to any action sounding in tort,
contract, or discrimination of any kind or any causes of action
arising under federal or state statute, including but not limited to,
the Age Discrimination in Employment Act 29 U.S.C. 621 to 634, New
York Executive Law, Art. 15, Sec 296 and/or claims growing out of any
legal restrictions on the Company's right to terminate its employees.
This release and covenant does not have any effect on any claims I
may have against the Company unrelated to this termination.
I agree to indemnify the Company for any attorneys fees and
costs associated with defending a breach of this General Release and
Covenant Not to Sue.
I have carefully read and fully understand all of the provisions
of this General Release and Covenant Not to Sue which sets forth the
entire agreement between me and the Company pertaining to the subject
matter hereof and I acknowledge that I have not relied upon any
representation or statement, written oral, not set forth in this
document.
I acknowledge that the Company advised me to consult an attorney
before signing this General Release and Covenant Not to Sue. I
acknowledge that I was given at least twenty-one (21) days to
negotiate, review and consider all the terms, conditions, and
covenants entered into herein and have had the opportunity to consult
my attorney in connection with such negotiations, review and
consideration prior to signing this General Release and Covenant Not
to Sue.
I acknowledge that I have the right to revoke this General
Release and Covenant Not to Sue for a period of seven (7) days
following the date of my signature set forth below and in such event
this General Release and Covenant Not to Sue shall be null and void.
This General Release and Covenant Not to Sue shall become fully
effective and enforceable after the expiration of such seven (7) day
period, in which case the Company and I shall be fully bound by the
terms hereof.
Any provision within this release deemed to be in contravention
of local, state or federal law shall be considered eliminated and of
no force or effect upon the remaining provisions validly set forth
herein.
Employee's Name (Print) Date
Employee's Signature
Sworn to before me this day of 19 .
Notary Public
<F50>
EXHIBIT 10-C
Goulds Pumps, Inc.
Deferred Compensation Plan for Directors
Article 1. Establishment and Purposes
1.1 Establishment. Goulds Pumps, Inc., a Delaware corporation
(the "Company"), hereby established, effective as of October 1, 1994,
a deferred compensation plan for Directors as described herein, which
shall be known as the "Goulds Pumps, Inc. Deferred Compensation Plan
for Directors" (the "Plan").
1.2 Purpose. The primary purpose of the Plan is to provide
Directors with the opportunity to voluntarily defer a portion of
their compensation, subject to the terms of the Plan. By adopting the
Plan, the Company desires to enhance its ability to attract and
retain Directors of outstanding competence.
Article 2. Definitions
Whenever used herein, the following terms shall have the meanings
set forth below, and, when the defined meaning is intended, the term
is capitalized:
(a) "Board" or "Board of Directors" means the Board of
Directors of the Company.
(b) "Chairman Fee" means fees paid to a Director as
compensation for the additional duties of leading a committee of
the Board.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a committee of two (2) or more
individuals, appointed by the Board to administer this Plan,
pursuant to Article 3.
(e) "Company" means Goulds Pumps, Inc., a Delaware corporation.
(f) "Compensation" means the gross Retainers, Meeting Fees,
Chairman Fees, and other payments eligible for deferral under
the Plan, which are payable to a Participant with respect to
Board services performed during a Year.
(g) "Director" means an individual who serves as an elected
member of the Board of Directors, but who is not otherwise an
employee of the Company.
(h) "Disability" means a disability as determined under the
disability provisions of the Goulds Pumps, Inc. Retirement Plan
for Non-Employee Directors.
(i) "Effective Date" means the date the Plan becomes effective,
as set forth in Section 1.1 herein.
(j) "Meeting Fees" means per diem payments made to Directors
for attendance at various meetings of the Board, including full
Board meetings and Committee meetings.
(k) "Participant" means a Director who is actively
participating in the Plan.
(l) "Plan" means the Goulds Pumps, Inc. Deferred Compensation
Plan for Directors.
(m) "Retainer" means the annual amounts payable to a Director
as compensation for the Director's services on the Board during
the Year and shall be exclusive of any Meeting Fees, Chairman
Fees, or any other fees payable to a Director.
(n) "Retirement" means the Participant leaves the service of
the Board and is eligible to retire under the terms of the
Goulds Pumps, Inc. Retirement Plan for Non-Employee Directors.
(o) "Subsidiary" means any corporation (other than the Company)
in which the Company or a Subsidiary of the Company owns fifty
percent (50%) or more of the total combined voting power of all
classes of stock.
(p) "Year" means the fiscal year of the Company.
Article 3. Administration
3.1 Authority of the Committee. The Plan shall initially be
administered by the Human Resources Committee of the Board. Subject
to the terms of this Plan, the Board may appoint a successor
Committee to administer the Plan. The members of the Committee shall
be appointed by and shall serve at the discretion of the Board.
The terms of each Director's participation shall be governed by
this Plan. Subject to the terms of this Plan the Committee shall
have the authority to construe and interpret the Plan and any
agreement or instrument entered into under the Plan; to establish,
amend, or waive rules and regulations for the Plan's administration;
to amend (subject to the provisions of Article 8 herein) the terms
and conditions of the Plan and any agreement entered into under the
Plan; and to make other determinations which may be necessary or
advisable for the administration of the Plan. Subject to the terms of
the Plan, the Committee may delegate any or all of its authority
granted under the Plan to an executive or executives of the Company.
3.2 Decisions Binding. All determinations and decisions of the
Committee as to any disputed question arising under the Plan,
including questions of construction and interpretation, shall be
final, conclusive, and binding on all parties.
3.3 Indemnification. Each person who is or shall have been a
member of the Committee, or of the Board, shall be indemnified and
held harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred
by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party, or in which he
or she may be involved by reason of any action taken or failure to
act under the Plan, and against and from any and all amounts paid by
him or her in settlement thereof, with the Company's approval, or
paid by him or her in satisfaction of any judgment in any such
action, suit, or proceeding against him or her, provided he or she
shall give the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and defend
it on his or her own behalf.
The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be
entitled under the Company's Certificate of Incorporation or Bylaws,
as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
Article 4. Eligibility and Participation
4.1 Eligibility. All Directors shall be eligible to
participate in the Plan during their service as Directors.
4.2 Partial Year Eligibility. In the event that a Director
first becomes eligible to participate in the Plan during a Year, such
Director shall, within thirty (30) calendar days of becoming
eligible, be notified by the Company of his or her eligibility to
participate, and the Company shall provide each such Director with an
"Election to Defer" form, which must be completed by the Director as
provided in Section 5.2 herein; provided, however, that such Director
may only make an election to defer with respect to that portion of
his or her Compensation for such Year which is to be earned after the
filing of the deferral election.
Article 5. Deferral Opportunity
5.1 Amount Which May Be Deferred. A Participant may elect to
defer up to one hundred percent (100%) of each eligible component of
Compensation, including but not limited to Retainers, Chairman Fees
and Meeting Fees, in any Year. The minimum amount of any single
eligible component of Compensation which may be deferred in any Year
is the lesser of ten percent (10%) of such component Compensation or
one thousand dollars ($1,000). In addition, an election to defer
Compensation in any Year shall be expressed by each Participant in
minimum increments of either ten percent (10%) of the applicable
component of Compensation or one thousand dollars ($1,000).
5.2 Deferral Election. Participants shall make their elections
to defer Compensation under the Plan at least thirty (30) calendar
days prior to the beginning of each Year, or not later than thirty
(30) calendar days following notification of eligibility to
participate for a partial Year. All deferral elections shall be
irrevocable, and shall be made on an "Election to Defer" form, as
described herein.
Participants shall make the following irrevocable elections on each
"Election to Defer" form:
(a) The amount to be deferred with respect to each eligible
component of Compensation for the Year;
(b) The length of the deferral period with respect to each
eligible component of Compensation, pursuant to the terms of
Section 5.3 herein; and
(c) The form of payment to be made to the Participant at the
end of the deferral period(s), pursuant to the terms of
Section 5.4 herein.
Notwithstanding the amounts requested to be deferred pursuant to
subparagraph (a) above, the limits on deferrals set forth in Section
5.1 herein shall apply to the requested deferrals each Year.
5.3 Length of Deferral. The deferral periods elected by each
Participant with respect to deferrals of Compensation for any Year
shall be at least equal to one (1) year following the end of the Year
in which the Compensation is earned. However, notwithstanding the
deferral periods elected by a Participant, payment of deferred
amounts and accumulated interest thereon shall be made to the
Participant in a single lump sum in the event the Participant's
service on the Board is involuntarily terminated for any reason,
including, but not limited to death or Disability at any time prior
to full payment of deferred amounts and interest thereon. Such
payment following termination shall be made in cash, within thirty
(30) calendar days after the termination of the Participant's service
on the Board.
5.4 Payment of Deferred Amounts. Participants shall be
entitled to elect to receive payment of deferred amounts, together
with interest earned thereon, at the end of the deferral period in a
single lump-sum cash payment or by means of installments.
(a) Lump-Sum Payment. Such payment shall be made in cash in
single lump sum, within thirty (30) days following Retirement
pursuant to Section 5.2 herein.
(b) Installment Payments. Participants may elect payout in
installments, with a minimum number of installments of two (2)
and a maximum of five (5). The initial payment shall be made in
cash within thirty (30) calendar days after the commencement
date selected by the Participant pursuant to Sections 5.2 and
5.3 herein. The remaining installment payments shall be made in
cash during January each year thereafter, until the
Participant's entire deferred compensation account has been
paid. Interest shall accrue on the deferred amounts in the
Participant's deferred compensation account, as provided in
Section 6.2 of this Plan. The amount of each installment payment
shall be equal to the balance remaining in the Participant's
deferred compensation account immediately prior to each such
payment, multiplied by a fraction, the numerator of which is one
(1), and the denominator of which is the number of installment
payments remaining.
(c) Involuntary Termination. In the event a Participant's
service on the Board of the Company is involuntarily terminated
for any reason, including but not limited to death or Disability
at a time when there is a balance in the Participant's deferred
compensation account, the entire balance shall be paid out to
the Participant, as set forth in Section 5.3 herein.
Article 6. Deferred Compensation Accounts
6.1 Participants' Accounts. The Company shall establish and
maintain an individual bookkeeping account for deferrals made by each
Participant under Article 5 herein. Each account shall be credited as
of the date the amount deferred otherwise would have become due and
payable to the Participant.
6.2 Interest on Deferred Amounts. Compensation deferred under
Article 5 shall accrue interest on an annual basis at an annual
interest rate equal to the average of the interest rate on the
Company's 401(k) Fixed Income Fund for the relevant Year. Each
Participant's deferred compensation account shall be credited on the
last day of the calendar year, with one quarter of the annual rate of
interest computed on the beginning balance in the account for each
quarter during such year. The beginning balance of each quarter is
credited with deferrals made during the prior quarter. Interest is
compounded annually.
Interest earned on deferred amounts shall be paid out to
Participants at the same time and in the same manner as the
underlying deferred amounts.
6.3 Charges Against Accounts. There shall be charged against
each Participant's deferred compensation account any payments made to
the Participant or to his or her beneficiary.
6.4 Designation of Beneficiary. Each Participant may designate
a beneficiary or beneficiaries who, upon the Participant's death,
will receive the amounts that otherwise would have been paid to the
Participant under the Plan. All designations shall be signed by the
Participant, and shall be in such form as prescribed by the
Committee. Each designation shall be effective as of the date
delivered to the Secretary of the Company by the Participant.
Participants may, at any time, change their designation of
beneficiary on such form as prescribed by the Committee. The payment
of amounts deferred under the Plan shall be in accordance with the
last unrevoked written designation of beneficiary that has been
signed by the Participant and delivered by the Participant to the
Secretary of the Company prior to the Participant's death.
In the event that all the beneficiaries named by a Participant
pursuant to this Section 6.4 predecease the Participant, the deferred
amounts that would have been paid to the Participant or the
Participant's beneficiaries shall be paid to the Participant's
estate.
In the event a Participant does not designate a beneficiary, or for
any reason such designation is ineffective, in whole or in part, the
amounts that otherwise would have been paid to the Participant or the
Participant's beneficiaries under the Plan shall be paid to the
Participant's estate.
Article 7. Rights of Participants
7.1 Contractual Obligation. The Plan shall create a
contractual obligation on the part of the Company to make payments
from the Participants' accounts when due. Payment of account balances
shall be made out of the general funds of the Company.
7.2 Unsecured Interest. No Participant or party claiming an
interest in deferred amounts or contributions under a Participant's
account shall have any interest whatsoever in any specific asset of
the Company. To the extent that any party acquires a right to
receive payments under the Plan, such right shall be equivalent to
that of an unsecured general creditor of the Company.
The Company may establish one or more trusts, with such trustee as
the Committee may approve, for the purpose of providing for the
payment of deferred amounts and/or contributions. Such trust or
trusts may be irrevocable, but the assets thereof shall be subject to
the claims of the Company's general creditors. To the extent any
deferred amounts or contributions under the Plan are actually paid
from any such trust, the Company shall have no further obligation
with respect thereto, but to the extent not so paid, such deferred
amounts and contributions shall remain the obligation of, and shall
be paid by, the Company.
Article 8. Amendment and Termination
The Company hereby reserves the right to amend, modify, or
terminate the Plan at any time by action of the Committee; provided
however, that no such amendment or termination shall in any material
manner adversely affect any Participant's rights to deferred amounts,
contributions, or interest earned thereon, without the consent of the
Participant.
Article 9. Miscellaneous
9.1 Notice. Any notice or filing required or permitted to be
given to the Company under the Plan shall be sufficient if in writing
and hand delivered, or sent by registered or certified mail to the
Secretary of the company. Notice to the Secretary of the Company, if
mailed, shall be addressed to the principal executive offices of the
Company. Notice mailed to a Participant shall be at such address as
is given in the records of the Company. Notices shall be deemed
given as of the date of delivery or, if delivery is made by mail, as
of the date shown on the postmark on the receipt for registration or
certification.
9.2 Non-transferability. Participants' rights to deferred
amounts, contributions, and interest earned thereon under the Plan
may not be sold, transferred, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. In no event shall the Company make any payment under
the Plan to any assignee or creditor of a Participant.
9.3 Severability. In the event any provision of the Plan shall
be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of the Plan, and the
Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.
9.4 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the
feminine; the plural shall include the singular, and the singular
shall include the plural.
9.5 Costs of the Plan. All costs of implementing and
administering the Plan shall be borne by the Company. All costs
incurred by Participants as a result of participation in the Plan,
such as legal, financial planning, or tax preparation fees, are the
responsibility of the participant.
9.6 Applicable Law. The Plan shall be governed by and
construed in accordance with the laws of the state of New York.
9.7 Successors. All obligations of the Company under the Plan
shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.
IN WITNESS HEREOF, the Company has caused this document to be
executed by its duly authorized officer on this 22nd day of November,
1994.
Goulds Pumps, Inc.
ATTEST:
<F50>
Contents
Page
Article 1. Establishment and Purposes 1
Article 2. Definitions 1
Article 3. Administration 2
Article 4. Eligibility and Participation 3
Article 5. Deferral Opportunity 3
Article 6. Deferred Compensation Accounts 4
Article 7. Rights of Participants 5
Article 8. Amendment and Termination 5
Article 9. Miscellaneous 6
<F50>
EXHIBIT 10-D
SEVERANCE AGREEMENT
AGREEMENT made as of the 5th day of December, 1996 between GOULDS
PUMPS, INCORPORATED, a Delaware Corporation with its principal office
at 300 WillowBrook Office Park, Fairport, New York ("Goulds"), and
Frank J. Zonarich residing at 2906 Route 89, Seneca Falls, New York
13152 ("Employee").
WHEREAS, Employee has been employed by Goulds and has served as Vice
President - Water Technologies of Goulds, President of the Water
Technologies Group of Goulds, as an officer or director of a number
of subsidiaries and affiliates of Goulds and, since September 16,
1996, his title has been Vice President - Commercial Products
Strategies; and
WHEREAS, Employee intends to resign as an officer of Goulds and as an
officer and director of all Goulds' subsidiaries as to which he is a
director or officer; and
WHEREAS, Goulds is desirous of retaining Employee as an employee;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants contained herein, it is mutually agreed as follows:
1. Employee hereby resigns as an officer of Goulds and as an
officer or director of each of Goulds' affiliates, effective as
of the earlier of January 1, 1997 or the date on which
Employee's purchase of the assets of Allegheny Pump & Equipment
Co. closes (the "Resignation Date"). Such resignation shall
require no further action by Employee, except as may be required
to comply with local laws. After the Resignation Date, Employee
shall remain as an Employee of Goulds on a one year paid leave
of absence followed by a one year unpaid leave of absence
without any break in service (collectively, such leaves of
absence being referred to herein as the "Leave of Absence").
During the Leave of Absence, Employee is required to be
available for consulting on matters related to the Company, in
addition to Employee's obligations in paragraph 6 hereof.
2. During the first year of the Leave of Absence, Goulds shall pay
a monthly salary of $20,583.33 to Employee subject to
withholding, on a semi-monthly basis for twelve (12) months
commencing after the Resignation Date.
3. During the Leave of Absence, the following compensation and
benefit provisions will apply:
a. An award will be made to Employee under the Goulds
Pumps, Incorporated Executive Incentive Plan in 1997 with
respect to 1996 performance which represents ninety
percent (90%) of the earned annual award.
b. Employee will not be eligible for any award or other
payment under Goulds' Long Term Incentive Compensation
Plan.
c. Pension credits under Goulds' Pension Plan III will
continue to accumulate. No Supplemental Executive Pension
Plan credit will be given during the Leave of Absence or
thereafter.
d. Employee will not be eligible to receive any stock
options during the Leave of Absence period or any future
period. Presently held stock options will continue to vest
for the Leave of Absence only. All stock options which
remain unvested on the final day of the Leave of Absence
shall expire on that date. Except as specifically stated
herein, all provisions of the 1981 Stock Option Plan, the
1988 Stock Option Plan and the 1994 Stock Incentive Plan
to Increase Stockholder Value and any Stock Option Grant
Agreements made pursuant thereto, shall apply including,
but in no way limited to, the provisions of the above
referenced plans which would provide that upon the
termination of the Leave of Absence the stock options may
be exercisable at any time during the three month period
following such termination.
e. Goulds will reimburse, upon submission of appropriate
claim for reimbursement, up to $2,000 of Employee's
expenses for financial planning services for one year from
the date hereof.
f. Employee shall remain a participant in Goulds'
Executive Medical Coverage (to a maximum of $5,000) for
one year from the Resignation Date.
g. Employee will continue to participate in the Goulds
medical, dental and life insurance plans in active
Employee status under the terms of such plans, provided
Employee makes the required Employee contributions.
h. Should Employee's house at 2906 Route 89 in Seneca
Falls not be under an agreement to sell within one year of
the Resignation Date, Goulds will reimburse Employee's
utility, tax, maintenance and interest costs on such house
to a maximum of $10,000, for a period of six months
thereafter or until the house sells, whichever comes
sooner.
i. Short Term Disability and Long Term Disability as
defined by Goulds will cease upon the Resignation Date,
and there are no conversion privileges. However, Goulds
will reasonably assist Employee in obtaining third party
long term disability coverage provided it is at no cost to
Goulds.
j. Employee will remain eligible to contribute to the
Goulds Pumps Employee Savings and Retirement (401(k)) Plan
for the initial twelve months of the Leave of Absence
during which payments are being made under paragraph 2
above. Such contributions shall be made by appropriate
withholding in accordance with such plan.
k. Except as expressly stated above, all other
compensation, benefits, perquisites and rights to which
Employee was or may be entitled as an officer or employee
of Goulds or any of its affiliates, including without
limitation, the Senior Executive Severance Agreement
(Change In Control) and the Executive Security (Life
Insurance) Plan will no longer be effective, and Employee
shall not have any further rights in same.
l. Upon obtaining age 55, Employee shall be entitled to
receive a total retirement benefit of approximately
$7,006.60 per month comprised of payments from the Pension
Plan III and the Supplemental Executive Pension Plan based
upon his selection of the 100% Joint and Survivor Annuity
Benefit. Employee shall have the right to select a Joint
and Survivor Benefit Plan other than 100%, with the above
benefit being appropriately adjusted to take into account
the option selected.
The compensation and benefits provided for herein shall not be
subject to reduction or offset for compensation and benefits
received by Employee through his ownership of Allegheny Pump &
Equipment Co.
4. Following the Leave of Absence, Employee will be put on "special
employee" status until Employee reaches age 55. During this
period, Employee will be eligible to stay in the Goulds medical
plan provided he pays 100% of the monthly premiums. Life
Insurance and Dental Insurance coverage will cease. Employee
will resign, without further action, from his "special employee"
status, will take early retirement from Goulds at age 55 and
will then be eligible for retiree medical benefits under Goulds
Pension Plan III.
5. (a) In consideration of the benefits to be provided to Employee
and as part of his fiduciary obligations to Goulds, Employee
shall not, at any time while he is receiving benefits hereunder,
directly or indirectly compete with any business of Goulds as
engaged in or under active development by Goulds or any of its
subsidiaries. For the purpose of this Agreement, the phrase
"compete" shall include serving as an employee, officer,
director, owner, partner or a 5% or more shareholder of any
business or otherwise engaging in or assisting another to engage
in any business. Notwithstanding the foregoing, it is agreed
that Employee's ownership and operation of Allegheny Pump &
Equipment Co. shall not be deemed a violation of this covenant.
(b) Employee shall not, directly or indirectly, on his own
behalf or on behalf of any other person, firm or company:
(i) induce any employee, agent, representative or other person
(an "Employee") associated with Goulds to terminate his or her
association with such entity, provided, however, that the
foregoing shall not restrict Employee from hiring any such
Employee if such Employee was terminated by Goulds, or
(ii) induce any customer or supplier of Goulds to terminate its
association with Goulds.
6. The foregoing payment and benefit obligations of Goulds are
contingent upon Goulds' receipt of Employee's continued
cooperation until the conclusion of all matters, such as
litigation, that are now pending or that may reasonably arise in
the future from circumstances occurring during Employee's tenure
as an officer of Goulds. Goulds will reimburse Employee for his
reasonable out-of-pocket expenses for travel, lodging, and other
similar expenses incurred at the advance written request of
Goulds in order to comply with the duty of cooperation set forth
in this paragraph.
In the event that Goulds reasonably believes that Employee is
not cooperating in such matters, Goulds shall promptly give
Employee notice of such non-cooperation specifying in reasonable
detail the manner in which Goulds believes Employee is not
cooperating. Employee shall then have a period of fifteen (15)
calendar days to cure the default which Goulds has detailed. If
at the end of said fifteen (15) calendar day period Employee has
not cured the said default, Goulds shall have the right to
terminate said payments and benefits and Employee's rights
hereunder shall terminate.
7. Nothing herein shall be deemed to deny or limit Employee's right
to coverage under applicable director and officer liability
policies of insurance carried by Goulds for circumstances
arising during the period he served as Vice President of Goulds.
8. All car phone charges billed after Employee's resignation as an
officer of Goulds shall be for the account of Employee. Any
outstanding amounts owed to Goulds in Employee's Personal and
Sundry Account will be deducted from the first salary payment
that is administratively feasible following Employee's
resignation as an Officer of Goulds. All expense reimbursements
due Employee will be made within a reasonable period after the
submission of documentation.
9. Employee agrees that he will not, without prior written consent
of Goulds, disclose or cause to be disclosed, or use or make
known, any confidential and trade secret information of Goulds.
Confidential and trade secret information of Goulds shall for
purpose of this Agreement include Goulds matters not readily
available to the public which:
1) Are of a technical nature such as methods, formula,
drawings, blueprints, inventions, processes, discoveries,
machines, computer programs, software, software
documentation and similar items;
2) Are of a business nature such as, but not limited
to, information about sales or lists of customers, prices,
costs, purchasing, profits, markets and product capabilities;
or
3) Pertain to future developments such as, but not limited
to, research and development, new or improved products,
business ventures and marketing and merchandising plans
and ideas.
Employee agrees to turn over to Goulds all data and information,
including without limitation all drawings, photographs, graphs,
tables, charts, documents, correspondence, specifications,
blueprints, notebooks, report sketches, formula, computer
programs, software, software documentation, sales data, business
manuals, price lists, customer lists, samples and all other
materials and copies thereof including product and other
embodiments relating in any way to the business of Goulds, made
fully or in part, or obtained by him during the period of his
active employment with Goulds, of a confidential or trade secret
nature, which are in his possession or under his control.
10. Employee agrees that during the period of this Agreement he will
maintain the confidentiality of this Agreement except that he
may disclose its terms to his spouse, attorney and tax advisor.
Goulds will also maintain the confidentiality of this Agreement
disclosing it only within the Company on an absolute need-to-
know basis. Further, Employee shall not in any way during the
period of this Agreement directly or indirectly disparage,
discredit, demean, or otherwise communicate displeasure with
Goulds, its officers or employees. Goulds will use its best
efforts to require that Goulds will not either directly or
indirectly, disparage, discredit, demean, or otherwise
communicate displeasure with Employee following the date of
signing of this Agreement.
11. In exchange for a portion of the payments and benefits described
herein which are provided as additional consideration, Employee
also agrees and hereby does release Goulds, and its successors,
subsidiaries, affiliates and assigns, and their present and
former officers, directors, agents, and employees from all
actions, causes of action including, but not limited to, suits,
debts, sums of money, accounts, reckonings, bonds, executions,
claims, and demands which Employee, his heirs, successors or
assigns ever had, or has, or hereafter may have against Goulds
from the beginning of the world to the date of this Agreement
including, but not limited to, all claims for attorneys' fees,
costs and expenses, and other actions or claims arising out of
or related to Employee's past employment with Goulds, including
liabilities arising under the Age Discrimination in Employment
Act of 1967 as amended, the New York Human rights Law, the New
York Labor Law and the Employee Retirement Income Security Act
(except insofar as it relates to Employee's pension benefits)
and any federal or state employment discrimination laws, but
specifically excluding obligations pursuant to this Agreement.
12. Goulds hereby releases Employee from all actions, causes of
action including, but not limited to, suits, debts, sums of
money, accounts, reckonings, bonds, executions, claims, and
demands which Goulds and its successors, subsidiaries,
affiliates and assigns ever had, or has, or hereafter may have
against Employee from the beginning of the world to the date of
this Agreement including, but not limited to, all claims for
attorneys' fees, costs and expenses, and other actions or claims
arising out of or related to Employee's past employment with
Goulds.
13. Employee is hereby advised to consult with an attorney prior to
executing this Agreement. Employee acknowledges that he has had
at least twenty-one days to consider whether or not enter into
this Agreement, and he shall have seven days following the
execution of the Agreement during which he may revoke the
Agreement. The Agreement will not become effective or
enforceable until the revocation period has expired.
14. Each party shall take such further actions as are necessary to
effect the purposes of this Agreement.
The Agreement shall be governed by the internal laws of the State of
New York. The parties consent to the exclusive jurisdiction of and
venue in New York or Federal courts in Monroe County, New York, for
the resolution of all disputes arising under this Agreement.
This Agreement is the entire agreement of the parties as to the
subject matter hereof.
GOULDS PUMPS, INCORPORATED
Signed /s/ William G. Kelley Signed /s/ Frank J. Zonarich
William G. Kelley Frank J. Zonarich
Vice President - Human Resources
Date December 5, 1996 Date December 5, 1996
<F50>
STATE OF NEW YORK
COUNTY OF SENECA
On the 5th day of December, 1996 before me personally came Frank J.
Zonarich, to me known to be the individual described in and who
executed the foregoing instrument, and acknowledged that he executed
the same.
/s/ Joan S. Grela
Notary Public
STATE OF NEW YORK
COUNTY OF SENECA
On the 5th day of December, 1996 before me personally came William G.
Kelley, to me known who, being by me duly sworn, did depose and say
that he resides in Canandaigua, New York, that he is Vice President -
Human Resources of Goulds Pumps, Incorporated, the corporation
described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of
the Board of Directors of said corporation and that he signed his
name thereto by like order.
/s/ Joan S. Grela
Notary Public
<F50>
EXHIBIT 11
GOULDS PUMPS, INCORPORATED AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1996 1995 1994
a. Net earnings - as reported............. $34,707 $18,072 $18,201
b. Actual weighted average number of shares
outstanding............................ 21,313 21,240 21,175
c. Primary earnings per share based on actual average shares
outstanding (a / b) (1)................ $ 1.63 $ .85 $ .86
d. Shares exercisable under all common stock
equivalents............................ 968 893 423
e. Proceeds assuming exercise of outstanding
options................................ $19,864 $18,650 $ 8,073
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)......... $ 22.94 $ 25.00 $ 22.34
g. Shares to be acquired (e/f)............ 866 746 361
h. Net increase in all common stock equivalents
(d -g)................................ 102 147 62
i. Adjusted weighted average shares outstanding
(b + h)................................ 21,415 21,387 21,237
j. Fully diluted earnings per share (a/i). $ 1.62 $ .84 $ .86
k. Dilutive effect on earnings per share
(c - j) (2)............................ $ .01 $ .01 $ --
(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.
<F50>
EXHIBIT 13
Portions of the 1996 Annual Report to Stockholders
<F50>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information in this review should be read in conjunction
with the accompanying consolidated financial statements, the related
Notes to Consolidated Financial Statements and the Eleven-Year
Summary of Financial Data. Forward-looking statements in this review
are qualified by the cautionary statement on page 81 of this Annual
Report.
OVERVIEW
Goulds Pumps had an outstanding year in 1996, setting records for
sales, orders and earnings. Consolidated sales rose 7.7% to a record
$774.4 million for the year. Sales in both of the Company's sectors
grew in 1996, with a 9.8% increase in Water Technologies (WT) and a
5.9% increase in Industrial Products (IP). The growth in both
sectors was influenced significantly by a strong showing in the non-
U.S. Regions. Orders in 1996 continued to strengthen and set a
record at $752.0 million, an increase of 4.0% over 1995. Net
earnings were $34.7 million in 1996, up 91.7% from 1995. Earnings
per common share were $1.63 for 1996, up 91.8% from 1995's reported
results of $.85.
The financial results for 1996 and 1995 included the impact of
certain restructuring activities. The 1995 results included a net
pre-tax restructuring charge of $18.5 million ($10.6 million after
taxes, or $.50 per share) which reflected the Company's decision to
wind down its Venezuelan manufacturing activities and to transfer
ownership of its 100%-owned subsidiary, Environamics Corporation, to
that company's management. In 1996, a $0.1 million net pre-tax
credit was recorded, reflecting a $1.6 million reversal of a portion
of the 1995 restructuring charge, largely offset by a $1.5 million
restructuring charge at the Company's European operations. Excluding
restructuring charges in both years, earnings per common share would
have been $1.63 in 1996 and $1.35 in 1995, or an increase of 20.7%.
Several noteworthy events impacted the Company during 1996. These
events are summarized as follows:
- The Company's ANSI pump focused factory
became fully functional at its facility in Seneca Falls,
New York in June 1996. Focused factories are cellular
manufacturing systems that are designed to provide manufacturing
and productivity enhancements. This factory has substantially
enhanced productivity, increased throughput and improved
customer on time performance with respect to ANSI products,
which represent a very important part of the Company's
product portfolio. In September 1996, a second
focused factory for the Model 3171 general industrial
vertical sump and process pump became fully operational at
the Company's Ashland, Pennsylvania facility.
- The Company opened its new Auburn, New York facility to
accommodate manufacturing of Water Systems products that had
previously been produced at the Seneca Falls, New York plant.
Begun in the second quarter of 1996, this $9.0 million
project was completed in December 1996, well ahead of
schedule. The Auburn facility, previously used for assembly
and warehousing, was expanded by adding 48,500 square feet of
manufacturing space, and existing office space was renovated.
This state-of-the-art facility utilizes focused factory
cellular manufacturing to meet the increasing demand for
products and further improve the Company's competitive
position.
- The Company established a global strategic alliance
with John Crane International, a division of TI Group
plc, in March 1996. The Company believes that
this alliance with John Crane, the world's leading
mechanical seal company, will leverage the strengths of
both companies to foster product innovation and supply
chain integration. As a result of this alliance, the two
companies are jointly developing pump and seal combinations
to enhance plant performance and optimize life cycle costs.
- A new management team was formed in Europe,
which has provided increased focus on profitable
growth for the European Region. As a result of
efforts to contain costs by leveraging the operating expense
base in the Region, Europe's selling, general and
administrative costs as a percentage of sales improved by two
percentage points in 1996.
- The Company sold certain product lines of
its Municipal Business Unit (MBU) in Baldwinsville,
New York in February 1996 for $2.7 million, realizing
a gain of $1.2 million. These product lines were
not considered to be a core business for the Company, and the
investments necessary to achieve a viable market in these
products were not consistent with the Company's strategy.
Net sales associated with these product lines in 1995 were
$5.5 million.
- The Company purchased a controlling
interest in Nanjing Goulds Pumps Limited Co., China in
early 1996 by investing an additional $1.4 million. This
investment increased the Company's ownership from 45% to
62%. As a result, the financial results of this affiliate
have been consolidated for the year ended December 31, 1996.
Net sales for this operation in 1996 were $1.4 million.
Analysis of Operations
(Dollars in millions)
1996 vs. 1995 vs.
1996 1995 1994 1995 1994
Net sales $774.4 $718.8 $585.5 7.7% 22.8%
Net Sales
The increase in total net sales of $55.6 million in 1996
compared with 1995 resulted from a $33.5 million or 9.8% increase in
Water Technologies and a $22.1 million or 5.9% increase in Industrial
Products. WT sales for 1996 reached record levels of $374.9 million,
outpacing 1995's sales of $341.4 million. Geographically, sales in
the WT sector were up in all Regions of the world.
IP sales reached a record $399.5 million in 1996 primarily due
to strong growth in Regions outside the U.S., particularly in Asia
Pacific and Latin America. Shipments increased in 1996 mainly due to
strong demand in the chemical market and the impact of the unusually
high backlog in late 1995 that resulted from manufacturing throughput
issues earlier that year. Partially offsetting this sales growth was
a downturn in the pulp and paper market, the impact of the sale of
the municipal product lines in early 1996 and the transfer of
ownership of Environamics Corporation in late 1995.
In 1995, consolidated net sales increased $133.3 million, or
22.8%, compared with 1994. IP sales increased $54.1 million in 1995
due primarily to incremental sales from the acquisition of the
Company's Vogel subsidiary in Austria, which accounted for $29.7
million of the increase, and strong demand in both the pulp and paper
and chemical markets. WT's 1995 sales increased $79.2 million due to
a combination of additional sales from Vogel, which accounted for
$33.5 million of the increase, an expanded sales presence and new
product growth in Europe, as well as growing market acceptance of
recently introduced products in North America.
<F50>
Costs and Expenses
(As a % of Net Sales)
1996 1995 1994
Gross profit 29.3% 28.5% 28.5%
Selling, general and
administrative expenses 19.8% 20.1% 20.1%
Research and development
expenses 1.2% 1.1% 1.8%
Consolidated gross profit as a percentage of net sales in 1996
improved to 29.3%, versus 1995's 28.5%. This improvement was due
largely to significant strides that were made in operating
efficiencies, including the implementation of focused factories and
the benefits realized from the first full year of the Company's
strategic purchasing function. There was also a favorable impact
from the downsizing of the Venezuelan manufacturing operation and the
transfer of ownership of Environamics Corporation that occurred in
late 1995. Gross profit as a percentage of net sales in Europe,
however, declined somewhat as a result of raw material cost
increases, which were incrementally influenced by the negative impact
of currency fluctuations within the Region.
In 1995, consolidated gross profit as a percentage of net sales
was constant with 1994 at 28.5%. Improvements resulting from
manufacturing efficiencies were offset by higher raw material costs
in Europe and temporary manufacturing issues in North America that
adversely affected throughput and lead times during the year.
Selling, general and administrative (SG&A) expenses as a
percentage of net sales improved to 19.8% in 1996, down from 20.1% in
1995. This improvement was attributable to the Company's ability to
leverage its operating expense base, chiefly in Europe where SG&A
expenses fell by two percentage points. In addition, the disposition
of Environamics Corporation and the downsizing of the Venezuelan
manufacturing operation at the end of 1995 had a favorable impact on
SG&A costs. SG&A expenses in 1995 as a percentage of net sales were
unchanged from 1994.
Research and development (R&D) expenses in 1996 were $9.4
million, an increase of 13.9% over 1995. On a percentage of sales
basis, R&D expenses were up 0.1 percentage point, reflecting a
consistent effort in the development of new products. In 1995, R&D
expenses were $8.2 million, a decrease of 22.1% from 1994. The higher
level of R&D expenses in 1994 was related to Environamics
Corporation, where all costs were charged to R&D prior to the first
product shipments in late 1994.
Restructuring Charges
In 1996, the Company recorded a net pre-tax restructuring credit
of $0.1 million. This net credit resulted from two offsetting items.
First, the Company recorded a $1.5 million restructuring charge as a
result of the decision to consolidate European facilities. This
European restructuring plan is expected to result in pre-tax savings,
mainly compensation related, of approximately $1.5 million annually.
More than offsetting this charge was a $1.6 million credit for the
reversal of certain termination and exit costs related to the 1995
restructuring reserve.
In 1995, the Company recorded a pre-tax restructuring charge of
$18.5 million. This charge resulted from the Company's decision to
wind down its manufacturing operation in Venezuela, impacting the
Company's investment in this subsidiary, and to transfer its
ownership interest in Environamics Corporation to that company's
management. 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 of 1994's restructuring charge. The decision to transfer
ownership of Environamics Corporation came after losses were recorded
in both 1994 and 1995 and the Company concluded that further losses
were likely to occur in 1996, requiring substantial additional
investment. Net sales for Environamics Corporation in 1995 were $3.1
million.
<F50>
The decision to close the manufacturing operations in Venezuela
was the result of losses that had been sustained in almost every year
since 1990, coupled with an uncertain economic climate in Venezuela.
This business unit now operates primarily as a PRO (Pump Repair and
Overhaul) Service Center. The Company has maintained its presence in
the country with sales offices, and shipments have continued into
Venezuela from the Company's other manufacturing facilities.
As stated above, $1.6 million of the 1995 restructuring charge
was reversed in 1996. Net of the reversal, the total $18.1 million
restructuring charge for Environamics Corporation and Venezuela
consisted of $1.7 million of termination benefits and $16.4 million
of other exit costs (including the write-off of previous
investments). Through year-end 1996, the Company has incurred $1.5
million in termination costs and $15.7 million in exit costs. The
balance for this restructuring reserve at December 31, 1996 was $0.9
million.
In 1994, the Company recorded a pre-tax restructuring charge of
$3.5 million for the downsizing of the Company's California,
Netherlands and Mexico 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 1995 due to lower than expected outsourcing in California
and the transfer of certain Netherlands employees to other Goulds
Pumps Europe operations. The restructuring included the termination
of 126 employees. Net of the reversal, the total related costs for
this restructuring amounted to $1.1 million to exit facilities and
$1.2 million for termination benefits. At December 31, 1996, there
was no reserve remaining.
Other Income and Expenses
(Dollars in millions)
1996 1995 1994
Interest expense $11.2 $11.4 $6.6
Interest income (1.8) (1.8) (3.0)
Other expense (income)--net 1.1 (0.4) (1.1)
Interest expense decreased $0.2 million in 1996. This decrease
resulted from lower worldwide interest rates, substantially offset by
higher average borrowings. The $4.8 million increase in interest
expense in 1995 was mainly the result of debt assumed or incurred in
connection with the Vogel acquisition, as well as other increased
debt levels.
Interest income in 1996 was substantially unchanged from 1995,
while 1995's interest income declined $1.2 million from 1994. The
decrease in 1995 resulted primarily from a short-term investment
arrangement in 1994 which increased interest income in that year by
$1.4 million.
"Other expense (income)--net" changed by $1.5 million, from a
"net - other income" of $0.4 million in 1995 to a "net - other
expense" of $1.1 million in 1996. This unfavorable change is mainly
due to currency exchange losses that relate to the devaluation of the
Venezuelan bolivar and currency transaction losses in Europe and
Canada. Additionally, 1996's "other income" included a $1.2 million
gain from the sale of certain product lines of the Company's
Municipal Business Unit and 1995's "other income" included certain
customs refunds at Vogel.
For 1995, the year-over-year comparisons of "other expense
(income)--net" are affected by a 1994 benefits curtailment gain of
$4.2 million and a 1994 charge of $1.7 million due to foreign
currency transaction losses. Excluding these items, "other expense
(income)--net" improved $1.8 million in 1995 over 1994 mainly from
transaction and translation losses that occurred in 1994 resulting
from significant devaluations of the Venezuelan bolivar.
<F50>
Income Taxes
1996 1995 1994
Effective tax rate 35.6% 28.0% 38.6%
The low effective tax rate of 28.0% in 1995 resulted from tax
benefits associated with the Venezuelan restructuring charge and a
non-U.S. tax reorganization strategy. The 1996 and 1994 rates are
reflective of a more typical range, based on the Company's current
mix of federal, state and non-U.S. jurisdictions. The 1996 effective
tax rate was at the lower end of this range due to a number of
factors, including the utilization of loss carryforwards existing in
various non-U.S. operations, relatively lower pre-tax earnings in
higher tax jurisdictions, and continued efforts to reduce state
income taxes.
Return on Equity
The return on average stockholders' equity in 1996 increased to
17.3% from 9.3% in 1995 and 9.5% in 1994. The changes in both years
were principally due to changes in net earnings which were
significantly impacted by restructuring and environmental litigation
charges in 1995 and 1994. Excluding restructuring charges, net of
taxes, the returns on average stockholders' equity were 10.6%, 14.7%
and 17.3% in 1994, 1995 and 1996, respectively.
Liquidity and Capital Resources
As reflected in the Consolidated Statements of Cash Flows for
1996, the $54.7 million of cash provided by operating activities was
used to fund $31.3 million of net investing activities and $24.6
million of financing activities, thus decreasing cash and cash
equivalents by $1.2 million. Significant changes in working capital
items that impacted cash flow from operating activities in 1996
included an $11.8 million increase in trade receivables largely
related to a growing base of customers outside the U.S. where payment
terms are typically longer than in the U.S., a $7.1 million decrease
in inventories resulting from efforts to manage inventory more
effectively, and a $12.5 million decrease in trade payables and
accrued expenses that resulted mainly from payments made in
connection with the 1995 restructurings and reduced inventory levels.
Capital additions in 1996 were $36.4 million, compared with
depreciation of $27.0 million. Expenditures were made for various
upgrades and additions to equipment and buildings, including the
construction of the new Water Systems manufacturing facility in
Auburn, New York.
Total debt at the end of 1996 was $9.4 million lower when
compared with year-end 1995, primarily due to favorable cash flows
from operations during the fourth quarter of 1996. During 1995,
total debt increased $44.0 million due to the Vogel acquisition and
increased borrowings at European operations mainly required to
finance working capital needs.
In December 1996, the Company declared a regular quarterly
dividend of $.20 per share of common stock outstanding, payable on
January 15, 1997 to stockholders of record as of January 6, 1997.
This was the 200th consecutive quarterly dividend by the Company
dating back to 1947.
The Company operates internationally, giving rise to exposure to
market risks from changes in interest rates, foreign exchange rates,
and the cost of non-ferrous metals used in the production of its
products. 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 or speculative
purposes.
<F50>
Cumulative translation adjustments in the accompanying
Consolidated Balance Sheets were $10.7 million at December 31, 1996
compared with $12.2 million at December 31, 1995. This decrease was
principally the result of the strengthening of the Italian lira
against the U.S. dollar, offset partially by a weakening of the
Austrian schilling.
Orders and Backlog
In 1996, orders received set a new record of $752.0 million, an
increase of 4.0% over 1995's record orders level of $722.8 million,
which have been adjusted to exclude orders related to Environamics
Corporation and the Municipal Business Unit. WT posted record orders
with an increase of 8.4% in 1996 over 1995, while IP orders rose 0.1%
to a new record. Within the WT sector, the increase in 1996 orders
activity was led by growth in Europe, with solid increases also in
the U.S. and Asia Pacific. The IP sector's order activity for 1996
reflected significant growth in the worldwide chemical market, partly
offset by a decline in the pulp and paper market. Regionally,
industrial orders improved impressively in Latin America, Asia
Pacific and the Middle East, while the U.S. and Canada experienced a
decline. In addition, the Company has been much more selective in
the bidding of large engineered projects to ensure that those
projects undertaken are profitable.
Backlog levels at December 31, 1996 totaled $124.5 million.
Excluding the 1995 backlog for the municipal business lines that were
sold in early 1996, backlog decreased 13.7% from 1995. This decrease
resulted from an abnormally high backlog at the end of 1995 which was
due to 1995 manufacturing throughput issues which have since been
resolved. Backlog exists primarily at the IP sector, as the WT
sector maintains small backlog levels. WT 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. The Company
continues to monitor the impact of inflation in order to minimize its
effects through pricing strategies, productivity improvements and
cost reductions.
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
counterclaims. 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 the vigorous defense of these lawsuits. During 1995, all
litigation related to these complaints was resolved, and the Company
reversed the then remaining reserve of $0.9 million.
<F50>
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, 1996, the remaining
reserve was $0.7 million. The remediation plan was approved by the
New York State Department of Environmental Conservation in 1995 and
is expected to be completed in 1997. The Company believes that the
current reserve associated with this site is sufficient to absorb any
future costs.
Apart from issues discussed above, the Company is not currently
aware of other environmental matters which would be reasonably likely
to have any material impact on recurring costs, capital expenditures
or mandated expenditures.
Outlook
Management continues to place a strong emphasis on improving
gross margins and controlling operating expenses. Overall, gross
margins are expected to improve in 1997 due mainly to improved
operating efficiencies, and the Company believes that further
reductions in SG&A expenses as a percentage of sales can be achieved.
For R&D expenses in 1997, 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 1996.
The Company expects that its effective tax rate in 1997 will be in
the range of 36.5% to 37%.
The Company expects to spend approximately $35 - $40 million for
capital additions during 1997. This spending level includes
continued major investments in upgrades of machinery and equipment,
facilities additions and improvements, and product development
related expenditures, including the ongoing development of focused
factories in North America and the construction of a regional
distribution and assembly facility in the Philippines to support the
strong growth opportunities in the Asia Pacific Region.
The Company believes cash generated from operations and
committed and uncommitted credit facilities worldwide at December 31,
1996 will be sufficient to meet its liquidity needs during 1997.
It is possible that future currency devaluations may occur at
some of the Company's non-U.S. locations. The Company continually
evaluates methods to minimize the impact of devaluations on
operations and reported operating results.
In Conclusion
In summary, 1996 was a most impressive year for Goulds Pumps,
reflecting vigorous sales growth in Regions outside the U.S.,
improved gross margins, lower operating expense levels as a
percentage of sales and positive free cash flow, which translated
into strongly improved profitability. The Company further
strengthened its management team during 1996 and expects that the
momentum that has been realized during the past two years will carry
forward with another strong, record-setting year in 1997.
<F50>
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, 1996
and 1995, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1996. 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, 1996 and 1995,
and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Rochester, New York
January 24, 1997
<F50>
Goulds Pumps, Incorporated
Consolidated Statements of Earnings
(Dollars in thousands except per share amounts)
For the year ended December 31, 1996 1995 1994
Net sales $774,420 $718,763 $585,476
Costs and expenses
Cost of sales 547,465 514,050 418,386
Selling, general and administrative
expenses 153,237 144,603 117,572
Research and development expenses 9,370 8,227 10,564
Restructuring (credit) charges (83) 18,513 3,463
Provision (credit) for environmental
litigation -- (890) 3,454
Interest expense 11,171 11,373 6,553
Interest income (1,778) (1,825) (3,038)
Other expense (income)--net 1,136 (384) (1,121)
720,518 693,667 555,833
Earnings before income taxes 53,902 25,096 29,643
Income taxes 19,195 7,024 11,442
Net earnings $ 34,707 $18,072 $ 18,201
Net earnings per common share $ 1.63 $ .85 $ .86
See Notes to Consolidated Financial Statements.
<F50>
Goulds Pumps, Incorporated
Consolidated Balance Sheets
(Dollars in thousands except per share amounts)
December 31, 1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 5,227 $ 6,383
Receivables--net 156,018 143,819
Inventories--net 125,507 131,693
Deferred tax asset 6,867 18,972
Prepaid expenses and other current assets 16,358 16,598
Total current assets 309,977 317,465
Property, plant and equipment--net 183,457 173,304
Other investments 9,218 9,046
Deferred tax asset 10,607 8,834
Goodwill--net 25,880 29,858
Other assets 15,732 15,479
$554,871 $553,986
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 51,108 $ 37,904
Current portion of long-term debt 14,631 21,716
Trade payables 68,951 71,406
Compensation and commissions 26,925 24,265
Income taxes payable 615 839
Pension 5,169 4,515
Progress payments 3,749 8,793
Warranty reserves 5,632 4,555
Dividends payable 4,275 4,257
Deferred tax liability 52 1,514
Restructuring accrual 2,403 7,701
Other current liabilities 19,622 23,071
Total current liabilities 203,132 210,536
Long-term debt 57,965 73,454
Pension 28,258 26,302
Other postretirement benefits obligation 51,220 50,903
Deferred tax liability and other 3,190 2,477
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: 1996 - 21,376,093;
1995 - 21,283,496 21,376 21,283
Additional paid-in capital 61,351 59,175
Retained earnings 140,388 122,741
Cumulative translation adjustments and other (12,009) (12,885)
Total stockholders' equity 211,106 190,314
$554,871 $553,986
See Notes to Consolidated Financial Statements.
<F50>
Goulds Pumps, Incorporated
Consolidated Statements of Cash Flows
(Dollars in thousands)
For the year ended December 31, 1996 1995 1994
Operating activities:
Net earnings $34,707 $18,072 $18,201
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation 26,989 26,016 24,925
Amortization 2,554 2,100 1,428
Gain on sale of certain product lines (1,174) -- --
Restructuring (credit) charges (83) 18,513 3,463
Earnings from affiliates (7) (23) (451)
Dividends received from affiliates -- -- 11,622
Changes in assets and liabilities, net of effects from
acquisitions:
Decrease in deferred tax liability (2,018) (1,371) (1,008)
Decrease (increase) in deferred
tax asset 10,686 (6,339) (1,852)
Increase in receivables--net (11,755) (22,584) (6,295)
Decrease (increase) in inventories
--net 7,083 (7,098) (4,566)
Increase (decrease) in trade payables
and accrued expenses (12,478) 16,754 10,808
Other--net 150 1,951 4,755
Net cash provided by operating
activities 54,654 45,991 61,030
Investing activities:
Purchases of property, plant and
equipment (36,434) (33,468) (28,080)
Proceeds from sale of certain
product lines 2,723 -- --
Investment in Vogel -- -- (17,800)
Other--net 2,457 (1,975) 99
Net cash applied to investing
activities (31,254) (35,443) (45,781)
Financing activities:
Proceeds from long-term debt 18,652 25,191 12,446
Payment on long-term debt (29,871) (20,894) (2,319)
Increase (decrease) in revolving credit facility
classified as long-term debt (11,000) 11,000 --
Increase (decrease) in short-term
borrowings 13,084 (8,063) (9,776)
Proceeds from stock options exercised 1,550 1,643 617
Dividends paid (17,042) (16,984) (16,937)
Net cash applied to financing
activities (24,627) (8,107) (15,969)
Effect of exchange rate changes on cash
and cash equivalents 71 (3,432) 941
Increase (decrease) in cash and cash
equivalents (1,156) (991) 221
Cash and cash equivalents, beginning of year 6,383 7,374 7,153
Cash and cash equivalents, end of year $ 5,227 $ 6,383 $ 7,374
Supplemental cash flow information:
Interest paid $11,259 $10,588 $ 6,479
Income taxes paid $11,357 $16,750 $13,956
See Notes to Consolidated Financial Statements.
<F50>
Goulds Pumps, Incorporated
Consolidated Statements of Stockholders' Equity
(Dollars in thousands except per share amounts)
Cumulative
Number of Additional Translation Total
Common Shares Common Paid-in Retained Adjustments Stockholders'
Outstanding Stock Capital Earnings and Other Equity
Balance, January 1 1994
21,153,966 $21,154 $57,044 $120,415 $(11,412) $187,201
Net earnings -- -- -- 18,201 -- 18,201
Dividends declared
-- -- -- (16,945) -- (16,945)
Stock options exercised
39,088 39 578 -- -- 617
Translation adjustments
-- -- -- -- 1,758 1,758
Change in minimum pension liability
-- -- -- -- 455 455
Balance, December 31, 1994
21,193,054 21,193 57,622 121,671 (9,199) 191,287
Net earnings -- -- -- 18,072 -- 18,072
Dividends declared
-- -- -- (17,002) -- (17,002)
Stock options exercised
90,442 90 1,553 -- -- 1,643
Translation adjustments
-- -- -- -- (3,344) (3,344)
Change in minimum pension liability
-- -- -- -- (342) (342)
Balance, December 31, 1995
21,283,496 21,283 59,175 122,741 (12,885) 190,314
Net earnings -- -- -- 34,707 -- 34,707
Dividends declared
-- -- -- (17,060) -- (17,060)
Stock options exercised
82,485 83 1,469 -- -- 1,552
Translation adjustments
-- -- -- -- 1,521 1,521
Change in minimum pension liability
-- -- -- -- (398) (398)
Other 10,112 10 707 -- (247) 470
Balance, December 31,1996
21,376,093 $21,376 $61,351 $140,388 $(12,009) $211,106
<F50>
See Notes to Consolidated Financial Statements.
Notes To Consolidated Financial Statements
(Dollars in thousands except per share amounts)
1. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of all
wholly-owned and majority-owned subsidiaries after elimination of all
significant intercompany transactions. Investments in affiliates
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 non-U.S. 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 non-U.S. operations in accordance with Statement of
Financial Accounting Standards (SFAS) No. 52, "Foreign Currency
Translation." Gains and losses from foreign currency transactions
are included in net earnings. For subsidiaries where the local
currency is the functional currency, assets and liabilities are
translated at current exchange rates. Income and expense items are
translated using average exchange rates during the year. Foreign
currency 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
U.S. inventories are stated at the lower of cost or market, with
cost generally determined by the last-in, first-out (LIFO) method.
Inventories of non-U.S. 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.
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, foreign currency exchange rates and the cost of
raw materials. 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.
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 non-U.S.
subsidiaries which, under existing law, will not be subject to U.S.
tax until distributed as dividends were $37,562 on December 31, 1996.
Since the earnings have been or are intended to be indefinitely
reinvested in non-U.S. operations, no provision has been made for any
U.S. taxes that may be applicable thereto. Any taxes paid to non-
U.S. 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 and Dividends Per Common Share
Net earnings per share of common stock are based upon the weighted
average number of shares of common stock outstanding during the year
(21,313,000 in 1996, 21,240,000 in 1995, and 21,175,000 in 1994). 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. Dividends
declared for each year ended December 31, 1996, 1995 and 1994 were
$.80 per common share.
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.
<F50>
2. Receivables--net
December 31, 1996 1995
Receivables $159,051 $146,826
Less allowance for doubtful accounts 3,033 3,007
$156,018 $143,819
3. Inventories--net
December 31, 1996 1995
Raw materials $ 43,358 $ 38,962
Work in process 53,143 58,097
Finished goods 61,072 66,613
Inventories valued at FIFO/average cost 157,573 163,672
Less LIFO allowance 32,066 31,979
$125,507 $131,693
Inventories of non-U.S. subsidiaries, valued at FIFO or average
cost, were $76,688 and $82,715 at December 31, 1996 and 1995, respectively.
4. Property, Plant and Equipment--net
December 31, 1996 1995
Land $ 10,608 $ 10,077
Buildings 60,311 59,366
Machinery and equipment 379,538 357,043
Construction-in-progress 20,803 12,466
471,260 438,952
Less accumulated depreciation 287,803 265,648
$183,457 $173,304
<F50>
5. Other Investments
December 31, 1996 1995
Insurance certificates
Variable, $2,588 due 1998, $1,961 due 2003,
$1,968 due 2008 $6,517 $6,250
Austrian bank certificates
7.26% weighted average at December 31, 1996,
due 1997 - 2003 1,801 1,939
Italian government VAT bond
9.50% stated rate, due 1999 900 857
$9,218 $9,046
The Company has the ability and intent to hold all of its other
investments until maturity. All of the investments are classified as
held to maturity and are stated at amortized cost.
6. Goodwill--net
December 31, 1996 1995
Goodwill $29,042 $31,797
Less accumulated amortization 3,162 1,939
$25,880 $29,858
<F50>
7. Debt and Credit Agreements
December 31, 1996 1995
Non-U.S. unsecured short-term loans
6.45% weighted average
at December 31, 1996, due 1997 $ 39,608 $ 35,481
Unsecured committed lines of credit borrowings -- 2,423
Unsecured uncommitted lines of credit borrowings
6.63% weighted average
at December 31, 1996, due 1997 11,500 --
Non-U.S. long-term notes payable
7.13% weighted average
at December 31, 1996, due 1997-2014 35,993 36,837
Industrial development revenue bonds
4.74% weighted average at
December 31, 1996, due 1997-2009 3,171 3,280
Revolving credit agreement borrowings
Agreement expires 1999 -- 11,000
Unsecured committed credit facilities borrowings
5.40% weighted average at
December 31, 1996, due 1997-1998 11,916 17,817
Term loan
7.18%, due 1997-2000 16,000 20,000
Capital leases
7.42% weighted average at
December 31, 1996, due 1997-2012 5,516 6,236
123,704 133,074
Less payments due within one year 65,739 59,620
$ 57,965 $ 73,454
At December 31, 1996, the Company had a $55,000 unused revolving
committed line of credit that permits borrowings under several
interest rate options which are reflective of current market rates of
interest. Non-U.S. subsidiaries have unused short-term credit lines
available at prevailing interest rates in the amount of $54,576. The
weighted average interest rates on short-term borrowings at December
31, 1996 and 1995 were 6.49% and 8.76%, respectively.
The Company's non-U.S. subsidiaries had $17,499 in borrowings for
which property, plant and equipment with a net book value of $23,841
and other investments carried at $6,605 were pledged as collateral.
The Company's industrial development revenue bonds are collateralized
by property, plant and equipment with a net book value of $17,974.
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, 1996.
Debt maturities, excluding maturities of capital lease
obligations, during the next five years are $65,132 in 1997, $14,705
in 1998, $8,399 in 1999, $6,270 in 2000, and $1,745 in 2001. See
Note 13 for future minimum payments on capital lease obligations.
<F50>
8. Employee Benefit Plans
Pension Plans
The Company has several defined benefit pension plans covering
substantially all U.S. employees. Plans covering salaried exempt
employees provide pension benefits based upon final average salary
and years of service. Benefits to other covered 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.
Net pension cost includes the following components:
For the year ended December 31, 1996 1995 1994
Service cost - benefits earned during
the year $ 4,142 $ 3,000 $ 3,855
Interest cost on projected
benefit obligation 8,092 7,589 7,194
Actual return on plan assets (13,000) (18,567) 1,825
Net amortization and deferral 4,084 9,763 (9,854)
Net pension cost $ 3,318 $ 1,785 $ 3,020
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, 1996 1995 1996 1995
Actuarial present value of
benefit obligations:
Vested benefit obligation $56,428 $51,439 $46,572 $45,966
Accumulated benefit
obligation $57,456 $52,035 $50,735 $47,115
Projected benefit obligation $70,560 $63,609 $50,794 $47,457
Plan assets at fair value 70,245 60,127 41,242 39,302
Projected benefit obligation in excess
of plan assets 315 3,482 9,552 8,155
Unrecognized net gain (loss) 769 2,808 1,301 (2,227)
Unrecognized prior service cost (724) (589) (7,502) (7,399)
Unrecognized net asset (liability)
4,618 729 (2,898) 1,735
Adjustment required to recognize
minimum liability -- -- 9,040 7,549
Accrued pension liabilities $ 4,978 $ 6,430 $ 9,493 $ 7,813
In determining the actuarial present value of the projected
benefit obligation, the weighted average discount rate was 7.50% and
7.46% as of December 31, 1996 and 1995, respectively; the rate of
increase in future compensation levels was 4.5% as of December 31,
1996 and 1995; and the expected long-term rate of return on assets
was 9.5% for each year.
<F50>
As required by SFAS No. 87, "Employers' Accounting for Pensions,"
for plans as to which 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
effect.
The Company's Italian subsidiary 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
$2,097 in 1996, $2,174 in 1995, and $1,898 in 1994, and the related
accrued liability at December 31, 1996 and 1995 was $12,181 and
$10,406, respectively.
The Company's Austrian subsidiary is required by Austrian law to
provide certain actuarially determined benefits to personnel upon
termination of employment. The expense provision was $949 in 1996 and
$493 in 1995 and indemnities paid were $940 in 1996 and $615 in 1995.
The accrued liability for these benefits at December 31, 1996 and
1995 was $3,905 and $4,187, respectively.
Postretirement Benefits Other Than Pensions
In addition to providing pension benefits, the Company's U.S.
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:
For the year ended December 31, 1996 1995 1994
Service cost - benefits earned during
the year $ 1,017 $ 767 $1,335
Interest cost on accumulated postretirement
benefit obligation 2,593 2,369 3,819
Amortization of prior service cost and
actuarial gain (1,316) (2,105) (645)
Net postretirement benefit cost $ 2,294 $1,031 $4,509
<F50>
The accrued postretirement benefit obligation, included in the
accompanying Consolidated Balance Sheets, is comprised of the
following:
December 31, 1996 1995
Accumulated postretirement benefit obligation
attributable to:
Retirees $18,043 $18,698
Active, eligible employees 4,846 5,205
Active, non-eligible employees 11,260 11,907
Total accumulated postretirement benefit
obligation 34,149 35,810
Unrecognized net gain 9,714 10,565
Unrecognized prior service gain 9,599 6,677
Accrued postretirement benefit obligation $53,462 $53,052
In determining the accrued postretirement benefit obligation as of
December 31, 1996 and 1995, weighted average discount rates of 7.50%
and 7.46% and medical care cost trend rates for under-65 premiums of
9.0% and 10.0%, respectively, and medical care cost trend rates for
over-65 premiums of 5.0% were used. The under-65 medical care cost
trend rates used in the actuarial computations as of December 31,
1996 and 1995 were gradually reduced to 4.5% by 2001. As of December
31, 1996 and 1995, the over-65 medical care cost trend rate used in
the actuarial computations was assumed to remain level until the year
2001, when it would decrease to 4.5% and 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 1996
and 1995 service and interest components of the net postretirement
benefit cost by $523 and $364, respectively, and the accrued
postretirement benefit obligation at December 31, 1996 and 1995 by
$3,379 and $3,581, respectively.
In 1996, the Company introduced a managed care option under its
retiree medical plan which decreased the prior service cost base by
$3,564 as of December 31, 1996.
9. Income Taxes
The components of the provision for income taxes are as follows:
For the year ended December 31, 1996 1995 1994
Current:
U.S. federal $ 8,999 $10,060 $11,199
U.S. state 1,156 1,541 2,225
Non-U.S. 3,949 4,254 3,658
Total 14,104 15,855 17,082
Deferred:
U.S. federal 7,585 (8,458) (4,700)
U.S. state 58 167 (488)
Non-U.S. (2,552) (540) (452)
Total 5,091 (8,831) (5,640)
Provision for income taxes $19,195 $ 7,024 $11,442
<F50>
Reconciliations of the U.S. federal statutory tax rate with the
effective tax rates reported for earnings before income taxes were as
follows:
For the year ended December 31, 1996 1995 1994
U.S. federal statutory rate 35.0% 35.0% 35.0%
U.S. state taxes--net 2.1 4.3 3.8
Non-U.S. taxes in excess of U.S. federal statutory
rate, net of U.S. credits 0.9 7.4 4.5
U.S. benefits of foreign sales
corporation (1.7) (3.1) (2.3)
Non-U.S. tax restructuring
and recapitalization -- (6.3) --
Excess tax basis on restructuring
charges -- (6.1) --
Other--net (0.7) (3.2) (2.4)
Effective tax rate 35.6% 28.0% 38.6%
The net deferred tax asset components are as follows:
December 31, 1996 1995
Deferred tax assets:
Postretirement benefits other than pensions $18,641 $18,530
Other nondeductible liabilities and reserves 3,948 3,500
Tax credit carryforwards 3,673 2,587
Deferrals under non-U.S.jurisdictions 1,306 5,416
Deferrals under U.S. state jurisdictions--net 1,250 1,826
Workers' compensation and other claims 1,881 2,206
Accrued vacation pay 1,016 965
Pension benefits 912 2,341
Restructuring reserves 245 8,440
Miscellaneous 1,019 1,152
Gross deferred tax assets 33,891 46,963
Valuation allowance for deferred tax assets (1,992) (4,786)
Deferred tax liabilities:
Property, plant and equipment (11,162) (10,809)
Deferrals under non-U.S. jurisdictions (2,050) (4,091)
Inventories (1,299) (1,000)
Other assets and miscellaneous (1,964) (2,462)
Gross deferred tax liabilities (16,475) (18,362)
Net deferred tax asset $15,424 $23,815
Earnings before income taxes resulting from non-U.S. operations for
1996, 1995 and 1994 were $8,709, $5,860 and $1,315, respectively.
The Company and its U.S. subsidiaries file a consolidated U.S.
federal income tax return. Such returns have been audited and
settled through the year 1991.
The valuation allowance for deferred tax assets decreased by $2,794
in 1996 and increased by $1,831 in 1995.
At December 31, 1996, the Company had non-U.S. tax credit
carryforwards of $3,673 that will expire at the end of the following
years if not otherwise used: $354 - 1997, $1,581 - 1998, $684 - 2000
and $1,054 - 2001.
10. Stock Option and Award Plans
The Company has four active stock option and award plans. Under
the plans the exercise price for shares of the Company's common stock
related to stock options may not be less than 100% of the fair market
value on the date of grant; stock option grants to employees vest
over four years; all stock option grants have a contractual life of
ten years; and grants of restricted stock vest as determined by the
agreement between the employee and the Company, with a minimum
vesting period of three years.
<F50>
The Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation," effective January 1, 1996. As permitted by that
standard, the Company has elected to continue to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for employee
stock-based compensation. Employee stock-based compensation expense
related to restricted stock and performance-based stock awards
recognized for the year ended December 31, 1996 was $749, with no
expense recognized during 1995 and 1994.
The 1994 Incentive Plan to Increase Stockholder Value (1994 Plan)
permits up to 1,000,000 shares of common stock to be issued for stock
options, stock appreciation rights, restricted stock awards, and
performance-based restricted stock awards to officers and other key
employees of the Company until May 2004. At December 31, 1996,
352,693 shares were reserved for future grants, and 610,500 shares
were subject to outstanding stock options, of which options for
60,925 shares were exercisable.
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 common
share over a three-year period, under the 1994 Plan. The value of
the awards will vary based on the degree to which earnings per common
share goals are attained over the three-year cycle. During the
performance period, dividends on the performance-based stock awards
are accrued currently as performance-based stock awards. During 1996,
the Company granted 1,282 shares of performance-based restricted
stock awards with a weighted-average fair value of $23.88 per share.
Performance-based restricted stock awards for 24,132 shares were
outstanding at December 31, 1996, none of which had vested, including
933 shares accrued as dividends.
During 1996, the Company granted 12,200 shares of restricted stock
awards with a weighted-average fair value of $24.56 per share, under
the 1994 Plan. Restricted stock awards for 12,200 shares were
outstanding at December 31, 1996, none of which had vested.
The 1994 Incentive Plan for Non-Employee Directors permits up to
175,000 shares of common stock to be issued for stock options which
may 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. Each
non-employee Director receives an annual Nonstatutory Option of 1,500
shares that vests one year after the date of grant. At December 31,
1996, 142,000 shares were reserved for future grants, and 33,000
shares were subject to stock options outstanding, of which options
for 22,500 shares were exercisable.
The 1988 Stock Incentive Plan permits up to 1,500,000 shares of
common stock to be issued for stock options and stock awards to key
employees during the period ending in May 1998. At December 31,
1996, 321,916 shares were reserved for future grants, and 981,263
shares were subject to stock options outstanding, of which options
for 670,301 shares were exercisable.
The 1981 Incentive Stock Option Plan permitted up to 1,000,000
shares of common stock to be issued for stock options to key
employees during the period ended April 1992. At December 31, 1996,
no shares were available for future grants, and 93,957 shares were
subject to stock options outstanding, all of which were exercisable.
<F50>
The following table summarizes stock option activity for the three
years ended December 31, 1996:
Shares
Subject to Weighted-Average
Options Exercise Price
Outstanding at January 1, 1994 929,969 $21.73
Granted 339,165 $22.70
Exercised (42,681) $16.64
Forfeited (33,272) $20.93
Outstanding at December 31, 1994 1,193,181 $22.21
Granted 526,900 $21.96
Exercised (101,187) $18.80
Forfeited (93,584) $23.19
Outstanding at December 31, 1995 1,525,310 $22.29
Granted 405,400 $25.14
Exercised (82,485) $18.79
Forfeited (129,505) $23.22
Outstanding at December 31, 1996 1,718,720 $23.06
Exercisable at December 31, 1994 541,462 $21.09
Exercisable at December 31, 1995 660,847 $21.97
Exercisable at December 31, 1996 847,683 $22.58
The following table summarizes information about stock options
outstanding at December 31, 1996:
Options Outstanding Options Exercisable
Weighted-
Average Weighted-
Range of Shares Average Remaining Shares Average
Exercise Subject to Exercise Life of Subject to Exercise
Prices Options Price Contract Options Price
$15.50 to $23.00 785,407 $21.13 7.0 367,619 $20.43
$23.25 to $25.25 33,313 $24.69 7.3 480,064 $24.23
$15.50 to $25.25 1,718,720 $23.06 7.2 847,683 $22.58
The weighted-average fair value of stock options granted for the
years ended December 31, 1996 and 1995 were $6.63 and $5.88 per
share, respectively.
Pro forma information regarding net earnings and earnings per
common share is required by SFAS No. 123 and has been determined as
if the Company had accounted for its employee stock options and
awards under the fair value method of that standard. The Company's
pro forma net earnings and net earnings per common share for the
years ended December 31, 1996 and 1995, were $33,887 and $17,370, and
$1.59 and $.82 per share, respectively. The fair value of those stock
options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions
for the years ended December 31, 1996 and 1995: risk-free interest
rates of 6.8% and 6.7%, respectively; dividend yields of 3.2% and
3.6%, respectively; volatility factors of the expected market price
of the Company's common stock of .25 and .28, respectively; and for
each year a weighted-average expected life of six years. For
purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period.
<F50>
11. 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, 1996 and 1995, the Company
had no significant concentrations of credit risks.
Letters of Credit. At December 31, 1996 and 1995, the Company had
performance letters of credit outstanding totaling $7,980 and $9,754,
respectively, which primarily 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, foreign exchange rates, and the cost
of non-ferrous metals used in the production of its products.
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 or speculative purposes.
Notional Amounts and Credit Exposures of Derivative Financial
Instruments. The notional amounts of derivatives 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 contractual conditions of
the derivatives, which relate to interest rates, indices, and foreign
currency exchange rates.
The Company actively evaluates the creditworthiness of the
financial institutions which are counterparties to derivative
financial instruments, and it does not expect any counterparties to
fail to meet their obligations. The credit exposure of interest
rate, foreign exchange and commodity contracts is represented by the
fair value of contracts with a favorable fair value at December 31,
1996 and 1995.
Interest Rate Risk Management. All of the Company's one-year
interest rate derivatives have been designated by management as
hedges of the Company's variable rate borrowings. The amounts
receivable and payable are recorded as a current liability, with
realized gains or losses recognized as adjustments to interest
expense.
The Company utilizes interest rate swaps to reduce the impact on
interest expense of fluctuating interest rates on its variable rate
debt. Under the Company's interest rate swap agreement, the Company
agreed with the counterparty to exchange, at quarterly intervals, the
difference between the Company's fixed pay rate and the
counterparty's variable pay rate of three-month LIBOR. At December
31, 1996 and 1995, the Company was a fixed rate payor of 6.060% and
5.325% and received a variable rate of 5.594% and 5.668% on notional
amounts of $20,000 and $15,000, respectively. The fair values at
December 31, 1996 and 1995, as estimated by a dealer, were
unfavorable $73 and $9, respectively.
<F50>
At December 31, 1996 and 1995, the Company held zero-cost collars
with notional amounts of $10,371 and $19,416, with weighted-average
ceiling rates of 4.83% and 5.63%, and with weighted-average floor
rates of 3.73% and 4.33%, respectively. The fair values at December
31, 1996 and 1995, as estimated by dealers, were unfavorable $4 and
$9, respectively.
Commodity Price Risk Management. All of the Company's commodity
derivatives have been designated by management as hedges of the
Company's anticipated purchases of non-ferrous metals used in the
production of its products. The amounts receivable and payable are
recorded as a current liability, with realized gains or losses
recognized as adjustments to cost of sales when the commodities are
consumed. At December 31, 1996, the Company held zero-cost collars
for non-ferrous metals with notional amounts of $8,920, with a
weighted-average ceiling of $2,901 (in whole dollars) per metric ton,
and with a weighted-average floor of $2,557 (in whole dollars) per
metric ton. These derivatives extend through 1998. The fair value
at December 31, 1996, as estimated by dealers, was unfavorable $931.
At December 31, 1995, the Company did not have any commodity
derivatives.
Foreign Exchange Risk Management. The Company enters into foreign
exchange forward contracts and option contracts to hedge anticipated
and firmly committed foreign currency transactions. The Company does
not hedge foreign currency translation or foreign currency net assets
or liabilities. The terms of the derivatives are one year or less.
The Company held foreign forward exchange contracts for notional
amounts as follows:
December 31, 1996 1995
Buy Sell Buy Sell
Italian lire $12,688 $ 110 $ 9,758 $ 130
Canadian dollars -- 9,122 225 17,581
United States dollars -- -- 3,929 --
Australian dollars -- 2,552 -- 1,440
Austrian schillings -- 1,371 36 --
Other 182 -- 395 --
$12,870 $13,155 $14,343 $19,151
Fair value $13,158 $13,234 $14,699 $19,298
At December 31, 1996, the Company had 10 option contracts to
purchase Canadian dollars, with a total notional amount of $10,001.
The Company also had 10 option contracts to sell Canadian dollars,
with a total notional amount of $10,001. Each of the contracts to
purchase currency matures on the same date as a sell contract at the
same notional amount. These contracts had a net fair value of $63
unfavorable. At December 31, 1996 and 1995, the fair values of the
foreign exchange forward contracts and option contracts were
estimated by dealers.
Fair Value of Financial Instruments. Short-term financial
instruments are valued at their carrying amounts included in the
Consolidated Balance Sheets, which are reasonable estimates of fair
value due to the relatively short period to maturity of the
instruments. This approach applies to cash and cash equivalents,
receivables, short-term borrowings and certain other current
liabilities.
The fair value of other investments and long-term debt
approximates their carrying value at December 31, 1996 and 1995.
Those fair values were estimated by discounting cash flows using
rates currently available for financial instruments with similar
terms and remaining maturities.
<F50>
12. Unusual Charges
Restructuring Charges. In October 1996, the Company recorded a
restructuring charge of $1,509 as a result of the decision to
consolidate European facilities. The consolidation is projected to
generate annual savings of approximately $1,500. The charge includes
$1,288 for severance costs associated with the consolidation, and
$221 of other exit costs. At December 31, 1996, the reserve was
$1,478.
In December 1995, the Company implemented a restructuring plan to
wind down its Venezuelan manufacturing activities, which impacted the
Company's investment in this subsidiary, and to transfer its
ownership interest in Environamics Corporation to that company's
management. 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, 1996 and 1995, the remaining
reserve was $700 and $5,091, respectively. During the fourth quarter
of 1996, the Company reversed $1,023 as a result of lower exit costs
than anticipated. The Environamics restructuring plan is expected to
be substantially completed by the end of 1997. The Venezuelan
portion of the restructuring plan was $6,040, which included the
termination of approximately 50 employees, and provided severance
benefits of $1,365 and other exit costs of $4,675. During the fourth
quarter of 1996, the Company reversed $569 due to generally lower
costs than originally estimated. At December 31, 1996 and 1995, the
reserve for the Venezuelan restructuring was $225 and $1,865,
respectively, with $225 related to severance benefits, and with
$1,365 for severance benefits and $500 for other exit costs,
respectively. The Venezuelan restructuring plan is expected to be
completed during 1997.
In December 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 Mexico 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 announced, and non-U.S. termination
benefits were less than originally estimated. During 1996, the
reserve was completely used. At December 31, 1995, the reserve was
$745, with $411 for remaining severance benefits and $334 for
remaining other exit costs.
Provision for Environmental Litigation. A charge of $3,454 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 such litigation was
resolved, the Company reversed into income the remaining accrual of
$890.
13. 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, 1996 and 1995, the remaining reserve, classified
as a current liability, was $732 and $1,667, 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 1997, and the Company does not currently expect any
additional material costs in future years associated with this site
beyond the 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, 1996, 1995 and 1994 was
$8,005, $6,225 and $5,088, 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, 1996:
Capital Operating
Leases Leases
1997 $ 982 $4,844
1998 819 3,893
1999 733 2,249
2000 733 744
2001 673 350
Future years 4,116 554
Total minimum lease payments 8,056
Amounts representing interest 2,540
Present value of net minimum
payments 5,516
Current portion 607
Long-term portion $4,909
<F50>
14. 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 and electric utility, and provides parts and repair services for
various types of pumps and other rotating equipment. The Water
Technologies segment produces and sells pumps for residential, farm,
irrigation and commercial/light industrial use. Intersegment sales are
not material.
1996 1995(2) 1994
Industry Segments
Net sales:
Industrial Products $399,507 $377,399 $323,254
Water Technologies 374,913 341,364 262,222
Total net sales $774,420 $718,763 $585,476
Operating earnings:
Industrial Products $ 40,648(1) $ 9,258(3) $ 18,224(4)
Water Technologies 31,284(1) 31,195(3) 20,896(4)
Total operating
earnings 71,932 40,453 39,120
General corporate expenses 7,501 6,193 7,083
Interest expense--net 9,393 9,548 3,515
Other expense (income)--net 1,136 (384) (1,121)
Earnings before income
taxes $ 53,902 $ 25,096 $ 29,643
Identifiable assets:
Industrial Products $245,699 $243,186 $205,079
Water Technologies 287,874 278,241 214,356
Investments in
affiliates -- 1,207 1,178
Investment in Vogel -- -- 17,800
General corporate assets 21,298 31,352 18,828
Total assets $554,871 $553,986 $457,241
Geographic Segments
Net sales:
United States $483,433 $466,234 $428,002
Europe 205,538 183,336 99,613
Other 85,449 69,193 57,861
Total net sales $774,420 $718,763 $585,476
Operating earnings:
United States $ 58,207(1) $ 36,383(3) $ 36,181(4)
Europe 9,466(1) 9,616(3) 5,390(4)
Other 4,259(1) (5,546)(3) (2,451)(4)
Total operating
earnings 71,932 40,453 39,120
General corporate expenses 7,501 6,193 7,083
Interest expense--net 9,393 9,548 3,515
Other expense(income)--net 1,136 (384) (1,121)
Earnings before income
taxes $ 53,902 $ 25,096 $ 29,643
Identifiable assets:
United States $257,096 $252,905 $243,220
Europe 227,674 233,821 137,540
Other 48,803 34,701 38,675
Investments in
affiliates -- 1,207 1,178
Investment in Vogel -- -- 17,800
General corporate
assets 21,298 31,352 18,828
Total assets $554,871 $553,986 $457,241
Other information:
Purchases of property,
Depreciation expense plant and equipment Export net sales
1996 1995(2) 1994 1996 1995(2) 1994 1996 1995(2) 1994
Industrial Products
$14,879 $14,142 $14,901 $17,444 $17,416 $11,893 $74,06(2) $52,137 $45,328
Water Technologies
11,862 11,605 9,698 18,633 15,463 15,456 15,787 16,923 12,851
Corporate
248 269 326 357 589 731 -- -- --
$26,989 $26,016 $24,925 $36,434 $33,468 $28,080 $89,849(5) $69,060 $58,179
1 Industry segment operating earnings include the
impact of the restructuring (credit) charge
(IP - ($1,592); WT - $1,509). On a geographical basis, IP's
restructuring reversal impacted the United States by ($1,023) and
Other by ($569), whereas WT's charge is included in Europe.
2 Prior to 1995, the Company's IJmuiden, Netherlands
operations were part of Industrial Products.
In 1995, these operations became part of Water Technologies.
3 Includes the impact of the restructuring charge (credit) (IP -
$19,217; WT - ($704)) and the reversal of a provision for
environmental litigation (WT - ($890)). On a geographical basis,
the IP restructuring charge impacted the United States by $13,192
and Other by $6,025. WT's reversal for restructuring specifically
relates to the Company's IJmuiden, Netherlands operations. The
reversal of the environmental litigation provision impacted only
the United States.
4 Includes the impact of the restructuring charge (IP - $3,332; WT -
$127) and provision for environmental litigation (WT - $3,454).
On a geographical basis, the restructuring charge impacted the
United States by $1,619, Europe by $1,378 and Other by $462. The
entire provision for environmental litigation impacted the United
States.
5 Comprised of net sales from the United States to external
customers in Europe, the Middle East and Africa of $24,019, Latin
America of $30,536 and Asia Pacific of $35,294.
<F50>
15. Quarterly Financial Data
(Unaudited)
For the quarter ended 3/31/96 6/30/96 9/30/96 12/31/96
Net sales $183,581 $197,576 $205,512 $187,751
Gross profit 53,427 59,367 61,929 52,232
Net earnings 7,237 9,798 10,649 7,023
Net earnings per common share .34 .46 .50 .33
Dividends per common share .20 .20 .20 .20
Market value per common share:
- High 25.13 25.88 25.88 25.00
- Low 20.88 20.00 21.13 20.38
For the quarter ended 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
common share .26 .39 .42 (.21)
Dividends per common share .20 .20 .20 .20
Market value per common share:
- High 24.25 25.50 23.63 26.00
- Low 19.63 20.38 21.00 22.63
<F50>
In an effort to give investors a well-rounded view of the Company's
current condition and future opportunities, this Annual Report
includes statements by the Company's management about future
performance and results. Because they are forward-looking, such
statements 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.
<F50>
EXHIBIT 21
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, 1996 or Organized
AVIS Werbung Gmbh........................... 100 Austria
Bombas Goulds de Mexico, S. de R.L. de C.V.. 100 Mexico
Bombas Goulds de Venezuela, S.R.L........... 100 Venezuela
Goulds Pumps (Asia), Ltd.................... 100 Hong Kong
Goulds Pumps Australia Ltd. Pty............. 100 Australia
Goulds Pumps (Barbados) Ltd................. 100 Barbados
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 Investments, Inc............... 100 Canada
Goulds Pumps (IPG), Inc..................... 100 Delaware
Goulds Pumps Korea Co. Ltd.................. 100 South Korea
Goulds Pumps Ltd............................ 100 United Kingdom
Goulds Pumps Nederlands B.V................. 100 Netherlands
Goulds Pumps (N.Y.), Inc.................... 100 New York
Goulds Pumps (PA), Inc...................... 100 Delaware
Goulds Pumps (Phil.), Inc................... 100 Philippines
Goulds Pumps Polska......................... 100 Poland
Goulds Pumps (Portugal) comercio de bombas,
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
Lowara Belgium, NV.......................... 100 Belgium
Lowara Danmark A/S.......................... 80 Denmark
Lowara France S.A........................... 100 France
Lowara Ireland Ltd.......................... 100 Ireland
Lowara Nederlands B.V....................... 100 Netherlands
Lowara S.p.A................................ 100 Italy
Nanjing Goulds Pumps Limited Co............. 62 China
Ochsner Pumpen GmbH......................... 100 Germany
Pumpenfabrik Ernst Vogel Gmbh............... 100 Austria
Quality Industrial Technology Co., Ltd...... 100 Thailand
The names of particular subsidiaries have been omitted in accordance
with SEC Reg. S-K 601(21)(ii) because they do not, in the aggregate,
constitute a "significant subsidiary" of the Company.
<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 on Form S-8 of our reports
dated January 24, 1997, appearing in and incorporated by reference in
this Form 10-K of Goulds Pumps, Incorporated for the year ended
December 31, 1996.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Rochester, New York
March 27, 1997
<F50>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,227
<SECURITIES> 0
<RECEIVABLES> 159,051
<ALLOWANCES> 3,033
<INVENTORY> 125,507
<CURRENT-ASSETS> 309,977
<PP&E> 471,260
<DEPRECIATION> 287,803
<TOTAL-ASSETS> 554,871
<CURRENT-LIABILITIES> 203,132
<BONDS> 0
0
0
<COMMON> 21,376
<OTHER-SE> 189,730
<TOTAL-LIABILITY-AND-EQUITY> 554,871
<SALES> 774,420
<TOTAL-REVENUES> 774,420
<CGS> 547,465
<TOTAL-COSTS> 547,465
<OTHER-EXPENSES> 163,660
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,171
<INCOME-PRETAX> 53,902
<INCOME-TAX> 19,195
<INCOME-CONTINUING> 34,707
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,707
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.62
</TABLE>
