1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For three months ended March 31, 1998 Commission File Number 1-6747 ------------------ ------ The Gorman-Rupp Company - ------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) Ohio 34-0253990 - ------------------------------------------------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 305 Bowman Street, P. O. Box 1217, Mansfield, Ohio 44901 - ------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (419) 755-1011 --------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Shares outstanding at March 31, 1998 ----- common, without par value, 8,622,001 Page 1 of 6 pages
2 <TABLE> <CAPTION> PART I - FINANCIAL INFORMATION THE GORMAN-RUPP COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (in thousands of dollars, except per share data) Three Months Ended March 31 1998 1997 ---------- ---------- <S> <C> <C> INCOME Net sales $ 43,703 $ 40,530 Other income 223 139 ---------- ---------- TOTAL INCOME 43,926 40,669 DEDUCTIONS FROM INCOME Cost of products sold 32,596 30,623 Selling, general and administrative expenses 6,054 5,667 ---------- ---------- TOTAL DEDUCTIONS 38,650 36,290 ---------- ---------- INCOME BEFORE INCOME TAXES 5,276 4,379 Income taxes 2,025 1,643 ---------- ---------- NET INCOME $ 3,251 $ 2,736 ========== ========== Basic And Diluted Earnings Per Share $ 0.38 $ 0.32 Dividends Paid Per Share $ 0.14 $ 0.14 Average Shares Outstanding 8,615,292 8,618,383 </TABLE> CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands of dollars) <TABLE> <CAPTION> Three Months Ended March 31 1998 1997 ---------- ---------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,251 $ 2,736 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,538 1,395 Changes in operating assets and liabilities 6,705 (471) CASH FLOWS FROM INVESTING ACTIVITIES: Capital additions, net (2,990) (1,713) Change in short-term investments (2,880) (1,996) Other (2) (360) CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends (1,206) (1,207) Change in treasury shares 248 0 (Repayments to) Borrowings from bank (4,457) 1,083 NET (DECREASE) INCREASE IN CASH ------- ------- AND CASH EQUIVALENTS 207 (533) CASH AND CASH EQUIVALENTS: Beginning of year 836 830 ------- ------- March 31 $ 1,043 $ 297 ======= ======= </TABLE> 2
3 THE GORMAN-RUPP COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands of dollars) <TABLE> <CAPTION> March 31 December 31 1998 1997 ASSETS --------- --------- <S> <C> <C> CURRENT ASSETS Cash and cash equivalents $ 1,043 $ 836 Short-term investments 9,781 6,901 Accounts receivable 29,339 31,263 Inventories 37,331 39,761 Other current assets and deferred income taxes 2,550 2,934 ------------ ------------ TOTAL CURRENT ASSETS 80,044 81,695 OTHER ASSETS 860 816 DEFERRED INCOME TAXES 4,433 4,435 PROPERTY, PLANT AND EQUIPMENT 88,427 86,997 Less allowances for depreciation 46,044 46,078 ------------ ------------ PROPERTY, PLANT AND EQUIPMENT - NET 42,383 40,919 ------------ ------------ TOTAL ASSETS $ 127,720 $ 127,865 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 7,528 $ 7,669 Payrolls and related liabilities, accrued expenses 9,456 7,908 Income taxes 1,951 1,459 ------------ ------------ TOTAL CURRENT LIABILITIES 18,935 17,036 LONG TERM DEBT 2,232 6,689 PENSION LIABILITY 1,258 1,418 POSTRETIREMENT HEALTH BENEFITS OBLIGATION 24,887 24,662 SHAREHOLDERS' EQUITY Common shares, without par value at stated capital amount 5,143 5,135 Retained earnings 76,428 74,143 Accumulated other comprehensive income (1,163) (1,218) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 80,408 78,060 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 127,720 $ 127,865 ============ ============ 14,000,000 14,000,000 Common shares - authorized * Common shares - outstanding 8,622,001 8,609,368 Common shares - treasury 243,175 255,808 * After deducting treasury shares </TABLE> 3
4 THE GORMAN-RUPP COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1998 NOTE A - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1998 are not necessarily indicative of results that may be expected for the year ending December 31, 1998. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. NOTE B - INVENTORIES The major components of inventories are as follows: (Thousands of dollars) March 31 December 31 1998 1997 ------- ------- Raw materials and in-process $22,298 $23,749 Finished parts 11,709 12,471 Finished products 3,324 3,541 ------- ------- $37,331 $39,761 ======= ======= NOTE C - COMPREHENSIVE INCOME As of January 1, 1998, the Company adopted Statement 130, Reporting Comprehensive Income. Statement 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this Statement had no impact on the Company's net income or shareholders' equity. Statement 130 requires foreign currency translation adjustments, which prior to adoption were reported separately in shareholders' equity to be included in other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of Statement 130. During the first quarter of 1998 and 1997, total comprehensive income amounted to $3,306,000 and $2,658,000. 4
5 THE GORMAN-RUPP COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS First Quarter 1998 vs First Quarter 1997 - ------------------------------------------ Net sales were $43,703,000 in 1998, an increase of $3,173,000 or 7.8% from the $40,530,000 in 1997. Most of the increase was due to increased sales at the Patterson subsidiary. Other income was $223,000 in 1998 compared to $139,000 in 1997. Most of this increase was a result of higher interest income. Cost of products sold in 1998 was $32,596,000 compared to $30,623,000 in 1997. The increase was primarily due to the use of materials to build additional product. As a percentage of net sales, cost of products sold in 1998 was 74.6% compared to 75.6% in 1997. The reduction is principally the result of changes in product mix and manufacturing efficiencies. Selling, general and administrative expenses increased to $6,054,000 in 1998 from $5,667,000 in 1997 with an increase in payroll related expenses being the largest factor. Income before income taxes was $5,276,000 in 1998 compared to $4,379,000 in 1997, an increase of $897,000. Income tax expense increased from $1,643,000 in 1997 to $2,025,000 in 1998, primarily as a result of an increase in profit. The effective income tax rate was 38.4% in 1998 compared to 37.5% in 1997. Net income in 1998 of $3,251,000 increased $515,000 from $2,736,000 in 1997. As a percent of net sales, net income was 7.4% in 1998 and 6.8% in 1997. Net income per share was $.38 in 1998, an increase of $.06 from $.32 in 1997. FINANCIAL CONDITION - ------------------- The Company continues to finance most of its capital expenditures and working capital requirements through internally generated funds and bank financing. The ratio of current assets to current liabilities was 4.2 to 1 at March 31, 1998 and 4.8 to 1 at December 31, 1997. The Company presently has adequate working capital, adequate borrowing capacity and a healthy liquidity position. 5
6 PART II - OTHER INFORMATION THE GORMAN-RUPP COMPANY AND SUBSIDIARIES Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - 27 Financial Data Schedule (b) Reports filed on Form 8-K during the Quarter Ended March 31, 1998 - None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The Gorman-Rupp Company ------------------------------ (Registrant) Date April 28, 1998 Kenneth E. Dudley ---------------------- /S/ Kenneth E. Dudley ------------------------------ (Signature) Treasurer & Principal Financial Officer 6