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 nine months ended September 30, 1997 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 by 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 September 30, 1997 ----- common, without par value, 8,599,600 Page 1 of 7 pages
2 PART I - FINANCIAL INFORMATION THE GORMAN-RUPP COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (in thousands of dollars, except per share data) <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30 September 30 1997 1996 1997 1996 ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> INCOME Net sales $ 42,278 $ 39,625 $ 122,971 $ 113,882 Other income 134 131 423 372 ---------- ---------- ---------- ---------- TOTAL INCOME 42,412 39,756 123,394 114,254 DEDUCTIONS FROM INCOME Cost of products sold 31,503 29,489 91,717 85,931 Selling, general and administrative expenses 6,133 5,661 18,033 17,483 ---------- ---------- ---------- ---------- TOTAL DEDUCTIONS 37,636 35,150 109,750 103,414 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 4,776 4,606 13,644 10,840 Income taxes 1,768 1,695 5,088 4,134 ---------- ---------- ---------- ---------- NET INCOME $ 3,008 $ 2,911 $ 8,556 $ 6,706 ========== ========== ========== ========== Net Income Per Share $ 0.35 $ 0.34 $ 0.99 $ 0.78 Dividends Paid Per Share $ 0.14 $ 0.13 $ 0.42 $ 0.39 Average Shares Outstanding 8,603,013 8,618,383 8,611,680 8,616,760 </TABLE> CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands of dollars) <TABLE> <CAPTION> Nine Months Ended September 30 1997 1996 --------- -------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 8,556 $ 6,706 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,414 4,121 Changes in operating assets and liabilities (165) 5,203 CASH FLOWS FROM INVESTING ACTIVITIES: Capital additions, net (5,124) (2,926) Other (43) (167) CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends (3,616) (3,361) Change in treasury shares (338) 165 Repayments to bank (278) (7,852) -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 3,406 1,889 CASH AND CASH EQUIVALENTS: Beginning of year 4,284 3,250 -------- -------- September 30 $ 7,690 $ 5,139 ======== ======== </TABLE> 2
3 THE GORMAN-RUPP COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands of dollars) <TABLE> <CAPTION> September 30 December 31 1997 1996 ------------ ----------- <S> <C> <C> ASSETS CURRENT ASSETS Cash and cash equivalents $ 7,690 $ 4,284 Accounts receivable 30,521 29,894 Inventories 37,626 33,621 Other current assets and deferred income taxes 4,317 4,127 ------------ ------------ TOTAL CURRENT ASSETS 80,154 71,926 OTHER ASSETS 876 786 DEFERRED INCOME TAXES 4,391 4,389 PROPERTY, PLANT AND EQUIPMENT 85,984 84,667 Less allowances for depreciation 44,830 44,118 ------------ ------------ PROPERTY, PLANT AND EQUIPMENT - NET 41,154 40,549 ------------ ------------ TOTAL ASSETS $ 126,575 $ 117,650 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 6,756 $ 6,659 Payrolls and related liabilities, accrued expenses 10,716 7,439 Income taxes 2,688 1,101 ------------ ------------ TOTAL CURRENT LIABILITIES 20,160 15,199 LONG TERM DEBT 3,518 3,796 PENSION LIABILITY 1,124 1,921 POSTRETIREMENT HEALTH BENEFITS OBLIGATION 24,493 23,997 SHAREHOLDERS' EQUITY Common shares, without par value at stated capital amount 5,162 5,141 Retained earnings 73,082 68,502 Translation adjustments (964) (906) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 77,280 72,737 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 126,575 $ 117,650 ============ ============ Common shares - authorized 14,000,000 14,000,000 * Common shares - outstanding 8,599,600 8,618,383 Common shares - treasury 265,576 246,793 * After deducting treasury shares </TABLE> 3
4 THE GORMAN-RUPP COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 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 the management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period and nine month period ended September 30, 1997 are not necessarily indicative of results that may be expected for the year ending December 31, 1997. 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, 1996. NOTE B - INVENTORIES The major components of inventories are as follows: <TABLE> <CAPTION> September 30 December 31 (Thousands of dollars) 1997 1996 ------------ ----------- <S> <C> <C> Raw materials and in-process $18,793 $16,793 Finished parts 14,943 13,352 Finished products 3,890 3,476 --------- -------- Inventories $37,626 $33,621 ========= ======== </TABLE> 4
5 THE GORMAN-RUPP COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Third Quarter 1997 vs Third Quarter 1996 - ------------------------------------------ Net sales were $42,278,000 in 1997 compared to $39,625,000 in 1996, an increase of 6.7%. Most of the increase was due to increased sales at the Patterson Pump Company. Other income was $134,000 in 1997 compared to $131,000 in 1996. Cost of products sold in 1997 was $31,503,000 compared to $29,489,000 in 1996. The largest factors in the increase were higher material and labor costs incurred to support increased sales. As a percentage of net sales, cost of products sold was 74.5% in 1997 compared to 74.4% in 1996. Some change in product mix resulted in the higher gross margin percentage in 1997. Selling, general and administrative expenses increased from $5,661,000 in 1996 to $6,133,000 in 1997 with increases in advertising and travel being the largest reasons for the increase. Income before income taxes was $4,776,000 in 1997 compared to $4,606,000 in 1996, an increase of $170,000. Income tax expense increased from $1,695,000 in 1996 to $1,768,000 in 1997, primarily as a result of the increase in profit. The effective tax rate was 37.0% in 1997 compared to 36.8% in 1996. Net income in 1997 of $3,008,000 increased $97,000 from $2,911,000 in 1996. As a percent of net sales, net income was 7.1% in 1997 and 7.3% in 1996. Net income per share was $.35 in 1997, an increase of $.01 from the $.34 in 1996. 5
6 THE GORMAN-RUPP COMPANY AND SUBSIDIARIES Nine Months 1997 vs Nine Months 1996 - ------------------------------------------ Net sales were $122,971,000 in 1997, an increase of $9,089,000 or 8.0% over the $113,882,000 in 1996. Most of the increase was due to increased sales at the Patterson Pump Company. Other income was $423,000 in 1997 compared to $372,000 in 1996. This increase was primarily due to higher interest income. Cost of products sold in 1997 was $91,717,000 compared to $85,931,000 in 1996. The largest factors in the increase were higher material and labor costs incurred to support increased sales. As a percentage of net sales, cost of products sold was 74.6% in 1997 compared to 75.5% in 1996. Some change in product mix resulted in the lower gross margin percentage in 1997. Selling, general and administrative expenses increased from $17,483,000 in 1996 to $18,033,000 in 1997 with increases in payroll and travel expenses being the largest reasons for the increase. Income before income taxes was $13,644,000 in 1997 compared to $10,840,000 in 1996, an increase of $2,804,000. Income tax expense increased from $4,134,000 in 1996 to $5,088,000 in 1997, primarily as a result of the increase in profit. The effective income tax rate was 37.3% in 1997 compared to 38.1% in 1996. Net income of $8,556,000 in 1997 increased to $1,850,000 from $6,706,000 in 1996. As a percent of net sales, net income was 7.0% in 1997 and 5.9% in 1996. Net income per share was $.99 in 1997, an increase of .21 from $.78 in 1996. 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 4.0 to 1 at September 30, 1997 and 4.7 to 1 at December 31, 1996. The Company presently has adequate working capital, adequate borrowing capacity and a healthy liquidity position. 6
7 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 September 30, 1997 - 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 October 27, 1997 Kenneth E. Dudley ---------------------- /S/ Kenneth E. Dudley ------------------------------ (Signature) Treasurer & Principal Financial Officer 7