GORMAN RUPP CO - Annual Report: 2005 (Form 10-K)
Table of Contents
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the fiscal year ended December 31, 2005
Commission
file number 1-6747
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
THE GORMAN-RUPP COMPANY
(Exact name of Registrant as specified in its charter)
| Ohio | 34-0253990 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 305 Bowman St., Mansfield, Ohio | 44903 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (419) 755-1011
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
| Title of each class | Name of each exchange on which registered | |
| Common Shares, without par value | American Stock Exchange |
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
Yes o No þ
Yes o No þ
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
Yes o No þ
Yes o No þ
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, and (2)
has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate
by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (§229.405 of this chapter) is
not contained herein, and will not be contained, to the best of Registrant’s knowledge, in the
definitive proxy statement incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. þ
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or
a non-accelerated filer. See definition of “accelerated filer and
large accelerated filer” in Rule 12b-2 of Exchange Act. (Check
one):
Large accelerated filer o Accelerated filer þ Non-accelerated filer o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
State the aggregate market value of the voting common equity held by non-affiliates of the
Registrant. The aggregate market value is computed by reference to the price at which the common
equity was sold as of June 30,
2005. $125,818,691.
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock as of
March 1, 2006.
Common
Shares, without par value — 10,685,697
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 2005 Annual Report to Shareholders incorporated by reference into Part II (Items
5-9B).
Portions of Notice of 2006 Annual Meeting of Shareholders and related Proxy Statement incorporated
by reference into Part III (Items 10-14).
**************
The Exhibit Index is located at Page 18
TABLE OF CONTENTS
Table of Contents
PART I
ITEM 1. BUSINESS
Registrant (“Gorman-Rupp” or the “Company”) designs, manufactures and sells pumps and related
equipment (pump and motor controls) for use in water, wastewater, construction, industrial,
petroleum, original equipment, agriculture, fire protection, heating, ventilating and air
conditioning (“HVAC”), military and other liquid-handling applications.
PRODUCTS
The principal products of the Company are pumps and fluid control products. (The Company operates
principally in one business segment, the manufacture and sale of pumps and related fluid control
equipment.) The following table sets forth, for the years 2003 through 2005, the total net sales,
income before income taxes and identifiable assets ($000 omitted) of the Company.
| 2005 | 2004 | 2003 | ||||||||||
Net Sales |
$ | 231,249 | $ | 203,554 | $ | 195,826 | ||||||
Income Before Income Taxes |
17,138 | 14,352 | 14,400 | |||||||||
Identifiable Assets |
179,541 | 165,344 | 162,395 | |||||||||
The Company’s product line consists of pump models ranging in size from 1/4” to 84” and ranging in
rated capacity from less than one gallon per minute up to 500,000 gallons per minute. The types of
pumps which the Company produces include self priming centrifugal, standard centrifugal, magnetic
drive centrifugal, axial and mixed flow, rotary gear, diaphragm, bellows and oscillating.
The pumps have drives that range from 1/35 horsepower electric motors up to much larger electric
motors or internal combustion engines. Many of the larger units comprise encased, fully integrated
sewage pumping stations. In certain cases, units are designed for the inclusion of
customer-supplied drives.
The Company’s larger pumps are sold principally for use in the construction, industrial, sewage and
waste handling fields; for boosting low residential water pressure; for pumping refined petroleum
products, including the ground refueling of aircraft; for agricultural applications; and for fire
fighting.
Many of the Company’s smallest pumps are sold to customers for incorporation into such products as
X-ray processing equipment; gas air conditioning equipment; office copy machines; chemical feeding,
instrumentation and ice cube making machinery; photographic processing and laser cooling
applications; graphic arts equipment; and floor cleaning equipment.
New products developed in 2005 include the Ultra V SeriesTM High Performance
Self-Priming Centrifugal Trash Pump, which provides for increased pressures, increased flows and
greater efficiencies. These pumps furnish up to 300% increased pressure and 40% increased flow
over traditional solids-handling, self-priming, single stage pumps.
As previously forecast, Patterson Pump Company (a wholly owned subsidiary of the Company)
introduced a new line of pumps and pump systems for the HVAC market in 2005 which provides for
superior quality and performance for heating and cooling applications. Specific applications
include chill water, condenser water, heating water, process cooling and heating, and ice storage.
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PART I
ITEM 1.
BUSINESS — Continued
Additionally during 2005, a low cost, six-inch trailer mounted trash pump made of aluminum was
introduced by another wholly owned subsidiary, American Machine and Tool Co., Inc. of Pennsylvania.
A key aspect of this unit is the incorporation of a unique slide mechanism for ease of pump
service.
The forgoing new products will help maintain the Company’s position as a leading manufacturer of
innovative and top quality pumps for the highly competitive fluid handling marketplace.
ACQUISITIONS
During 2005, the Company acquired a submersible pump line from a private European company. The
purchase was made with cash from the Company’s treasury after the fair value of the acquired assets
was determined by an independent third party evaluation. The addition of the pump line will
complement and expand the Gorman-Rupp family of pumps currently offered in international markets.
MARKETING
Except for government and export sales, the Company’s pumps are marketed in the United States and
Canada through a network of about 1,000 distributors, through manufacturers’ representatives (for
sales to many original equipment manufacturers), through third-party distributor catalogs, and by
direct sales. The Company is continuously seeking alliances to further enhance marketing
opportunities. Government sales are handled directly by the Company; and export sales are made
primarily through foreign distributors and representatives. During 2005, 2004 and 2003, there were
no shipments to any single customer that exceeded 10% of total net sales.
In recent years, Gorman-Rupp has actively pursued international business opportunities by, among
other efforts, opening facilities outside North America. In 1996, the Company established an
office in Greece to improve access to Middle East and European markets. In 1998, Patterson Pump
Company’s majority-owned subsidiary, Patterson Pump Ireland Limited, started the assembly of pumps
in Ireland to better serve the European market. (In March 2002, Patterson Pump Company acquired
the balance of the equity interest in Patterson Pump Ireland Limited.) In January 2002, the
Mansfield Division opened a warehouse near Leeuwarden, The Netherlands to further enhance marketing
opportunities in Europe and the Middle East. During 2005, construction began on a leased warehouse
in Bangkok, Thailand from which pumps are scheduled to be shipped in the first half of 2006. The
Company’s foreign operations do not involve material market risks due to their small size, both
individually and collectively.
Approximately 26% of all 2005 sales were made to customers in over 90 nations outside the United
States, as compared to 21% in 2004 and 19% in 2003. (Included were sales made to customers in
Canada approximating 4% in 2005, 2004 and 2003.) The Company continues its efforts to penetrate
international markets principally by its aggressive response to worldwide pumping needs.
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PART I—Continued
ITEM 1. BUSINESS—Continued
COMPETITION
Since the late 1990’s, a number of consolidations have occurred within the highly competitive pump
industry. As a consequence, numerous pump competitors now exist as subsidiaries, divisions or
departments within larger corporations. Foreign sourced pumps have also increasingly penetrated
into the Company’s domestic markets.
Gorman-Rupp estimates that 80 other companies selling pumps and pump units compete in one or more
of the lines of business and applications in which comparable products of the Company are utilized.
Many pumps are specifically designed and engineered for a particular customer’s application. The
Company believes that proper application, product performance, and quality of delivery and service
are the principal methods of competition, and attributes its success to its continued emphasis in
these areas.
PURCHASING AND PRODUCTION
Virtually all materials, supplies, components and accessories used by the Company in the
fabrication of its products, including all castings (for which most patterns are made and owned by
the Company), structural steel, bar stock, motors, solenoids, engines, seals, and plastic and
elastomeric components, are purchased by the Company from other suppliers and manufacturers. No
purchases are made under long-term contracts and the Company is not dependent upon a single source
for any materials, supplies, components or accessories which are of material importance to its
business.
The Company purchases motors for its polypropylene bellows pumps and magnetic drive pumps from
several alternative vendors, and motor components for its large submersible pumps from a limited
number of suppliers. Small motor requirements are also currently sourced from alternative
suppliers.
The other production operations of the Company consist of the machining of castings, the cutting,
shaping and welding of bar stock and structural members, the manufacture of a few minor components,
and the assembling, painting and testing of its products. Virtually all of the Company’s products
are tested prior to shipment.
OTHER ASPECTS
As of December 31, 2005, the Company employed approximately 1,021 persons, of whom approximately
614 were hourly employees. The Company has no collective bargaining agreements, has never
experienced a strike and considers its labor relations to be satisfactory.
Although the Company owns a number of patents, and several of them are important to its business,
Gorman-Rupp believes that the business of the Company is not materially dependent upon any one or
more patents. The Company’s patents, trademarks and other intellectual property are adequate for
its business purposes.
As of December 31, 2005, the value of the Company’s backlog of unfilled orders was approximately
$94.1 million, of which $67.3 million was for the unfilled orders of Patterson Pump Company. The
Company’s
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PART I—Continued
ITEM 1. BUSINESS—Continued
backlog of unfilled orders is scheduled to be shipped during 2006. As of December 31, 2004, the
value of the backlog of unfilled orders was approximately $68.9 million, of which $47.0 million was
for the unfilled orders of Patterson Pump Company.
AVAILABLE INFORMATION
The Company maintains a website accessible through its Internet address of www.gormanrupp.com.
Gorman-Rupp makes available free of charge on or through www.gormanrupp.com its annual reports on
Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K, and any
amendments thereto, as soon as reasonably practicable after those reports (and any amendments) are
electronically filed with or furnished to the Securities and Exchange Commission. (As noted in
Gorman-Rupp’s Annual Report to Shareholders, a paper copy of the Company’s Form 10-K is also
available free of charge upon written request to the Company’s Corporate Secretary.) However, the
information contained on the Company’s website is not a part of this Form 10-K or any other report
filed with or furnished to the Commission.
ITEM 1A. RISK FACTORS
Market influences and cost pressures
The overall pump industry is cyclical in nature, and business activity is somewhat related to
conditions in the durable goods and capital equipment markets. The Company cannot predict the
timing or extent of future economic or market swings. Additionally, raw material and energy
purchases are major drivers of costs in the manufacture of pumps, and these costs are highly
unpredictable. While efforts are made to recoup higher production costs through increased prices,
the future acceptability of such price increases by customers is not guaranteed due to the highly
competitive market place.
Family ownership of common equity
A substantial percentage of the Company’s Common Shares is held by various members of the Gorman
and Rupp families and their affiliates. These family holdings do not typically trade; therefore,
the Common Shares, in part because of these circumstances, as a general matter, have a history of
relatively thin trading experiences on the American Stock Exchange.
ITEM 1B. UNRESOLVED STAFF COMMENTS
The Company has not received any written comments from the Commission staff regarding its periodic
or current reports under the Securities Exchange Act of 1934 within 180 days before the end of its
fiscal year to which this Form10-K relates.
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PART I—Continued
ITEM 2. PROPERTIES
All of the production operations of the Company are conducted at its plants located in Mansfield
and Bellville, Ohio; Toccoa and Buford, Georgia; St. Thomas, Ontario, Canada; County Westmeath,
Ireland; and Royersford, Pennsylvania. All of these properties, except the plants in Buford,
Georgia and County Westmeth, Ireland are owned in fee without any material encumbrance. The
Company similarly owns a facility in Sparks, Nevada comprising a training center and warehouse, and
a former production plant in Oklahoma now used for warehousing and office space. In addition, the
Company leases warehouse facilities in Toccoa, Georgia and near Leeuwarden, The Netherlands to
house pumps and pump parts. The Company’s various production facilities and three warehouses are
described below in more detail.
| Company | ||||||||
| Square | Operation | |||||||
| Location | Footage | Start Date | Description of Production Activity | |||||
Mansfield, Ohio |
238,000 | 1947 | Assembly, Warehousing and Office (1) | |||||
| 134,200 | 1968 | Assembly, Warehousing and Office (2) | ||||||
| 11,500 | 1979 | Training, Personnel and Advertising | ||||||
| 83,500 | 1983 | Warehousing (3) | ||||||
| 360,000 | 2000 | Machining, Assembly and Warehousing (4) | ||||||
Bellville, Ohio |
93,200 | 1953 | Assembly, Warehousing and Office (5) | |||||
Toccoa, Georgia |
171,750 | 1988 | Manufacturing, Warehousing and Office (6) | |||||
| 26,200 | 2005 | Warehousing (7) | ||||||
Buford, Georgia |
19,200 | 2002 | Manufacturing, Warehousing and Office (8) | |||||
St. Thomas, Ontario, Canada |
52,600 | 1960 | Manufacturing, Warehousing and Office (9) | |||||
County Westmeath, Ireland |
10,000 | 1998 | Manufacturing (10) | |||||
Royersford, Pennsylvania |
78,400 | 2002 | Manufacturing, Warehousing and Office (11) | |||||
| 43,100 | 2002 | Warehousing (12) | ||||||
Sand Springs, Oklahoma |
28,200 | 1977 | Warehousing and Office (13) | |||||
Leeuwarden, The Netherlands |
10,000 | 2002 | Warehousing (14) | |||||
Sparks, Nevada |
26,000 | 1972 | Warehousing(15) | |||||
| (1) | The original production plant, located on a 26 acre site, was built in 1917 and has been expanded on several occasions, the latest in 1973. | |
| (2) | This facility, also situated on the foregoing 26 acre site, has been frequently expanded, most recently in 1994 and includes a modern testing facility. | |
| (3) | This facility was built in 1920 and is located on 3.4 acres adjacent to the Company’s 26 acre site. This facility was renovated in 1983. |
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PART I—Continued
ITEM 2. PROPERTIES—Continued
| (4) | In 1997, the Company purchased 90 acres of undeveloped land near the Mansfield Lahm Airport for future expansion and consolidation of facilities for the Mansfield Division and the Corporate Office. In 1998, design work and site preparation began on the new consolidated facilities project. In 2000, the first phase of the manufacturing and warehousing facility was completed, and the machining, weld and fabrication operations of the Mansfield Division were relocated to this facility. The second phase has not yet begun. | |
| (5) | This facility, which comprises the production operations of the Industries Division, is situated on an 8.5 acre site. The initial portion of this plant was built in 1953 and has been expanded on several occasions, most recently in 1973-74. | |
| (6) | This facility, which supports Patterson Pump Company, is situated on a 31 acre site. Between 1989 and 2000, the facility was expanded on several occasions, including the addition of a modern 400,000 gallon testing facility and office. | |
| (7) | This leased facility is utilized by Patterson Pump Company for inventory warehousing purposes. The lease is on an annual basis ending in December, 2006. | |
| (8) | This facility partially supports the operations of the Flo-Pak business unit of Patterson Pump Company. It is leased to Patterson Pump Company for a term of 36 months ending May 31, 2007. | |
| (9) | The plant in St. Thomas, Ontario is operated by Gorman-Rupp of Canada, Ltd. It is situated on an 11 acre site and has undergone a number of expansions since it was established in 1960, the latest being completed in 1998. | |
| (10) | This leased manufacturing facility is occupied by Patterson Pump Ireland Limited and consists of 8,000 square feet of manufacturing space and 2,000 square feet of office space. The lease is a 20 year lease ending March 31, 2022 with certain lease termination points throughout the time period. | |
| (11) | This facility supports the operations of American Machine and Tool Co., Inc. of Pennsylvania. It is located on a 3.25 acre site and has undergone a number of expansions since it was established in 1962. | |
| (12) | This facility also supports the operations of American Machine and Tool Co., Inc. of Pennsylvania. It is located on a 2.2 acre site and has undergone two expansions since it was established in 1982. Ten thousand square feet of this facility is leased to an unrelated company under a 60 month agreement (beginning April 1, 2004). | |
| (13) | The Oklahoma facility is located on 4.5 acres of land. Originally built in 1973, the facility was expanded four times between 1978 and 1991. In 1980, a contiguous parcel of two acres of undeveloped land was purchased for future needs. Starting in 1977, this plant comprised the Company’s Ramparts Division (manufacturer of chemical pumps). In 2003, the Ramparts Division was integrated into the Mansfield Division and manufacturing operations were relocated to Mansfield, Ohio. | |
| (14) | This leased warehousing facility near Leeuwarden, The Netherlands is used by the Mansfield Division for distributing product principally to European customers. The lease is on a month to month basis. | |
| (15) | The Sparks facility consists of office and warehouse space. The Company utilizes 13,000 square feet of the facility, and 13,000 square feet is leased to an unrelated party. The lease is on a month to month basis. |
Gorman-Rupp considers its plants, machinery and equipment to be well maintained, in good
operating condition and adequate for the present uses and business requirements of the Company.
ITEM 3. LEGAL PROCEEDINGS
Numerous business entities in the pump and fluid-handling industries, as well as a multitude of
companies in many other industries, have been targeted in a series of lawsuits in several
jurisdictions by various
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PART I—Continued
ITEM 3. LEGAL PROCEEDINGS—Continued
individuals seeking redress to claimed injury as a result of the entities’ alleged use of asbestos
in their products. The Company and three of its subsidiaries have been drawn into this mass-scaled
litigation, typically as one of hundreds of co-defendants in a particular proceeding. (The vast
majority of these cases
are against Patterson Pump Company.) The allegations in the lawsuits involving the Company and/or
its subsidiaries are vague, general and speculative, and most cases have not advanced beyond the
early stage of discovery. In certain situations, the plaintiffs have voluntarily dismissed the
Company and/or its subsidiaries from some of the lawsuits after the plaintiffs have acknowledged
that there is no basis for their claims. In other situations, the Company and/or its subsidiaries
have been dismissed from some of the lawsuits as a result of court rulings in favor of motions to
dismiss and/or motions for summary judgment. In less than 10 cases, the Company and/or its
subsidiaries have entered into nominal economic settlements, coupled with dismissal of the
lawsuits. Insurers of the Company have engaged legal counsel to represent the Company and its
subsidiaries and to protect their interests.
In addition, the Company and/or its subsidiaries are parties in a small number of legal proceedings
arising out of the ordinary course of business. Management does not currently believe that these
proceedings, or the industry-wide asbestos litigation, will materially impact the Company’s results
of operations, liquidity or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this Form 10-K, no matter was submitted to
a vote of the Company’s shareholders, through the solicitation of proxies or otherwise.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3), the information regarding executive officers called for by
Item 401 of Regulation S-K and by Item 10 of this Form 10-K is set forth below.
| Date | |||||||||
| Elected to | |||||||||
| Name | Age | Office | Position | ||||||
James C. Gorman
|
81 | Chairman | 1989 | ||||||
Jeffrey S. Gorman
|
53 | President and Chief Executive Officer; General Manager, Mansfield Division |
1998/1989 | ||||||
Robert E. Kirkendall
|
63 | Senior Vice President, Chief Financial Officer and Assistant Corporate Secretary |
2003/2002 | ||||||
William D. Danuloff
|
58 | Vice President and Chief Information Officer | 2005 | ||||||
Judith L. Sovine
|
61 | Treasurer | 2001 | ||||||
David P. Emmens
|
57 | Corporate Counsel and Corporate Secretary | 1997/2002 | ||||||
Except as noted, each of the above-named officers has held his or her executive position with the
Company for the past five years. Mr. J. C. Gorman served as the Company’s President from 1964
until 1989, and as Chief Executive Officer from 1964 until 1996. (He has served as a Director of
the Company continuously since 1946.) Mr. J. S. Gorman was elected President and Chief Executive
Officer effective May 1, 1998, after having served as Senior Vice President since 1996. Mr. J. S.
Gorman has held the position of General Manager of the Mansfield Division since 1989. He served as
Assistant General Manager from 1986 to 1988; and he held the office of Corporate Secretary from
1982 to 1990. (He has served as a Director of the Company continuously since 1989.) Mr. Kirkendall
was elected Senior Vice President, Chief Financial Officer and Assistant Corporate Secretary in
2003. He was elected Senior Vice President and Assistant Corporate Secretary in 2002; and he served
as Vice President Corporate Development from 1999 to 2002, Corporate Secretary from 1990 to 2002
and Assistant Treasurer from 1982 to 1999. Mr. Danuloff was elected Vice President and Chief
Information Officer in 2005. He previously served as Vice President Information Technology from
1991 to 2005, after having served as Director of Information Services from 1981 to 1991. Ms.
Sovine was elected Treasurer in 2001. She served as Assistant Treasurer from 1999 to 2001 and prior
to 1999 held a variety of financial management positions within the Company. Mr. Emmens joined the
Company as Corporate Counsel in 1997, and was elected as Corporate Secretary in 2002. He served as
Assistant Corporate Secretary from 1999 to 2002. Mr. J. S. Gorman is the son of Mr. J. C. Gorman.
Mr. Christopher H. Lake, a Director of the Company, is the son of Dr. Peter B. Lake, also a
Director. There are no other family relationships among any of the Executive Officers and Directors
of the Company.
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PART II
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Attention is directed to the section “Ranges of Stock Prices” and the data immediately below
pertaining to the shareholder information reported by the Transfer Agent and Registrar on page 34
in the Company’s 2005 Annual Report to Shareholders, which are incorporated herein by this
reference.
None of the Company’s Common Shares were sold by the Company during the period covered by this Form
10-K that were not registered under the Securities Act of 1933.
The Company did not repurchase any of its Common Shares during the fourth quarter of the period
covered by this Form 10-K.
ITEM
6. SELECTED FINANCIAL DATA
Attention is directed to the section “Eleven Year Summary of Selected Financial Data” on pages 30
and 31 in the Company’s 2005 Annual Report to Shareholders, which is incorporated herein by this
reference.
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Attention is directed to the section “Management’s Discussion and Analysis of Financial Condition
and
Results of Operations” on pages 24-27, and to the “Safe Harbor Statement” on page 35, in the
Company’s 2005 Annual Report to Shareholders, which are incorporated herein by this reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Attention is directed to the section “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” on pages 24-27, and to the “Safe Harbor Statement” on page 35, in the
Company’s 2005 Annual Report to Shareholders, which are incorporated herein by this reference. The
Company’s foreign operations do not involve material market risks due to their small size, both
individually and collectively. As indicated in paragraph 10 on page 25 referenced above, the
Company has no material market risk exposures required to be reported by Item 305 of Regulation
S-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attention is directed to the Company’s consolidated financial statements, the notes thereto and the
report of the independent registered public Accounting Firm thereon on pages 12-23, and to the section “Summary of Quarterly
Results of Operations” on pages 30 and 31, in the Company’s 2005 Annual Report to Shareholders,
which are incorporated herein by this reference.
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PART II—Continued
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
The Company has not changed its independent public accountants and there have been no reportable
disagreements with such accountants regarding accounting principles or practices or financial
disclosure matters.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains a set of disclosure controls and procedures designed to ensure that
information required to be disclosed by the Company in reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms. An evaluation was carried
out under the supervision and with the participation of the Company’s Management, including the
principal executive officer and the principal financial officer, of the effectiveness of the design
and operation of the Company’s disclosure controls and procedures as of the end of the period
covered by this report on Form 10-K. Based on that evaluation, the principal executive officer and
the principal financial officer have concluded that the Company’s disclosure controls and
procedures maintained effective internal control over financial reporting as of December 31, 2005.
Management’s Report on Internal Control Over Financial Reporting
During the course of the Company’s 2004 financial statements close process, one material weakness
in the Company’s internal control over financial reporting was identified. The material weakness
related to the inadequacy of accounting personnel and certain communication procedures at Patterson
Pump Company (a wholly owned subsidiary) which resulted in an untimely recognition of a decrease in
inventory and net income at Patterson Pump.
During the fiscal year ending December 31, 2005, the material weakness was remediated and continued
to remain remediated at year end. Additional accounting staff, development and implementation of
additional controls, and refinement of Company procedures and processes all contributed to the
elimination of the material weakness. There were no other material weaknesses identified at any
Division or Subsidiary of the Company during 2005.
The 2005 Report of Management on Internal Control Over Financial Reporting and the related
Attestation Report of the Independent Registered Public Accounting Firm are incorporated herein by
this reference from pages 28 and 29 of the Company’s 2005 Annual Report to Shareholders.
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PART II—Continued
ITEM 9A. CONTROLS AND PROCEDURES—Continued
Changes in Internal Control Over Financial Reporting
There were no other changes in the Company’s disclosure controls and procedures that occurred
during the most recent fiscal year that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial reporting. Subsequent to the date
of the evaluation, there have been no significant changes in the Company’s disclosure controls and
procedures that could significantly affect the Company’s internal control over financial reporting,
other than the corrective actions taken by Gorman-Rupp with respect to Patterson Pump.
ITEM 9B. OTHER INFORMATION
The Company has no information required to be disclosed in a report on Form 8-K during the fourth
quarter of the year covered by this report on Form 10-K that has not otherwise been reported on a
Form 8-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
With respect to Directors, attention is directed to the sections “Election of Directors” and “Board
of
Directors and Directors’ Committees” in the Company’s definitive Notice of 2006 Annual Meeting of
Shareholders and related Proxy Statement (filed pursuant to Regulation 14A not later than 120 days
after the end of the fiscal year covered by this Form 10-K), which are incorporated herein by this
reference.
With respect to executive officers, attention is directed to Part I of this Form 10-K.
The Company has adopted a Code of Ethics that applies to its President and Chief Executive Officer,
Senior Vice President and Chief Financial Officer, and Treasurer (as well as to all employees,
officers and Directors). The Code of Ethics is set forth as an exhibit to this Form 10-K. In
addition, the Code of Ethics is posted on the Company’s website accessible through its Internet
address of www.gormanrupp.com (under the heading “Investor Relations” and the sub-heading
“Corporate Governance”).
ITEM 11. EXECUTIVE COMPENSATION
Attention is directed to the sections “Board of Directors and Directors’ Committees”, “Executive
Compensation”, “Pension and Retirement Benefits”, “Salary Committee Report on Executive
Compensation” and “Shareholder Return Performance Presentation” in the Company’s definitive Notice
of 2006 Annual Meeting of Shareholders and related Proxy Statement (filed pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this Form 10-K), which are
incorporated herein by this reference.
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PART III—Continued
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | |
Attention is directed to the sections “Principal Shareholders”, “Election of Directors” and
“Shareholdings by Executive Officers” in the Company’s definitive Notice of 2006 Annual Meeting of
Shareholders and related Proxy Statement (filed pursuant to Regulation 14A not later than 120 days
after the end of the fiscal year covered by this Form 10-K), which are incorporated herein by this
reference.
On May 22, 1997, the Company’s Board of Directors adopted a Non-Employee Directors’ Compensation
Plan. This Plan became effective without shareholder approval and constitutes the Company’s only
equity compensation plan. The Plan provides for share compensation for regular services performed
by each of the Company’s non-employee Directors. In addition to cash compensation, non-employee
Directors receive an automatic award of 500 Common Shares (from the Company’s treasury) on each
July 1 (through 2006 unless extended). The number of Common Shares which may be awarded under the
Plan cannot exceed 50,000, subject to certain conditions (e.g. stock splits, stock dividends). As
of December 31, 2005, 25,500 Common Shares had been issued to non-employee Directors and 31,375
Common Shares remained available for future issuance. (6,875 Common Shares were added as a result
of the 5 for 4 stock split effective September 10, 2004.) No options, warrants or rights are
available for issuance under the Plan. Attention is directed to the section “Board of Directors
and Directors’ Committees” in the Company’s definitive Notice of 2006 Annual Meeting of
Shareholders and related Proxy Statement (filed pursuant to Regulation 14A not later than 120 days
after the end of the fiscal year covered by this Form 10-K), which is incorporated herein by this
reference.
EQUITY COMPENSATION PLAN INFORMATION
| Number of securities | ||||||||
| to be issued upon | Weighted average | |||||||
| exercise of outstanding | exercise price of | Number of securities | ||||||
| options, warrants and | outstanding options, | remaining available | ||||||
| Plan Category | rights | warrants and rights | for future issuance | |||||
Non-Employee
Directors’ Compensation Plan
(not approved
by shareholders) |
-0- | $-0- | 31,375 | |||||
Equity compensation
plans approved by
shareholders |
— | — | — | |||||
Total |
-0- | $-0- | 31,375 | |||||
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The
Company has no relationships or transactions required to be reported by Item 404 of Regulation S-K.
13
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PART III—Continued
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Attention
is directed to the section “Appointment of Independent
Registered Public Accounting Firm” in the
Company’s definitive Notice of 2006 Annual Meeting of Shareholders and related Proxy Statement
(filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered
by this Form 10-K), which is incorporated herein by this reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this report:
| 1. | Financial Statements | ||
| With respect to the audited consolidated financial statements of the Registrant and its subsidiaries, the following documents have been incorporated by reference into this report: |
| (i) | Consolidated balance sheets—December 31, 2005 and 2004 | ||
| (ii) | Consolidated statements of income—Years ended December 31, 2005, 2004 and 2003 | ||
| (iii) | Consolidated statements of shareholders’ equity—Years ended December 31, 2005, 2004 and 2003 | ||
| (iv) | Consolidated statements of cash flows—Years ended December 31, 2005, 2004 and 2003 | ||
| (v) | Notes to consolidated financial statements | ||
| (vi) | 2005 Report of independent registered public accounting firm on consolidated financial statements | ||
| (vii) | 2005 Report of management on internal control over financial reporting | ||
| (viii) | 2005 Report of independent registered public accounting firm on management’s assessment |
| 2. | Financial Statement Schedules | ||
| All financial statement schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. |
14
Table of Contents
PART IV—Continued
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES—Continued
3. Exhibits
The exhibits listed below are submitted in a separate section of this report immediately
following the Exhibit Index.
(3)
|
(i) Articles of incorporation and (ii) By-laws | |
(4)
|
Instruments defining the rights of security holders, including indentures | |
(10)
|
Material contracts | |
(13)
|
Annual report to security holders | |
(14)
|
Code of Ethics | |
(21)
|
Subsidiaries of the registrant | |
(23)
|
Consents of experts | |
(24)
|
Powers of attorney | |
(31)
|
Rule 13a-14(a)/15d-14(a) Certifications | |
(32)
|
Section 1350 Certifications |
15
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
*By:
|
DAVID P. EMMENS | |||
| David P. Emmens | ||||
| Attorney-In-Fact |
Date: March 10, 2006
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Table of Contents
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 and on the date
indicated.
*
|
JEFFREY S. GORMAN | President, Principal Executive | |
| Jeffrey S. Gorman | Officer and Director | ||
*
|
ROBERT E. KIRKENDALL | Senior Vice President and Principal Financial and Accounting Officer | |
| Robert E. Kirkendall | |||
*
|
JAMES C. GORMAN | Director | |
| James C. Gorman | |||
*
|
THOMAS E. HOAGLIN | Director | |
| Thomas E. Hoaglin | |||
*
|
CHRISTOPHER H. LAKE | Director | |
| Christopher H. Lake | |||
*
|
PETER B. LAKE | Director | |
| Peter B. Lake | |||
*
|
RICK R. TAYLOR | Director | |
| Rick R. Taylor | |||
*
|
W. WAYNE WALSTON | Director | |
| W. Wayne Walston | |||
*
|
JOHN A. WALTER | Director | |
| John A. Walter |
| * | The undersigned, by signing his name hereto, does sign and execute this Annual Report on Form 10-K on behalf of The Gorman-Rupp Company and on behalf of each of the above-named Officers and Directors of The Gorman-Rupp Company pursuant to Powers of Attorney executed by The Gorman-Rupp Company and by each such Officer and Director and filed with the Securities and Exchange Commission. |
March 10, 2006
By:
|
/s/DAVID P. EMMENS | |||
| David P. Emmens | ||||
| Attorney-In-Fact |
17
Table of Contents
ANNUAL REPORT ON FORM 10-K
THE GORMAN-RUPP COMPANY
For the Year Ended December 31, 2005
EXHIBIT INDEX
| EXHIBIT | pg.no. | |||||
(3)(4)
|
Amended Articles of Incorporation, as amended | 19 | ||||
(3)(4)
|
Regulations | 21 | ||||
(10)(a)
|
Form of Indemnification Agreement between the Company and its Directors and Officers | 28 | ||||
(10)(b)
|
Non-Employee Directors’ Compensation Plan | 36 | ||||
(13)
|
Incorporated Portions of 2005 Annual Report to Shareholders | 38 | ||||
(14)
|
Code of Ethics | 60 | ||||
(21)
|
Subsidiaries of the Company | 63 | ||||
(23)
|
Consent of Independent Registered Public Accounting Firm | 64 | ||||
(24)
|
Powers of Attorney | 65 | ||||
(31)(a)
|
Certification of Chief Executive Officer (Section 302 of the Sarbanes-Oxley Act of 2002) | 68 | ||||
(31)(b)
|
Certification of Chief Financial Officer (Section 302 of the Sarbanes-Oxley Act of 2002) | 70 | ||||
(32)
|
Certification Pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | 72 | ||||
18