Exhibit (13)
The Gorman-Rupp Company
Report of Ernst & Young LLP, Independent Auditors
Board of Directors and Shareholders
The Gorman-Rupp Company
We have audited the accompanying consolidated balance sheets of The Gorman-Rupp
Company and subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 2002, appearing on pages 11
through 19. 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 auditing standards generally accepted
in the United States. 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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Gorman-Rupp Company and subsidiaries at December 31, 2002 and 2001, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Ernst & Young LLP
Cleveland, Ohio
January 31, 2003
10
The Gorman-Rupp Company
Consolidated Statements of Income
(Thousands of dollars, except per share amounts) Year ended December 31,
2002 2001 2000
----------- ----------- -----------
Net sales $ 194,075 $ 202,927 $ 190,144
Cost of products sold 152,624 154,819 141,714
----------- ----------- -----------
Gross Profit 41,451 48,108 48,430
Selling, general and
administrative expenses 27,921 25,640 25,807
Non-recurring expense -
plant relocation -- -- 1,143
----------- ----------- -----------
Operating Income 13,530 22,468 21,480
Other income 797 886 1,340
Other expense (124) (319) (624)
----------- ----------- -----------
Income Before Income Taxes 14,203 23,035 22,196
Income taxes 5,267 8,450 8,400
----------- ----------- -----------
Net Income $ 8,936 $ 14,585 $ 13,796
=========== =========== ===========
Basic and Diluted Earnings
Per Share $ 1.05 $ 1.70 $ 1.61
=========== =========== ===========
Average number of shares outstanding 8,539,065 8,555,830 8,583,183
See notes to consolidated financial statements.
11
The Gorman-Rupp Company
Consolidated Balance Sheets
(Thousands of dollars) December 31,
Assets 2002 2001
-------- --------
Current Assets:
Cash and cash equivalents $ 13,086 $ 20,583
Accounts receivable 29,234 28,378
Inventories:
Raw materials and in-process 20,778 22,224
Finished parts 12,970 9,700
Finished products 1,839 1,965
-------- --------
35,587 33,889
Deferred income taxes 4,294 4,249
Prepaid and other 1,658 2,020
-------- --------
Total Current Assets 83,859 89,119
Property, Plant and Equipment
Land 2,004 1,592
Buildings 47,258 43,070
Machinery and equipment 79,591 73,787
-------- --------
128,853 118,449
Less accumulated depreciation 71,096 64,554
-------- --------
Property, Plant and Equipment - Net 57,757 53,895
Deferred Income Taxes -- 2,819
Other 11,230 2,280
-------- --------
$152,846 $148,113
======== ========
See notes to consolidated financial statements.
12
December 31,
Liabilities and Shareholders' Equity 2002 2001
---- ----
Current Liabilities:
Accounts payable $ 6,557 $ 5,433
Payrolls and related liabilities 3,306 3,377
Commissions payable 2,347 3,389
Accrued expenses 1,950 1,355
Accrued property and sales tax 1,740 1,600
Income taxes 468 --
Accrued medical benefits 2,769 2,949
Current portion of long-term notes payable 145 --
--------- ---------
Total Current Liabilities 19,282 18,103
Long-Term Notes Payable 291 --
Postretirement Benefits 21,817 22,100
Shareholders' Equity
Common Shares, without par value:
Authorized - 14,000,000 shares;
Outstanding - 8,540,553 shares in 2002 and
8,537,553 shares in 2001 (after deducting
treasury shares of 324,623 in 2002 and
327,623 in 2001) at stated capital amount 5,089 5,087
Retained earnings 108,309 104,833
Accumulated other comprehensive loss
(translation adjustments) (1,942) (2,010)
--------- ---------
Total Shareholders' Equity 111,456 107,910
--------- ---------
$ 152,846 $ 148,113
========= =========
13
The Gorman-Rupp Company
Consolidated Statements of Shareholders' Equity
ACCUMULATED
OTHER
COMMON RETAINED COMPREHENSIVE
(Thousands of dollars, except per share amounts) SHARES EARNINGS INCOME (LOSS) TOTAL
------ -------- ------------- -----
BALANCES JANUARY 1, 2000 $5,123 $88,409 $(1,237) $92,295
Comprehensive income:
Net income 13,796 13,796
Foreign currency translation adjustments (287) (287)
-------
Total comprehensive income 13,509
Issuance of 3,000 common shares from treasury 2 45 47
Purchase of 29,496 common shares for treasury (19) (511) (530)
Cash dividends - $.62 a share (5,322) (5,322)
------ -------- ------- --------
BALANCES DECEMBER 31, 2000 5,106 96,417 (1,524) 99,999
Comprehensive income:
Net income 14,585 14,585
Foreign currency translation adjustments (486) (486)
-------
Total comprehensive income 14,099
Issuance of 3,000 common shares from treasury 2 71 73
Purchase of 31,000 common shares for treasury (21) (765) (786)
Cash dividends - $.64 a share (5,475) (5,475)
------ -------- ------- --------
BALANCES DECEMBER 31, 2001 5,087 104,833 (2,010) 107,910
Comprehensive income:
Net income 8,936 8,936
Foreign currency translation adjustments 68 68
-------
Total comprehensive income 9,004
Issuance of 3,000 common shares from treasury 2 90 92
Cash dividends - $.65 a share (5,550) (5,550)
------ -------- ------- --------
BALANCES DECEMBER 31, 2002 $5,089 $108,309 $(1,942) $111,456
====== ======== ======= ========
See notes to consolidated financial statements.
14
The Gorman-Rupp Company
Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31,
(Thousands of dollars) 2002 2001 2000
-------- -------- --------
Cash flows from operating activities:
Net income $ 8,936 $ 14,585 $ 13,796
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,035 7,128 6,863
Deferred income taxes 791 1,835 661
Changes in operating assets and liabilities:
Accounts receivable 2,517 473 (953)
Inventories 4,862 5,871 (3,571)
Accounts payable (294) (1,958) 1,586
Postretirement benefits (2,156) (1,490) (1,057)
Other (312) (78) (949)
-------- -------- --------
Net cash provided by operating activities 21,379 26,366 16,376
Cash flows from investing activities:
Capital additions, net (5,765) (3,139) (11,439)
Purchases of short-term investments -- (2,000) (7,204)
Proceeds from short-term investments 1,039 2,000 10,429
Payment for acquisitions, net of $3,671
cash acquired (18,150) -- --
Other -- -- 300
-------- -------- --------
Net cash used for investing activities (22,876) (3,139) (7,914)
Cash flows from financing activities:
Cash dividends (5,550) (5,475) (5,322)
Proceeds from bank borrowings 10,000 2,495 17,119
Payments to bank and note holders for borrowings (10,450) (6,508) (16,213)
Purchase of common shares for treasury -- (786) (530)
-------- -------- --------
Net cash used for financing activities (6,000) (10,274) (4,946)
-------- -------- --------
Net (decrease) increase in cash
and cash equivalents (7,497) 12,953 3,516
Cash and cash equivalents:
Beginning of year 20,583 7, 630 4,114
-------- -------- --------
End of year $ 13,086 $ 20,583 $ 7,630
======== ======== ========
See notes to consolidated financial statements.
15
The Gorman-Rupp Company
Notes To Consolidated Financial Statements
NOTE A - SUMMARY OF MAJOR ACCOUNTING POLICIES CONSOLIDATION: The consolidated
financial statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS: The Company considers highly liquid
instruments with maturities of 90 days or less to be cash equivalents. The
Company periodically makes short term investments for which cost approximates
market value.
INVENTORIES: Inventories are stated at the lower of cost or market. The cost for
approximately 97% and 96% of inventories at December 31, 2002 and 2001,
respectively, is determined using the last-in, first-out (LIFO) method, with the
remainder determined using the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated on the
basis of cost. Depreciation is computed principally by the straight-line method
over the estimated useful lives of the assets. The estimated useful life ranges
from 20 to 50 years for buildings and 5 to 10 years for machinery and
equipment. Long-lived assets are reviewed for impairment losses whenever events
or changes in circumstances indicate the carrying amount may not be recovered
through future net cash flows generated by the assets.
CONCENTRATION OF CREDIT RISK: The Company does not require collateral from its
customers and has generally had a good collection history. Sales to one customer
were approximately 11.6% and 16.7% of total net sales for the year ended
December 31, 2002 and 2001, respectively. In 2000 there were no sales to any
customer greater than 10% of net sales.
FREIGHT COSTS: The Company reflects the cost for shipping its products to
customers in cost of products sold.
REVENUE RECOGNITION: Revenue from product sales is generally recognized when
shipment to the customer has been made, which is when title passes.
ADVERTISING: The Company expenses all advertising costs as incurred which, for
the years ended December 31, 2002, 2001, and 2000 totaled $2,532,000,
$2,519,000 and $2,968,000 respectively.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS: The Company adopted SFAS No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets, effective
January 1, 2002, as required. The evaluation of goodwill under SFAS 142 requires
valuations of each applicable underlying business. These valuations can be
significantly affected by estimates of future performance and discount rates
over a relatively long period of time, market price valuation multiples and
marketplace transactions in related markets. These estimates will likely change
over time.
The Company was not required to conduct the transitional business valuation
reviews required by SFAS 142 as the Company had no goodwill or significant
intangible assets as of January 1, 2002. Upon adoption of SFAS 142, goodwill is
not amortized, but it is required to be evaluated annually. If this annual
review indicates impairment of goodwill balances, that entire impairment will be
recorded immediately and reported as a component of current operations. The
Company performed its annual review as of October 1, 2002, which did not
indicate impairment. At December 31, 2002, the Company had $4.1 million of
goodwill included in other assets.
Effective January 1, 2002, the Company adopted FASB Statement No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets"which supersedes
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of."Statement No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
The Company determined there was no effect on earnings or financial position
upon adoption.
In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities."Statement No. 146 requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or disposal
plan. Examples of costs covered by the standard include lease termination costs
and certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity.
Statement No. 146 is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002.
TRANSLATION OF FOREIGN CURRENCY: Assets and liabilities of the Company's
operations outside the United States which are accounted for in a functional
currency other than U.S. dollars are translated into U.S. dollars using year-end
exchange rates. Revenues and expenses are translated at average exchange rates
effective during the year. Foreign currency translation gains and losses are
included as a component of accumulated other comprehensive (loss) income within
shareholders' equity.
Gains and losses resulting from foreign currency transactions, the amounts of
which are not material, are included in net income.
RECLASSIFICATION: Certain prior year amounts have been reclassified to conform
to the 2002 presentation.
NOTE B - INVENTORIES: The excess of replacement cost over LIFO cost is
approximately $26,128,000 and $25,113,000 at December 31, 2002 and 2001,
respectively. Replacement cost approximates current cost.
NOTE C - FINANCING ARRANGEMENTS: Under unsecured demand lines of credit with
banks, the Company may borrow up to $10.0 million with interest at LIBOR plus
..75% or at alternative rates as selected by the Company. At December 31, 2002,
$10.0 million was available for borrowing.
On January 3, 2002, the Company negotiated an unsecured $16.0 million credit
facility with interest at LIBOR plus .75% or at alternate rates as selected by
the Company. The Company borrowed $10.0 million during the year. The Company
paid the outstanding balance of the term loan and subsequently terminated the
loan.
The Company had an $8.0 million unsecured revolving loan agreement that matured
in May 2001 and was renewed as a $4.0 million unsecured revolving loan agreement
which matures in May 2005. At December 31, 2002, $3.0 million was available for
borrowing after deducting $1.0 million for letters of credit. Interest is
payable quarterly at LIBOR plus .55% or at alternative rates as selected by the
Company (interest rate of 1.93% and 2.70% at December 31, 2002 and 2001,
respectively.)
The $10.0 million demand line of credit and the $4.0 million revolving loan
agreements contain restrictive covenants including limits on additional
borrowings and maintenance of certain operating and financial ratios. At
December 31, 2002, the Company was in compliance with such requirements.
At December 31, 2002, the Company had a note payable of $436,000 resulting from
one of its acquisitions. The note is due in installments on March 1, 2003, 2004
and 2005.
Interest expense which approximates interest paid, was $72,000, $116,000 and
$183,000 (net of $25,000 capitalized interest) in 2002, 2001, and 2000,
respectively.
16
The Gorman-Rupp Company
Notes To Consolidated Financial Statements
NOTE D - INCOME TAXES: The components of income before income taxes are:
(Thousands of dollars) 2002 2001 2000
------- ------- -------
United States $14,089 $22,456 $22,002
Foreign 114 579 194
------- ------- -------
$14,203 $23,035 $22,196
======= ======= =======
The components of income tax expense are as follows:
(Thousands of dollars) 2002 2001 2000
------- ------- -------
Current expense:
Federal $ 3,894 $ 5,306 $ 6,484
Canadian 159 306 332
State and local 423 1,003 923
------- ------- -------
4,476 6,615 7,739
Deferred expense (credit):
Federal 753 1,723 640
Canadian (35) (123) (67)
State and local 73 235 88
------- ------- -------
791 1,835 661
------- ------- -------
$ 5,267 $ 8,450 $ 8,400
======= ======= =======
The reconciliation between income tax expense and the amount computed by
applying the statutory federal income tax rate of 35% to income before income
taxes is as follows:
(Thousands of dollars) 2002 2001 2000
------- ------- -------
Income taxes at
statutory rate $ 4,971 $ 8,062 $ 7,769
State and local income taxes,
net of federal tax benefit 265 773 694
Other 31 (385) (63)
------- ------- -------
$ 5,267 $ 8,450 $ 8,400
======= ======= =======
Deferred tax assets and liabilities consist of the following:
(Thousands of dollars) 2002 2001 2000
------- ------- -------
Deferred tax assets
Inventories $ 1,817 $ 1,430 $ 2,089
Accrued liabilities 2,477 2,819 2,700
Postretirement health
benefits obligation 8,607 8,725 9,718
------- ------- -------
Total deferred tax assets 12,901 12,974 14,507
Deferred tax liabilities
Depreciation and
amortization 8,034 5,651 5,501
Other 573 255 103
------- ------- -------
Total deferred tax liabilities 8,607 5,906 5,604
------- ------- -------
Net deferred tax assets $ 4,294 $ 7,068 $ 8,903
======= ======= =======
The Company made income tax payments of $3,985,000, $7,223,000, and $8,849,000
in 2002, 2001 and 2000, respectively.
NOTE E - PENSIONS AND OTHER POSTRETIREMENT BENEFITS: The Company sponsors a
defined benefit pension plan covering substantially all employees. The Company's
policy is to fund the maximum tax-deductible contribution. The Company also
sponsors a non-contributory defined benefit health care plan that provides
health benefits to retirees and their spouses. The Company funds the cost of
these benefits as incurred.
The following table presents the plans' funded status reconciled with amounts
recognized in the Company's balance sheets:
PENSION POSTRETIREMENT
BENEFITS BENEFITS
----------------------- ------------------------
(Thousands of dollars) 2002 2001 2002 2001
CHANGE IN BENEFIT OBLIGATION
Benefit obligation
at beginning of year $ 29,917 $ 26,343 $ 18,649 $ 16,280
Service cost 1,510 1,339 724 602
Interest cost 2,137 2,071 1,357 1,262
Actuarial loss/(gain) 2,931 2,804 4,928 2,042
Benefits paid (3,505) (2,640) (1,526) (1,537)
-------- -------- -------- --------
BENEFIT OBLIGATION AT END OF YEAR 32,990 29,917 24,132 18,649
CHANGE IN PLAN ASSETS
Fair value of plan assets
at beginning of year 27,099 30,670 -- --
Actual return on plan assets (1,329) (2,351) -- --
Company contributions 3,276 1,420 1,526 1,537
Benefits paid (3,505) (2,640) (1,526) (1,537)
-------- -------- -------- --------
Fair value of plan assets
at end of year 25,541 27,099 -- --
-------- -------- -------- --------
Funded status of the plan
(under) funded (7,449) (2,818) (24,132) (18,649)
Unrecognized net actuarial
loss/(gain) 10,419 4,103 2,284 (2,734)
Unrecognized net transition asset -- (174) -- --
Unrecognized prior service cost -- -- (1,495) (2,252)
-------- -------- -------- --------
PREPAID (ACCRUED) BENEFIT COST $ 2,970 $ 1,111 $(23,343) $(23,635)
======== ======== ======== ========
WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate 6.96% 7.50% 6.96% 7.50%
Expected rate of return
on plan assets 8.00% 8.00% -- --
Rate of compensation increase 3.75% 4.00% -- --
17
The Gorman-Rupp Company
Notes To Consolidated Financial Statements
Approximately $1,500,000 of the post-retirement benefit obligation has been
classified as a current liability at December 31, 2002 and 2001.
For measurement purposes, an 9.8 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 2003.
The rate was assumed to decrease gradually to 5.0 percent by 2008 and remain at
that level thereafter. The plan's assets consist of equity and fixed-income
mutual funds in approximately equal proportion.
The following table presents the components of net periodic benefit cost:
PENSION BENEFITS POSTRETIREMENT BENEFITS
----------------------------------- -----------------------------------
(Thousands of dollars) 2002 2001 2000 2002 2001 2000
------- ------- ------- ------- ------- -------
Service cost $ 1,510 $ 1,339 $ 1,251 $ 724 $ 602 $ 582
Interest cost 2,137 2,071 1,739 1,357 1,262 1,232
Expected return on plan assets (2,137) (2,477) (2,104) -- -- --
Amortization of prior service cost
and unrecognized gain 81 (36) (42) (756) (756) (756)
Recognized net actuarial loss (174) (174) (174) (91) (351) (340)
------- ------- ------- ------- ------- -------
BENEFIT COST $ 1,417 $ 723 $ 670 $ 1,234 $ 757 $ 718
======= ======= ======= ======= ======= =======
The assumed health care trend rate has a significant effect on the amounts
reported for postretirement benefits.
A one-percentage point change in the assumed health care cost trend rate would
have the following effects:
ONE-PERCENTAGE POINT
--------------------
(Thousands of dollars) INCREASE DECREASE
-------- --------
Effect on total of service and interest cost components in 2002 $ 173 $ (159)
Effect on accumulated postretirement benefit obligation as of December 31, 2002 $1,954 $(1,761)
NOTE F - BUSINESS SEGMENT INFORMATION: The Company operates principally in one
business segment, the manufacture and sale of pumps and related fluid control
equipment for water, wastewater, construction, industrial, petroleum, original
equipment, agricultural, fire protection, heating, ventilating and air
conditioning (HVAC), and military applications. 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) and by direct sales.
Export sales are principally made through foreign distributors and
manufacturers' representatives. The Company exports to more than 75 countries
around the world. The components of customer sales, based on the location of
customers, are as follows:
(Thousands of dollars) 2002 % 2001 % 2000 %
-------- --- -------- --- -------- ---
United States $167,160 86 $170,250 84 $153,104 81
Exports to foreign countries 26,915 14 32,677 16 37,040 19
-------- --- -------- --- -------- ---
TOTAL $194,075 100 $202,927 100 $190,144 100
======== === ======== === ======== ===
NOTE G - ACQUISITIONS: On February 28, 2002, the Company acquired all of the
issued and outstanding stock of American Machine & Tool Co., Inc. ("AMT") for a
cash purchase price of approximately $12.6 million, net of $3.7 million cash
acquired. AMT's "off the shelf" pumps give the Company the opportunity to market
commodity type products. AMT, located in Royersford, Pennsylvania, is a
developer and manufacturer of standard centrifugal pumps for industrial and
commercial fluid-handling applications. The acquisition of AMT offers the
Company the opportunity to increase sales of AMT's products through the
Company's existing outlets to domestic and international markets. AMT's primary
sales channel is comprised of large-scale distributors of industrial supplies
promoted through third-party distributor catalogs. AMT operates as a subsidiary
of the Company.
On March 1, 2002, the Company acquired all of the issued and outstanding stock
of Flo-Pak, Inc.("Flo-Pak") for a purchase price of approximately $6.5 million,
of which $5.6 million was cash and $900, 000 was a note payable, a portion of
which was paid in 2002. The acquisition of Flo-Pak offers the Company a "ready
business" opportunity to diversify its product line and increase market share
without the cost or time to perform the necessary research and development
activities to enter the market. Gorman-Rupp has a distribution network and
market strength to offer growth opportunities to Flo-Pak eliminating the need
for additional capital investment to gain market share. Flo-Pak, located in
Atlanta, Georgia, is a manufacturer of designed pumping systems for the heating,
ventilation and air-conditioning (HVAC) market. The results of operations of
Flo-Pak are part of Patterson Pump Company, a subsidiary of the Company.
The following tables summarizes the estimated fair values of the assets acquired
and liabilities assumed at the date of acquisition of AMT and Flo-Pak:
AMT FLO-PAK
FEBRUARY 28, MARCH 1,
(Thousands of dollars) 2002 2002
------- -------
Current Assets $ 8,416 Current Assets $2,717
Property, plant Property, plant
& equipment 4,942 & equipment 190
Intangible assets 327 Intangible assets 2,780
Other assets 104 Goodwill 4,053
------- -------
Total assets acquired 13,789 Total assets acquired 9,740
Liabilities (1,212) Liabilities (3,282)
------- -------
Net assets acquired $12,577 Net assets acquired $6,458
======= ======
18
Notes Cont'd
Of the $327,000 of acquired intangible assets for AMT, $140,000 was assigned to
tradenames and is not subject to amortization. The remaining $187,000 is a sales
contract that will be amortized over a weighted-average useful life of
approximately 18 years.
Of the $2.8 million of acquired intangible assets for Flo-Pak, $880,000 was
assigned to tradenames and is not subject to amortization. The remaining
intangible assets will be amortized. The amortizable intangible assets are
comprised of drawings of $1.4 million (15 year weighted-average useful life) and
program logic of $500,000 (10 year weighted-average useful life). The $4.1
million of goodwill is recorded in other assets and is not expected to be
deductible for income tax purposes.
Annual amortization expense for all intangibles is expected to be $150,000 for
the next 5 years. Amortization expense was $125,000 in 2002.
The acquisitions were financed with cash from the Company's treasury, a $900,000
note payable and by a draw of $10.0 million on an unsecured credit facility
established on January 3, 2002. The Company paid back the credit facility
borrowings and $450,000 of the note payable in 2002.
The acquired businesses' results have been included in the Company's financial
statements since the date of acquisitions. The following unaudited pro forma
data summarizes the results of operations of the Company for the periods
indicated as if the fiscal 2002 acquisitions had been completed as of the
beginning of the periods presented. The pro forma data shows the effect on
actual operating results prior to the acquisitions. Effects of cost reductions
and operating synergies are not presented. These pro forma amounts are not
indicative of the results that would have actually been achieved if the
acquisitions had occurred at the beginning of the periods presented or that may
be achieved in the future.
YEAR ENDED DECEMBER 31,
(Thousands of dollars) 2002 2001
-------- --------
Net sales $197,171 $230,147
Net income 8,074 15,249
Basic and diluted earnings
per common share $ 0.95 $ 1.78
Note H - Other Assets: The major components of other assets are as follows:
DECEMBER 31,
(Thousands of dollars) 2002 2001
-------- --------
Goodwill $ 4,053 $ --
Intangibles:
Flo-Pak tradenames 880 --
Drawings 1,400 --
Other intangibles 827 --
Prepaid pension cost 2,970 1,111
Other assets 1,225 1,169
-------- --------
11,355 2,280
Less - accumulated amortization (125) --
-------- --------
$ 11,230 $ 2,280
======== ========
The Gorman-Rupp Company
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The Company operates in one business segment, the manufacture and sale of pumps
and related fluid control equipment for water, wastewater, construction,
industrial, petroleum, original equipment, agriculture, fire protection,
heating, ventilating and air conditioning (HVAC), and military applications.
On February 28, 2002, the Company acquired all of the issued and outstanding
stock of American Machine & Tool Co., Inc.("AMT") for a net cash purchase price
of approximately $12.6 million.O n March 1, 2002, the Company acquired all of
the issued and outstanding stock of Flo-Pak, Inc.("Flo-Pak") for a cash purchase
price of approximately $5.6 million. The acquisitions were financed with cash
from the Company's treasury, $900,000 of notes payable and by a draw of $10.0
million on an unsecured credit facility. The Company paid back these bank
borrowings in 2002. AMT, located in Royersford, Pennsylvania, is a developer and
manufacturer of standard centrifugal pumps for industrial and commercial
fluid-handling applications. AMT operates as a subsidiary of the Company.
Flo-Pak, located in Atlanta, Georgia, is a manufacturer of designed pumping
systems for the HVAC market. Flo-Pak's operations have been merged into
Patterson Pump Company, a subsidiary of the Company.
In March 2002, Patterson Pump Company acquired the remaining interest in its
subsidiary, Patterson Pump Ireland Limited. Patterson Pump Company now owns 100%
of Patterson Pump Ireland Limited. Pump assembly at Patterson Pump Ireland
Limited will continue to serve the European market.
RESULTS OF OPERATIONS
2002 COMPARED TO 2001: The Company recorded net sales of $194.1 million in 2002
compared to $202.9 million in 2001, a decline of $8.8 million or 4.4 percent.
The decline in sales principally resulted from the impact of a stalled economy
for our customers in the capital goods markets and weaker industrial and
municipal sales. The newly acquired businesses contributed approximately $20.3
million to sales in 2002, offsetting the decline in basic pump sales.
Significant to the overall reduction of sales was a 31.0% decline in sales of
fabricated components used in the gas turbine power generation industry, a
market that contributed to the Company's record performance in 2001. Price
increases on products marketed in a more price conscious environment ranged from
0-3 percent. Export shipments decreased 17.6% in 2002, and represented 14% of
net sales compared to 16% in 2001. The Company is not exposed to material market
risks as a result of its export sales or operations outside of the United
States.
Export sales are denominated predominately in U.S. dollars and made on open
account or with a letter of credit.
Cost of products sold in 2002 amounted to $152.6 million compared to $154.8
million in 2001. As a percent of net sales, gross profit margins were 21.4% in
2002 and 23.7% in 2001. The decrease in gross margins resulted principally from
the impact of slowed capital spending creating lower volume-related margins,
continued increases in employee medical and healthcare expenses and higher cost
of property and liability insurance. All of the Company's subsidiaries and
divisions felt the impact of volume-related costs. The implementation of
cost-reduction programs and strategies along with ongoing manufacturing
efficiency improvements resulting from continued capital investments somewhat
offset this marginal decline during 2002.
Selling, general and administrative (SG&A) expenses in 2002 were $27.9 million
compared to $25.6 million in 2001, an increase of $2.3 million or 8.9 percent.
As a percent of net sales, during 2002 and 2001, SG&A expenses were 14.4% and
12.6%, respectively. SG&A expenses resulting from the acquisitions accounted for
approximately $3.4 million. Cost control efforts resulting in reductions in
employee related costs offset a portion of the SG&A increase.
Other income in 2002 was $797,000 and consisted principally of interest income
and income from the rental of one of the Company's vacated facilities. Other
income in 2001 totaled $886,000 and was principally the result of interest
income on invested funds. Interest income during 2002 was reduced due to lower
available rates of return.
Other expense was $124,000 and $319,000 in 2002 and 2001, respectively. Other
expenses consisted principally of interest expense and loss on the disposal of
assets.
19
The Gorman-Rupp Company
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The effective income tax rate was 37.1% in 2002, compared to 36.7% in 2001.
Net income for 2002 was $8.9 million compared to $14.6 million in 2001. As a
percent of net sales, net income was 4.6% and 7.2% in 2002 and 2001,
respectively. Earnings per share was $1.05 in 2002 compared to $1.70 in 2001.
The decrease in each of these performance measures resulted from the reasons
discussed above. All of the Company's subsidiaries and divisions were profitable
during 2002.
Cash dividends paid on common shares increased during 2002 to 65 cents per share
and marked the 30th consecutive year of increased cash dividends. The dividend
yield at December 31, 2002 was 2.8 percent.
2001 COMPARED TO 2000: The Company recorded net sales of $202.9 million in 2001,
a record that marked the 15th consecutive year of increased sales, and exceeded
2000 net sales of $190.1 million by 6.7 percent. Highlighting sales growth was
the substantial increase in demand for fabricated components used in the gas
turbine power generation industry combined with continued strong demand for
pumps in the fire protection, fresh water and wastewater markets. Growth in
these markets, together with price increases on products ranging from 2-3%, were
partially offset by the economic downturn in 2001, reducing demand for small
pumps made for the original equipment market and establishing flat demand for
pumps distributed to other domestic commercial markets. In addition,
international business declined as export shipments decreased nearly 12% in
2001, representing 16% of total net sales as compared to 19% in 2000. However,
the Company is not exposed to material market risks as a result of its export
sales or its operations outside of the United States. Payment terms for export
sales transacted by the Company consist of revocable and irrevocable letters of
credit and open accounts; and payment terms regarding export shipments are made
solely in U.S. Dollars. The Company's operations outside of the United States
are small, both individually and collectively.
Cost of products sold in 2001 equaled 76.3% of net sales and amounted to $154.8
million compared to 74.5% and $141.7 million in 2000. As a percent of net sales,
gross profit margins were 23.7% in 2001 and 25.5% in 2000. Decreased gross
margins resulted principally from the economic impact of higher energy costs,
increased medical and healthcare expense and underutilized capacity primarily
occurring after the September 11th terrorist attack and extending through the
fourth quarter. The last half of 2001 presented different capacity utilization
issues for the Company. While the Company's subsidiary in Georgia was responding
to substantial increases in demand, two facilities in Ohio were experiencing
order reductions and budget cutbacks. Cost control measures, and on-going
manufacturing efficiencies from prior investments assisted in maintaining the
performance results for 2001.
Selling, general and administrative (SG&A) expenses in 2001 were $25.6 million
compared to $25.8 million in 2000, a decrease of 0.6 percent. As a percent of
net sales, SG&A expenses were 12.6% and 13.6% in 2001 and 2000, respectively.
Cost control reductions, principally in advertising and product promotion in the
fourth quarter contributed to lower SG&A expense for the year.
Other income in 2001 totaled $886,000 and was principally the result of interest
income on invested funds. Interest income was constrained, however, due to lower
rates of return. Other income in 2000 was $1.3 million and included interest
income and a gain from the sale of unutilized machinery and equipment recorded
in the fourth quarter.
Other expense was $319,000 in 2001 and consisted principally of interest expense
and loss on the disposal of assets. In 2000 other expense was $624,000 and
consisted of interest expense, change in the dollar exchange and loss on the
disposal of assets.
The effective income tax rate was 36.7% in 2001, compared to 37.8% in 2000.
Record net income for the 15th consecutive year increased 5.7% in 2001 to $14.6
million compared to $13.8 million in 2000. As a percent of net sales, net income
was 7.2% and 7.3% in 2001 and 2000, respectively. Earnings per share increased
nine cents to $1.70 in 2001 compared to $1.61 in 2000.
Cash dividends paid on common shares equaled 64 cents per share and marked the
29th consecutive year of increased cash dividends. The dividend yield at
December 31, 2001 was 2.4 percent.
TRENDS: 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 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. 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.
LIQUIDITY AND SOURCES OF CAPITAL: Cash and cash equivalents totaled $13.1
million and there was no bank debt at December 31, 2002. In addition, the
Company has $10.0 million available in bank short-term lines of credit and $3.0
million available under a $4.0 million unsecured revolving credit facility that
matures in May 2005. As of December 31, 2002, $1.0 million of the revolving
facility covered outstanding letters of credit. Although the $10.0 million
credit facility and the $4.0 million revolving facility contain restrictive
covenants, including limits on additional borrowings and maintenance of certain
operating and financial ratios, the Company was in compliance with all
requirements at December 31, 2002. At December 31, 2002, the Company had a note
payable of $436,000 resulting from one of its acquisitions. The note is due in
installments on March 1, 2003, 2004, and 2005.
During 2002, the Company financed its business acquisitions, including the
repayment of a $10.0 million draw, capital improvements and working capital
requirements principally through internally generated funds, including inventory
reductions. Capital expenditures for 2003, estimated to be $3.0 to $5.0 million,
are expected to be financed through internally generated funds and existing
credit arrangements. During 2001 and 2000, the Company financed its capital
improvements and working capital requirements principally through internally
generated funds, proceeds from short-term investments and line of credit
arrangements with banks.
Cash flows from operating activities were $21.4 million, $26.4 million and $16.4
million in 2002, 2001 and 2000, respectively. The decrease in 2002 was primarily
due to decreased operating results. The increase in 2001 as compared to 2000 was
the result of improved operating results and inventory reductions.
Cash used for investing activities was $22.9 million, $3.1 million and $7.9
million for 2002, 2001 and 2000, respectively. In 2002, the Company spent $18.2
million for the acquisitions of AMT and Flo-Pak and related costs. The major
capital expenditure in 2000 related to the Company's new manufacturing facility
for the Mansfield Division.
Cash used for financing activities was $6.0 million, $10.3 million and $4.9
million in 2002, 2001 and 2000, respectively. Cash dividends were the major
reason for the cash outflows.
The ratio of current assets to current liabilities was 4.3 to 1 at December 31,
2002, compared to 4.9 to 1 at December 31, 2001. Management believes that the
Company has adequate working capital and a healthy liquidity position.
20
NEW ACCOUNTING PRONOUNCEMENTS: In the first quarter of 2002, the Company adopted
the Financial Accounting Standards Board ("FASB") issued Statement No. 141,
"Business Combinations, "and Statement No. 142, "Goodwill and Other Intangible
Assets." Goodwill and indefinite-lived intangibles will no longer be amortized
but will be subject to annual impairment review in accordance with the
Statements. Other intangible assets will continue to be amortized over their
useful lives. Since the Company had no goodwill and intangible assets were
insignificant at January 1, 2002, the adoption of these statements had no effect
on the earnings and financial position of the Company.
As a result of the 2002 acquisitions of AMT and Flo-Pak, goodwill and indefinite
lived intangibles totaling $4.1 million and $1.0 million respectively, were
recorded. The Company performed its annual impairment review as of October 1,
2002, which did not indicate impairment.
In 2002, the Company adopted FASB Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" which supersedes Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." Statement No. 144 addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. The effect of adopting this
statement had no effect on the Company's financial statements.
In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." Statement No. 146 requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or disposal
plan. Examples of costs covered by the standard include lease termination costs
and certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity.
Statement No. 146 is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002.
CRITICAL ACCOUNTING POLICIES: The accompanying consolidated financial statements
have been prepared in conformity with accounting principles generally accepted
in the United States. When more than one accounting principle, or the method of
its application, is generally accepted, Management selects the principle or
method that is appropriate in Gorman-Rupp's specific circumstances. Application
of these accounting principles requires Management to make estimates about the
future resolution of existing uncertainties; as a result, actual results could
differ from these estimates. In preparing these financial statements, Management
has made its best estimates and judgments of the amounts and disclosures
included in the financial statements, giving due regard to materiality. The
Company does not believe there is a great likelihood that materially different
amounts would be reported under different conditions or using different
assumptions pertaining to the accounting policies described below.
REVENUE RECOGNITION: Substantially all of Gorman-Rupp's revenues are recognized
when products are shipped to unaffiliated customers. The Securities and Exchange
Commission's Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition"provides guidance on the application of generally accepted
accounting principles to selected revenue recognition issues. The Company has
concluded that its revenue recognition policy is appropriate and in accordance
with generally accepted accounting principles and SAB No. 101.
ALLOWANCE FOR DOUBTFUL ACCOUNTS: The Company evaluates the collectibility of its
accounts receivable based on a combination of factors. In circumstances where
the Company is aware of a specific customer's inability to meet its financial
obligations to Gorman-Rupp (e.g., bankruptcy filings, substantial down-grading
of credit scores), the Company records a specific reserve for bad debts against
amounts due to reduce the net recognized receivable to the amount the Company
reasonably believes will be collected. For all other customers, the Company
recognizes reserves for bad debts based on the length of time the receivables
are past due. If circumstances change (e.g., an unexpected material adverse
change in a major customer's ability to meet its financial obligations), the
Company's estimates of the recoverability of amounts due could be reduced by a
material amount. Historically the Company's collection history has been good.
INVENTORIES AND RELATED ALLOWANCE: Inventories are valued at the lower of cost
or market value and have been reduced by an allowance for excess and obsolete
inventories. The estimated allowance is based on a variety of factors, including
historical inventory usage and management evaluations. The Company uses the
last-in, first-out method for primarily all of its inventories. Historically the
Company has not experienced large write-offs due to obsolescence.
PENSION PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS: The measurement of
liabilities related to pension plans and other post-retirement benefit plans is
based on management's assumptions related to future events including interest
rates, return on pension plan assets, compensation increases and health care
cost trend rates. The Company uses a measurement date of October 31st for the
benefit plan determination. The discount rates used to determine the present
value of future benefits are based on effective yields of AA quality or better
fixed income investments. The discount rate used to value pension plan and
postretirement obligations was 6.96% at October 31, 2002, compared to 7.5% at
October 31, 2001. Annual expense amounts are determined based on the discount
rate at October 31st of the prior year. The expected rate of return on pension
assets is designed to be a long-term assumption that will be subject to
year-to-year variability. The rate for 2002 and 2001 was 8.0%.During 2002, the
fair market value of pension assets decreased. Actual pension plan asset
performance will either reduce or increase unamortized losses which will
ultimately affect net income. The rate of compensation increases was reduced
from 4.0% in 2001 to 3.75% in 2002 to reflect actual experience.
The rate of increase in medical costs over the next five years was increased to
reflect actual experience. The health care cost trend rate assumption has a
significant effect on the amounts reported. For example, a one percentage
increase in the assumed health care cost trend rate would result in a $173,000
increase in total service and interest costs in 2002, and a one percent decrease
would result in a $159,000 decrease in these costs. A one percent increase in
the assumed health care cost trend rate would also increase the accumulated
postretirement benefit obligation as of December 31, 2002 by $2.0 million and a
one percent decrease would decrease it by $1.8 million.
The overall effect of the assumption changes above will be to increase pension
and postretirement expenses in fiscal 2003.
INCOME TAXES: The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standard No. 109, "Accounting for Income Taxes" which
requires that deferred tax assets and liabilities be recognized using enacted
tax rates for the effect of temporary differences between the book and tax bases
of recorded assets and liabilities. Realization of the Company's deferred tax
assets is principally dependent upon the Company's achievement of projected
future taxable income, which Management believes is sufficient to fully utilize
the deferred tax assets recorded.
GOODWILL AND OTHER INTANGIBLES: The Company accounts for goodwill in a purchase
business combination as the excess of the cost over the fair value of net assets
acquired. Business combinations can also result in other intangible assets being
recognized. Amortization of intangible assets, if applicable, occurs over their
estimated useful lives. SFAS 142 establishes a new two-step method for testing
goodwill for impairment on an annual basis (or an interim basis if an event
occurs that might reduce the fair value of a reporting unit below its carrying
value). SFAS 142 also requires that an identifiable intangible asset that is
determined to have an indefinite useful economic life not be amortized, but
separately tested for impairment using a one-step fair value based approach.
Gorman-Rupp conducts this review for all of its reporting units during the
fourth quarter of the fiscal year. No impairment resulted from the annual
reviews performed in 2002.
OTHER MATTERS: Transactions with related parties are in the ordinary course of
business and are not material to Gorman-Rupp's financial position, net income or
cash flows. Gorman-Rupp does not have off-balance sheet arrangements, financings
or other relationships with unconsolidated "special purpose entities."
21
The Gorman-Rupp Company
Eleven Year Summary of Selected Financial Data
(Thousands of dollars,except per share amounts)
2002 2001 2000 1999
---------- ---------- ---------- ----------
OPERATING RESULTS:
Net sales $ 194,075 $ 202,927 $ 190,144 $ 181,945
Gross profit 41,451 48,108 48,430 46,347
Income taxes 5,267 8,450 8,400 8,460
Income (1) 8,936 14,585 13,796 13,081
Depreciation and amortization 7,035 7,128 6,863 6,489
Interest expense 72 116 183 55
Return on net sales (%) 4.6 7.2 7.3 7.2
Sales dollars per employee 184.1 194.9 186.2 177.3
Income dollars per employee 8.5 14.0 13.5 12.7
FINANCIAL POSITION:
Current assets $ 83,859 $ 89,119 $ 82,289 $ 78,185
Current liabilities 19,282 18,103 19,079 17,439
Working capital 64,577 71,016 63,210 60,746
Current ratio 4.3 4.9 4.3 4.5
Property,plant and equipment - net 57,757 53,895 57,885 53,609
Capital additions 5,765 3,139 11,439 16,182
Total assets 152,846 148,113 145,881 136,875
Long-term notes payable 291 -- 3,413 3,107
Shareholders' equity 111,456 107,910 99,999 92,295
Dividends paid 5,550 5,475 5,322 5,152
Average number of employees 1,054 1,041 1,021 1,026
SHAREHOLDER INFORMATION:
Basic and diluted earnings per share (1) $ 1.05 $ 1.70 $ 1.61 $ 1.52
Cash dividends per share .65 .64 .62 .60
Shareholders' equity per share at December 31 13.05 12.64 11.67 10.74
Average number of shares outstanding 8,539,065 8,555,830 8,583,183 8,585,877
(1) Income in 1992 is before the cumulative effect of a change in accounting
principle which reduced income by $11,886 or $1.38 per share.
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS
The following is a summary of unaudited quarterly results of operations for the
years ended December 31, 2002 and 2001:
(Thousands of dollars, except per share amounts)
BASIC AND DILUTED
QUARTER ENDED 2002 NET SALES GROSS PROFIT NET INCOME EARNINGS PER SHARE
-------- ------- ------ -----
First Quarter $ 45,299 $ 9,547 $2,153 $ .25
Second Quarter 52,583 12,247 3,250 .38
Third Quarter 49,139 9,920 1,905 .23
Fourth Quarter 47,054 9,737 1,628 .19
-------- ------- ------ -----
Total $194,075 $41,451 $8,936 $1.05
======== ======= ====== =====
22
1998 1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
$ 173,864 $ 167,426 $ 157,549 $ 151,765 $ 139,601 $ 133,537 $ 127,937
43,713 40,964 39,127 36,516 35,763 32,699 30,975
7,400 6,340 5,735 5,590 5,625 5,063 4,693
11,752 10,612 9,928 9,461 9,327 8,795 7,966
6,330 5,959 5,675 5,173 4,534 4,274 4,025
188 238 330 602 195 58 213
6.8 6.3 6.3 6.2 6.7 6.6 6.2
170.1 163.5 161.8 156.1 140.6 136.0 127.6
11.5 10.4 10.2 9.7 9.4 9.0 7.9
$ 78,556 $ 81,695 $ 71,926 $ 71,401 $ 60,070 $ 55,746 $ 50,152
17,431 17,036 15,199 19,727 16,391 14,382 12,380
61,125 64,659 56,727 51,674 43,679 41,364 37,772
4.5 4.8 4.7 3.6 3.7 3.9 4.1
43,916 40,919 40,549 42,163 40,879 36,835 30,807
9,327 6,329 4,036 8,229 8,553 10,277 4,496
127,477 127,865 117,650 119,816 107,100 98,706 86,434
783 6,689 3,796 7,188 4,715 5,338 668
83,706 78,060 72,737 67,240 61,608 56,911 52,759
4,983 4,821 4,567 4,466 4,209 4,122 3,923
1,022 1,024 974 972 993 982 1,003
$ 1.37 $ 1.23 $ 1.15 $ 1.10 $ 1.09 $ 1.02 $ .92
.58 .56 .53 .52 .49 .48 .46
9.75 9.07 8.44 7.81 7.18 6.63 6.14
8,599,713 8,609,479 8,617,168 8,587,466 8,579,633 8,588,493 8,594,255
BASIC AND DILUTED
QUARTER ENDED 2001 NET SALES GROSS PROFIT NET INCOME EARNINGS PER SHARE
-------- -------- -------- -----
First Quarter $ 49,671 $ 12,346 $ 3,604 $ .42
Second Quarter 54,838 13,425 3,998 .47
Third Quarter 51,430 11,959 3,637 .42
Fourth Quarter 46,988 10,378 3,346 .39
-------- -------- -------- -----
Total $202,927 $ 48,108 $ 14,585 $1.70
======== ======== ======== =====
23
The Gorman-Rupp Company
Shareholder Information
RANGES OF STOCK PRICES
The high and low sales price and dividends per share for common shares traded on
the American Stock Exchange were:
SALES PRICE OF COMMON SHARES DIVIDENDS PER SHARE
2002 2001 2002 2001
------------------ ------------------- ---- ----
HIGH LOW HIGH LOW
First Quarter $27.5000 $23.5100 $18.5000 $17.3750 $.16 $.16
Second Quarter 31.5000 25.6500 28.7500 18.0000 .16 .16
Third Quarter 31.0000 21.5000 26.3000 18.8000 .16 .16
Fourth Quarter 27.2900 20.4000 27.2500 19.2000 .17 .16
Shareholder information reported by Transfer Agent and Registrar, National City
Bank, February 6, 2003.
HOLDERS SHARES
------- ---------
Individuals 1,296 2,313,612
Nominees, brokers and others 25 6,226,941
----- ---------
Total 1,321 8,540,553
===== =========
An additional 324,623 common shares are held in Treasury.
26
SAFE HARBOR
STATEMENT
This Annual Report contains various forward-looking statements and includes
assumptions concerning The Gorman-Rupp Company's operations, future results and
prospects. These forward-looking statements are based on current expectations
and are subject to risk and uncertainties. In connection with the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, The
Gorman-Rupp Company provides the following cautionary statement identifying
important economic, political and technological factors, among others, the
absence of which could cause the actual results or events to differ materially
from those set forth in or implied by the forward-looking statements and related
assumptions.
Such factors include the following: (1) continuation of the current and
projected future business environment, including interest rates and capital and
consumer spending; (2) competitive factors and competitor responses to
Gorman-Rupp initiatives; (3) successful development and market introductions of
anticipated new products; (4) stability of government laws and regulations,
including taxes; (5) stable governments and business conditions in emerging
economies; (6) successful penetration of emerging economies; and (7)
continuation of the favorable environment to make acquisitions, domestic and
foreign, including regulatory requirements and market values of candidates.
27