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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2014

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 1-6747

 

 

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.)

600 South Airport Road, Mansfield, Ohio   44903
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code (419) 755-1011

 

 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨    Smaller reporting company   ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

There were 26,253,043 shares of common stock, without par value, outstanding at April 23, 2014.

 

 

 

*********************

Page 1 of 21 Pages


Table of Contents

The Gorman-Rupp Company and Subsidiaries

Three Months Ended March 31, 2014 and 2013

 

PART I. FINANCIAL INFORMATION

 

Item 1.

   Financial Statements (Unaudited)     3   
   Condensed Consolidated Statements of Income  
  

-Three Months Ended March 31, 2014 and 2013

    3   
   Condensed Consolidated Statements of Comprehensive Income  
  

-Three Months Ended March 31, 2014 and 2013

    4   
   Condensed Consolidated Balance Sheets  
  

-March 31, 2014 and December 31, 2013

    5   
   Condensed Consolidated Statements of Cash Flows  
  

-Three Months Ended March 31, 2014 and 2013

    6   

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations     10   

Item 3.

   Quantitative and Qualitative Disclosures about Market Risk     14   

Item 4.

   Controls and Procedures     14   

PART II. OTHER INFORMATION

 

Item 1.

   Legal Proceedings     15   

Item 1A.

   Risk Factors     15   

Item 6.

   Exhibits     16   

EX-31.1

   Section 302 Principal Executive Officer (PEO) Certification     17   

EX-31.2

   Section 302 Principal Financial Officer (PFO) Certification     19   

EX-32

   Section 1350 Certifications     21   

EX-101

   Financial statements from the Quarterly Report on Form 10-Q of The Gorman-Rupp Company for the quarter ended March 31, 2014, formatted in eXtensible Business Reporting Language (XBRL)  

 

2


Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1—FINANCIAL STATEMENTS (UNAUDITED)

THE GORMAN-RUPP COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

 

     Three Months Ended
March 31,
 
(Dollars in thousands, except per share amounts)    2014     2013  

Net sales

   $ 110,064      $ 92,457   

Cost of products sold

     82,510        71,233   
  

 

 

   

 

 

 

Gross profit

     27,554        21,224   

Selling, general and administrative expenses

     12,861        12,967   
  

 

 

   

 

 

 

Operating income

     14,693        8,257   

Other income

     173        119   

Other expense

     (34     (149
  

 

 

   

 

 

 

Income before income taxes

     14,832        8,227   

Income taxes

     4,878        2,409   
  

 

 

   

 

 

 

Net income

   $ 9,954      $ 5,818   
  

 

 

   

 

 

 

Earnings per share

   $ 0.38      $ 0.22   

Cash dividends paid per share

   $ 0.09      $ 0.08   

Average shares outstanding

     26,253,043        26,246,116   

See notes to condensed consolidated financial statements.

 

3


Table of Contents

THE GORMAN-RUPP COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

 

     Three Months Ended
March 31,
 
(Thousands of dollars)    2014     2013  

Net income

   $ 9,954      $ 5,818   

Cumulative translation adjustments

     (356     (833

Pension and postretirement medical liability adjustments, net of tax

     174        1,209   
  

 

 

   

 

 

 

Other comprehensive (loss) income

     (182     376   
  

 

 

   

 

 

 

Total comprehensive income

   $ 9,772      $ 6,194   
  

 

 

   

 

 

 

See notes to condensed consolidated financial statements.

 

4


Table of Contents

THE GORMAN-RUPP COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

(Thousands of dollars)    March 31,
2014
    December 31,
2013
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 21,750      $ 31,123   

Short-term investments

     254        253   

Accounts receivable - net

     71,902        59,374   

Inventories - net

     88,933        89,946   

Deferred income taxes and other current assets

     8,370        8,593   
  

 

 

   

 

 

 

Total current assets

     191,209        189,289   

Property, plant and equipment

     255,463        253,758   

Less accumulated depreciation

     125,815        122,569   
  

 

 

   

 

 

 

Property, plant and equipment - net

     129,648        131,189   

Other assets

     5,749        3,657   

Goodwill and other intangible assets - net

     31,199        31,503   
  

 

 

   

 

 

 

Total assets

   $ 357,805      $ 355,638   
  

 

 

   

 

 

 

Liabilities and shareholders’ equity

    

Current liabilities:

    

Accounts payable

   $ 16,961      $ 17,882   

Short-term debt

     5,163        9,000   

Payroll and related liabilities

     9,916        11,020   

Commissions payable

     6,184        6,081   

Deferred revenue

     6,591        7,190   

Accrued expenses

     10,867        9,587   
  

 

 

   

 

 

 

Total current liabilities

     55,682        60,760   

Postretirement benefits

     18,563        18,393   

Deferred and other income taxes

     12,339        12,345   
  

 

 

   

 

 

 

Total liabilities

     86,584        91,498   

Shareholders’ equity

    

Common shares, without par value:

    

Authorized - 35,000,000 shares

    

Outstanding - 26,253,043 shares in 2014 and in 2013 (after deducting treasury shares of 795,753 in 2014 and in 2013) at stated capital amount

     5,131        5,131   

Additional paid-in capital

     2,822        2,822   

Retained earnings

     271,911        264,648   

Accumulated other comprehensive loss

     (8,643     (8,461
  

 

 

   

 

 

 

Total shareholders’ equity

     271,221        264,140   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 357,805      $ 355,638   
  

 

 

   

 

 

 

See notes to condensed consolidated financial statements.

 

5


Table of Contents

THE GORMAN-RUPP COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

     Three Months Ended  
     March 31,  
(Thousands of dollars)    2014     2013  

Cash flows from operating activities:

    

Net income

   $ 9,954      $ 5,818   

Adjustments to reconcile net income attributable to net cash (used) provided by operating activities:

    

Depreciation and amortization

     3,462        3,428   

Pension expense, including 2013 non-cash settlement loss

     697        2,284   

Contributions to pension plan

     (1,200     (1,800

Changes in operating assets and liabilities:

    

Accounts receivable

     (12,528     (4,276

Inventories

     1,014        (1,414

Accounts payable

     (920     682   

Commissions payable

     103        651   

Other

     (1,944     (1,703
  

 

 

   

 

 

 

Net cash (used) provided by operating activities

     (1,362     3,670   

Cash flows from investing activities:

    

Capital additions

     (1,591     (2,349

Change in short-term investments

     (1     4   
  

 

 

   

 

 

 

Net cash used for investing activities

     (1,592     (2,345

Cash flows from financing activities:

    

Cash dividends

     (2,692     (2,100

Payments to bank for borrowings

     (3,837     (3,000
  

 

 

   

 

 

 

Net cash used for financing activities

     (6,529     (5,100

Effect of exchange rate changes on cash

     110        120   
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (9,373     (3,655

Cash and cash equivalents:

    

Beginning of year

     31,123        20,119   
  

 

 

   

 

 

 

March 31,

   $ 21,750      $ 16,464   
  

 

 

   

 

 

 

See notes to condensed consolidated financial statements.

 

6


Table of Contents

PART I

 

ITEM 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by GAAP for complete financial statements. The consolidated financial statements include the accounts of The Gorman-Rupp Company (the “Company” or “Gorman-Rupp”) and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management of the Company, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2014 are not necessarily indicative of results that may be expected for the year ending December 31, 2014. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, from which related information herein has been derived.

NOTE B - INVENTORIES

Inventories are stated at the lower of cost or market. The costs for approximately 74% of inventories at March 31, 2014 and 76% of inventories at December 31, 2013 are determined using the last-in, first-out (LIFO) method, with the remainder determined using the first-in, first-out (FIFO) method applied on a consistent basis. An actual valuation of inventory under the LIFO method is made at the end of each year based on the inventory levels and costs at that time. Interim LIFO calculations are based on management’s estimate of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory valuation.

The major components of inventories are as follows (net of LIFO reserves of $56.4 million and $55.3 million at March 31, 2014 and December 31, 2013, respectively):

 

(Thousands of dollars)

   March 31,
2014
     December 31,
2013
 

Raw materials and in-process

   $ 22,769       $ 26,877   

Finished parts

     39,995         46,491   

Finished products

     26,169         16,578   
  

 

 

    

 

 

 

Total inventories

   $ 88,933       $ 89,946   
  

 

 

    

 

 

 

NOTE C - PRODUCT WARRANTIES

A liability is established for estimated future warranty and service claims based on historical claims experience and specific product failures. The Company expenses warranty costs directly to cost of products sold. Changes in the Company’s product warranty liability are:

 

(Thousands of dollars)

   March 31,  
   2014     2013  

Balance at beginning of year

   $ 1,170      $ 1,133   

Provision

     488        354   

Claims

     (486     (324
  

 

 

   

 

 

 

Balance at end of period

   $ 1,172      $ 1,163   
  

 

 

   

 

 

 

 

7


Table of Contents

PART I – CONTINUED

 

ITEM 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – CONTINUED

 

NOTE D - PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company sponsors a defined benefit pension plan (“Plan”) covering certain domestic employees. Benefits are based on each covered employee’s years of service and compensation. The Plan is funded in conformity with the funding requirements of applicable U.S. regulations. The Plan was closed to new participants effective January 1, 2008. Employees hired after this date, in eligible locations, participate in an enhanced 401(k) plan instead of the defined benefit pension plan. Employees hired prior to this date continue to accrue benefits.

Additionally, the Company sponsors defined contribution pension plans made available to all domestic and Canadian employees.

The Company also sponsors a non-contributory defined benefit health care plan that provides health benefits to certain domestic and Canadian retirees and their spouses. The Company funds the cost of these benefits as incurred.

The following tables present the components of net periodic benefit cost:

 

     Pension Benefits     Postretirement Benefits  

(Thousands of dollars)

   Three Months Ended
March 31,
    Three Months Ended
March 31,
 
   2014     2013     2014     2013  

Service cost

   $ 726      $ 849      $ 227      $ 288   

Interest cost

     720        666        212        182   

Expected return on plan assets

     (1,208     (1,293     —          —     

Recognized actuarial loss (gain)

     458        612        (197     (181

Settlement loss

     —          1,386        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

   $ 696      $ 2,220      $ 242      $ 289   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

8


Table of Contents

PART I – CONTINUED

 

ITEM 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – CONTINUED

 

NOTE E – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes reclassifications out of accumulated other comprehensive income (loss):

 

(Thousands of dollars)

   Three Months Ended March 31,  
           2014                     2013          

Pension and other postretirement benefits:

    

Recognized actuarial loss (a)

   $ 261      $ 431   

Settlement loss (b)

     —          916   

Settlement loss (c)

     —          470   
  

 

 

   

 

 

 

Total before income tax

   $ 261      $ 1,817   

Income tax

     (87     (608
  

 

 

   

 

 

 

Net of income tax

   $ 174      $ 1,209   
  

 

 

   

 

 

 

 

(a) The recognized actuarial loss is included in the computation of net periodic benefit cost. See Note D for additional details.
(b) This portion of the settlement loss is included in Cost of products sold on the Statements of Income.
(c) This portion of the settlement loss in included in Selling, general & administrative expenses on the Statements of Income.

The following tables summarize changes in accumulated balances for each component of other comprehensive income (loss):

 

(Thousands of dollars)

   Currency
Translation
Adjustments
    Pension and
Other
Postretirement
Benefits
    Accumulated
Other
Comprehensive
Income (Loss)
 

Balance at January 1, 2014

   $ (1,062   $ (7,399   $ (8,461

Current period credit (charge)

     (356     261        (95

Income tax expense

     —          (87     (87
  

 

 

   

 

 

   

 

 

 

Balance at March 31, 2014

   $ (1,418   $ (7,225   $ (8,643
  

 

 

   

 

 

   

 

 

 

 

(Thousands of dollars)

   Currency
Translation
Adjustments
    Pension and
Other
Postretirement
Benefits
    Accumulated
Other
Comprehensive
Income (Loss)
 

Balance at January 1, 2013

   $ 319      $ (16,601   $ (16,282

Current period credit (charge)

     (833     1,817        984   

Income tax expense

     —          (608     (608
  

 

 

   

 

 

   

 

 

 

Balance at March 31, 2013

   $ (514   $ (15,392   $ (15,906
  

 

 

   

 

 

   

 

 

 

 

9


Table of Contents

PART I – CONTINUED

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview and Outlook

Net sales during the first quarter of 2014 increased 19.0% to a record $110.1 million compared to $92.5 million during the same period in 2013. Domestic sales increased 28.0% or $15.7 million and international sales increased 5.3% or $1.9 million. Sales in our water end markets increased $12.0 million and sales in non-water end markets increased $5.6 million during the first quarter.

The increase in water end market sales was due about equally to increases in shipments of $4.1 million in the construction market principally for pumps for rental businesses and for oil and gas drilling and fracking within North America, $4.1 million in the fire market due to increased domestic commercial construction spending, and $4.3 million in the municipal market driven by large volume pumps related to wastewater and water supply. Sales increased $4.8 million in the non-water markets primarily due to increased shipments for the OEM market related to power generation equipment and pumps for military applications.

Gross profit was a record $27.6 million for the first quarter of 2014, resulting in gross margin of 25.0% compared to 23.0% in the same period in 2013. The increase in gross margin was principally due to increased sales and sales mix changes during the quarter. Operating income was $14.7 million, resulting in operating margin of 13.3% in the first quarter of 2014 compared to 8.9% in the same period in 2013. The gross margin and operating margin for the first quarter of 2013 were reduced by 90 and 150 basis points, respectively, due to a non-cash pension settlement charge which did not recur in the first quarter of 2014.

Net income was $10.0 million during the first quarter of 2014 compared to $5.8 million in the first quarter of 2013 and earnings per share were $0.38 and $0.22 for the respective periods. Earnings per share for the first quarter of 2013 were reduced by $0.04 due to the pension settlement charge noted above.

The Company’s backlog of orders was $171.7 million at March 31, 2014 compared to $182.2 million at December 31, 2013. Incoming orders grew 19% during the current quarter compared to the previous quarter primarily reflecting increased activity across our water end markets. The $10.5 million decrease in backlog is principally due to record shipments during the current quarter. Approximately $56.1 million of the PCCP project to supply major flood control pumps to a member of a joint venture construction group for a significant New Orleans flood control project remain in the March 31, 2014 backlog total. The pumps for this project are expected to be shipped primarily in the second half of 2014 and first half of 2015.

Cash and short-term investments totaled $22.0 million and short-term bank debt was $5.2 million at March 31, 2014. Working capital rose 5.4% from December 31, 2013 to a record $135.5 million at March 31, 2014 principally due to increased first quarter 2014 net sales. Net capital expenditures for 2014, consisting principally of machinery and equipment and building improvements, are estimated to be in the range of $12 to $14 million and are expected to be financed through internally generated funds.

 

10


Table of Contents

PART I – CONTINUED

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – CONTINUED

 

At its April 24, 2014 meeting, the Board of Directors of the Company declared a quarterly cash dividend of $0.09 per share on the common stock of the Company, payable June 10, 2014, to shareholders of record May 15, 2014. This marks the 257th consecutive dividend paid by The Gorman-Rupp Company.

We believe that the Company is well positioned to grow organically at generally comparable operating margins over the long term by expanding our customer base both domestically and globally, and through new product offerings. We expect that the increasing need for water and wastewater infrastructure rehabilitation within the United States, and similar needs internationally, along with increasing demand for high quality pumps and pump systems for industrial and agricultural applications, will provide excellent growth opportunities for Gorman-Rupp in the future.

First Quarter 2014 Compared to First Quarter 2013

Net Sales

 

(Thousands of dollars)

   Three Months Ended
March 31,
     $ Change      % Change  
   2014      2013        

Net sales

   $ 110,064       $ 92,457       $ 17,607         19.0

Sales increased $12.0 million in our water end markets due to increased construction market demand of $4.1 million principally for pumps for rental businesses and for oil and gas drilling and fracking within North America. In addition, sales increased in the fire market of $4.1 million due to commercial construction spending and in the municipal market of $4.3 million driven by large volume pumps related to wastewater and water supply.

Sales increased $4.8 million in the non-water markets primarily due to increased shipments for the OEM market related to power generation equipment and pumps for military applications.

Cost of Products Sold and Gross Profit

 

(Thousands of dollars)

   Three Months Ended
March 31,
    $ Change      % Change  
   2014     2013       

Cost of products sold

   $ 82,510      $ 71,233      $ 11,277         15.8

% of Net sales

     75.0     77.0     

Gross margin

     25.0     23.0     

The increase in gross margin was principally due to increased sales and sales mix changes during the quarter. The gross margin for the first quarter of 2013 was reduced by 90 basis points due to a pension settlement charge which did not recur in the first quarter of 2014.

 

11


Table of Contents

PART I - CONTINUED

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – CONTINUED

 

Selling, General and Administrative Expenses (SG&A)

 

(Thousands of dollars)

   Three Months Ended
March 31,
    $ Change     % Change  
   2014     2013      

Selling, general and administrative expenses (SG&A)

   $ 12,861      $ 12,967      $ (106     0.8

% of Net sales

     11.7     14.0    

The decrease in SG&A expenses as a percent of net sales is principally due to increased sales during the quarter. SG&A expenses for the first quarter of 2013 as a percent of net sales included 60 basis points due to a pension settlement charge which did not recur in the first quarter of 2014 and costs related to two acquisitions made in the fourth quarter of 2012.

Net Income

 

(Thousands of dollars)

   Three Months Ended
March 31,
    $ Change      % Change  
   2014     2013       

Income before income taxes

   $ 14,832      $ 8,227      $ 6,605         80.3

% of Net sales

     13.5     8.9     

Income taxes

   $ 4,878      $ 2,409      $ 2,469         102.5

Effective tax rate

     32.9     29.3     

Net income

   $ 9,954      $ 5,818      $ 4,136         71.1

% of Net sales

     9.0     6.3     

Earnings per share

   $ 0.38      $ 0.22      $ 0.16         72.7

The increase in net income was primarily due to increased sales during the current quarter of $17.6 million, and a pension settlement charge, net of income taxes, of $922,000 in the first quarter of 2013 which did not recur in the first quarter of 2014. The difference in the effective tax rate between the two periods is primarily due to the federal research and development tax credit which was reinstated and extended in January 2013 from January 1, 2012 to December 31, 2013, and was not permitted to be recorded in 2012 under applicable accounting rules based on the date of the reinstatement’s enactment.

Liquidity and Capital Resources

 

(Thousands of dollars)

   Three Months Ended
March 31,
 
   2014     2013  

Net cash (used by) provided by operating activities

   $ (1,362   $ 3,670   

Net cash used for investing activities

     (1,592     (2,345

Net cash used for financing activities

     (6,529     (5,100

 

12


Table of Contents

PART I - CONTINUED

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – CONTINUED

 

Cash and cash equivalents and short-term investments totaled $22.0 million, and there was $5.2 million in outstanding bank debt at March 31, 2014. In addition, the Company had $26.1 million available in bank lines of credit after deducting $3.9 million in outstanding letters of credit primarily related to customer orders. The Company was in compliance with its nominal restrictive covenants, including limits on additional borrowings and maintenance of certain operating and financial ratios, at March 31, 2014.

Working capital increased 5.4% from December 31, 2013 to a record $135.5 million at March 31, 2014 principally due to record first quarter 2014 net sales and debt reduction during the quarter.

The primary driver of operating cash flows during the first quarter of 2014 was increased accounts receivable due to record sales during the period. During this same period in 2013 operating cash flows were primarily driven by a reduction in the use of cash required to fund inventory and decreased accounts receivable.

During the first quarter of 2014, investing activities of $1.6 million primarily consisted of capital expenditures for machinery and equipment. Net capital expenditures for 2014, consisting principally of machinery and equipment and building improvements, are estimated to be in the range of $12 to $14 million and are expected to be principally financed through internally generated funds. During the first quarter of 2013, investing activities of $2.3 million consisted primarily of capital expenditures for machinery and equipment.

Net cash used for financing activities for the first quarter of 2014 consisted of dividend payments of $2.7 million and re-payment of $3.8 million in short-term debt. The ratio of current assets to current liabilities was 3.4 to 1 at March 31, 2014 and 3.1 to 1 at December 31, 2013.

On April 24, 2014, the Board of Directors of the Company declared a quarterly cash dividend of $0.09 per share on the common stock of the Company, payable June 10, 2014, to shareholders of record May 15, 2014. This marks the 257th consecutive dividend paid by The Gorman-Rupp Company.

The Company currently expects to continue its distinguished history of paying regular quarterly dividends and increased annual dividends. However, any future dividends will be reviewed individually and declared by our Board of Directors at its discretion, dependent on our assessment of the Company’s financial condition and business outlook at the applicable time.

Critical Accounting Policies

Our critical accounting policies are described in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in the notes to our Consolidated Financial Statements for the year ended December 31, 2013 contained in our Fiscal 2013 Annual Report on Form 10-K. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been discussed in the notes to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q. The application of our critical accounting policies may require management to make judgments and estimates about the amounts reflected in the Consolidated Financial Statements. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.

 

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PART I - CONTINUED

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – CONTINUED

 

Safe Harbor Statement

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: This Quarterly Report on Form 10-Q contains various forward-looking statements based on assumptions concerning The Gorman-Rupp Company’s operations, future results and prospects. These forward-looking statements are based on current expectations about important economic, political, and technological factors, among others, and are subject to risks and uncertainties, 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, but are not limited to: (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; (7) unforeseen delays or disruptions in the New Orleans flood control project; and (8) continuation of the favorable environment to make acquisitions, domestic and foreign, including regulatory requirements and market values of candidates. Except to the extent required by law, we do not undertake and specifically decline any obligation to review or update any forward-looking statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments or otherwise.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s foreign operations do not involve material risks due to their relative size, both individually and collectively. Approximately 90% of the Company’s sales are domiciled within or originated from the United States. The Company is not exposed to material market risks as a result of its diversified export sales. Export sales generally are denominated in U.S. Dollars and made on open account or under letters of credit.

 

ITEM 4. 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. The Company’s disclosure controls and procedures are also designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act of 1934 is accumulated and communicated to the Company’s Management, including the principal executive officer and the principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

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PART I - CONTINUED

 

ITEM 4. CONTROLS AND PROCEDURES – CONTINUED

 

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-Q. Based on that evaluation, the principal executive officer and the principal financial officer have concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2014.

Changes in Internal Control Over Financial Reporting

During the quarter ended March 31, 2014, the Company implemented the enterprise performance management system of Tagetik at all of our locations, including Corporate. The Company believes that effective internal control over financial reporting was maintained during and after this conversion. There have been no other changes in the Company’s disclosure controls and procedures that occurred during the most recent fiscal quarter 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.

PART II OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

There are no material changes from the legal proceedings previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

 

ITEM 1A. RISK FACTORS

There are no material changes from the risk factors previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

 

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ITEM 6. EXHIBITS

 

Exhibit 31.1    Certification of Jeffrey S. Gorman, Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2    Certification of Wayne L. Knabel, Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32    Certification pursuant to 18 U.S.C Section 1350, as adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
Exhibit 101    Financial statements from the Quarterly Report on Form 10-Q of The Gorman-Rupp Company for the quarter ended March 31, 2014, formatted in eXtensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements.
  

*       In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act of 1934, as amended, and is otherwise not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  The Gorman-Rupp Company
    (Registrant)
Date: April 30, 2014    
  By:  

/s/ Wayne L. Knabel

    Wayne L. Knabel
    Chief Financial Officer

 

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