##### 



SECURITIES AND EXCHANGE COMMISSION  WASHINGTON, D.C. 20549
 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2005
    
    Commission File Number 1-6747
  The Gorman-Rupp Company
   Ohio
    
    34-0253990
 (State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 305 Bowman Street, 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 þ No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12-b-2 of
the Exchange Act). Yes þ No o Common shares, without par value, outstanding at March 31, 2005. 10,682,697 *****************   Page 1 of 18 pages




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The Gorman-Rupp Company and Subsidiaries
Three Months Ended March 31, 2005 and 2004 PART I. FINANCIAL INFORMATION Item 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Statements of Income-Three months ended March 31, 2005 and 2004Condensed Consolidated Balance Sheets-March 31, 2005 and December 31, 2004Condensed Consolidated Statements of Cash Flows-Three months ended March 31, 2005 and 2004Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of OperationsItem 3.
    
    Quantitative and Qualitative Disclosures about Market RiskItem 4.
    
    Controls and Procedures
 PART II. OTHER INFORMATION Item 6.  ExhibitsEX-31.1 302 CEO CertificationEX-31.2 302 CFO CertificationEX-32 Section 1350 CEO and CFO Certifications
 2




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PART I. FINANCIAL INFORMATION ITEM 1FINANCIAL STATEMENTS (UNAUDITED) THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months EndedMarch 31,(Thousands of dollars, except per share amounts)
    
    2005
    

    
    2004Net sales
    
    $
    52,037
    
    
    $
    49,431Cost of products sold
    
    
    42,252
    
    
    
    39,335Gross Profit
    
    
    9,785
    
    
    
    10,096Selling, general and
administrative expenses
    
    

    7,431
    
    
    
    6,864Operating Income
    
    
    2,354
    
    
    
    3,232Other income
    
    
    317
    
    
    
    290Other expense
    
    
    (47
    )
    
    
    (19
    )Income Before Income Taxes
    
    
    2,624
    
    
    
    3,503Income taxes
    
    
    970
    
    
    
    1,296Net Income
    
    $
    1,654
    
    
    $
    2,207Basic And DilutedEarnings Per Share
    
    $
    0.15
    
    
    $
    0.21Dividends Paid Per Share
    
    $
    0.140
    
    
    $
    0.136Average Shares Outstanding
    
    
    10,682,697
    
    
    
    10,678,947
 Shares outstanding and per share data reflect the 5 for 4 stock split effective
September 10, 2004. See notes to condensed consolidated financial statements. 3




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THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) March 31,
    
    
    December 31,(Thousands of dollars)
    
    2005
    
    
    2004AssetsCurrent Assets:Cash and cash equivalents
    
    $
    15,040
    
    
    $
    16,202Short-term investments
    
    
    2,672
    
    
    
    2,696Accounts receivable - net
    
    
    32,145
    
    
    
    32,988Inventories - net
    
    
    42,875
    
    
    
    38,234Other current assets and deferred income taxes
    
    
    6,101
    
    
    
    6,525Total Current Assets
    
    
    98,833
    
    
    
    96,645Property, plant and equipment
    
    
    133,587
    
    
    
    135,660less allowances for depreciation
    
    
    80,486
    
    
    
    80,848Property, Plant and Equipment - Net
    
    
    53,101
    
    
    
    54,812Other assets
    
    
    14,932
    
    
    
    13,887Total Assets
    
    $
    166,866
    
    
    $
    165,344Liabilities and Shareholders EquityCurrent Liabilities:Accounts payable
    
    $
    7,057
    
    
    $
    6,615Payrolls and related liabilities
    
    
    3,732
    
    
    
    3,412Accrued expenses
    
    
    10,339
    
    
    
    10,514Income taxes
    
    
    1,209
    
    
    
    571Total Current Liabilities
    
    
    22,337
    
    
    
    21,112Postretirement benefits
    
    
    22,641
    
    
    
    22,334Shareholders EquityCommon shares, without par value:Authorized - 14,000,000 shares;Outstanding - 10,682,697 shares in 2005 and 2004
(after deducting treasury shares of 398,278 in
2005 and 2004) at stated capital amount
    
    
    5,093
    
    
    
    5,093Retained earnings
    
    
    117,420
    
    
    
    117,261Accumulated other comprehensive loss
    
    
    (625
    )
    
    
    (456
    )Total Shareholders Equity
    
    
    121,888
    
    
    
    121,898Total Liabilities and Shareholders Equity
    
    $
    166,866
    
    
    $
    165,344
 Shares outstanding reflect the 5 for 4 stock split effective September 10, 2004. See notes to condensed consolidated financial statements. 4




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THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months EndedMarch 31,(Thousands of dollars)
    
    2005
    
    
    2004Cash Flows From Operating Activities:Net income
    
    $
    1,654
    
    
    $
    2,207Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation and amortization
    
    
    1,737
    
    
    
    1,790Changes in operating assets and
liabilities
    
    
    (1,850
    )
    
    
    587Net Cash Provided by Operating
Activities
    
    
    1,541
    
    
    
    4,584Cash Flows From Investing Activities:Capital disposals (additions), net
    
    
    134
    
    
    
    (970
    )Change in short-term investments
    
    
    24
    
    
    
    (368
    )Payment for acquisition
    
    
    (1,331
    )
    
    
    Net Cash Used for Investing Activities
    
    
    (1,173
    )
    
    
    (1,338
    )Cash Flows From Financing Activities:Cash dividends
    
    
    (1,495
    )
    
    
    (1,452
    )Net Cash Used for Financing Activities
    
    
    (1,495
    )
    
    
    (1,452
    )Effect of exchange rate changes on
cash
    
    
    (35
    )
    
    
    (33
    )Net (Decrease) Increase in Cash
and Cash Equivalents
    
    
    (1,162
    )
    
    
    1,761Cash and Cash Equivalents:Beginning of year
    
    
    16,202
    
    
    
    16,272March 31,
    
    $
    15,040
    
    
    $
    18,033
 See notes to condensed consolidated financial statements. 5




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PART ICONTINUED 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 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 generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the three month
periods ended March 31, 2005 are not necessarily indicative of results that may be expected for the
year ending December 31, 2005. 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, 2004. Certain prior year amounts have been reclassified to conform to the 2005 presentation. RESTATEMENT During the course of the Companys 2004 financial statement close process, a prior period error
relating to the overstatement of a deferred income tax liability was identified. The correction of
the error, recognizing an increase to shareholders equity and a reduction to deferred tax
liability, resulted in a restatement of 2002, 2003 and the first three quarters of 2004 financial
statements. NEW ACCOUNTING PRONOUNCEMENTS In November 2004, the FASB issued Statement on Financial Accounting Standards (SFAS) No. 151
Inventory Costsan amendment of ARB No. 43, Chapter 4. This Statement amends the guidance in
ARB No. 43 to require idle facility expense, freight, handling costs, and wasted material
(spoilage) be recognized as current-period charges. In addition, SFAS No. 151 requires that
allocation of fixed production overheads to the costs of conversion be based on the normal capacity
of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal
years beginning after June 15, 2005. The Company is currently evaluating the impact of this
statement on its financial statements. FASB Staff Position (FSP) 109-1, Application of FASB Statement No. 109, Accounting for Income
Taxes, for the Tax Deduction Provided to U.S. Based Manufacturers by the American Job Creation Act
of 2004, and FSP 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation
Provisions within the American Jobs Creation Act of 2004 were enacted on October 22, 2004. FSP No. 109-1 clarifies the application of SFAS No. 109 to the new laws tax deduction for income
attributable to domestic production activities. The fully phased-in deduction is up to nine
percent of the lesser of taxable income or qualified production activities income. The staff
proposal would require that the deduction be accounted for as a special deduction in the period
earned, not as a tax-rate reduction. FSP No. 109-2 provides guidance under FASB Statement No. 109, Accounting for Income Taxes, with
respect to recording the potential impact of the repatriation provisions of the American Jobs
Creation Act of 2004 (the Jobs Act) on enterprises income tax expense and deferred tax
liability. 6




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PART ICONTINUED ITEM 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)CONTINUED FSP 109-2 states that an enterprise is permitted time beyond the financial reporting period of
enactment to evaluate the effect of the Jobs Act on its plan for reinvestment or repatriation of
foreign earnings for purposes of applying SFAS No. 109. The Company has not yet completed
evaluating the impact of the repatriation provisions. Accordingly, as provided for in FSP 109-2,
the Company has not adjusted its tax expense or deferred tax liability to reflect the repatriation
provisions of the Jobs Act. NOTE B  INVENTORIES The major components of inventories are as follows: March 31,
    
    
    December 31,(Thousands of dollars)
    
    2005
    
    
    2004Raw materials and in-process
    
    $
    22,724
    
    
    $
    20,348Finished parts
    
    
    18,436
    
    
    
    16,602Finished products
    
    
    1,715
    
    
    
    1,284$
    42,875
    
    
    $
    38,234
 NOTE C  PRODUCT WARRANTIES A liability is established for estimated future warranty and service claims based on historical
claim 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 as follows: Three Months EndedMarch 31,(Thousands of dollars)
    
    2005
    
    
    2004Balance at beginning of year
    
    $
    829
    
    
    $
    599Warranty costs
    
    
    269
    
    
    
    325Settlements
    
    
    (297
    )
    
    
    (151
    )Balance at end of quarter
    
    $
    801
    
    
    $
    773
 NOTE D  SHAREHOLDERS EQUITY On July 22, 2004, the Company announced a 5 for 4 common stock split effective September 10, 2004
to shareholders of record as of August 13, 2004. The outstanding common stock was increased from 7




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PART ICONTINUED ITEM 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)CONTINUED 8,546,553 shares without par value to 10,682,697 shares without par value. Share and per share
data for all periods presented have been restated to reflect the stock split. NOTE E  COMPREHENSIVE INCOME During the three-month period ended March 31, 2005 and 2004, total comprehensive income was
$1,485,000 and $1,962,000, respectively. The reconciling item between net income and comprehensive
income consists of foreign currency translation adjustments. NOTE FPENSION AND OTHER POSTRETIREMENT BENEFITS The Company sponsors a defined benefit pension plan covering substantially all employees. The
Company also sponsors a non-contributory defined benefit health care plan that provides health
benefits to retirees and their spouses. (See Note F  Pensions and Other Postretirement Benefits
for the year ended December 31, 2004 included in the Form 10-K.) The following table presents the components of net periodic benefit cost: Pension Benefits
    
    
    Postretirement BenefitsThree Months Ended
    
    
    Three Months EndedMarch 31,
    
    
    March 31,(Thousands of dollars)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Service cost
    
    $
    485
    
    
    $
    468
    
    
    $
    262
    
    
    $
    262Interest cost
    
    
    554
    
    
    
    535
    
    
    
    444
    
    
    
    431Expected return on plan assets
    
    
    (609
    )
    
    
    (559
    )
    
    
    
    
    
    
    Amortization of prior service cost
and unrecognized (gain)/loss
    
    
    169
    
    
    
    136
    
    
    
    
    
    
    
    (185
    )Recognized net actuarial (gain)/loss
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    50Benefit cost
    
    $
    599
    
    
    $
    580
    
    
    $
    780
    
    
    $
    558
 In March 2004, the FASB issued Staff Position No. FSP 106-2, Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of
2003,(FSP No. 106-2) in response to a new law regarding prescription drug benefits under
Medicare (Medicare Part D) as well as a federal subsidy to sponsors of retiree health care
benefit 8




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PART ICONTINUED ITEM 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)CONTINUED plans that provide a benefit that is at least actuarially equivalent to Medicare Part D.
Currently, Statement of Financial Accounting Standard No. 106, Employers Accounting for
Postretirement
Benefits Other Than Pensions (No. 106) requires that changes in relevant law be considered in
current measurement of postretirement benefit costs. FSP No. 106-2 became effective beginning in
the third quarter of 2004. In 2005, the Company determined that its current medical plan does not
satisfy the actuarially equivalent test of the ACT. NOTE GACQUISITIONS In March, 2005 the Company acquired a submersible pump line from a private European company for a
cash purchase price of $1,331,000. The acquisition was financed with cash from the Companys
treasury. The addition of this pump line will complement and expand the family of pumps currently
offered to international markets. ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS Certain statements in this section and elsewhere herein contain various forward-looking statements
and include 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 regulation,
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. First Quarter 2005 Compared to First Quarter 2004 Net sales for the first quarter 2005 were $52,037,000 compared to $49,431,000 for the same period
2004, an increase of $2,606,000 or 5.3%. The increase in net sales for the first quarter of 2005
resulted primarily from higher product sales in the construction, industrial and international
markets. The backlog of orders at March 31, 2005 was $88,958,000 compared to $56,444,000 at March
31, 2004, an increase of $32,514,000 or 57.6% principally due to increased business in the
construction, international and fire protection markets. The increase in net sales and backlog
reflects a continuation 9




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PART ICONTINUED ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONSCONTINUED of positive signs in the economy, expansion of the capital goods markets and increased global
demand for pumps principally driven by the higher price of oil. Cost of products sold for the first quarter 2005 was $42,252,000 compared to $39,335,000 during
2004, an increase of $2,917,000 or 7.4%, primarily due to higher sales volume. As a percentage of
net sales, cost of products sold was 81.2% in 2005, compared to 79.6% in 2004. The change in
percent of
net sales in the first quarter 2005 was primarily attributable to higher material costs from
suppliers, lower margins in price sensitive markets and start-up costs associated with the new
heating, ventilating and air conditioning (HVAC) market. Selling, general, and administrative (SG&A) expenses were $7,431,000 in the first quarter 2005
compared to $6,864,000 in 2004, an increase of $567,000 or 8.3%. As a percentage of net sales,
SG&A expenses were 14.3% in 2005 compared to 13.9% in 2004. Increases in SG&A expenses principally
resulted from higher professional service fees of $305,000 related to compliance requirements of
the Sarbanes-Oxley Act of 2002 and higher marketing cost of $260,000 related to product promotion
at a CONEXPO show held every three years. Other income in the current quarter 2005 was $317,000 compared to $290,000 for the same period in
2004, an increase of $27,000. Other expense in the current quarter 2005 was $47,000 compared to $19,000 for the same period in
2004, an increase of $28,000. Income before income taxes for the first quarter 2005 was $2,624,000 compared to $3,503,000 for the
same period in 2004, a decrease of $879,000 or 25.1%. The effective income tax rate was 37.0% in
2005 and 2004. Net income for the first quarter 2005 was $1,654,000 compared to $2,207,000 for the same period in
2004, a decrease of $553,000 or 25.1%. As a percent of net sales, net income was 3.2% in 2005
compared to 4.5% in 2004. Earnings per share was $0.15 in 2005 compared to $0.21 in 2004, a
decrease of $0.06 per share. Liquidity and Sources of Capital Cash provided by operating
activities during the first three months in 2005 was $1,541,000,
compared to $4,584,000 for the same period in 2004, a decrease of
$3,043,000. The decrease was
primarily attributable to unfavorable variances in inventory and commissions payable of $7,800,000
and $918,000, respectively. These variances are principally due to inventory build-up to support
the increased business activity and decreased sales that generate commissions. The decrease in
cash provided by operating activities was partially offset by a favorable variance in accounts
receivable of $5,100,000 which reflects timing of collections. Cash used for investing
activities during the first three months in 2005 was $1,173,000, compared
to $1,338,000 for the same period in 2004, a decrease of $165,000. Investing activities for the
three months ended March 31, 2005 primarily consisted of a payment for the acquisition of a
submersible pump line of $1,331,000, partially offset by a net gain on asset disposals of $134,000.
The Company 10




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PART ICONTINUED ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCONTINUED also increased its short-term investments by $1,130,000 during the trailing twelve months ended
March 31, 2005. Financing activities consisted of payments for dividends, which were $1,495,000, and $1,452,000 for
the three months ended March 31, 2005 and 2004, respectively. The Company continues to finance its capital expenditures and working capital requirements
principally through internally generated funds, available unsecured lines of credit from several
banks and proceeds from short-term investments. The ratio of current assets to current liabilities
was 4.4 to 1 at March 31, 2005 and 4.6 to 1 at March 31, 2004. The Company presently has adequate working capital and borrowing capacity and a strong liquidity
position. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK The Companys foreign operations do not involve any material risks due to their small size, both
individually and collectively. 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 under letters of credit. ITEM 4. CONTROLS AND PROCEDURES Current Status of Material Weaknesses in 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 Company. Progress has continued in the remediation process to correct the material weakness. The Company
has improved the adequacy of accounting personnel through the hiring of additional staff and is
currently recruiting for a senior level position. Also, improved lines of reporting to corporate
accounting have been incorporated throughout the Company. 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 11




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PART ICONTINUED ITEM 4. CONTROLS AND PROCEDURESCONTINUED 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
did maintain effective internal control over financial reporting as of March 31, 2005. 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 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,
other than the corrective actions taken by Gorman-Rupp with respect to Patterson Pump. **************************** 12




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PART IIOTHER INFORMATION ITEM 6. EXHIBITS  (a)
    Exhibits Exhibit 31.1
    
    Certification of Jeffrey S. Gorman, Chief Executive
Officer, pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002Exhibit 31.2
    
    Certification of Robert E. Kirkendall, Chief Financial
Officer, pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002Exhibit 32
    
    Certification pursuant to 18 U.S.C Section
1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
 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: May 4, 2005
 By:
    /s/ Judith L. SovineJudith L. SovineCorporate Treasurer By:
    /s/ Robert E. KirkendallRobert E. KirkendallSenior Vice President and
Chief Financial Officer 13