XML 80 R9.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

Note 1 - Summary of Significant Accounting Policies | 12 Months Ended
--- | ---
Dec. 31, 2019
Notes to Financial Statements |
Basis of Accounting [Text Block] | Note 1 – Summary of Significant Accounting Policies General Inform ation and Basis of Presentation The Gorman-Rupp Company is a leading designer, manufacturer and international marketer of pumps and pump systems for use in diverse water, wastewater, construction, dewatering, industrial, petroleum, original equipment, agriculture, fire protection, heating, ventilating and air conditioning (HVAC), military and other liquid-handling applications. The Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. Earnings per share are calculated based on the weighted-average number of Common Shares outstanding. 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 Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates. 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 fair value. Short-term investments at December 31, 2019 and 2018 consisted primarily of a certificate of deposit and is classified as Prepaid and other on the Consolidated Balance Sheets. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are stated at the historical carrying amount net of allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated losses from the failure of its customers to make required payments for products delivered. The Company estimates this allowance based on knowledge of the financial condition of customers, review of historical receivables and reserve trends and other relevant information. Inventories LIFO inventories are stated at the lower of cost or market and all other inventories are stated at the lower of cost or net realizable value. The costs for approximately 72% of inventories at December 31, 2019 and 73% of inventories at December 31, 2018 were determined using the last-in, first -out (LIFO) method, with the remainder determined using the first -in, first -out (FIFO) method. Cost components include materials, inbound freight costs, labor and allocations of fixed and variable overheads on an absorption costing basis. Property, plant and equipment Property, plant and equipment are stated on the basis of cost. Repairs and maintenance costs are expensed as incurred. Depreciation for property, plant and equipment assets is computed using the straight-line method over the estimated useful lives of the assets and is included in Cost of products sold and Selling, general and administrative expenses based on the use of the assets. Depreciation expense was $12.6 million for 2019, $13.3 million for 2018 and $13.5 million for 2017. Depreciation of property, plant and equipment is determined based on the following lives:
|  | Years |
Buildings |  |  | 20 | - | 50 |
Machinery and equipment |  |  | 5 | - | 15 |
Software |  |  | 3 | - | 5 |
Property, plant and equipment consist of the following:
|  | 2019 |  |  | 2018 |
Land |  | $ | 4,998 |  |  | $ | 3,869 |
Buildings |  |  | 110,162 |  |  |  | 106,940 |
Machinery and equipment |  |  | 182,922 |  |  |  | 177,668 |
|  |  | 298,082 |  |  |  | 288,477 |
Less accumulated depreciation |  |  | (186,303 | ) |  |  | (174,984 | )
Property, plant and equipment, net |  | $ | 111,779 |  |  | $ | 113,493 |
Property, plant and equipment are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount may not be recovered through future net cash flows generated by the assets. Impairment losses may be recorded when the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts based on the excess of the carrying amounts over the estimated fair value of the assets. Goodwill and Identifiable Int angible Assets Goodwill Goodwill represents the excess of the cost of acquired businesses over the fair value of tangible assets and identifiable intangible assets purchased and liabilities assumed. Goodwill is reviewed annually for impairment as of October 1 or whenever events or changes in circumstances indicate there may be a possible permanent loss of value using either a quantitative or qualitative analysis. For certain reporting units, the Company performs a quantitative analysis using both a market-based approach and a discounted cash flow model to estimate the fair value of our reporting units. This process requires significant judgements, including estimation of future cash flows, which is dependent on internal forecasts. The Company may otherwise elect to perform a qualitative analysis when deemed appropriate. A qualitative analysis may be performed by assessing certain trends and factors, including projected market outlook and growth rates, forecasted and actual sales and operating profit margins, discount rates, industry data and other relevant qualitative factors. These trends and factors are compared to, and based on, the assumptions used in the most recent quantitative assessment. In 2017, due primarily to the decreased demand for barge pumps for the marine transportation market driven by low oil prices and overcapacity of inland barges, the Bayou City Pump Company reporting unit recorded pre-tax goodwill impairment charges of $0.9 million. There were no goodwill impairment charges in any of the Company’s other reporting units in 2017. No impairment charges were recognized in any of the Company’s reporting units in 2019 or 2018. See Note 10 to the Consolidated Financial Statements, Goodwill and Other Intangible Assets. Identifiable intangible assets The Company’s primary identifiable intangible assets include customer relationships, technology and drawings, and trade names and trademarks. Identifiable intangible assets with finite lives are amortized and those identifiable intangible assets with indefinite lives are not amortized. Amortization for finite-lived intangible assets is computed using the straight-line method over the estimated useful lives of the assets and is included in Cost of products sold and Selling, general and administrative expenses based on the use of the assets. Amortization of finite-lived intangible assets is determined based on the following lives:
|  | Years |
Technology and drawings |  |  | 13 | - | 20 |
Customer relationships |  |  | 9 | - | 15 |
Other intangibles |  |  | 2 | - | 18 |
Identifiable intangible assets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount may not be recovered through future net cash flows generated by the assets. Impairment losses may be recorded when the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts based on the excess of the carrying amounts over the estimated fair value of the assets. Based upon our fiscal 2019, 2018 and 2017 quantitative and qualitative impairment analyses, except for Bayou’s customer relationship intangible asset and the risk related to National’s indicated fair value, the Company was not aware of any events or changes in circumstances that indicated the carrying value of its finite-lived intangible assets may not be recoverable. In 2017, due primarily to the continued decreased demand for barge pumps for the marine transportation market driven by low oil prices and overcapacity of inland barges, the Company performed a recoverability test related to Bayou’s customer relationship intangible asset pursuant to Accounting Standards Codification (“ASC”) 360, “Property, Plant, and Equipment.” As a result of the recoverability test, Bayou recorded a pre-tax non-cash customer relationship impairment charge of $3.2 million in 2017. Identifiable intangible assets not subject to amortization are tested for impairment annually or more frequently if events warrant. The fair value of these assets is determined using a royalty relief methodology similar to that employed when the associated assets were acquired, but using updated estimates of future sales, cash flows and profitability. For 2019, 2018 and 2017, the fair value of indefinite lived intangible assets exceeded their carrying values. For additional information about goodwill and other intangible assets, see Note 10 to the Consolidated Financial Statements, Goodwill and Other Intangible Assets. Revenue Recognition The Company recognizes revenue when it transfers control of promised goods or services to its customers in an amount that reflects the consideration to which it expects to be entitled to in exchange for those goods or services. For additional information about revenue, see Note 3 to the Consolidated Financial Statements, Revenue. Income Taxes Income tax expense includes United States federal, state, local and international income taxes. Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the financial reporting and the tax basis of existing assets and liabilities and for loss carryforwards. The tax rate used to determine the deferred tax assets and liabilities is the enacted tax rate for the year and manner in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Tax Act”) was enacted. The Tax Act significantly revised U.S. corporate income tax regulations by, among other things, lowering corporate income tax rates, implementing the territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. For further discussion of the impact of the Tax Act on the Company, see Note 7 to the Consolidated Financial Statements, Income Taxes. Pension and Other Postretirement Benefits The Company sponsors a defined benefit pension plan covering certain domestic employees. 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 postretirement 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 determination of the Company’s obligation and expense for pension and other postretirement benefits is dependent on its selection of certain assumptions used by actuaries in calculating such amounts, which are described in Note 9, Pensions and Other Postretirement Benefits. The Company recognizes the funded status of its defined benefit pension plan as an asset or liability in the Consolidated Balance Sheets and recognizes the change in the funded status in the year in which the change occurs through accumulated other comprehensive loss in the Consolidated Balance Sheets. Concentration of Credit Risk The Company generally does not require collateral from its customers and has a very good collection history. There were no sales to a single customer that exceeded 10% of total net sales for the years ended December 31, 2019, 2018 or 2017. Shipping and Handling Costs The Company classifies all amounts billed to customers for shipping and handling as revenue and reflects related shipping and handling costs in Cost of products sold. Advertising The Company expenses all advertising costs as incurred, which for the years ended December 31, 2019, 2018 and 2017 totaled $3.0 million, $3.0 million, and $3.1 million, respectively. 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:
|  | 2019 |  |  | 2018 |  |  | 2017 |
Balance at beginning of year |  | $ | 1,380 |  |  | $ | 1,098 |  |  | $ | 1,435 |
Provision |  |  | 1,747 |  |  |  | 1,689 |  |  |  | 1,377 |
Claims |  |  | (1,689 | ) |  |  | (1,407 | ) |  |  | (1,714 | )
Balance at end of year |  | $ | 1,438 |  |  | $ | 1,380 |  |  | $ | 1,098 |
Stock-based compensation The Company awards shares pursuant to The Gorman-Rupp Company 2015 Omnibus Incentive Plan. Equity awards are typically conditioned upon achievement of appropriate performance metrics, however the Company may from time to time grant other types of awards including service-based awards or unrestricted shares to certain employees. Any performance-based shares that have been granted will vest and be awarded at the end of a three year performance period, based on the levels of achievement of compound annual growth targets for operating income and shareholders’ equity. The Company recognizes compensation expense for performance-based share grants based on the stock price at the date of the grant using the straight-line amortization method, over the vesting period specified in the grants, based on the probability of achieving the performance targets. The Company recognized stock-based compensation expense related to performance-based share grants of $0.7 million, $1.3 million and $0.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. The Company accounts for forfeitures as they occur, rather than estimate expected forfeitures. Foreign Currency Translation 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 weighted-average exchange rates effective during the year. Foreign currency translation gains and losses are included as a component of Accumulated other comprehensive loss within Equity. Gains and losses resulting from foreign currency transactions, the amounts of which are not material, are included in Other (expense) income, net. Fair Value The carrying value of Cash and cash equivalents, Accounts receivable and Accounts payable approximates fair value based on the short-term nature of these instruments. The Company does not recognize any non-financial assets at fair value. New Accounting Pronouncements The Company considers the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not listed below were assessed and determined either to be not applicable or are expected to have minimal impact on the Company’s Consolidated Financial Statements. In June 2016, the FASB issued ASU 2016 - 13, “Financial Instruments-Credit Losses (Topic 326 ): Measurement of Credit Losses on Financial Instruments”, which replaced the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016 - 13 requires use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. ASU 2016 - 13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Adoption of the standard requires using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date to align existing credit loss methodology with the new standard. In November 2019, the FASB issued ASU 2019 - 11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. ASU 2019 - 11 requires entities that did not adopt the amendments in ASU 2016 - 13 as of November 2019 to adopt ASU 2019 - 11. This ASU contains the same effective dates and transition requirements as ASU 2016 - 13. The Company adopted Topic 326 effective January 1, 2020. The impact of adoption of these standards is not material on the Company’s Consolidated Financial Statements. In December 2019, the FASB issued ASU 2019 - 12, “Simplifying the Accounting for Income Taxes”, which, as part of its Simplification Initiative to reduce the cost and complexity in accounting for income taxes, removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019 - 12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company currently does not expect the adoption of ASU 2019 - 12 will have a material impact on the Company’s Consolidated Financial Statements. Recently Adopted Accounting Standards In February 2016, the FASB issued ASU 2016 - 02, “Leases (Topic 842 ),” which requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with a term of more than one year. Accounting by lessors remains similar to pre-existing U.S. GAAP. Subsequent accounting standards updates have been issued, which amend and/or clarify the application of ASU 2016 - 02. The Company adopted Topic 842 effective January 1, 2019. See Note 6 to the Consolidated Financial Statements, Leases.

X
- Definition The entire disclosure for the basis of accounting, or basis of presentation, used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
Name: | us-gaap_BasisOfAccounting
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration