The Gorman-Rupp Company (NYSE: GRC) reports financial results
for the second quarter ended June 30, 2024.
Second Quarter 2024 Highlights
- Net sales of $169.5 million decreased 0.9%, or $1.5 million,
compared to the second quarter of 2023
- Second quarter net income was $8.3 million, or $0.32 per share,
compared to a net income of $10.5 million, or $0.40 per share, for
the second quarter of 2023
- Adjusted earnings per share1 for the second quarters of 2024
and 2023 were $0.54 and $0.41, respectively
- Incoming orders of $162.5 million were up $8.4 million, or
5.5%, compared to the second quarter of 2023
- Refinanced debt expected to reduce interest expense by over
$7.0 million annually
- Record Adjusted EBITDA1 of $35.4 million for the second quarter
of 2024 increased $1.7 million, or 4.9%, from $33.7 million for the
same period in 2023
Net sales for the second quarter of 2024 were $169.5 million
compared to net sales of $171.0 million for the second quarter of
2023, a decrease of 0.9% or $1.5 million. The decrease in sales was
due to a decrease in volume partially offset by the impact of
pricing increases taken in the first quarter of 2024.
Sales increased $6.7 million in the municipal market due to
domestic flood control and wastewater projects related to increased
infrastructure investment, $2.2 million in the OEM market, $0.6
million in the repair market, and $0.3 million in the petroleum
market. These increases were offset by a sales decrease of $8.0
million in the fire suppression market primarily resulting from
backlog returning to more normal levels. Fire suppression sales in
the second quarter of 2023 were up significantly compared to the
same period in 2022 as the Company was working to return backlog
and lead times to normal levels, which resulted in higher second
quarter 2023 sales and a tougher year-over-year comparison for the
second quarter of 2024. Fire suppression incoming orders for the
second quarter of 2024 were up 11.2% when compared to the second
quarter of 2023. Sales for the second quarter of 2024 also
decreased $1.6 million in the agriculture market primarily driven
by a significant decline in farm income, $1.2 million in the
industrial market, and $0.5 million in the construction market.
Gross profit was $54.1 million for the second quarter of 2024,
resulting in gross margin of 31.9%, compared to gross profit of
$51.7 million and gross margin of 30.2% for the same period in
2023. The 170 basis point increase in gross margin included a 280
basis point improvement in cost of material, which consisted of a
reduction in LIFO2 expense of 70 basis points, and a 210 basis
point improvement from the realization of selling price increases.
These improvements were partially offset by a 110 basis point
increase in labor and overhead expenses as a percent of sales.
Selling, general and administrative (“SG&A”) expenses were
$24.9 million and 14.7% of net sales for the second quarter of 2024
compared to $24.2 million and 14.1% of net sales for the same
period in 2023. SG&A expenses for the second quarter of 2024
included $1.3 million of refinancing transaction costs and a $1.1
million gain on the sale of a fixed asset.
Amortization expense was $3.1 million for the second quarter of
2024 compared to $3.2 million for the same period in 2023.
Operating income was $26.0 million for the second quarter of
2024, resulting in an operating margin of 15.4%, compared to
operating income of $24.3 million and operating margin of 14.2% for
the same period in 2023. Operating margin in the second quarter of
2024 increased 120 basis points compared to the same period in 2023
primarily due to improved cost of material, partially offset by
increased labor, overhead, and SG&A expenses.
Interest expense was $9.0 million for the second quarter of 2024
compared to $10.5 million for the same period in 2023. The decrease
in interest expense was due to a series of previously announced
refinancing transactions the Company completed on May 31, 2024. The
refinancing is expected to reduce interest expense, and also
extended and staggered the Company’s debt maturities. The Company
upsized, amended, and extended the existing Senior Term Loan
Facility from $350.0 million to $370.0 million, amended and
extended the existing $100.0 million revolving Credit Facility, and
issued $30.0 million in new 6.40% Senior Secured Notes. The
proceeds from these transactions, as well as $10.0 million of cash
on hand, were used to retire the Company’s $90.0 million unsecured
Subordinated Credit Facility.
Other income (expense), net was $6.3 million of expense for the
second quarter of 2024 compared to $0.5 million of expense for the
same period in 2023. Other expense for the second quarter of 2024
included a $4.4 million write-off of unamortized previously
deferred debt financing fees and a $1.8 million prepayment fee
related to the early retirement of the unsecured Subordinated
Credit Facility.
Net income was $8.3 million, or $0.32 per share, for the second
quarter of 2024 compared to net income of $10.5 million, or $0.40
per share, in the second quarter of 2023. Adjusted earnings per
share1 for the second quarter of 2024 were $0.54 per share compared
to $0.41 per share for the second quarter of 2023.
Adjusted EBITDA1 was $35.4 million and 20.8% of sales for the
second quarter of 2024 compared to $33.7 million and 19.7% of sales
for the second quarter of 2023.
Year to date 2024 Highlights
- Net sales of $328.8 million decreased 0.8%, or $2.7 million,
compared to 2023
- Net income was $16.2 million, or $0.62 per share, compared to
net income of $17.0 million, or $0.65 per share, in 2023
- Adjusted earnings per share1 for 2024 and 2023 were $0.84 and
$0.68, respectively
- Gross margin improved 190 basis points
- Adjusted EBITDA1 of $63.6 million for 2024 increased $1.5
million, or 2.4%, from $62.1 million in 2023
Net sales for the first six months of 2024 were $328.8 million
compared to net sales of $331.5 million for the first six months of
2023, a decrease of 0.8% or $2.7 million. The decrease in sales was
due to a decrease in volume partially offset by the impact of
pricing increases taken in the first quarter of 2024.
Sales increased $9.4 million in the municipal market due to
domestic flood control and wastewater projects related to increased
infrastructure investment, $1.4 million in the OEM market, $0.7
million in the petroleum market, $0.7 million in the repair market,
and $0.1 million in the construction market. Offsetting these
increases was a decrease of $11.8 million in the fire suppression
market primarily resulting from backlog returning to more normal
levels. Fire suppression sales for the first six months of 2023
were up significantly compared to the same period in 2022 as the
Company was working to return backlog and lead times to normal
levels, which resulted in higher sales for the first six months of
2023 and a tougher year-over-year comparison for the first six
months of 2024. Fire suppression incoming orders for the first six
months of 2024 were up 6.4% when compared to the first six months
of 2023. Sales for the first six months of 2024 also decreased $2.3
million in the agriculture market primarily driven by significant
declines in farm income, and $0.9 million in the industrial
market.
Gross profit was $102.5 million for the first six months of
2024, resulting in gross margin of 31.2%, compared to gross profit
of $97.2 million and gross margin of 29.3% for the same period in
2023. The 190 basis point increase in gross margin included a 260
basis point improvement in cost of material, which consisted of a
reduction in LIFO2 expense of 70 basis points, a favorable impact
of 30 basis points related to the amortization of acquired
Fill-Rite customer backlog which occurred in 2023 and did not
reoccur in 2024, and a 160 basis point improvement from the
realization of selling price increases. These improvements were
partially offset by a 70 basis point increase in labor and overhead
expenses as a percent of sales.
Selling, general and administrative (“SG&A”) expenses were
$49.8 million and 15.2% of net sales for the first six months of
2024 compared to $47.4 million and 14.3% of net sales for the same
period in 2023. SG&A expenses for the first six months of 2024
included $1.3 million of refinancing transaction costs and a $1.1
million gain on the sale of a fixed asset.
Amortization expense was $6.2 million for the first six months
of 2024 compared to $6.4 million for the same period in 2023.
Operating income was $46.5 million for the first six months of
2024, resulting in an operating margin of 14.1%, compared to
operating income of $43.4 million and operating margin of 13.1% for
the same period in 2023. Operating margin in the first six months
of 2024 increased 100 basis points compared to the same period in
2023 primarily due to improved cost of material, partially offset
by increased labor, overhead, and SG&A expenses.
Interest expense was $19.1 million for the first six months of
2024 compared to $20.7 million for the same period in 2023. The
decrease in interest expense was due to a series of debt
refinancing transactions the Company completed on May 31, 2024.
Other income (expense), net was $6.6 million of expense for the
first six months of 2024 compared to $1.0 million of expense for
the same period in 2023. Other expense for the first six months of
2024 included a $4.4 million write-off of unamortized previously
deferred debt financing fees and a $1.8 million prepayment fee
related to the early retirement of the unsecured Subordinated
Credit Facility.
Net income was $16.2 million, or $0.62 per share, for the first
six months of 2024 compared to net income of $17.0 million, or
$0.65 per share, for the first six months of 2023. Adjusted
earnings per share1 for the first six months of 2024 were $0.84 per
share compared to $0.68 per share for the first six months of
2023.
Adjusted EBITDA1 was $63.6 million and 19.4% of net sales for
the first six months of 2024 compared to $62.1 million and 18.7% of
net sales for the first six months of 2023.
The Company’s backlog of orders was $224.4 million at June 30,
2024 compared to $249.8 million at June 30, 2023 and $218.1 million
at December 31, 2023. Incoming orders for the first six months of
2024 were $341.4 million, or an increase of 6.3% compared to the
same period in 2023.
Net cash provided by operating activities for the first six
months of 2024 was $33.4 million compared to $37.9 million for the
same period in 2023 with the decrease driven by working capital
needs. Capital expenditures for the first six months of 2024 were
$7.1 million and consisted primarily of machinery and equipment.
Capital expenditures for the full-year 2024 are presently planned
to be approximately $20.0 million. Total debt, net of cash,
decreased $17.5 million during the first six months of 2024.
Scott A. King, President and CEO commented, “Incoming orders
have continued at a solid pace and on a year-to-date basis are up
over 6% compared to the first half of last year, resulting in an
increase in backlog since the end of 2023. In addition, our pricing
strategies contributed to improved gross margin and increased
adjusted earnings. We are focused on top line growth through
backlog reduction in the second half of the year, as well as
delivering strong gross margin and earnings. We are also pleased
that our previously announced refinancing is expected to result in
significant interest savings going forward.”
About The Gorman-Rupp Company
Founded in 1933, 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
suppression, heating, ventilating and air conditioning (HVAC),
military and other liquid-handling applications.
(1) Non-GAAP Information
This release includes certain non-GAAP financial data and
measures such as adjusted earnings, adjusted earnings per share,
and adjusted earnings before interest, taxes, depreciation and
amortization (“Adjusted EBITDA”). Adjusted earnings is earnings
excluding amortization of customer backlog, write-off of
unamortized previously deferred debt financing fees, and
refinancing costs. Adjusted earnings per share is earnings per
share excluding amortization of customer backlog per share,
write-off of unamortized previously deferred debt financing fees
per share, and refinancing costs per share. Adjusted earnings
before interest, taxes, depreciation and amortization is net income
(loss) excluding interest, taxes, depreciation and amortization,
adjusted to exclude amortization of customer backlog, write-off of
unamortized previously deferred debt financing fees, refinancing
costs, and non-cash LIFO2 expense. Management utilizes these
adjusted financial data and measures to assess comparative
operations against those of prior periods without the distortion of
non-comparable factors. The inclusion of these adjusted measures
should not be construed as an indication that the Company’s future
results will be unaffected by unusual or infrequent items or that
the items for which the Company has made adjustments are unusual or
infrequent or will not recur. Further, the impact of the LIFO2
inventory costing method can cause results to vary substantially
from company to company depending upon whether they elect to
utilize LIFO2 and depending upon which method they may elect. The
Gorman-Rupp Company believes that these non-GAAP financial data and
measures also will be useful to investors in assessing the strength
of the Company’s underlying operations and liquidity from period to
period. These non-GAAP financial measures are not intended to
replace GAAP financial measures, and they are not necessarily
standardized or comparable to similarly titled measures used by
other companies. Provided later in this release is a reconciliation
of adjusted earnings, adjusted earnings per share, and adjusted
EBITDA to their respective corresponding GAAP financial measures,
which includes descriptions of actual adjustments made in the
current period and the corresponding prior period.
(2) LIFO Inventory Method
The majority of the Company’s inventories are valued on the
last-in, first-out (LIFO) method and stated at the lower of cost or
market. Current cost approximates replacement cost, or market, and
LIFO cost is determined at the end of each fiscal year based on
inventory levels on-hand at current replacement cost and a LIFO
reserve. The Company uses the simplified LIFO method, under which
the LIFO reserve is determined utilizing the inflation factor
specified in the Producer Price Index for Machinery and Equipment –
Pumps, Compressors and Equipment, as published by the U.S. Bureau
of Labor Statistics. Interim LIFO calculations are based on
management’s estimate of the expected year-end inflation index and,
as such, are subject to adjustment each quarter. When inflation
increases, the LIFO reserve and non-cash expense increase.
Forward-Looking Statements
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 news release
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 uncertainties include, but
are not limited to, our estimates of future earnings and cash
flows, general economic conditions and supply chain conditions and
any related impact on costs and availability of materials,
integration of the Fill-Rite business in a timely and cost
effective manner, retention of supplier and customer relationships
and key employees, the ability to achieve synergies and cost
savings in the amounts and within the time frames currently
anticipated and the ability to service and repay indebtedness
incurred in connection with the transaction. Other factors include,
but are not limited to: company specific risk factors including (1)
loss of key personnel; (2) intellectual property security; (3)
acquisition performance and integration; (4) the Company’s
indebtedness and how it may impact the Company’s financial
condition and the way it operates its business; (5) general risks
associated with acquisitions; (6) the anticipated benefits from the
Fill-Rite transaction may not be realized; (7) impairment in the
value of intangible assets, including goodwill; (8) defined benefit
pension plan settlement expense; (9) risk of reserve and expense
increases resulting from the LIFO2 inventory method; and (10)
family ownership of common equity; and general risk factors
including (11) continuation of the current and projected future
business environment; (12) highly competitive markets; (13)
availability and costs of raw materials and labor; (14)
cybersecurity threats; (15) compliance with, and costs related to,
a variety of import and export laws and regulations; (16)
environmental compliance costs and liabilities; (17) exposure to
fluctuations in foreign currency exchange rates; (18) conditions in
foreign countries in which The Gorman-Rupp Company conducts
business; (19) changes in our tax rates and exposure to additional
income tax liabilities; and (20) risks described from time to time
in our reports filed with the Securities and Exchange Commission.
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.
The Gorman-Rupp Company
Condensed Consolidated Statements
of Income (Unaudited)
(thousands of dollars, except per
share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2024
2023
2024
2023
Net sales
$
169,513
$
171,024
$
328,781
$
331,490
Cost of products sold
115,434
119,366
226,308
234,309
Gross profit
54,079
51,658
102,473
97,181
Selling, general and administrative expenses
24,930
24,193
49,818
47,430
Amortization expense
3,100
3,182
6,178
6,373
Operating income
26,049
24,283
46,477
43,378
Interest expense
(9,048
)
(10,485
)
(19,120
)
(20,672
)
Other income (expense), net
(6,331
)
(536
)
(6,603
)
(969
)
Income before income taxes
10,670
13,262
20,754
21,737
Provision for income taxes
2,335
2,785
4,535
4,740
Net income
$
8,335
$
10,477
$
16,219
$
16,997
Earnings per share
$
0.32
$
0.40
$
0.62
$
0.65
The Gorman-Rupp Company
Condensed Consolidated Balance
Sheets (Unaudited)
(thousands of dollars, except
share data)
June 30,
December 31,
Assets
2024
2023
Cash and cash equivalents
$
34,245
$
30,518
Accounts receivable, net
96,952
89,625
Inventories, net
101,698
104,156
Prepaid and other
13,526
11,812
Total current assets
246,421
236,111
Property, plant and equipment, net
133,827
134,872
Other assets
22,521
24,841
Goodwill and other intangible assets, net
488,291
494,534
Total assets
$
891,060
$
890,358
Liabilities and shareholders'
equity Accounts payable
$
29,082
$
23,277
Current portion of long-term debt
18,500
21,875
Accrued liabilities and expenses
53,186
55,524
Total current liabilities
100,768
100,676
Pension benefits
11,337
11,500
Postretirement benefits
22,840
22,786
Long-term debt, net of current portion
376,880
382,579
Other long-term liabilities
20,676
23,358
Total liabilities
532,501
540,899
Shareholders' equity
358,559
349,459
Total liabilities and shareholders' equity
$
891,060
$
890,358
Shares outstanding
26,227,540
26,193,998
The Gorman-Rupp Company
Condensed Consolidated Statements
of Cash Flows (Unaudited)
(thousands of dollars, except
share data)
Six Months Ended
June 30,
2024
2023
Cash flows from operating activities: Net income
$
16,219
$
16,997
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
14,089
14,158
LIFO expense
2,127
4,440
Pension expense
1,326
1,617
Stock based compensation
1,955
1,606
Contributions to pension plans
(595
)
-
Amortization of debt issuance fees
5,814
1,481
Gain on sale of property, plant, and equipment
(1,058
)
-
Other
200
30
Changes in operating assets and liabilities: Accounts receivable,
net
(7,693
)
(8,645
)
Inventories, net
(426
)
(8,959
)
Accounts payable
5,990
4,435
Commissions payable
241
142
Deferred revenue and customer deposits
(1,704
)
2,365
Income taxes
5
2,374
Accrued expenses and other
(3,812
)
2,235
Benefit obligations
719
3,580
Net cash provided by operating activities
33,397
37,856
Cash flows from investing activities: Capital additions
(7,131
)
(13,270
)
Proceeds from sale of property, plant, and equipment
2,116
-
Other
53
367
Net cash used for investing activities
(4,962
)
(12,903
)
Cash flows from financing activities: Cash dividends
(9,433
)
(9,148
)
Treasury share repurchases
(267
)
(1,029
)
Proceeds from bank borrowings
400,000
5,000
Payments to banks for borrowings
(413,750
)
(13,750
)
Debt issuance fees
(746
)
-
Other
(34
)
(534
)
Net cash used for financing activities
(24,230
)
(19,461
)
Effect of exchange rate changes on cash
(478
)
(102
)
Net increase in cash and cash equivalents
3,727
5,390
Cash and cash equivalents: Beginning of period
30,518
6,783
End of period
$
34,245
$
12,173
The Gorman-Rupp Company
Non-GAAP Financial
Information
(thousands of dollars, except per
share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2024
2023
2024
2023
Adjusted earnings: Reported net income – GAAP basis
$
8,335
$
10,477
$
16,219
$
16,997
Amortization of acquired customer backlog
-
344
-
857
Write-off of unamortized previously deferred debt financing fees
3,506
-
3,506
-
Refinancing costs
2,413
-
2,413
-
Non-GAAP adjusted earnings
$
14,254
$
10,821
$
22,138
$
17,854
Three Months Ended
June 30,
Six Months Ended
June 30,
2024
2023
2024
2023
Adjusted earnings per share: Reported earnings per share –
GAAP basis
$
0.32
$
0.40
$
0.62
$
0.65
Amortization of acquired customer backlog
-
0.01
-
0.03
Write-off of unamortized previously deferred debt financing fees
0.13
-
0.13
-
Refinancing costs
0.09
-
0.09
-
Non-GAAP adjusted earnings per share
$
0.54
$
0.41
$
0.84
$
0.68
Three Months Ended
June 30,
Six Months Ended
June 30,
2024
2023
2024
2023
Adjusted earnings before interest, taxes, depreciation and
amortization: Reported net income – GAAP basis
$
8,335
$
10,477
$
16,219
$
16,997
Interest expense
9,048
10,485
19,120
20,672
Provision for income taxes
2,335
2,785
4,535
4,740
Depreciation and amortization expense
7,024
7,114
14,089
14,158
Non-GAAP earnings before interest, taxes, depreciation and
amortization
26,742
30,861
53,963
56,567
Amortization of acquired customer backlog
-
434
-
1,085
Write-off of unamortized previously deferred debt financing fees
4,438
-
4,438
-
Refinancing costs
3,055
-
3,055
-
Non-cash LIFO expense
1,134
2,409
2,127
4,440
Non-GAAP adjusted earnings before interest, taxes, depreciation and
amortization
$
35,369
$
33,704
$
63,583
$
62,092
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240725028790/en/
Brigette A. Burnell Corporate Secretary The Gorman-Rupp Company
Telephone (419) 755-1246
For additional information, contact James C. Kerr, Chief
Financial Officer, Telephone (419) 755-1548.
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