The Gorman-Rupp Company (NYSE: GRC) reports financial results
for the third quarter ended September 30, 2024.
Third Quarter 2024 Highlights
- Net sales of $168.2 million increased 0.4%, or $0.7 million,
compared to the third quarter of 2023
- Third quarter net income was $12.9 million, or $0.49 per share,
compared to net income of $9.0 million, or $0.34 per share, for the
third quarter of 2023
- Gross margin improved 260 basis points
- Interest expense decreased $2.7 million or 25.9% primarily due
to debt refinanced in the second quarter of 2024
- Adjusted EBITDA1 of $32.0 million for the third quarter of 2024
increased $1.5 million, or 5.1%, from $30.5 million for the same
period in 2023
- Jeffrey S. Gorman will transition from Executive Chairman to
Chairman of the Board effective January 3, 2025
Net sales for the third quarter of 2024 were $168.2 million
compared to net sales of $167.5 million for the third quarter of
2023, an increase of 0.4% or $0.7 million. The increase in sales
was due to the impact of pricing increases taken in the first
quarter of 2024 partially offset by a decrease in volume.
Sales increased $5.4 million in the municipal market due to
domestic flood control and wastewater projects related to increased
infrastructure investment, $2.3 million in the repair market also
related to domestic flood control and wastewater projects, $1.8
million in the OEM market primarily related to computer cooling,
and $1.2 million in the petroleum market primarily driven by
increased international refueling applications. These increases
were offset by a sales decrease of $4.4 million in the fire
suppression market primarily resulting from backlog returning to
more normal levels. Fire suppression sales in 2023 were up
significantly compared to 2022 as the Company was working to return
backlog and lead times to normal levels, which resulted in higher
2023 sales and a tougher year-over-year comparison for 2024. Sales
for the third quarter of 2024 also decreased $3.8 million in the
industrial market and $1.1 million in the construction market due
to slower construction activity and $0.7 million in the agriculture
market primarily driven by a significant decline in farm
income.
Gross profit was $52.7 million for the third quarter of 2024,
resulting in gross margin of 31.3%, compared to gross profit of
$48.1 million and gross margin of 28.7% for the same period in
2023. The 260 basis point increase in gross margin included a 240
basis point improvement in cost of material, which consisted of a
reduction in LIFO2 expense of 40 basis points and a 200 basis point
improvement from the realization of selling price increases. The
increase in gross margin also included a 20 basis point improvement
on labor and overhead leverage.
Selling, general and administrative (“SG&A”) expenses were
$25.7 million and 15.3% of net sales for the third quarter of 2024
compared to $23.2 million and 13.9% of net sales for the same
period in 2023. SG&A expenses increased due to payroll and
payroll related costs, including healthcare costs, as well as
increased selling activity.
Operating income was $23.9 million for the third quarter of
2024, resulting in an operating margin of 14.2%, compared to
operating income of $21.9 million and operating margin of 13.1% for
the same period in 2023. Operating margin in the third quarter of
2024 increased 110 basis points compared to the same period in 2023
primarily due to improved cost of material, partially offset by
increased SG&A expenses.
Interest expense was $7.8 million for the third quarter of 2024
compared to $10.5 million for the same period in 2023. The decrease
in interest expense was due primarily to a series of refinancing
transactions the Company completed on May 31, 2024.
Net income was $12.9 million, or $0.49 per share, for the third
quarter of 2024 compared to net income of $9.0 million, or $0.34
per share, in the third quarter of 2023.
Adjusted EBITDA1 was $32.0 million and 19.0 % of sales for the
third quarter of 2024 compared to $30.5 million and 18.2% of sales
for the third quarter of 2023.
Year to date 2024 Highlights
- Net sales of $496.9 million decreased 0.4%, or $2.0 million,
compared to 2023
- Net income was $29.1 million, or $1.11 per share, compared to
net income of $26.0 million, or $0.99 per share, in 2023
- Adjusted earnings per share1 for 2024 and 2023 were $1.33 and
$1.02, respectively
- Adjusted EBITDA1 of $95.6 million for 2024 increased $3.0
million, or 3.3%, from $92.6 million in 2023
- Total debt, net of cash, decreased $37.6 million further
improving leverage
Net sales for the first nine months of 2024 were $496.9 million
compared to net sales of $498.9 million for the first nine months
of 2023, a decrease of 0.4% or $2.0 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 $14.8 million in the municipal market due to
domestic flood control and wastewater projects related to increased
infrastructure investment, $3.5 million in the repair market also
related to domestic flood control and wastewater projects, $3.2
million in the OEM market primarily related to computer cooling,
and $1.9 million in the petroleum market primarily driven by
increased international refueling applications. Offsetting these
increases was a decrease of $16.5 million in the fire suppression
market primarily resulting from backlog returning to more normal
levels. Fire suppression sales in 2023 were up significantly
compared to 2022 as the Company was working to return backlog and
lead times to normal levels, which resulted in higher 2023 sales
and a tougher year-over-year comparison for 2024. Fire suppression
incoming orders for the first nine months of 2024 were up 3.5% when
compared to the first nine months of 2023. Sales for the first nine
months of 2024 also decreased $4.8 million in the industrial
market, and $1.1 million in the construction market due to slower
construction activity, and $3.0 million in the agriculture market
primarily driven by significant declines in farm income.
Gross profit was $155.1 million for the first nine months of
2024, resulting in gross margin of 31.2%, compared to gross profit
of $145.3 million and gross margin of 29.1% for the same period in
2023. The 210 basis point increase in gross margin included a 250
basis point improvement in cost of material, which consisted of a
reduction in LIFO2 expense of 60 basis points, a favorable impact
of 20 basis points related to the amortization of acquired
Fill-Rite customer backlog which occurred in 2023 and did not
reoccur in 2024, and a 170 basis point improvement from the
realization of selling price increases. These improvements were
partially offset by a 40 basis point increase in labor and overhead
expenses as a percent of sales.
SG&A expenses were $75.5 million and 15.2% of net sales for
the first nine months of 2024 compared to $70.7 million and 14.2%
of net sales for the same period in 2023. SG&A expenses for the
first nine months of 2024 included $1.3 million of refinancing
transaction costs and a $1.1 million gain on the sale of a fixed
asset. SG&A expenses increased due to payroll and payroll
related costs, including healthcare costs, as well as increased
selling activity.
Operating income was $70.4 million for the first nine months of
2024, resulting in an operating margin of 14.2%, compared to
operating income of $65.3 million and operating margin of 13.1% for
the same period in 2023. Operating margin in the first nine months
of 2024 increased 110 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 $26.9 million for the first nine months of
2024 compared to $31.1 million for the same period in 2023. The
decrease in interest expense was due primarily to a series of debt
refinancing transactions the Company completed on May 31, 2024. In
addition to reducing interest expense, the refinancing 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 $6.7 million of expense for the
first nine months of 2024 compared to $1.4 million of expense for
the same period in 2023. Other expense for the first nine 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 $29.1 million, or $1.11 per share, for the first
nine months of 2024 compared to net income of $26.0 million, or
$0.99 per share, for the first nine months of 2023. Adjusted
earnings per share1 for the first nine months of 2024 were $1.33
per share compared to $1.02 per share for the first nine months of
2023.
Adjusted EBITDA1 was $95.6 million and 19.2% of net sales for
the first nine months of 2024 compared to $92.6 million and 18.6%
of net sales for the first nine months of 2023.
The Company’s backlog of orders was $207.8 million at September
30, 2024 compared to $237.5 million at September 30, 2023 and
$218.1 million at December 31, 2023. Incoming orders for the first
nine months of 2024 were $496.1 million, or an increase of 4.1%,
compared to the same period in 2023.
Net cash provided by operating activities for the first nine
months of 2024 was $60.6 million compared to $71.7 million for the
same period in 2023 with the decrease driven by working capital
needs. Capital expenditures for the first nine months of 2024 were
$10.3 million and consisted primarily of machinery and equipment.
Capital expenditures for the full-year 2024 are presently planned
to be approximately $18 - $20 million. Total debt, net of cash,
decreased $37.6 million during the first nine months of 2024.
Scott A. King, President and CEO commented, “We continued to
achieve gross margin and earnings improvement despite a nominal
increase in sales compared to last year. In addition to the
improvement in gross margin, interest expense in the third quarter
decreased significantly from last year due to the refinancing
transactions we completed during the second quarter. As a result of
these improvements, we saw a 44% increase in earnings over last
year. Our operating results allowed us to improve our debt, net of
cash, by $20 million during the quarter, further improving
leverage. Our year-to-date incoming orders are exceeding last
year’s pace and are up just over 4%. As expected, we reduced our
backlog during the quarter, however our backlog still remains at
healthy levels as we head into the fourth quarter.”
Jeffrey S. Gorman transition to Chairman
of the Board
Effective January 3, 2025, his 47th anniversary of working for
Gorman-Rupp, Jeffrey S. Gorman, age 72, will transition from
Executive Chairman of the Board to Chairman of the Board. In his
new role as Chairman of the Board, Mr. Gorman will continue to
provide valuable insights and governance oversight while working
closely with the Board of Directors and the executive team in
supporting the Company’s long-term strategic objectives.
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 September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Net sales
$168,182
$167,456
$496,963
$498,946
Cost of products sold
115,521
119,322
341,828
353,631
Gross profit
52,661
48,134
155,135
145,315
Selling, general and administrative expenses
25,675
23,233
75,494
70,664
Amortization expense
3,101
3,026
9,278
9,398
Operating income
23,885
21,875
70,363
65,253
Interest expense
(7,766
)
(10,475
)
(26,886
)
(31,147
)
Other income (expense), net
(59
)
(416
)
(6,662
)
(1,385
)
Income before income taxes
16,060
10,984
36,815
32,721
Provision for income taxes
3,141
2,006
7,677
6,746
Net income
$12,919
$8,978
$29,138
$25,975
Earnings per share
$0.49
$0.34
$1.11
$0.99
The Gorman-Rupp Company
Condensed Consolidated Balance
Sheets (Unaudited)
(thousands of dollars, except
share data)
September 30,
December 31,
Assets
2024
2023
Cash and cash equivalents
$39,701
$30,518
Accounts receivable, net
88,350
89,625
Inventories, net
101,781
104,156
Prepaid and other
10,806
11,812
Total current assets
240,638
236,111
Property, plant and equipment, net
133,619
134,872
Other assets
23,871
24,841
Goodwill and other intangible assets, net
485,346
494,534
Total assets
$883,474
$890,358
Liabilities and shareholders'
equity Accounts payable
$26,242
$23,277
Current portion of long-term debt
18,500
21,875
Accrued liabilities and expenses
55,773
55,524
Total current liabilities
100,515
100,676
Pension benefits
7,754
11,500
Postretirement benefits
22,717
22,786
Long-term debt, net of current portion
362,489
382,579
Other long-term liabilities
22,665
23,358
Total liabilities
516,140
540,899
Shareholders' equity
367,334
349,459
Total liabilities and shareholders' equity
$883,474
$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)
Nine Months Ended September
30,
2024
2023
Cash flows from operating activities: Net income
$29,138
$25,975
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
20,973
21,196
LIFO expense
3,445
6,414
Pension expense
1,989
2,426
Stock based compensation
3,025
2,335
Contributions to pension plans
(4,510
)
(2,250
)
Amortization of debt issuance fees
6,110
2,247
Gain on sale of property, plant, and equipment
(1,021
)
-
Other
296
1,282
Changes in operating assets and liabilities: Accounts receivable,
net
1,426
(6,515
)
Inventories, net
(921
)
656
Accounts payable
2,885
230
Commissions payable
(3,875
)
(531
)
Deferred revenue and customer deposits
(2,833
)
2,053
Income taxes
670
2,186
Accrued expenses and other
(1,894
)
5,499
Benefit obligations
5,671
8,456
Net cash provided by operating activities
60,574
71,659
Cash flows from investing activities: Capital additions
(10,309
)
(16,917
)
Proceeds from sale of property, plant, and equipment
2,278
-
Other
-
608
Net cash used for investing activities
(8,031
)
(16,309
)
Cash flows from financing activities: Cash dividends
(14,157
)
(13,732
)
Treasury share repurchases
(267
)
(1,028
)
Proceeds from bank borrowings
400,000
5,000
Payments to banks for borrowings
(428,375
)
(33,125
)
Debt issuance fees
(746
)
-
Other
(86
)
(519
)
Net cash used for financing activities
(43,631
)
(43,404
)
Effect of exchange rate changes on cash
271
(540
)
Net increase in cash and cash equivalents
9,183
11,406
Cash and cash equivalents: Beginning of period
30,518
6,783
End of period
$39,701
$18,189
The Gorman-Rupp Company Non-GAAP Financial Information (thousands
of dollars, except per share data)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Adjusted earnings: Reported net income – GAAP basis
$12,919
$8,978
$29,138
$25,975
Amortization of acquired customer backlog
-
-
-
857
Write-off of unamortized previously deferred debt financing fees
-
-
3,506
-
Refinancing costs
-
-
2,413
-
Non-GAAP adjusted earnings
$12,919
$8,978
$35,057
$26,832
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Adjusted earnings per share: Reported earnings per share –
GAAP basis
$0.49
$0.34
$1.11
$0.99
Amortization of acquired customer backlog
-
-
-
0.03
Write-off of unamortized previously deferred debt financing fees
-
-
0.13
-
Refinancing costs
-
-
0.09
-
Non-GAAP adjusted earnings per share
$0.49
$0.34
$1.33
$1.02
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Adjusted earnings before interest, taxes, depreciation and
amortization: Reported net income – GAAP basis
$12,919
$8,978
$29,138
$25,975
Interest expense
7,766
10,475
26,886
31,147
Provision for income taxes
3,141
2,006
7,677
6,746
Depreciation and amortization expense
6,884
7,038
20,973
21,196
Non-GAAP earnings before interest, taxes, depreciation and
amortization
30,710
28,497
84,674
85,064
Amortization of acquired customer backlog
-
-
-
1,085
Write-off of unamortized previously deferred debt financing fees
-
-
4,438
-
Refinancing costs
-
-
3,055
-
Non-cash LIFO expense
1,318
1,974
3,445
6,414
Non-GAAP adjusted earnings before interest, taxes, depreciation and
amortization
$32,028
$30,471
$95,612
$92,563
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241025718392/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.
Gorman Rupp (NYSE:GRC)
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Gorman Rupp (NYSE:GRC)
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