GORMAN RUPP CO

Previous wording

The Company’s backlog of orders was $234.2 million at March 31, 2024 compared to $270.6 million at March 31, 2023 and $218.1 million at December 31, 2023. Incoming orders for the first three months of 2024 were $178.9 million, or an increase of 7.1% compared to the same period in 2023.

Current wording

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.

Previous wording

On April 25, 2024, the Board of Directors authorized the payment of a quarterly dividend of $0.18 per share on the common stock of the Company, payable June 10, 2024, to shareholders of record as of May 15, 2024. This will mark the 297th consecutive quarterly dividend paid by The Gorman-Rupp Company.

Current wording

On July 25, 2024, the Board of Directors authorized the payment of a quarterly dividend of $0.18 per share on the common stock of the Company, payable September 10, 2024, to shareholders of record as of August 15, 2024. This will mark the 298th consecutive quarterly dividend paid by The Gorman-Rupp Company.

Previous wording

Selling, general and administrative (“SG&A”) expenses were $24.9 million and 15.6% of net sales for the first quarter of 2024 compared to $23.2 million and 14.5% of net sales for the same period in 2023. The increase in SG&A expenses was due to increased expenses to support ongoing sales growth.

Current wording

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 an asset.

Previous wording

Amortization expense was $3.1 million for the first quarter of 2024 compared to $3.2 million for the same period in 2023.

Current wording

Amortization expense was $3.1 million for the second quarter of 2024 compared to $3.2 million for the same period in 2023.

Previous wording

Operating income was $20.4 million for the first quarter of 2024, resulting in an operating margin of 12.8%, compared to operating income of $19.1 million and operating margin of 11.9% for the same period in 2023. Operating margin increased 90 basis points compared to the same period in 2023 due to improved margin on material costs partially offset by increased SG&A expenses.

Current wording

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.

Previous wording

Net income was $7.9 million, or $0.30 per share, for the first quarter of 2024 compared to net income of $6.5 million, or $0.25 per share, in the first quarter of 2023. Adjusted earnings per share for the first quarter of 2024 and 2023 were $0.30 and $0.27 per share, respectively. See “Non-GAAP Financial Information” for reconciliation of Reported earnings per share to Adjusted earnings per share.

Current wording

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 share for the second quarter of 2024 were $0.54 per share compared to $0.41 per share for the second quarter of 2023. Adjusted earnings per share is a non-GAAP financial measure; see “Non-GAAP Financial Information” below for a definition of the measure and the reconciliation to its comparable GAAP financial measure.

Previous wording

Gross profit was $48.4 million for the first quarter of 2024, resulting in gross margin of 30.4%, compared to gross profit of $45.5 million and gross margin of 28.4% for the same period in 2023. The 200 basis point increase in gross margin included a 230 basis point improvement in cost of material, which consisted of a reduction in LIFO expense of 60 basis points, a favorable impact of 40 basis points related to the amortization of acquired Fill-Rite customer backlog which occurred in the first quarter of 2023 and did not reoccur in 2024, and a 130 basis point improvement from the realization of selling price increases. The improvement in cost of material was partially offset by a 30 basis point increase in labor and overhead expenses.

Current wording

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 LIFO 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.

Previous wording

The Company’s effective tax rate was 21.8% for the first quarter of 2024 compared to 23.1% for the first quarter of 2023.

Current wording

The Company’s effective tax rate was 21.9% for the first six months of 2024 compared to 21.8% for the first six months of 2023.

Previous wording

The discussion of Results of Operations above 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 earnings is earnings excluding amortization of customer backlog. Adjusted earnings per share is earnings per share excluding amortization of customer backlog 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, and non-cash LIFO 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 LIFO inventory costing method can cause results to vary substantially from company to company depending upon whether they elect to utilize LIFO 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 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 below is a reconciliation of adjusted earnings, adjusted earnings per share, and adjusted earnings before interest, taxes, depreciation and amortization to their respective corresponding GAAP financial measures, which includes descriptions of actual adjustments made in the current period and the corresponding prior period.

Current wording

The discussion of Results of Operations above 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 LIFO 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 LIFO inventory costing method can cause results to vary substantially from company to company depending upon whether they elect to utilize LIFO 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 below 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.

Previous wording

Our primary sources of liquidity are cash generated from operations and borrowings under our Credit Facility. Cash and cash equivalents totaled $27.8 million at March 31, 2024. The Company had an additional $98.7 million available under the revolving credit facility after deducting $1.3 million in outstanding letters of credit primarily related to customer orders. We believe we have adequate liquidity from funds on hand and borrowing capacity to execute our financial and operating strategy, as well as comply with debt obligations and financial covenants for at least the next 12 months.

Current wording

Our primary sources of liquidity are cash generated from operations and borrowings under our Credit Facility. Cash and cash equivalents totaled $34.2 million at June 30, 2024. The Company had an additional $98.5 million of borrowing capacity available under the revolving credit facility with no amounts borrowed and $1.5 million in outstanding letters of credit primarily related to customer orders. We believe we have adequate liquidity from funds on hand and borrowing capacity to execute our financial and operating strategy, as well as comply with debt obligation and financial covenants for at least the next 12 months.

Previous wording

As of March 31, 2024, the Company had $409.4 million in total debt outstanding due in 2027. The Company was in compliance with its debt covenants, including limits on additional borrowings and maintenance of certain operating and financial ratios, at March 31, 2024 and December 31, 2023. See “Note 9 – Financing Arrangements: in the Notes to Consolidated Financial Statements included in this Form 10-Q for a further description of our outstanding debt.

Current wording

As of June 30, 2024, the Company had $400.0 million in total debt outstanding with $30.0 million due in 2031 and the remainder due in 2029. The Company was in compliance with its debt covenants, including limits on additional borrowings and maintenance of certain operating and financial ratios, at June 30, 2024 and December 31, 2023. See “Note 9 – Financing Arrangements” in the Notes to Consolidated Financial Statements included in this Form 10-Q for a further description of our outstanding debt.

Previous wording

Capital expenditures for the first three months of 2024 were $3.9 million and consisted primarily of machinery and equipment and building improvements. Capital expenditures for the full-year 2024 are presently planned to be in the range of $18 - $20 million primarily for building improvements and machinery and equipment purchases, and are expected to be financed through internally-generated funds.

Current wording

Capital expenditures for the first six months of 2024 were $7.1 million and consisted primarily of machinery and equipment and building improvements. Capital expenditures for the full-year 2024 are presently planned to be approximately $20 million primarily for building improvements and machinery and equipment purchases, and are expected to be financed through internally-generated funds.

Previous wording

On April 25, 2024, the Board of Directors authorized the payment of a quarterly dividend of $0.18 per share on the common stock of the Company, payable June 10, 2024, to shareholders of record as of May 15, 2024. This will mark the 297th consecutive quarterly dividend paid by The Gorman-Rupp Company. The Company currently expects to continue its exceptional history of paying regular quarterly dividends and increased annual dividends. However, any future dividends will be reviewed individually and declared by our Board of Directors at its discretion, dependent on our assessment of the Company’s financial condition and business outlook at the applicable time.

Current wording

On July 25, 2024, the Board of Directors authorized the payment of a quarterly dividend of $0.18 per share on the common stock of the Company, payable September 10, 2024, to shareholders of record as of August 15, 2024. This will mark the 298th consecutive quarterly dividend paid by The Gorman-Rupp Company. The Company currently expects to continue its exceptional history of paying regular quarterly dividends and increased annual dividends. However, any future dividends will be reviewed individually and declared by our Board of Directors at its discretion, dependent on our assessment of the Company’s financial condition and business outlook at the applicable time.

Previous wording

The decrease in cash provided by operating activities in the first three months of 2024 compared to the same period last year was primarily due to increased working capital needs.

Current wording

The increase in cash provided by operating activities in the first six months of 2024 compared to the same period last year was primarily due to increased earnings before depreciation, amortization, and LIFO expense, and improved cash flow from better working capital management.

Previous wording

During the first three months of 2024, investing activities of $3.9 million consisted of capital expenditures primarily for machinery and equipment. During the first three months of 2023, investing activities of $6.0 million consisted of $6.5 million for capital expenditures primarily for machinery and equipment.

Current wording

During the first six months of 2024, investing activities of $5.0 million consisted of $7.1 million for capital expenditures primarily for machinery and equipment partially offset by $2.1 million in proceeds from the sale of property, plant, and equipment. During the first six months of 2023, investing activities of $12.9 million consisted of $13.3 million for capital expenditures primarily for machinery and equipment.

Previous wording

Net cash used for financing activities of $9.4 million for the first three months of 2024 primarily consisted of net payments on bank borrowings of $4.4 million, dividend payments of $4.7 million, and $0.3 million of payments in the surrender of common shares to cover taxes upon the vesting of stock awards. Net cash used for financing activities for the first three months of 2023 primarily consisted of net payments on bank borrowings of $1.4 million, dividend payments of $4.6 million, and $1.0 million of payments in the surrender of common shares to cover taxes upon the vesting of stock awards.

Current wording

Net cash used for financing activities of $24.2 million for the first six months of 2024 primarily consisted of net payments on bank borrowings of $13.8 million and dividend payments of $9.4 million. Net cash used for financing activities for the first six months of 2023 primarily consisted of net payments on bank borrowings of $8.8 million, dividend payments of $9.1 million, and share repurchases of $1.0 million.

Previous wording

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 LIFO 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.

Current wording

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) LIFO 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.