GORMAN RUPP CO

Previous 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.

Current wording

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.

Previous 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.

Current wording

On October 24, 2024, the Board of Directors authorized the payment of a quarterly dividend of $0.185 per share on the common stock of the Company, payable December 10, 2024, to shareholders of record as of November 15, 2024. This will mark the 299th consecutive quarterly dividend paid by The Gorman-Rupp Company.

Previous wording

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.

Current wording

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.

Previous wording

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 significant declines in farm income, $1.2 million in the industrial market, and $0.5 million in the construction market.

Current wording

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.

Previous wording

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 LIFO 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.

Current wording

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 LIFO 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.

Previous 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

The Company’s effective tax rate was 21.9% for the second quarter of 2024 compared to 21.0% for the second quarter of 2023.

Current wording

The Company’s effective tax rate was 19.6% for the third quarter of 2024 compared to 18.3% for the third quarter of 2023.

Previous wording

The following table presents the Company’s disaggregated net sales by its end markets for the six months ended June 30, 2024 and June 30, 2023:

Current wording

The following table presents the Company’s disaggregated net sales by its end markets for the nine months ended September 30, 2024 and September 30, 2023:

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous 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.

Current wording

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 LIFO 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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous 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.

Current wording

The Company’s effective tax rate was 20.9% for the first nine months of 2024 compared to 20.6% for the first nine months of 2023.

Previous wording

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 share 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 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.

Current wording

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 share for the first nine months of 2024 were $1.32 per share compared to $1.02 per share for the first nine months of 2023.

Previous 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.

Current wording

Our primary sources of liquidity are cash generated from operations and borrowings under our Credit Facility. Cash and cash equivalents totaled $39.7 million at September 30, 2024. The Company had an additional $98.7 million available under the revolving credit facility with no amounts borrowed and $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 obligation and financial covenants for at least the next 12 months.

Previous 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.

Current wording

As of September 30, 2024, the Company had $385.4 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 September 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 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.

Current wording

Capital expenditures for the first nine months of 2024 were $10.3 million and consisted primarily of machinery and equipment and building improvements. Capital expenditures for the full-year 2024 are presently planned to be approximately $18 - $20 million primarily for building improvements and machinery and equipment purchases, and are expected to be financed through internally-generated funds.

Previous 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.

Current wording

On October 24, 2024, the Board of Directors authorized the payment of a quarterly dividend of $0.185 per share on the common stock of the Company, payable December 10, 2024, to shareholders of record as of November 15, 2024. This will mark the 299th 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 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.

Current wording

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

Previous 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.

Current wording

During the first nine months of 2024, investing activities of $8.0 million consisted of $10.3 million for capital expenditures primarily for machinery and equipment partially offset by $2.3 million in proceeds from the sale of property, plant, and equipment. During the first nine months of 2023, investing activities of $16.3 million consisted of $16.9 million for capital expenditures primarily for machinery and equipment.

Previous 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.

Current wording

Net cash used for financing activities of $43.6 million for the first nine months of 2024 primarily consisted of net payments on bank borrowings of $28.4 million and dividend payments of $14.2 million. Net cash used for financing activities of $43.4 million for the first nine months of 2023 primarily consisted of net payments on bank borrowings of $28.1 million, dividend payments of $13.7 million, and $1.0 million of payments in the surrender of common shares to cover taxes upon the vesting of stock awards.