The Gorman-Rupp Company (NYSE: GRC) reports financial results
for the fourth quarter and year ended December 31, 2023.
Fourth Quarter 2023 Highlights
- Net sales of $160.6 million increased 10.0%, or $14.6 million,
compared to the fourth quarter of 2022
- Fourth quarter net income was $9.0 million, or $0.34 per share,
compared to net income of $2.4 million, or $0.09 per share, for the
fourth quarter of 2022
- Adjusted earnings per share1 for the fourth quarter of 2023 and
2022 were $0.34 and $0.11, respectively
- Adjusted earnings per share1 included non-cash LIFO expense of
$0.01 per share and $0.25 per share in 2023 and 2022,
respectively
- Adjusted EBITDA1 of $29.1 million for the fourth quarter of
2023 increased $0.6 million, or 2.1%, from $28.5 million for the
same period in 2022
Net sales for the fourth quarter of 2023 were $160.6 million
compared to net sales of $146.0 million for the fourth quarter of
2022, an increase of 10.0% or $14.6 million. The increase in sales
was due to an increase in volume as well as the impact of pricing
increases taken in the first quarter of 2023. Domestic sales
increased 12.8% or $13.9 million and international sales increased
1.9% or $0.7 million compared to the same period in 2022.
Sales increased $4.9 million in the municipal market due to the
timing of domestic flood control and wastewater projects, $4.7
million in the industrial market due to strengthening in the
broader industrial economy, $2.3 million in the construction market
due to overall strong conditions including infrastructure-related
projects, $1.8 million in the petroleum market due to increased
demand for larger petroleum transfer pumps, $1.4 million in the
fire suppression market primarily from increased domestic
commercial construction, $1.4 million in the repair market, and
$0.5 million in the OEM market. Partially offsetting these
increases was a sales decrease of $2.4 million in the agriculture
market primarily driven by weather conditions that slowed
demand.
Gross profit was $50.9 million for the fourth quarter of 2023,
resulting in gross margin of 31.7%, compared to gross profit of
$36.6 million and gross margin of 25.1% for the same period in
2022. The 660 basis point increase in gross margin included a 620
basis point improvement in cost of material, which consisted of a
reduction in LIFO2 expense of 540 basis points, a favorable impact
of 40 basis points related to the amortization of acquired
Fill-Rite customer backlog which occurred in the fourth quarter of
2022 and did not reoccur in the fourth quarter of 2023, and a 40
basis point improvement from the realization of selling price
increases. The increase in gross margin also included a 40 basis
point increase in labor and overhead leverage due to increased
sales volumes.
Selling, general and administrative (“SG&A”) expenses were
$26.0 million and 16.2% of net sales for the fourth quarter of 2023
compared to $21.0 million and 14.4% of net sales for the same
period in 2022. The increase in SG&A expenses was due to
increased expenses to support sales growth and incentive
compensation.
Amortization expense was $3.2 million for the fourth quarter of
2023 compared to $3.1 million for the same period in 2022.
Operating income was $21.8 million for the fourth quarter of
2023, resulting in an operating margin of 13.6%, compared to
operating income of $12.5 million and operating margin of 8.6% for
the same period in 2022. Operating margin in the fourth quarter of
2023 increased 500 basis points compared to the same period in 2022
due to improved margin on material costs, improved leverage on
amortization expenses due to increased sales volumes, and was
partially offset by increased SG&A expenses.
Interest expense was $10.1 million for the fourth quarter of
2023 compared to $9.4 million for the same period in 2022 due to
increased interest rates, partially offset by reduced debt
levels.
Net income was $9.0 million, or $0.34 per share, for the fourth
quarter of 2023 compared to net income of $2.4 million, or $0.09
per share, in the fourth quarter of 2022. Adjusted earnings per
share1 for the fourth quarter of 2023 and 2022 were $0.34 and $0.11
per share, respectively. Adjusted earnings per share1 for the
fourth quarter of 2023 included an unfavorable LIFO2 impact of
$0.01 per share compared to an unfavorable LIFO2 impact of $0.25
per share in the fourth quarter of 2022.
Adjusted EBITDA1 was $29.1 million for the fourth quarter of
2023 compared to $28.5 million for the fourth quarter of 2022.
Adjusted EBITDA1 increased primarily from sales growth and improved
gross margin.
Full-Year 2023 Highlights
As previously announced, on May 31, 2022, the Company completed
its acquisition of Fill-Rite and Sotera (“Fill-Rite”), a division
of Tuthill Corporation.
- Net sales of $659.5 million increased 26.6%, or $138.5 million,
compared to 2022, a 15.8% increase excluding Fill-Rite
- Net income was $35.0 million, or $1.34 per share, compared to
net income of $11.2 million, or $0.43 per share, in 2022
- Adjusted earnings per share1 for 2023 and 2022 were $1.37 and
$0.94, respectively
- Adjusted EBITDA1 of $121.7 million for 2023 increased $33.0
million, or 37.1%, from $88.7 million in 2022
- Total debt, net of cash, decreased $58.2 million during
2023
Net sales for 2023 of $659.5 million increased 26.6% or $138.5
million compared to net sales of $521.0 million in 2022. The
increase in sales was due to the inclusion of a full year of
Fill-Rite sales compared to seven months of sales included in the
prior year, as well as an increase in volume and the impact of
pricing increases taken in 2022 and an annual price increase in the
first quarter of 2023. Domestic sales increased 30.4% or $116.1
million and international sales increased 16.0% or $22.4 million
compared to 2022.
Sales increased $36.2 million in the industrial market primarily
due to the inclusion of a full year of Fill-Rite sales in 2023
compared to seven months of sales included in the prior year. In
addition to the increase from Fill-Rite, industrial sales increased
$14.2 million due to the strengthening in the broader industrial
economy. Sales increased $25.4 million in the agriculture market
due entirely to the inclusion of a full year of Fill-Rite sales
compared to seven months of sales in the prior year. Sales
increased $26.4 million in the construction market primarily due to
the inclusion of a full year of Fill-Rite sales compared to seven
months of sales included in the prior year. In addition to the
increase from Fill-Rite, construction sales increased $8.9 million
due to overall strong conditions including infrastructure related
projects. Sales increased $22.6 million in the fire market
primarily from increased domestic commercial construction, $9.6
million in the repair market due to strengthening in the broader
industrial economy, $8.8 million in the municipal market due to
domestic flood control and wastewater projects related to increased
infrastructure investment, and $2.8 million in the OEM market.
Sales in the petroleum market increased $6.7 million primarily due
to the inclusion of a full year of Fill-Rite sales compared to
seven months of sales included in the prior year as well as
increased demand for larger petroleum transfer pumps.
Gross profit was $196.3 million for 2023, resulting in gross
margin of 29.8%, compared to gross profit of $130.9 million and
gross margin of 25.1% in 2022. The 470 basis point increase in
gross margin included a 380 basis point improvement in cost of
material, which consisted of a favorable LIFO2 impact of 240 basis
points, a favorable impact of 30 basis points related to the
Fill-Rite inventory step-up that was recognized in 2022 that did
not recur in 2023 and a 110 basis point improvement from the
realization of selling price increases. The increase in gross
margin also included a 90 basis point improvement on labor and
overhead leverage due to increased sales volume and sales mix which
includes a full year of Fill-Rite sales in 2023 compared to seven
months in 2022.
Selling, general and administrative (“SG&A”) expenses were
$96.7 million and 14.7% of net sales in 2023 compared to $83.1
million and 16.0% of net sales in 2022. SG&A expenses in 2022
included $7.1 million of one-time acquisition costs. Excluding
acquisition costs of $7.1 million, SG&A expenses were $76.0
million and 14.6% of net sales in 2022. The increase in SG&A
expenses, excluding acquisition costs, was due to the inclusion of
Fill-Rite expenses for the full year in 2023 as compared to seven
months in 2022, as well as increased expenses to support sales
growth.
Amortization expense was $12.6 million in 2023 compared to $7.6
million in 2022. The increase in amortization expense was due to
the inclusion of a full year of amortization attributable to the
Fill-Rite acquisition in 2023 compared to seven months in 2022.
Operating income was $87.0 million in 2023, resulting in an
operating margin of 13.2%, compared to operating income of $40.2
million and operating margin of 7.7% in 2022. Operating income in
2022 included $7.1 million of one-time acquisition costs, and $1.4
million of inventory step-up amortization. Excluding acquisition
costs and inventory step-up totaling $8.5 million, operating income
was $48.7 million in 2022 resulting in an operating margin of 9.3%
of net sales. Operating margin in 2023 increased 390 basis points
compared to 2022, excluding acquisition costs and inventory step-up
in 2022, due to improved margin on material costs and improved
leverage on SG&A expense due to increased sales volumes
partially offset by increased amortization expense.
Interest expense was $41.3 million in 2023 compared to $19.2
million in 2022. The increase in interest expense was primarily due
to the inclusion of a full year of interest expense in 2023
compared to seven months in 2022 on the debt financing attributable
to the Fill-Rite acquisition, as well as increased interest rates
in 2023 as compared to 2022.
Other income (expense), net was $1.8 million of expense in 2023
compared to $7.1 million of expense in 2022. The $7.1 million of
expense in 2022 included non-cash pension settlement charges of
$6.4 million.
Net income was $35.0 million, or $1.34 per share, in 2023
compared to net income of $11.2 million, or $0.43 per share, in
2022. Adjusted earnings per share1 in 2023 were $1.37 per share
compared to $0.94 per share in 2022. Adjusted earnings per share1
in 2023 included an unfavorable LIFO2 impact of $0.21 per share
compared to an unfavorable LIFO2 impact of $0.56 per share in
2022.
Adjusted EBITDA1 was $121.7 million in 2023 compared to $88.7
million in 2022. Adjusted EBITDA1 increased from organic sales
growth and improved gross margin as well as the inclusion of
Fill-Rite results for the full year of 2023 compared to seven
months in 2022.
The Company’s backlog of orders was $218.1 million at December
31, 2023 compared to $267.4 million at December 31, 2022. Incoming
orders for fiscal year 2023 were $617.6 million, or an increase of
4.4% compared to 2022.
Net cash provided by operating activities in 2023 was $98.2
million compared to $13.7 million in 2022 driven by increased
earnings before depreciation, amortization, and LIFO2 expense, and
improved cash flow from working capital management. Capital
expenditures in 2023 were $20.8 million and consisted primarily of
machinery and equipment. Capital expenditures for the full-year
2024 are presently planned to be in the range of $18-$20 million.
During 2023, total debt was reduced by $34.5 million and cash
increased $23.7 million.
Scott A. King, President and CEO commented, “2023 marked another
significant milestone as we celebrated our 90th anniversary. We are
proud that over that history we have stayed true to our values,
including delivering quality products and taking care of our
customers. In addition, we achieved our second consecutive year of
double-digit organic sales growth and saw a significant improvement
in Adjusted EBTIDA1 to a record $121.7 million. Our strong results
allowed us to improve debt net of cash by $58 million during the
year and to improve our leverage significantly from mid-2022 when
we acquired Fill-Rite. In addition to improving our leverage we
continued to invest for growth, including the relocation and
expansion of Fill-Rite’s manufacturing facility in Lenexa, Kansas.
We also increased our dividends paid to shareholders for the 51st
consecutive year. As expected, our backlog has come down from the
record levels that we saw in early 2023 but remains elevated as we
enter 2024. We expect backlog to return to more normal levels
during 2024. Our diverse markets continue to be a strength and we
remain well positioned to benefit from infrastructure spending and
the increased demand for flood control and storm water
management.
“I am grateful for the Gorman-Rupp team’s continued efforts to
contribute to a successful 90th year, as well as to our customers,
suppliers, and shareholders for their on-going support.”
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 non-cash pension settlement charges, one-time acquisition
costs, amortization of step up in value of acquired inventories,
and amortization of customer backlog. Adjusted earnings per share
is earnings per share excluding non-cash pension settlement charges
per share, one-time acquisition costs per share, amortization of
step up in value of acquired inventories per share, and
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 non-cash pension settlement charges, one-time
acquisition costs, amortization of step up in value of acquired
inventories, amortization of customer backlog, 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 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) 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) cyber
security 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 December 31, Year Ended December 31,
2023
2022
2023
2022
Net sales
$
160,565
$
146,001
$
659,511
$
521,027
Cost of products sold
109,628
109,363
463,258
390,090
Gross profit
50,937
36,638
196,253
130,937
Selling, general and administrative expenses
25,996
20,992
96,660
83,117
Amortization expense
3,153
3,139
12,552
7,637
Operating income
21,788
12,507
87,041
40,183
Interest expense
(10,126
)
(9,361
)
(41,273
)
(19,240
)
Other income (expense), net
(422
)
7
(1,807
)
(7,071
)
Income before income taxes
11,240
3,153
43,961
13,872
Provision from income taxes
2,264
726
9,010
2,677
Net income
$
8,976
$
2,427
$
34,951
$
11,195
Earnings per share
$
0.34
$
0.09
$
1.34
$
0.43
The Gorman-Rupp Company Condensed Consolidated
Balance Sheets (Unaudited) (thousands of dollars, except share
data)
December 31,
Assets
2023
2022
Cash and cash equivalents $
30,518
$
6,783
Accounts receivable, net
89,625
93,059
Inventories, net
104,156
111,133
Prepaid and other
11,812
14,551
Total current assets
236,111
225,526
Property, plant and equipment, net
134,872
128,640
Other assets
24,841
11,579
Goodwill and other intangible assets, net
494,534
507,085
Total assets $
890,358
$
872,830
Liabilities and shareholders'
equity Accounts payable $
23,277
$
24,697
Current portion of long-term debt
21,875
17,500
Accrued liabilities and expenses
55,524
43,016
Total current liabilities
100,676
85,213
Pension benefits
11,500
9,352
Postretirement benefits
22,786
22,413
Long-term debt, net of current portion
382,579
419,327
Other long-term liabilities
23,358
5,331
Total liabilities
540,899
541,636
Shareholders' equity
349,459
331,194
Total liabilities and shareholders' equity $
890,358
$
872,830
Shares outstanding
26,193,998
26,094,865
The Gorman-Rupp Company
Condensed Consolidated Statements
of Cash Flows (Unaudited)
(thousands of dollars, except
share data)
Year Ended December 31,
2023
2022
Cash flows from operating activities: Net income
$
34,951
$
11,195
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
28,496
21,158
LIFO expense
6,891
18,041
Pension expense
3,604
9,985
Contributions to pension plan
(2,250
)
(2,250
)
Stock based compensation
3,252
2,957
Amortization of debt issuance fees
3,014
1,717
Deferred income tax charge (benefit)
(414
)
(1,086
)
Other
1,335
(128
)
Changes in operating assets and liabilities: Accounts receivable,
net
3,752
(13,954
)
Inventories, net
559
(32,772
)
Accounts payable
(1,518
)
(2,250
)
Commissions payable
9
2,051
Deferred revenue and customer deposits
5,773
(2,329
)
Income taxes
1,226
1,907
Accrued expenses and other
6,316
(954
)
Benefit obligations
3,229
397
Net cash provided by operating activities
98,225
13,685
Cash flows from investing activities: Capital additions
(20,835
)
(17,986
)
Acquisitions
-
(527,993
)
Other
672
306
Net cash used for investing activities
(20,163
)
(545,673
)
Cash flows from financing activities: Cash dividends
(18,447
)
(17,872
)
Treasury share repurchases
(1,029
)
(918
)
Proceeds from bank borrowings
5,000
457,000
Payments to banks for borrowings
(39,500
)
(8,750
)
Debt issuance fees
-
(15,217
)
Other
(551
)
(130
)
Net cash provided by (used for) financing activities
(54,527
)
414,113
Effect of exchange rate changes on cash
200
(536
)
Net increase (decrease) in cash and cash equivalents
23,735
(118,411
)
Cash and cash equivalents: Beginning of period
6,783
125,194
End of period
$
30,518
$
6,783
The Gorman-Rupp Company Non-GAAP Financial Information (thousands
of dollars, except per share data) Three
Months Ended December 31, Year Ended December 31,
2023
2022
2023
2022
Adjusted earnings: Reported net income – GAAP basis
$
8,976
$
2,427
$
34,951
$
11,195
Plus pension settlement charge
-
58
-
5,216
Plus one-time acquisition costs
-
31
-
5,752
Plus amortization of step up in value of acquired inventories
-
-
-
1,141
Plus amortization of acquired customer backlog
-
514
863
1,231
Non-GAAP adjusted earnings
$
8,976
$
3,030
$
35,814
$
24,535
Three Months Ended December 31, Year Ended
December 31,
2023
2022
2023
2022
Adjusted earnings per share: Reported earnings per share –
GAAP basis
$
0.34
$
0.09
$
1.34
$
0.43
Plus pension settlement charge
-
-
-
0.20
Plus one-time acquisition costs
-
-
-
0.22
Plus amortization of step up in value of acquired inventories
-
-
-
0.04
Plus amortization of acquired customer backlog
-
0.02
0.03
0.05
Non-GAAP adjusted earnings per share
$
0.34
$
0.11
$
1.37
$
0.94
Three Months Ended December 31, Year
Ended December 31,
2023
2022
2023
2022
Adjusted earnings before interest, taxes, depreciation and
amortization: Reported net income – GAAP basis
$
8,976
$
2,427
$
34,951
$
11,195
Plus interest expense
10,126
9,361
41,273
19,240
Plus provision for income taxes
2,264
726
9,010
2,677
Plus depreciation and amortization expense
7,300
6,997
28,496
21,158
Non-GAAP earnings before interest, taxes, depreciation and
amortization
28,666
19,511
113,730
54,270
Plus pension settlement charge
-
72
-
6,427
Plus one-time acquisition costs
-
40
-
7,088
Plus amortization of step up in value of acquired inventories
-
-
-
1,406
Plus amortization of acquired customer backlog
-
650
1,085
1,517
Plus non-cash LIFO expense
477
8,274
6,891
18,041
Non-GAAP adjusted earnings before interest, taxes, depreciation and
amortization
$
29,143
$
28,547
$
121,706
$
88,749
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version on businesswire.com: https://www.businesswire.com/news/home/20240201312358/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.
Grafico Azioni Gorman Rupp (NYSE:GRC)
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Grafico Azioni Gorman Rupp (NYSE:GRC)
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