Gorman-Rupp Reports Fourth Quarter and Full-Year 2023 Financial Results
- None.
- None.
Insights
The reported financial results from The Gorman-Rupp Company indicate a substantial improvement in profitability and revenue growth, which is critical for investor confidence. Net sales growth of 10.0% in Q4 and 26.6% for the full year suggests robust demand for the company's products, with notable contributions from the acquisition of Fill-Rite. The 660 basis point increase in gross margin for Q4 and 470 basis points for the full year reflect effective cost management and successful price increases, which are particularly commendable given the current inflationary environment.
The reduction in total debt by $58.2 million, coupled with a significant increase in net income, demonstrates strong financial discipline and operational efficiency. Investors should note the improved leverage and the company's ability to service its debt, especially in the context of rising interest rates. The reduction in backlog from $267.4 million to $218.1 million could signal a return to normalcy in order fulfillment, which may alleviate concerns about supply chain constraints that have been prevalent in the industry.
Examining The Gorman-Rupp Company's performance across different markets reveals a strategic positioning that capitalizes on current economic trends. The increase in sales in the municipal, industrial, construction and fire suppression markets align with heightened infrastructure spending and commercial construction activities. However, the decrease in the agriculture market due to weather conditions highlights the sector's sensitivity to external factors.
Investors should consider the company's diversified market approach as a buffer against sector-specific downturns. The company's ability to capture increased demand for flood control and stormwater management products is a direct response to climate-related challenges, which may offer sustainable growth opportunities moving forward. The planned capital expenditures for 2024 suggest continued investment in operational capabilities, which could further strengthen the company's competitive edge in the industry.
The financial results of The Gorman-Rupp Company reflect broader economic trends, such as inflation and interest rates. The company's effective pricing strategy to counter material cost increases and inflation is a positive indicator of its pricing power in the market. The improved cash flow from working capital management in a year with increased interest rates suggests a robust operational strategy that can adapt to changing economic conditions.
Looking ahead, the company's anticipation of backlog normalization in 2024 may imply expectations of a stable economic environment. However, with the Federal Reserve's stance on controlling inflation through interest rate adjustments, the company's debt servicing costs could be impacted. Investors should monitor macroeconomic indicators and central bank policies, as these will influence the company's financial performance, particularly in terms of interest expenses and investment returns.
Fourth Quarter 2023 Highlights
-
Net sales of
$160.6 million 10.0% , or$14.6 million -
Fourth quarter net income was
$9.0 million $0.34 $2.4 million $0.09 -
Adjusted earnings per share1 for the fourth quarter of 2023 and 2022 were
$0.34 $0.11 -
Adjusted earnings per share1 included non-cash LIFO expense of
$0.01 $0.25
-
Adjusted earnings per share1 for the fourth quarter of 2023 and 2022 were
-
Adjusted EBITDA1 of
$29.1 million $0.6 million 2.1% , from$28.5 million
Net sales for the fourth quarter of 2023 were
Sales increased
Gross profit was
Selling, general and administrative (“SG&A”) expenses were
Amortization expense was
Operating income was
Interest expense was
Net income was
Adjusted EBITDA1 was
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 26.6% , or$138.5 million 15.8% increase excluding Fill-Rite -
Net income was
$35.0 million $1.34 $11.2 million $0.43 -
Adjusted earnings per share1 for 2023 and 2022 were
$1.37 $0.94
-
Adjusted earnings per share1 for 2023 and 2022 were
-
Adjusted EBITDA1 of
$121.7 million $33.0 million 37.1% , from$88.7 million -
Total debt, net of cash, decreased
$58.2 million
Net sales for 2023 of
Sales increased
Gross profit was
Selling, general and administrative (“SG&A”) expenses were
Amortization expense was
Operating income was
Interest expense was
Other income (expense), net was
Net income was
Adjusted EBITDA1 was
The Company’s backlog of orders was
Net cash provided by operating activities in 2023 was
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
“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
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 |
|||
View source 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.
Source: The Gorman-Rupp Company
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