UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2025
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-6747
The Gorman-Rupp Company
(Exact name of registrant as specified in its charter)
Ohio
34-0253990
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
600 South Airport Road, Mansfield, Ohio
44903
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code (419) 755-1011
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Shares, without par value
GRC
New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
On April 28, 2025 there were 26,294,377 common shares, without par value, of The Gorman-Rupp Company outstanding.
Three Months Ended March 31, 2025 and 2024
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements (Unaudited)
2
Consolidated Statements of Income
- Three months ended March 31, 2025 and 2024
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
3
- March 31, 2025 and December 31, 2024
Consolidated Statements of Cash Flows
4
Consolidated Statements of Equity
5
Notes to Consolidated Financial Statements (Unaudited)
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
13
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
17
Item 4.
Controls and Procedures
18
PART II. OTHER INFORMATION
Legal Proceedings
19
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Defaults Upon Senior Securities
20
Mine Safety Information
Item 5.
Other Information
Item 6.
Exhibits
21
EX-31.1
Section 302 Principal Executive Officer (PEO) Certification
EX-31.2
Section 302 Principal Financial Officer (PFO) Certification
EX-32
Section 1350 Certifications
1
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
THE GORMAN-RUPP COMPANY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months EndedMarch 31,
(Dollars in thousands, except per share amounts)
2025
2024
Net sales
$
163,948
159,268
Cost of products sold
113,616
110,874
Gross profit
50,332
48,394
Selling, general and administrative expenses
25,107
24,888
Amortization expense
3,100
3,077
Operating income
22,125
20,429
Interest expense
(6,203
)
(10,073
Other income (expense), net
(386
(272
Income before income taxes
15,536
10,084
Provision for income taxes
3,408
2,200
Net income
12,128
7,884
Earnings per share
0.46
0.30
Average number of shares outstanding
26,246,848
26,201,093
See notes to consolidated financial statements (unaudited).
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Dollars in thousands)
Other comprehensive income (loss), net of tax:
Cumulative translation adjustments
1,548
(1,084
Cash flow hedging activity
(677
1,609
Pension and postretirement medical liability adjustments
217
(277
Other comprehensive income (loss)
1,088
248
Comprehensive income
13,216
8,132
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, 2025
December 31, 2024
Assets
Current assets:
Cash and cash equivalents
21,840
24,213
Accounts receivable, net
93,531
87,636
Inventories, net
99,152
99,205
Prepaid and other
9,747
9,773
Total current assets
224,270
220,827
Property, plant and equipment, net
131,506
131,822
Other assets
23,069
23,838
Other intangible assets, net
221,331
224,428
Goodwill
257,671
257,554
Total assets
857,847
858,469
Liabilities and equity
Current liabilities:
Accounts payable
27,403
24,752
Payroll and employee related liabilities
19,582
20,982
Commissions payable
9,079
6,438
Deferred revenue and customer deposits
5,327
6,840
Current portion of long-term debt
18,500
Accrued expenses
12,793
10,015
Total current liabilities
92,684
87,527
Pension benefits
6,459
6,629
Postretirement benefits
22,216
22,178
Long-term debt, net of current portion
333,706
348,097
Other long-term liabilities
20,711
20,238
Total liabilities
475,776
484,669
Equity:
Common shares, without par value:
Authorized - 35,000,000 shares;
Outstanding - 26,294,377 shares at March 31, 2025 and 26,277,540 shares at December 31, 2024 (after deducting treasury shares of 754,419 and 821,256, respectively), at stated capital amounts
5,140
5,126
Additional paid-in capital
9,007
9,360
Retained earnings
392,279
384,757
Accumulated other comprehensive (loss)
(24,355
(25,443
Total equity
382,071
373,800
Total liabilities and equity
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
6,963
7,065
LIFO expense
995
993
Pension expense
696
663
Stock based compensation
1,048
1,074
Amortization of debt issuance fees
295
767
Other
(489
97
Changes in operating assets and liabilities:
(5,359
(5,425
(231
1,462
2,408
4,624
2,471
(1,826
(1,548
(169
Income taxes
2,608
2,406
Accrued expenses and other
589
(4,120
Benefit obligations
(1,474
(4,753
Net cash provided by operating activities
21,100
10,742
Cash flows from investing activities:
Capital additions
(3,020
(3,906
52
Net cash used for investing activities
(3,001
(3,854
Cash flows from financing activities:
Cash dividends
(4,852
(4,715
Treasury share repurchases
(1,141
(267
Payments to banks for borrowings
(14,625
(4,375
(30
(17
Net cash used for financing activities
(20,648
(9,374
Effect of exchange rate changes on cash
176
(260
Net increase (decrease) in cash and cash equivalents
(2,373
(2,746
Cash and cash equivalents:
Beginning of period
30,518
End of period
27,772
CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
Three Months Ended March 31, 2025
(Dollars in thousands, except
Common Shares
AdditionalPaid-In
Retained
AccumulatedOtherComprehensive
share and per share amounts)
Shares
Dollars
Capital
Earnings
(Loss) Income
Total
Balances December 31, 2024
26,227,540
Other comprehensive income
Stock based compensation, net
96,900
671
356
(30,063
(7
(1,024
(110
Cash dividends - $0.185 per share
Balances March 31, 2025
26,294,377
Three Months Ended March 31, 2024
Balances December 31, 2023
26,193,998
5,119
5,750
363,527
(24,937
349,459
24,336
979
90
(7,348
(2
(238
(27
Cash dividends - $0.18 per share
Balances March 31, 2024
26,210,986
5,122
6,491
366,759
(24,689
353,683
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Amounts in tables in thousands of dollars, except for per share amounts)
NOTE 1 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The Consolidated Financial Statements include the accounts of The Gorman-Rupp Company (the “Company” or “Gorman-Rupp”) and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management of the Company, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2025 are not necessarily indicative of results that may be expected for the year ending December 31, 2025. For further information, refer to the Consolidated Financial Statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, from which related information herein has been derived.
Accounting Standards Issued But Not Yet Adopted
The FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The standard is intended to enhance the transparency and decision usefulness of income tax disclosures. This amendment modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold, (2) the amount of income taxes paid, net of refunds received, disaggregated by federal, state and foreign taxes, as well as individual jurisdictions in which income taxes paid is equal to or greater than 5 percent of total income taxes paid, (3) the income or loss from continuing operations before income tax expense or benefit disaggregated between domestic and foreign, and (4) income tax expense or benefit from continuing operations disaggregated by federal, state and foreign. The standard is effective for annual periods beginning after December 15, 2024. The standard should be applied on a prospective basis, while retrospective application is permitted. The Company does not anticipate the adoption to have a material impact on the Company's financial disclosures.
The FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). The standard is intended to enhance the transparency of business expenses in commonly presented expense captions. This amendment requires entities to disclose the following amounts in each relevant income statement expense caption (1) purchases of inventory, (2) employee compensation, (3) depreciation, and (4) intangible asset amortization. Entities are also required to disclose the total amount of selling expense and the entities definition of selling expenses. The standard is effective for annual periods beginning after December 15, 2026. The standard should be applied on a prospective basis, while retrospective application is permitted. The Company is evaluating the impact of the standard on the Company's financial disclosures.
NOTE 2 – REVENUE
The following tables disaggregate total net sales by end market and geographic location:
End market
Industrial
32,617
33,560
Fire
32,977
32,289
Agriculture
19,463
20,406
Construction
18,781
21,482
Municipal
22,049
20,215
Petroleum
6,927
5,902
OEM
10,633
8,158
Repair parts
20,501
17,256
Total net sales
Geographic Location
United States
121,994
121,072
Foreign countries
41,954
38,196
The Company attributes revenues to individual countries based on the customer location to which finished products are shipped. International sales represented approximately 26% and 24% of total net sales for the first quarter of 2025 and 2024, respectively.
On March 31, 2025, the Company had $217.8 million of remaining performance obligations, also referred to as backlog. The Company expects to recognize as revenue substantially all of its remaining performance obligations within one year.
The Company’s contract assets and liabilities as of March 31, 2025 and December 31, 2024 were as follows:
March 31,2025
December 31,2024
Contract assets
441
390
Contract liabilities
Revenue recognized for the three months ended March 31, 2025 and 2024 that was included in the contract liabilities balance at the beginning of the period was $4.4 million and $5.4 million, respectively.
NOTE 3 - INVENTORIES
LIFO inventories are stated at the lower of cost or market and all other inventories are stated at the lower of cost or net realizable value. Replacement cost approximates current cost and the excess over LIFO cost was approximately $101.2 million and $100.2 million at March 31, 2025 and December 31, 2024, respectively. Allowances for excess and obsolete inventory totaled $7.1 million and $6.8 million at March 31, 2025 and December 31, 2024, respectively. An actual valuation of inventory under the LIFO method is made at the end of each year based on the inventory levels and costs at that time. Interim LIFO calculations are based on management’s estimate of expected year-end inventory levels and costs, and are subject to the final year-end LIFO inventory valuation.
Pre-tax LIFO expense was $1.0 million for both the three months ended March 31, 2025 and 2024.
Inventories are comprised of the following:
Inventories, net:
Raw materials and in-process
36,052
36,897
Finished parts
46,237
46,375
Finished products
16,863
15,933
Total net inventories
7
NOTE 4 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net consist of the following:
Land
6,183
6,116
Buildings
124,390
123,199
Machinery and equipment
232,103
229,624
362,676
358,939
Less accumulated depreciation
(231,170
(227,117
NOTE 5 - PRODUCT WARRANTIES
A liability is established for estimated future warranty and service claims based on historical claims experience and specific product failures. The Company expenses warranty costs directly to Cost of products sold. Changes in the Company’s product warranties liability are:
March 31,
Balance of beginning of year
2,210
2,269
Provision
1,089
877
Claims
(875
(718
Balance at end of period
2,424
2,428
NOTE 6 - PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company sponsors a defined benefit pension plan (“GR Plan”) covering certain domestic employees. Benefits are based on each covered employee’s years of service and compensation. The GR Plan is funded in conformity with the funding requirements of applicable U.S. regulations. The GR Plan was closed to new participants effective January 1, 2008. Employees hired after this date, in eligible locations, participate in an enhanced 401(k) plan instead of the defined benefit pension plan. Employees hired prior to this date continue to accrue benefits.
Additionally, the Company sponsors defined contribution pension plans made available to all domestic and Canadian employees. The Company funds the cost of these benefits as incurred.
The Company also sponsors a non-contributory defined benefit postretirement health care plan that provides health benefits to certain domestic and Canadian retirees and eligible spouses and dependent children. The Company funds the cost of these benefits as incurred.
The following tables present the components of net periodic benefit costs:
Pension Benefits
Postretirement Benefits
Service cost
493
502
202
212
Interest cost
750
669
310
286
Expected return on plan assets
(832
(839
—
Amortization of prior service cost
(19
Recognized actuarial loss (gain)
285
331
(8
Net periodic benefit cost (a)
485
490
8
NOTE 7 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The components of Accumulated other comprehensive income (loss) as reported in the Consolidated Balance Sheets are:
Currency Translation Adjustments
Deferred Gain (Loss) on Cash Flow Hedging
Pension and OPEB Adjustments
Accumulated Other Comprehensive (Loss) Income
Balance at December 31, 2024
(12,712
(103
(12,628
Reclassification adjustments
(104
277
173
Current period benefit (charge)
(785
771
Income tax benefit (charge)
(68
144
Balance at March 31, 2025
(11,164
(780
(12,411
Balance at December 31, 2023
(9,688
(1,069
(14,180
(525
(431
(956
2,634
236
1,786
(500
(82
(582
Balance at March 31, 2024
(10,772
540
(14,457
NOTE 8 – COMMON SHARE REPURCHASES
The Company has a share repurchase program with the authorization to purchase up to $50.0 million of the Company’s common shares. As of March 31, 2025, the Company had $48.1 million available for repurchase under the share repurchase program. During the three-month period ending March 31, 2025, the Company repurchased 30,063 shares at an average cost per share of $37.97 for a total of $1.1 million in the surrender of common shares to cover taxes in connection with the vesting of stock awards, which were not part of the share repurchase program. During the three month period ending March 31, 2024, the Company repurchased 7,348 shares at an average cost per share of $36.34 for a total of $0.3 million in the surrender of common shares to cover taxes in connection with the vesting of stock awards, which were not part of the share repurchase program.
NOTE 9 – FINANCING ARRANGEMENTS
Debt consisted of:
Senior Secured Credit Agreement
326,125
340,750
Credit Facility
6.40% Note Agreement
30,000
Total debt
356,125
370,750
Unamortized discount and debt issuance fees
(3,919
(4,153
Total debt, net
352,206
366,597
Less: current portion of long-term debt
(18,500
Total long-term debt, net
The carrying value of long term debt, including the current portion, approximates fair value as the variable interest rates approximate rates available to other market participants with comparable credit risk, and interest rates as of March 31, 2025 were approximately the same as interest rates at the time the fixed rate agreement was executed.
Amended and Restated Senior Secured Credit Agreement
On May 31, 2024, the Company entered into an Amended and Restated Senior Secured Credit Agreement (the “Amended and Restated Senior Credit Agreement”) with several lenders, which amended, extended, and restated the Company’s previous Senior Secured Credit Agreement, dated as of May 31, 2022. The Amended and Restated Senior Credit Agreement provides for a term loan facility in an aggregate principal amount of $370 million (the “Senior Term Loan Facility”), a revolving credit facility in an aggregate
9
principal amount of up to $100 million (the “Credit Facility”), a letter of credit sub-facility in the aggregate available amount of up to $30 million, as a sublimit of the Credit Facility, and a swing line sub-facility in the aggregate available amount of up to $20 million, as a sublimit of the Credit Facility. The obligations of the Company under the Amended and Restated Senior Credit Agreement are secured by a first priority lien on substantially all of its personal property, and guaranteed by certain of the Company’s direct, wholly-owned subsidiaries (the “Guarantors”), which guarantees are secured by a first priority lien in substantially all of the Guarantors’ personal property.
The Amended and Restated Senior Credit Agreement has a maturity date of May 31, 2029, with the Senior Term Loan Facility requiring quarterly installment payments commencing on September 30, 2024 and continuing on the last day of each consecutive December, March, June and September thereafter.
At the option of the Company, borrowings under the Senior Term Loan Facility and under the Credit Facility bear interest at either a base rate or at an Adjusted Term SOFR Rate (as defined in the Amended and Restated Senor Credit Agreement), plus the applicable margin, which ranges from 0.5% to 1.25% for base rate loans and 1.50% to 2.25% for Adjusted Term SOFR Rate loans. The applicable margin is based on the Company’s total leverage ratio. At March 31, 2025, the applicable interest rate under the Amended and Restated Senior Secured Credit Agreement was Adjusted Term SOFR plus 2.0%.
The Amended and Restated Senior Credit Agreement requires the Company to maintain a consolidated total net leverage ratio not to exceed 4.50 to 1.00 for each of the four consecutive fiscal quarter periods ending June 30, 2024 and September 30, 2024, decreasing to 4.25 to 1.00 for each of the four consecutive quarters ending December 31, 2024 and March 31, 2025, decreasing to 4.00 to 1.00 for each of the four consecutive fiscal quarter periods ending June 30, 2025 and September 30, 2025, and decreasing to 3.50 to 1.00 for the four consecutive fiscal quarter periods ending December 31, 2025 and each of the four consecutive fiscal quarter periods ending thereafter.
The Amended and Restated Senior Credit Agreement requires the Company to maintain an interest coverage ratio of not less than 3.00 to 1.00 for any four consecutive fiscal quarter period.
The Amended and Restated Senior Credit Agreement contains customary affirmative and negative covenants, including among others, limitations on the Company and its subsidiaries with respect to the incurrence of liens and indebtedness, dispositions of assets, mergers, transaction with affiliates, and the ability to make or pay dividends in excess of certain thresholds.
The Amended and Restated Senior Credit Agreement also contains customary provisions requiring certain mandatory prepayments, including, among others, prepayments of the net cash proceeds from any non-ordinary course sale of assets, and net cash proceeds of any non-permitted indebtedness.
On May 31, 2024, the Company entered into a Note Agreement (the “6.40% Note Agreement”) whereby the Company issued $30.0 million aggregate principal amount of 6.40% senior secured notes (the “6.40% Notes”). The Company’s obligations under the 6.40% Notes are secured by a first priority lien on substantially all of its personal property, and guaranteed by each of the Guarantors, which guarantees are secured by a first priority lien in substantially all of the Guarantors’ personal property. The liens granted under the 6.40% Notes are equal in priority to those granted pursuant to the Amended and Restated Senior Credit Agreement.
The 6.40% Note Agreement has a maturity date of May 31, 2031 and interest is payable semiannually on the last day of May and November in each year, commencing with November 30, 2024.
The 6.40% Note Agreement includes representations, warranties, covenants and events of default, substantially consistent with those contained in the Amended and Restated Senior Credit Agreement.
The Company was in compliance with all debt covenants as of March 31, 2025.
10
Interest Rate Derivatives
The Company entered into interest rate swaps that hedge interest payments on its SOFR borrowing during the fourth quarter of 2022. All swaps have been designated as cash flow hedges. The following table summarizes the notional amounts, related rates and remaining terms of interest swap agreements as of March 31, 2025 and December 31, 2024:
Notional Amount
Average Fixed Rate
Term
Interest rate swaps
147,656
150,938
4.1
%
Extending to May 2027
The fair value of the Company’s interest rate swaps was a payable of $1.0 million as of March 31, 2025 and a payable of $0.1 million as of December 31, 2024. The fair value was based on inputs other than quoted prices in active markets for identical assets that are observable either directly or indirectly and therefore considered level 2. The mark-to-market effect of interest rate swap agreements that are considered effective as hedges has been included in Accumulated Other Comprehensive Loss. The interest rate swap agreements held by the Company on March 31, 2025 are expected to continue to be effective hedges.
The following table summarizes the fair value of derivative instruments as recorded in the Consolidated Balance Sheets:
Current Assets:
Prepaid and Other
70
Liabilities:
(190
(833
(204
Total derivatives
(1,023
(134
The following table summarizes total gains (losses) recognized on derivatives:
Derivatives in Cash Flow Hedging Relationships
Amount of (Loss) Gain Recognized in AOCI on Derivatives
The effects of derivative instruments on the Company’s Consolidated Statements of Income are as follows:
Location of (Loss) Gain Reclassed from AOCI into Income (Effective Portion)
Amount of (Loss) Gain Reclassed from AOCI into Income (Effective Portion)
104
525
Note 10 – BUSINESS SEGMENT INFORMATION
The Company operates in one business segment comprising the design, manufacture and sale of pumps and pump systems. The Company’s products are used in water, wastewater, construction, industrial, petroleum, original equipment, agriculture, fire suppression, heating, ventilation and air conditioning (HVAC), military and other liquid-handling applications.
The pumps and pump systems are marketed in the United States and worldwide through a broad network of distributors, through manufacturers’ representatives (for sales to many original equipment manufacturers), through third-party distributor catalogs, and by direct sales. International sales are made primarily through foreign distributors and representatives.
11
The Company's chief operating decision maker ("CODM") is its chief executive officer, who reviews financial information presented on a consolidated basis. The CODM uses consolidated operating income and net income to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the allocation of capital between reinvestment in the business, the payment of dividends, paying down debt, and/or acquisitions. The measure of segment assets is reported on the balance sheet as total consolidated assets.
The following table presents selected financial information with respect to the Company’s single operating segment for the three months ended March 31, 2025 and 2024:
Less:
Cost of Material
77,428
76,974
Labor
21,142
19,899
Overhead
15,046
14,001
Selling
11,588
12,237
General and administrative
13,519
12,651
Operating Income
Other income (expense):
Other income (expense)
Provision from income taxes
The Company sells to approximately 140 countries around the world. The Company attributes revenues to individual countries based on the customer location to which finished products are shipped. The following tables disaggregate total net sales by geographic location:
12
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except for per share amounts)
The following discussion and analysis of the Company’s financial condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements, and notes thereto, and the other financial data included elsewhere in this Quarterly Report on Form 10-Q. The following discussion should also be read in conjunction with the Company’s audited Consolidated Financial Statements and accompanying notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in its Annual Report on Form 10-K for the year ended December 31, 2024.
Executive Overview
The Gorman-Rupp Company (“we”, “our”, “Gorman-Rupp” or the “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. The Company attributes its success to long-term product quality, applications and performance combined with timely delivery and service, and continually seeks to develop initiatives to improve performance in these key areas.
We regularly invest in training for our employees, in new product development and in modern manufacturing equipment, technology and facilities all designed to increase production efficiency and capacity and drive growth by delivering innovative solutions to our customers. We believe that the diversity of our markets is a major contributor to the generally stable financial growth we have produced historically.
The Company’s backlog of orders was $217.8 million at March 31, 2025 compared to $234.2 million at March 31, 2024 and $206.0 million at December 31, 2024. Incoming orders for the first three months of 2025 were $177.7 million, or a decrease of 0.7%, compared to the same period in 2024.
On April 24, 2025, the Board of Directors authorized the payment of a quarterly dividend of $0.185 per share on the common stock of the Company, payable June 10, 2025, to shareholders of record as of May 15, 2025. This will mark the 301st 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.
Outlook
Although we benefit from a primarily U.S. based supply chain, we continue to monitor the impact of tariffs and believe we will be able to mitigate the impact through product pricing and supply arrangements. We remain optimistic about our full year outlook and are focused on delivering profitable growth.
Three Months Ended March 31, 2025 vs. Three Months Ended March 31, 2024
Net Sales
The following table presents the Company’s disaggregated net sales by its end markets:
$ Change
% Change
(943
(2.8
%)
688
2.1
(4.6
(2,701
(12.6
1,834
9.1
1,025
17.4
2,475
30.3
3,245
18.8
4,680
2.9
Net sales for the first quarter of 2025 were $163.9 million compared to net sales of $159.3 million for the first quarter of 2024, an increase of 2.9% or $4.7 million. The increase in sales was due primarily to the impact of price increases taken in the first quarter of 2025.
Sales increased $1.8 million in the municipal market and $3.2 million in the repair market due to water and wastewater projects related to increased infrastructure investment. Sales also increased $2.5 million in the OEM market due to increases in various OEM applications, $1.0 million in the petroleum market, and $0.7 million in the fire suppression market. These increases were partially offset by sales decreases of $2.7 million in the construction market due to a general slow down in construction activity including sales into the rental market, $0.9 million in the agriculture market, and $0.9 million in the industrial market.
Cost of Products Sold and Gross Profit
2,742
2.5
% of Net sales
69.3
69.6
Gross Margin
30.7
30.4
Gross profit was $50.3 million for the first quarter of 2025, resulting in gross margin of 30.7%, compared to gross profit of $48.4 million and gross margin of 30.4% for the same period in 2024. The increase in gross margin was primarily driven by the realization of selling price increases partially offset by increased labor and overhead expenses.
Selling, General and Administrative (SG&A) Expenses
219
0.9
15.3
15.6
Selling, general and administrative (“SG&A”) expenses were $25.1 million and 15.3% of net sales for the first quarter of 2025 compared to $24.9 million and 15.6% of net sales for the same period in 2024.
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1,696
8.3
13.5
12.8
Operating income was $22.1 million for the first quarter of 2025, resulting in an operating margin of 13.5%, compared to operating income of $20.4 million and an operating margin of 12.8% for the same period in 2024. Operating margin increased 70 basis points compared to the same period in 2024 due to the realization of selling price increases and SG&A leverage partially offset by increased labor and overhead expenses.
Interest Expense
6,203
10,073
(3,870
(38.4
3.8
6.3
Interest expense was $6.2 million for the first quarter of 2025 compared to $10.1 million for the same period in 2024. The decrease in interest expense was due primarily to the series of refinancing transactions the Company completed on May 31, 2024 as well as a decrease in outstanding debt.
Net Income
5,452
54.1
9.5
1,208
54.9
Effective tax rate
21.9
21.8
4,244
53.8
7.4
5.0
0.16
53.3
The Company’s effective tax rate was 21.9% for the first quarter of 2025 compared to 21.8% for the first quarter of 2024.
Net income was $12.1 million, or $0.46 per share, for the first quarter of 2025 compared to net income of $7.9 million, or $0.30 per share, in the first quarter of 2024.
Adjusted EBITDA was $29.7 million for the first quarter of 2025 compared to $28.2 million for the first quarter of 2024.
Non-GAAP Financial Information
The discussion of Results of Operations above includes certain non-GAAP financial data and measures such as adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). Adjusted earnings before interest, taxes, depreciation and amortization is net income (loss) excluding interest, taxes, depreciation and amortization, adjusted to exclude 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
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titled measures used by other companies. Provided below is a reconciliation of adjusted EBITDA to its corresponding GAAP financial measure, which includes a description of actual adjustments made in the current period and the corresponding prior period.
Adjusted earnings before interest, taxes, depreciation and amortization:
Reported net income –GAAP basis
Depreciation and amortization expense
Non-GAAP earnings before interest, taxes, depreciation and amortization
28,702
27,222
Non-cash LIFO expense
Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization
29,697
28,215
Liquidity and Capital Resources
Our primary sources of liquidity are cash generated from operations and borrowings under our Credit Facility. Cash and cash equivalents totaled $21.8 million at March 31, 2025. The Company had an additional $99.1 million available under the revolving credit facility after deducting $0.9 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.
As of March 31, 2025, the Company had $356.1 million in total debt outstanding with $326.1 million due in 2029 and $30.0 million due in 2031. 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, 2025 and December 31, 2024. 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.
Capital expenditures for the first three months of 2025 were $3.0 million and consisted primarily of machinery and equipment. Capital expenditures for the full-year 2025 are presently planned to be approximately $20.0 million primarily for machinery and equipment, and are expected to be financed through cash from operations.
On April 24, 2025, the Board of Directors authorized the payment of a quarterly dividend of $0.185 per share on the common stock of the Company, payable June 10, 2025, to shareholders of record as of May 15, 2025. This will mark the 301st 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.
The Board of Directors has authorized a share repurchase program of up to $50.0 million of the Company’s common shares. The actual number of shares repurchased will depend on prevailing market conditions, alternative uses of capital and other factors, and will be determined at management’s discretion. The Company is not obligated to make any purchases under the program, and the program may be suspended or discontinued at any time. As of March 31, 2025, the Company had $48.1 million available for repurchase under the share repurchase program.
Financial Cash Flow
Beginning of period cash and cash equivalents
End of period cash and cash equivalents
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The increase in cash provided by operating activities in the first three months of 2025 compared to the same period last year was primarily due to increased net income, an increase in commissions payable and accrued expenses during the three month period ended March 31, 2025 compared to the same period last year.
During the first three months of 2025, investing activities of $3.0 million consisted of capital expenditures primarily for machinery and equipment. During the first three months of 2024, investing activities of $3.9 million consisted of capital expenditures primarily for machinery and equipment.
Net cash used for financing activities of $20.6 million for the first three months of 2025 primarily consisted of net payments on bank borrowings of $14.6 million, dividend payments of $4.9 million, and $1.1 million of payments in the surrender of common shares to cover taxes upon the vesting of stock awards. 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.
Critical Accounting Policies
Our critical accounting policies are described in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in the notes to our Consolidated Financial Statements for the year ended December 31, 2024 contained in our Annual Report on Form 10-K for the year ended December 31, 2024. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been discussed in the notes to our Consolidated Financial Statements in this Quarterly Report on Form 10-Q. The application of our critical accounting policies may require management to make judgments and estimates about the amounts reflected in the Consolidated Financial Statements. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.
Cautionary Note Regarding 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 Form 10-Q 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, retention of supplier and customer relationships and key employees, and the ability to service and repay indebtedness. Other factors include, but are not limited to: company specific risk factors including (1) loss of key personnel; (2) intellectual property security; (3) growth through acquisitions; (4) the Company’s indebtedness and how it may impact the Company’s financial condition and the way it operates its business; (5) acquisition performance and integration; (6) impairment in the value of intangible assets, including goodwill; (7) defined benefit pension plan settlement expense; (8) LIFO inventory method; and (9) family ownership of common equity; and general risk factors including (10) continuation of the current and projected future business environment; (11) highly competitive markets; (12) availability and costs of raw materials and labor; (13) cybersecurity threats; (14) artificial intelligence risk and challenges that can impact our business; (15) compliance with, and costs related to, a variety of import and export laws and regulations; (16) the impact of U.S. trade policy, including resulting tariffs; (17) environmental compliance costs and liabilities; (18) exposure to fluctuations in foreign currency exchange rates; (19) conditions in foreign countries in which The Gorman-Rupp Company conducts business; (20) changes in our tax rates and exposure to additional income tax liabilities; and (21) 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Exposure to foreign exchange rate risk is due to certain costs and revenue being denominated in currencies other than one of the Company’s subsidiaries functional currency. The Company is also exposed to market risk as the result of changes in interest rates which may affect the cost of financing. We continually monitor these risks and regularly develop appropriate strategies to manage them. Accordingly, from time to time, we may enter into certain derivative or other financial instruments. These financial instruments are used to mitigate market exposure and are not used for trading or speculative purposes.
Interest Rate Risk
The results of operations are exposed to changes in interest rates primarily with respect to borrowings under the Company’s Senior Term Loan Facility and Credit Facility. Borrowings under the Senior Term Loan Facility and Credit Facility may be made either at (i) a base rate plus the applicable margin, which ranges from 0.50% to 1.25%, or at (ii) an Adjusted Term SOFR Rate, plus the applicable margin, which ranges from 1.5% to 2.25%. At March 31, 2025, the Company had $326.1 million in borrowings under the Senior Term Loan Facility and no borrowings under the Credit Facility. As of March 31, 2025, the applicable interest rates under the Senior Secured Credit Agreement were Adjusted Term SOFR plus 2.0%. See Note 9 “Financing Arrangements” in the notes to our Consolidated Financial Statements.
To reduce the exposure to changes in the market rate of interest, effective October 31, 2022, the Company entered into interest rate swap agreements for a portion of the Senior Term Loan Facility. Terms of the interest rate swap agreements require the Company to receive a fixed interest rate and pay a variable interest rate. The interest rate swap agreements are designated as a cash flow hedge, and as a result, the mark-to-market gains or losses will be deferred and included as a component of accumulated other comprehensive income (loss) and reclassified to interest expense in the period during which the hedged transactions affect earnings. See “Derivative Financial Instruments” and “Interest Rate Derivatives” in the Notes to our Consolidated Financial Statements.
The Company estimates that a hypothetical increase of 100 basis points in interest rates would increase interest expense by approximately $1.8 million on an annual basis.
Foreign Currency Risk
The Company’s foreign currency exchange rate risk is limited primarily to the Euro, Canadian Dollar, South African Rand and British Pound. The Company manages its foreign exchange risk principally through invoicing customers in the same currency as is used in the market of the source of products. The foreign currency transaction gains (losses) for the three month periods ending March 31, 2025 and 2024 were both ($0.1) million, and are reported within Other (expense) income, net on the Consolidated Statements of Income.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. The Company’s disclosure controls and procedures are also designed to ensure that information required to be disclosed in Company reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to the Company’s management, including the principal executive officer and the principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
An evaluation was carried out under the supervision and with the participation of the Company’s management, including the principal executive officer and the principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q. Based on that evaluation, the principal executive officer and the principal financial officer have concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2025.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 1. LEGAL PROCEEDINGS
There are no material changes from the legal proceedings previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
ITEM 1A. RISK FACTORS
In addition to the information set forth in this report, you should carefully consider the risk factors disclosed in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, except for the following which supplements the COmpany's previously disclosed risk factors:
U.S. trade policy, including the implementation of tariffs, could adversely affect the Company’s business and financial results.
The U.S. administration has implemented numerous tariffs on imported materials and products and, in response, various countries have imposed new, or increased existing, tariffs on imports. These tariffs, to the extent that they continue to be imposed, and any new or increased tariffs, may increase the cost of imported materials used by our suppliers and in our products. Tariffs imposed by other countries may apply to our products sold internationally. The ultimate impact of the announced tariffs and any future tariffs will depend on various factors, including the extent to which such tariffs are implemented, the timing of implementation and the amount, scope and nature of such tariffs. If we are unable to mitigate the impact of tariffs, including through product pricing and supply arrangements, our business and financial results could be adversely affected.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Issuer purchases of its common shares during the first quarter of 2025 were:
Period
Total numberof sharespurchased
Average pricepaid per share
Total number ofshares purchased aspart of publiclyannounced program
Approximate dollarvalue of shares thatmay yet be purchasedunder the program
January 1 to January 31, 2025
48,067
February 1 to February 28, 2025
March 1 to March 31, 2025
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
During the quarter ended March 31, 2025, no director or officer of the Company adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, each as defined in Item 408 of Regulation S-K.
ITEM 6. EXHIBITS
Exhibit 31.1
Certification of Scott A. King, President and Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2
Certification of James C. Kerr, Executive Vice President and Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32
Certification pursuant to 18 U.S.C Section 1350, as adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002
Exhibit 101
Financial statements from the Quarterly Report on Form 10-Q of The Gorman-Rupp Company for the quarter ended March 31, 2025, formatted in Inline eXtensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Equity, and (vi) the Notes to Consolidated Financial Statements.
Exhibit 104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
(Registrant)
Date: April 28, 2025
By:
/s/James C. Kerr
James C. Kerr
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
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