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 SeptemberJune 30, 20222023
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 OctoberJuly 31, 20222023 there were 26,094,86526,193,998 common shares, without par value, of The Gorman-Rupp Company outstanding.
The Gorman-Rupp Company
Three and NineSix Months Ended SeptemberJune 30, 20222023 and 20212022
PART I. FINANCIAL INFORMATION | ||
Item 1. | Financial Statements (Unaudited) | |
Consolidated Statements of Income - Three months ended - | 3 | |
Consolidated Statements of Comprehensive Income - Three months ended - | 3 | |
Consolidated Balance Sheets | 4 | |
Consolidated Statements of Cash Flows | 5 | |
Consolidated Statements of Equity - | 6 | |
Notes to Consolidated Financial Statements (Unaudited) | 7 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 22 |
Item 4. | Controls and Procedures |
|
PART II. OTHER INFORMATION | ||
Item 1. | Legal Proceedings | 23 |
Item 1A. | Risk Factors | 23 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 24 |
Item 3. | Defaults Upon Senior Securities | 24 |
Item 4. | Mine Safety Information | 24 |
Item 5. | Other Information | 24 |
Item 6. | Exhibits | 25 |
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 |
|
PART I. FINANCIAL INFORMATION
ITEM 1 - 1.FINANCIAL STATEMENTS (UNAUDITED)
THE GORMAN-RUPP COMPANY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended | Nine Months Ended | Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | 2022 | 2021 | 2022 | 2021 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||
Net sales | $ | 153,792 | $ | 102,110 | $ | 375,026 | $ | 284,152 | $ | 171,024 | $ | 119,067 | $ | 331,490 | $ | 221,234 | ||||||||||||||||
Cost of products sold | 113,229 | 76,277 | 280,727 | 210,604 | 119,366 | 90,828 | 234,309 | 167,498 | ||||||||||||||||||||||||
Gross profit | 40,563 | 25,833 | 94,299 | 73,548 | 51,658 | 28,239 | 97,181 | 53,736 | ||||||||||||||||||||||||
Selling, general and administrative expenses | 22,076 | 14,173 | 62,125 | 42,064 | 24,193 | 24,114 | 47,430 | 39,936 | ||||||||||||||||||||||||
Amortization expense | 3,176 | 118 | 4,498 | 356 | 3,182 | 1,218 | 6,373 | 1,435 | ||||||||||||||||||||||||
Operating income | 15,311 | 11,542 | 27,676 | 31,128 | 24,283 | 2,907 | 43,378 | 12,365 | ||||||||||||||||||||||||
Interest expense | (7,556 | ) | - | (9,878 | ) | - | (10,485 | ) | (2,322 | ) | (20,672 | ) | (2,322 | ) | ||||||||||||||||||
Other income (expense), net | (5,323 | ) | (486 | ) | (7,079 | ) | (1,846 | ) | (536 | ) | (1,846 | ) | (969 | ) | (1,756 | ) | ||||||||||||||||
Income before income taxes | 2,432 | 11,056 | 10,719 | 29,282 | ||||||||||||||||||||||||||||
Provision from income taxes | 211 | 2,274 | 1,951 | 5,974 | ||||||||||||||||||||||||||||
Net income | $ | 2,221 | $ | 8,782 | $ | 8,768 | $ | 23,308 | ||||||||||||||||||||||||
Earnings per share | $ | 0.09 | $ | 0.34 | $ | 0.34 | $ | 0.89 | ||||||||||||||||||||||||
Income (loss) before income taxes | 13,262 | (1,261 | ) | 21,737 | 8,287 | |||||||||||||||||||||||||||
Provision (benefit) from income taxes | 2,785 | (265 | ) | 4,740 | 1,740 | |||||||||||||||||||||||||||
Net income (loss) | $ | 10,477 | $ | (996 | ) | $ | 16,997 | $ | 6,547 | |||||||||||||||||||||||
Earnings (loss) per share | $ | 0.40 | $ | (0.04 | ) | $ | 0.65 | $ | 0.25 | |||||||||||||||||||||||
Cash dividends per share | $ | 0.170 | $ | 0.155 | $ | 0.510 | $ | 0.465 | $ | 0.175 | $ | 0.170 | $ | 0.350 | $ | 0.340 | ||||||||||||||||
Average number of shares outstanding | 26,094,865 | 26,126,640 | 26,088,329 | 26,117,262 | 26,178,248 | 26,079,115 | 26,154,196 | 26,085,006 | ||||||||||||||||||||||||
See notes to consolidated financial statements (unaudited).
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Dollars in thousands, except per share amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Net income | $ | 2,221 | $ | 8,782 | $ | 8,768 | $ | 23,308 | ||||||||
Other comprehensive (loss) income, net of tax: | ||||||||||||||||
Cumulative translation adjustments | (2,855 | ) | (1,427 | ) | (5,719 | ) | (1,849 | |||||||||
Pension and postretirement medical liability adjustments | 3,981 | 726 | 6,067 | 3,089 | ||||||||||||
Other comprehensive (loss) income | 1,126 | (701 | ) | 348 | 1,240 | |||||||||||
Comprehensive income | $ | 3,347 | $ | 8,081 | $ | 9,116 | $ | 24,548 | ||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
(Dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Net income (loss) | $ | 10,477 | $ | (996 | ) | $ | 16,997 | $ | 6,547 | |||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Cumulative translation adjustments | 23 | (2,828 | ) | 278 | (2,864 | ) | ||||||||||
Cash flow hedging activity | 2,626 | - | 1,094 | - | ||||||||||||
Pension and postretirement medical liability adjustments | 233 | 1,663 | 366 | 2,086 | ||||||||||||
Other comprehensive income (loss) | 2,882 | (1,165 | ) | 1,738 | (778 | ) | ||||||||||
Comprehensive income (loss) | $ | 13,359 | $ | (2,161 | ) | $ | 18,735 | $ | 5,769 | |||||||
See notes to consolidated financial statements (unaudited).
THE GORMAN-RUPP COMPANY
CONSOLIDATED BALANCE SHEETS
(unaudited) | (unaudited) | |||||||||||||||
(Dollars in thousands) | September 30, | December 31, | June 30, 2023 | December 31, 2022 | ||||||||||||
Assets | Assets | |||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 10,288 | $ | 125,194 | $ | 12,173 | $ | 6,783 | ||||||||
Accounts receivable, net | 91,314 | 58,545 | 101,875 | 93,059 | ||||||||||||
Inventories, net | 105,850 | 85,648 | 115,816 | 111,133 | ||||||||||||
Prepaid and other | 18,123 | 7,795 | 10,957 | 14,551 | ||||||||||||
Total current assets | 225,575 | 277,182 | 240,821 | 225,526 | ||||||||||||
Property, plant and equipment, net | 127,798 | 104,293 | 136,047 | 128,640 | ||||||||||||
Other assets | 9,398 | 6,193 | 26,133 | 11,579 | ||||||||||||
Goodwill and other intangible assets, net | 508,053 | 33,086 | ||||||||||||||
Other intangible assets, net | 242,989 | 249,361 | ||||||||||||||
Goodwill | 257,660 | 257,724 | ||||||||||||||
Total assets | $ | 870,824 | $ | 420,754 | $ | 903,650 | $ | 872,830 | ||||||||
Liabilities and equity | Liabilities and equity | |||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 29,364 | $ | 17,633 | $ | 29,161 | $ | 24,697 | ||||||||
Payroll and employee related liabilities | 21,508 | 11,754 | 21,281 | 17,132 | ||||||||||||
Commissions payable | 7,945 | 8,164 | 10,352 | 10,116 | ||||||||||||
Deferred revenue and customer deposits | 6,504 | 9,200 | 9,097 | 6,740 | ||||||||||||
Current portion of long-term debt | 17,500 | - | 17,500 | 17,500 | ||||||||||||
Accrued expenses | 12,075 | 5,689 | 8,796 | 9,028 | ||||||||||||
Total current liabilities | 94,896 | 52,440 | 96,187 | 85,213 | ||||||||||||
Pension benefits | 8,636 | 9,342 | 10,368 | 9,352 | ||||||||||||
Postretirement benefits | 26,897 | 27,359 | 22,092 | 22,413 | ||||||||||||
Long-term debt, net of current portion | 411,080 | - | 411,405 | 419,327 | ||||||||||||
Other long-term liabilities | 2,339 | 1,637 | 22,239 | 5,331 | ||||||||||||
Total liabilities | 543,848 | 90,778 | 562,291 | 541,636 | ||||||||||||
Equity: | ||||||||||||||||
Common shares, without par value: | ||||||||||||||||
Authorized – 35,000,000 shares; | ||||||||||||||||
Outstanding – 26,094,865 shares at September 30, 2022 and 26,103,661 shares at December 31, 2021 (after deducting treasury shares of 953,931 and 945,135, respectively), at stated capital amounts | 5,097 | 5,099 | ||||||||||||||
Authorized - 35,000,000 shares; | ||||||||||||||||
Outstanding - 26,178,248 shares at June 30, 2023 and 26,094,865 shares at December 31, 2022 (after deducting treasury shares of 870,548 and 953,931, respectively), at stated capital amounts | 5,115 | 5,097 | ||||||||||||||
Additional paid-in capital | 3,062 | 1,838 | 4,165 | 3,912 | ||||||||||||
Retained earnings | 348,799 | 353,369 | 354,815 | 346,659 | ||||||||||||
Accumulated other comprehensive (loss) | (29,982 | ) | (30,330 | ) | (22,736 | ) | (24,474 | ) | ||||||||
Total equity | 326,976 | 329,976 | 341,359 | 331,194 | ||||||||||||
Total liabilities and equity | $ | 870,824 | $ | 420,754 | $ | 903,650 | $ | 872,830 | ||||||||
See notes to consolidated financial statements (unaudited).
THE GORMAN-RUPP COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended | ||||||||
(Dollars in thousands) | 2022 | 2021 | ||||||
| Cash flows from operating activities: | ||||||||
Net income | $ | 8,768 | $ | 23,308 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 14,161 | 8,908 | ||||||
Pension expense | 8,963 | 4,177 | ||||||
Stock based compensation | 2,107 | 1,790 | ||||||
Contributions to pension plan | (2,000 | ) | (2,000 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | (13,514 | ) | (8,644 | ) | ||||
Inventories, net | (10,994 | ) | 342 | |||||
Accounts payable | 3,437 | 6,692 | ||||||
Commissions payable | 319 | 1,099 | ||||||
Deferred revenue and customer deposits | (2,526 | ) | 1,646 | |||||
Income taxes | 206 | 1,341 | ||||||
Accrued expenses and other | (3,042 | ) | (1,089 | ) | ||||
Benefit obligations | 6,623 | 3,965 | ||||||
Net cash provided by operating activities | 12,508 | 41,535 | ||||||
| Cash used for investing activities: | ||||||||
Capital additions | (11,268 | ) | (5,617 | ) | ||||
Payment for acquisitions | (526,301 | ) | - | |||||
Other | 327 | 572 | ||||||
Net cash used for investing activities | (537,242 | ) | (5,045 | ) | ||||
| Cash provided by (used for) financing activities: | ||||||||
Cash dividends | (13,306 | ) | (12,145 | ) | ||||
Treasury share repurchases | (918 | ) | (231 | ) | ||||
Proceeds from bank borrowings | 445,000 | - | ||||||
Payments to banks for borrowings | (4,375 | ) | - | |||||
Debt issuance fees | (15,217 | ) | - | |||||
Other | (97 | ) | (689 | ) | ||||
Net cash provided by (used for) financing activities | 411,087 | (13,065 | ) | |||||
Effect of exchange rate changes on cash | (1,259 | ) | (508 | ) | ||||
Net increase (decrease) in cash and cash equivalents | (114,906 | ) | 22,917 | |||||
| Cash and cash equivalents: | ||||||||
Beginning of period | 125,194 | 108,203 | ||||||
End of period | $ | 10,288 | $ | 131,120 | ||||
See notes to consolidated financial statements (unaudited).
THE GORMAN-RUPP COMPANY
CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
| Common Shares | Additional | Other | ||||||||||||||||||||||
| (Dollars in thousands, except share and per share amounts) | Paid-In | Retained | Comprehensive | |||||||||||||||||||||
Shares | Dollars | Capital | Earnings | (Loss) Income | Total | |||||||||||||||||||
Balances December 31, 2021 | 26,103,661 | $ | 5,099 | $ | 1,838 | $ | 353,369 | $ | (30,330 | ) | $ | 329,976 | ||||||||||||
Net income | 7,543 | 7,543 | ||||||||||||||||||||||
Other comprehensive income | 387 | 387 | ||||||||||||||||||||||
Stock based compensation, net | 682 | 682 | ||||||||||||||||||||||
Treasury share repurchases | (24,546 | ) | (5 | ) | (882 | ) | (91 | ) | (918 | ) | ||||||||||||||
Cash dividends - $0.17 per share | (4,436 | ) | (4,436 | ) | ||||||||||||||||||||
Balances March 31, 2022 | 26,079,115 | $ | 5,094 | $ | 1,698 | $ | 356,385 | $ | (29,943 | ) | $ | 333,234 | ||||||||||||
Net income (loss) | (996 | ) | (996 | ) | ||||||||||||||||||||
Other comprehensive loss | (1,165 | ) | (1,165 | ) | ||||||||||||||||||||
Stock based compensation, net | 730 | 730 | ||||||||||||||||||||||
Cash dividends - $0.17 per share | (4,433 | ) | (4,433 | ) | ||||||||||||||||||||
Balances June 30, 2022 | 26,079,115 | $ | 5,094 | $ | 2,428 | $ | 350,956 | $ | (31,108 | ) | $ | 327,370 | ||||||||||||
Net income | 2,221 | 2,221 | ||||||||||||||||||||||
Other comprehensive loss | 1,126 | 1,126 | ||||||||||||||||||||||
Stock based compensation, net | 15,750 | 3 | 634 | 59 | 696 | |||||||||||||||||||
Cash dividends - $0.17 per share | (4,437 | ) | (4,437 | ) | ||||||||||||||||||||
Balances September 30, 2022 | 26,094,865 | $ | 5,097 | $ | 3,062 | $ | 348,799 | $ | (29,982 | ) | $ | 326,976 | ||||||||||||
Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||
| Accumulated | |||||||||||||||||||||||
| Common Shares | Additional | Other | ||||||||||||||||||||||
| (Dollars in thousands, except share and per share amounts) |
| Paid-In | Retained | Comprehensive | ||||||||||||||||||||
Shares | Dollars | Capital | Earnings | (Loss) Income | Total | |||||||||||||||||||
Balances December 31, 2020 | 26,101,992 | $ | 5,099 | $ | 693 | $ | 340,098 | $ | (30,377 | ) | $ | 315,513 | ||||||||||||
Net income | 7,429 | 7,429 | ||||||||||||||||||||||
Other comprehensive loss | (871 | ) | (871 | ) | ||||||||||||||||||||
Stock based compensation, net | 14,148 | 3 | 551 | 52 | 606 | |||||||||||||||||||
Cash dividends - $0.155 per share | (4,047 | ) | (4,047 | ) | ||||||||||||||||||||
Balances March 31, 2021 | 26,116,140 | $ | 5,102 | $ | 1,244 | $ | 343,532 | $ | (31,248 | ) | $ | 318,630 | ||||||||||||
Net income | 7,097 | 7,097 | ||||||||||||||||||||||
Other comprehensive income | 2,812 | 2,812 | ||||||||||||||||||||||
Stock based compensation, net | 465 | 465 | ||||||||||||||||||||||
Cash dividends - $0.155 per share | (4,048 | ) | (4,048 | ) | ||||||||||||||||||||
Balances June 30, 2021 | 26,116,140 | $ | 5,102 | $ | 1,709 | $ | 346,581 | $ | (28,436 | ) | $ | 324,956 | ||||||||||||
Net income | 8,782 | 8,782 | ||||||||||||||||||||||
Other comprehensive loss | (701 | ) | (701 | ) | ||||||||||||||||||||
Stock based compensation, net | 10,500 | 2 | 448 | 39 | 489 | |||||||||||||||||||
Cash dividends - $0.155 per share | (4,050 | ) | (4,050 | ) | ||||||||||||||||||||
Balances September 30, 2021 | 26,126,640 | $ | 5,104 | $ | 2,157 | $ | 351,352 | $ | (29,137 | ) | $ | 329,476 | ||||||||||||
Six Months Ended | ||||||||
(Dollars in thousands) | 2023 | 2022 | ||||||
| Cash flows from operating activities: | ||||||||
Net income | $ | 16,997 | $ | 6,547 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 14,158 | 7,201 | ||||||
LIFO expense | 4,440 | 6,004 | ||||||
Pension expense | 1,617 | 3,357 | ||||||
Stock based compensation | 1,606 | 1,413 | ||||||
Amortization of debt issuance fees | 1,481 | 237 | ||||||
Other | 30 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | (8,645 | ) | (11,713 | ) | ||||
Inventories, net | (8,959 | ) | (10,687 | ) | ||||
Accounts payable | 4,435 | 938 | ||||||
Commissions payable | 142 | 392 | ||||||
Deferred revenue and customer deposits | 2,365 | (1,269 | ) | |||||
Income taxes | 2,374 | (1,045 | ) | |||||
Accrued expenses and other | 2,235 | 1,273 | ||||||
Benefit obligations | 3,580 | 4,044 | ||||||
Net cash provided by operating activities | 37,856 | 6,692 | ||||||
| Cash flows from investing activities: | ||||||||
Capital additions | (13,270 | ) | (8,445 | ) | ||||
Payment for acquisitions | - | (526,301 | ) | |||||
Other | 367 | 208 | ||||||
Net cash used for investing activities | (12,903 | ) | (534,538 | ) | ||||
| Cash flows from financing activities: | ||||||||
Cash dividends | (9,148 | ) | (8,869 | ) | ||||
Treasury share repurchases | (1,029 | ) | (918 | ) | ||||
Proceeds from bank borrowings | 5,000 | 445,000 | ||||||
Payments to banks for borrowings | (13,750 | ) | - | |||||
Debt issuance fees | - | (15,165 | ) | |||||
Other | (534 | ) | (65 | ) | ||||
Net cash provided by (used for) financing activities | (19,461 | ) | 419,983 | |||||
Effect of exchange rate changes on cash | (102 | ) | (503 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 5,390 | (108,366 | ) | |||||
| Cash and cash equivalents: | ||||||||
Beginning of period | 6,783 | 125,194 | ||||||
End of period | $ | 12,173 | $ | 16,828 | ||||
See notes to consolidated financial statements (unaudited).
THE GORMAN-RUPP COMPANY CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
See notes to consolidated financial statements (unaudited). 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. Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results. In the opinion of management of the Company, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and ninesix months ended SeptemberJune 30, 20222023 are not necessarily indicative of results that may be expected for the year ending December 31, 2022.2023. 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, 2021,2022, from which related information herein has been derived.
Acquisitions
The Company allocates the purchase price of its acquisitions to the assets acquired, liabilities assumed, and noncontrolling interests based upon their respective fair values at the acquisition date. The Company utilizes management estimates and inputs from an independent third-party valuation firm to assist in determining these fair values.
The Company uses the income, market or cost approach (or a combination thereof) for the valuation as appropriate. The valuation inputs in these models and analyses are based on market participant assumptions. Management values property, plant and equipment using the cost approach supported where available by observable market data, which includes consideration of obsolescence. Management values acquired intangible assets using the relief from royalty method or excess earnings method, which are forms of the income approach supported by observable market data for peer companies. The significant assumptions used to estimate the value of the acquired intangible assets include discount rates and certain assumptions that form the basis of future cash flows (such as revenue growth rates, customer attrition rates, and royalty rates), which are considered Level 3 assets as the assumptions are unobservable inputs developed by the Company. Acquired inventories are recorded at fair value. For certain items, the carrying value is determined to be a reasonable approximation of fair value based on information available to the Company.
The excess of the acquisition price over estimated fair values is recorded as goodwill. Goodwill is adjusted for any changes to acquisition date fair value amounts made within the measurement period. Acquisition-related transaction costs are recognized separately from the business combination and expensed as incurred. Refer to “Note 2 – Acquisitions” for additional details.
Recently Issued Accounting Standards
The Company considers the applicability and impact of all Accounting Standard Updates (“ASUs”). All recently issued ASUs were assessed and determined to be not applicable or are expected to have minimal impact on the Company’s Consolidated Financial Statements.
NOTE 2 - ACQUISITIONS
On May 31, 2022, the Company acquired the assets of Fill-Rite and Sotera (“Fill-Rite”), a division of Tuthill Corporation, for cash consideration of $526.3$528.0 million. The acquisitiontransaction was funded with new debt consisting of $350.0 million from a senior secured term loan, $90.0 million from a subordinated unsecured loan, $5.0 million from the new revolving Credit Facility, and $81.3$83.0 million of cash on hand. Refer to “Note 10 – Financing Arrangements” for further details related to the financing completed as part of the transaction.
The Company accounted for the Fill-Rite acquisitiontransaction in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations”. The results of operations for Fill-Rite are included in the accompanying Consolidated Statements of Income from the acquisition date. Fill-Rite had $40.1$13.5 million in net sales and $3.6$0.2 million in operating income and $53.7 million in net sales and $3.7 million in operating incomethat was included in the Company’s consolidated financial statements for the three and ninesix months ended SeptemberJune 30, 2022, respectively.2022. Operating income for the three months ended September 30, 2022 included $0.6$1.4 million of inventory step up amortization and $0.2 million of acquired customer backlog amortization and $3.0in addition to the $1.0 million in amortization on customer relationships and developed technology. Operating income for the nine months ended September 30, 2022 included $1.4 million of inventory step-up amortization, $0.8 million of acquired customer backlog amortization, and $4.0 million in amortization on customer relationships and developed technology.
Under the acquisition method of accounting, the assets and liabilities have been recorded at their respective estimated fair values as of the date of completion of the acquisition and included inreported into the Company’s Consolidated Balance Sheets. These preliminary estimates may be revised during the measurement period as third-party valuations are finalized, additional information becomes available and as additional analyses are performed, and any such revisions could have a material impact on our results of operations and financial position.
The following table presents the preliminary fair value of assets acquired and liabilities assumedassumed. No adjustments to the preliminary purchase price allocation were made during the second quarter of 2023 and will be finalized upon completion ofthe purchase accounting matters:price allocation is now final:
Accounts receivable | $ | 21,273 | ||||||
Account receivable | $ | 21,273 | ||||||
Inventory | 12,214 | 12,214 | ||||||
Customer backlog (amortized over 1 year) | 2,600 | 2,600 | ||||||
Other current assets | 914 | 914 | ||||||
Property, plant, and equipment | 24,505 | 24,505 | ||||||
Customer relationships (amortized over 20 years) | 200,900 | 200,900 | ||||||
Technology (amortized over 20 years) | 39,800 | 39,800 | ||||||
Tradenames (unamortized) | 10,700 | 10,700 | ||||||
Goodwill | 228,725 | 230,688 | ||||||
Total assets acquired | $ | 541,631 | $ | 543,594 | ||||
Current liabilities assumed | (15,330 | ) | (15,601 | ) | ||||
Allocated purchase price | $ | 526,301 | $ | 527,993 | ||||
For tax purposes, the Fill-Rite acquisition was treated as an asset purchase. As such, the Company received a step-up in tax basis of the net Fill-Rite assets, equal to the purchase price, including goodwill which is deductible for tax purposes.
The transaction costs related to the acquisition approximated $0.1 million and $7.0$6.9 million for the three and ninesix months ended SeptemberJune 30, 2022. These costs were expensed as incurred and recorded within selling, general, and administrative expensesexpenses.
The following is a supplemental presentation of our pro-forma net sales, operating income, net income, and earnings per share had the Fill-Rite acquisitionAcquisition occurred as of January 1, 2021 (in millions):
Nine months ended September 30, | ||||||||||||
2022 | 2021 | Six Months Ended June 30, 2022 | ||||||||||
Net sales | $ | 440.1 | $ | 384.9 | $ | 286.3 | ||||||
Operating income | $ | 43.9 | $ | 37.7 | $ | 27.7 | ||||||
Net income | $ | 12.1 | $ | 11.8 | $ | 9.5 | ||||||
Earnings per share | $ | 0.46 | $ | 0.45 | $ | 0.36 | ||||||
The supplemental pro forma information presented above is being provided for information purposes only and may not necessarily reflect the future results of operations of the Company or what the results of operations would have been had the Company owned and operated Fill-Rite since January 1, 2021. The proforma results for the nine months ended 2021 include $3.4 million in non-recurring costs related to inventory step up amortization and customer backlog amortization.
NOTE 3 – REVENUE
Disaggregation of Revenue
The following tables disaggregate total net sales by major product categoryend market and geographic location:
Product Category | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Pumps and pump systems | $ | 138,522 | $ | 86,770 | $ | 327,883 | $ | 241,038 | ||||||||
Repair parts for pumps and pump systems and other | 15,270 | 15,340 | 47,143 | 43,114 | ||||||||||||
Total net sales | $ | 153,792 | $ | 102,110 | $ | 375,026 | $ | 284,152 | ||||||||
End market | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Industrial | $ | 22,786 | $ | 18,664 | $ | 43,731 | $ | 36,518 | ||||||||
Fire | 36,935 | 27,904 | 73,074 | 56,326 | ||||||||||||
Agriculture | 5,027 | 5,195 | 9,776 | 10,207 | ||||||||||||
Construction | 11,921 | 10,073 | 22,949 | 19,238 | ||||||||||||
Municipal | 19,549 | 16,950 | 36,973 | 31,257 | ||||||||||||
Petroleum | 3,719 | 2,631 | 7,739 | 6,173 | ||||||||||||
OEM | 9,480 | 9,300 | 18,490 | 18,031 | ||||||||||||
Repair parts | 18,722 | 14,809 | 35,912 | 29,943 | ||||||||||||
Total net sales excluding Fill-Rite | 128,139 | 105,526 | 248,644 | 207,693 | ||||||||||||
Fill-Rite | 42,885 | 13,541 | 82,846 | 13,541 | ||||||||||||
Total net sales | $ | 171,024 | $ | 119,067 | $ | 331,490 | $ | 221,234 | ||||||||
Geographic Location | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
United States | $ | 115,478 | $ | 68,726 | $ | 272,943 | $ | 195,823 | ||||||||
Foreign countries | 38,314 | 33,384 | 102,083 | 88,329 | ||||||||||||
Total net sales | $ | 153,792 | $ | 102,110 | $ | 375,026 | $ | 284,152 | ||||||||
| Geographic Location | ||||||||||||||||
| Three Months Ended June 30, | Six Months Ended | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
United States | $ | 128,289 | $ | 85,375 | $ | 248,039 | $ | 157,766 | ||||||||
Foreign countries | 42,735 | 33,692 | 83,451 | 63,468 | ||||||||||||
Total net sales | $ | 171,024 | $ | 119,067 | $ | 331,490 | $ | 221,234 | ||||||||
International sales represented approximately 25% and 33%28% of total net sales for the third quarterssecond quarter of 20222023 and 2021,2022, respectively, and were made to customers in many different countries around the world.
On SeptemberJune 30, 2022,2023, the Company had $266.7$249.8 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 SeptemberJune 30, 20222023 and December 31, 20212022 were as follows:
September 30, | December 31, 2021 | June 30, | December 31, | |||||||||||||
Contract assets | $ | - | $ | - | $ | - | $ | - | ||||||||
Contract liabilities | $ | 6,504 | $ | 9,200 | $ | 9,097 | $ | 6,740 | ||||||||
Revenue recognized for the ninesix months ended SeptemberJune 30, 20222023 and 20212022 that was included in the contract liabilities balance at the beginning of the periodsperiod was $8.9$3.7 million and $6.0$8.2 million, respectively.
NOTE 4 - 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 wasis approximately $79.9$92.6 million and $70.1$88.2 million at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively. Allowances for excess and obsolete inventory totaled $6.3$7.2 million and $6.0 million as of Septemberat June 30, 20222023 and December 31, 2021,2022, 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.
Inventories are comprised of the following:
June 30, | December 31, | |||||||||||||||
Inventories, net: | September 30, | December 31, 2021 | ||||||||||||||
Raw materials and in-process | $ | 35,030 | $ | 23,263 | $ | 40,752 | $ | 40,448 | ||||||||
Finished parts | 57,811 | 52,039 | 61,536 | 57,224 | ||||||||||||
Finished products | 13,009 | 10,346 | 13,528 | 13,461 | ||||||||||||
Total net inventories | $ | 105,850 | $ | 85,648 | $ | 115,816 | $ | 111,133 | ||||||||
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net consist of the following:
September 30, | December 31, 2021 | |||||||
Land | $ | 6,072 | $ | 5,813 | ||||
Buildings | 117,909 | 112,760 | ||||||
Machinery and equipment | 208,997 | 188,123 | ||||||
| 332,978 | 306,696 | |||||||
Less accumulated depreciation | (205,180 | ) | (202,403 | ) | ||||
Property, plant and equipment, net | $ | 127,798 | $ | 104,293 | ||||
June 30, | December 31, | |||||||
Land | $ | 6,210 | $ | 6,215 | ||||
Buildings | 120,149 | 119,197 | ||||||
Machinery and equipment | 224,510 | 212,581 | ||||||
| $ | 350,869 | $ | 337,993 | |||||
Less accumulated depreciation | (214,822 | ) | (209,353 | ) | ||||
Property, plant and equipment, net | $ | 136,047 | $ | 128,640 | ||||
NOTE 6 - 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:
September 30, | June 30, | |||||||||||||||
2022 | 2021 | 2023 | 2022 | |||||||||||||
Balance at beginning of year | $ | 1,637 | $ | 1,361 | ||||||||||||
Balance of beginning of year | $ | 1,973 | $ | 1,637 | ||||||||||||
Provision | 1,085 | 1,317 | 2,130 | 593 | ||||||||||||
Acquired | 645 | - | - | 645 | ||||||||||||
Claims | (1,238 | ) | (1,248 | ) | (1,741 | ) | (665 | ) | ||||||||
Balance at end of period | $ | 2,129 | $ | 1,430 | $ | 2,362 | $ | 2,210 | ||||||||
NOTE 7 - 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.
The Company established a defined benefit pension plan for certain Fill-Rite employees (“Fill-Rite Plan”) upon the acquisition as of June 1, 2022. The activity is included in the tables within this footnote.
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 | Pension Benefits | Postretirement Benefits | |||||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||
Service cost | $ | 496 | $ | 636 | $ | 287 | $ | 365 | $ | 530 | $ | 482 | $ | 209 | $ | 287 | ||||||||||||||||
Interest cost | 580 | 467 | 190 | 163 | 635 | 711 | 299 | 190 | ||||||||||||||||||||||||
Expected return on plan assets | (665 | ) | (907 | ) | - | - | (657 | ) | (692 | ) | - | - | ||||||||||||||||||||
Amortization of prior service cost | - | - | (282 | ) | (282 | ) | - | - | (249 | ) | (283 | ) | ||||||||||||||||||||
Recognized actuarial loss | 379 | 423 | 92 | 145 | 301 | 481 | (9 | ) | 92 | |||||||||||||||||||||||
Settlement loss | 4,759 | 388 | - | - | - | 1,597 | - | - | ||||||||||||||||||||||||
Net periodic benefit cost (a) | $ | 5,549 | $ | 1,007 | $ | 287 | $ | 391 | $ | 809 | $ | 2,579 | $ | 250 | $ | 286 | ||||||||||||||||
Pension Benefits | Postretirement Benefits | Pension Benefits | Postretirement Benefits | |||||||||||||||||||||||||
Nine Months Ended | Nine Months Ended | Six Months Ended | Six Months Ended | |||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||
Service cost | $ | 1,642 | $ | 2,034 | $ | 860 | $ | 1,096 | $ | 1,060 | $ | 1,146 | $ | 417 | $ | 573 | ||||||||||||
Interest cost | 1,745 | 1,252 | 570 | 490 | 1,270 | 1,165 | 598 | 380 | ||||||||||||||||||||
Expected return on plan assets | (2,169 | ) | (2,707 | ) | - | - | (1,314 | ) | (1,504 | ) | - | - | ||||||||||||||||
Amortization of prior service cost | - | - | (847 | ) | (847 | ) | - | - | (497 | ) | (565 | ) | ||||||||||||||||
Recognized actuarial loss | 1,314 | 1,482 | 276 | 435 | 601 | 935 | (18 | ) | 184 | |||||||||||||||||||
Settlement loss | 6,355 | 2,116 | - | - | - | 1,597 | - | - | ||||||||||||||||||||
Net periodic benefit cost (a) | $ | 8,887 | $ | 4,177 | $ | 859 | $ | 1,174 | $ | 1,617 | $ | 3,339 | $ | 500 | $ | 572 | ||||||||||||
(a) | The components of net periodic |
During the three and ninesix months ended SeptemberJune 30, 2022, the Company recorded a settlement loss relating to retirees that received lump-sum distributions from the Company’s defined benefit pension plan totaling $4.8 million and $6.4 million, respectively. The Company recorded$1.6 million. There were no settlement losses of $0.4 million and $2.1 millionrecorded for the three and nineor six month periods ended SeptemberJune 30, 2021, respectively.2023. These chargeschanges were the result of lump-sum distributionspayments to retirees exceeding the Plan’s actuarial service and interest cost thresholds.cost.
As part of the agreement to purchase the assets of Fill-Rite, the Company is required to establish a defined benefit pension plan for certain Fill-Rite employees as of June 1, 2022. No pension or other postretirement benefit plan liabilities existing as of the acquisition date were assumed as part of the transaction. The obligation under the new plan as of September 30, 2022 is not material.
NOTE 8 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The reclassifications out of Accumulated other comprehensive income (loss) as reported in the Consolidated Statements of Income are:
Three Months Ended | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Pension and other postretirement benefits: | ||||||||||||||||
Recognized actuarial loss (a) | $ | 471 | $ | 568 | $ | 1,590 | $ | 1,917 | ||||||||
Settlement loss (a) | 4,759 | 388 | 6,355 | 2,116 | ||||||||||||
Total before income tax | $ | 5,230 | $ | 956 | $ | 7,945 | $ | 4,033 | ||||||||
Income tax | (1,249 | ) | (230 | ) | (1,878 | ) | (944 | ) | ||||||||
Net of income tax | $ | 3,981 | $ | 726 | $ | 6,067 | $ | 3,089 | ||||||||
|
|
The components of Accumulated other comprehensive income (loss) as reported in the Consolidated Balance Sheets are:
Currency | Pension and | Accumulated | ||||||||||
Balance at December 31, 2021 | $ | (7,851 | ) | $ | (22,479 | ) | $ | (30,330 | ) | |||
Reclassification adjustments | - | 7,945 | 7,945 | |||||||||
Current period charge | (5,719 | ) | - | (5,719 | ) | |||||||
Income tax benefit (charge) | - | (1,878 | ) | (1,878 | ) | |||||||
Balance at September 30, 2022 | $ | (13,570 | ) | $ | (16,412 | ) | $ | (29,982 | ) | |||
Currency Translation Adjustments | Deferred Gain (Loss) on Cash Flow Hedging | Pension and OPEB Adjustments | Accumulated Other Comprehensive (Loss) Income | |||||||||||||
Balance at December 31, 2022 | $ | (10,619 | ) | $ | (617 | ) | $ | (13,238 | ) | $ | (24,474 | ) | ||||
Reclassification adjustments | - | (588 | ) | 583 | (5 | ) | ||||||||||
Current period benefit (charge) | 278 | 2,023 | (72 | ) | 2,229 | |||||||||||
Income tax benefit (charge) | - | (341 | ) | (145 | ) | (486 | ) | |||||||||
Balance at June 30, 2023 | $ | (10,341 | ) | $ | 477 | $ | (12,872 | ) | $ | (22,736 | ) | |||||
Currency | Pension and | Accumulated | ||||||||||
Balance at December 31, 2020 | $ | (5,044 | ) | $ | (25,333 | ) | $ | (30,377 | ) | |||
Reclassification adjustments | - | 4,033 | 4,033 | |||||||||
Current period charge | (1,849 | ) | - | (1,849 | ) | |||||||
Income tax benefit (charge) | - | (944 | ) | (944 | ) | |||||||
Balance at September 30, 2021 | $ | (6,893 | ) | $ | (22,244 | ) | $ | (29,137 | ) | |||
Currency Translation Adjustments | Deferred Gain (Loss) on Cash Flow Hedging | Pension and OPEB Adjustments | Accumulated Other Comprehensive (Loss) Income | |||||||||||||
Balance at December 31, 2021 | $ | (7,851 | ) | $ | - | $ | (22,479 | ) | $ | (30,330 | ) | |||||
Reclassification adjustments | - | - | 2,716 | 2,716 | ||||||||||||
Current period benefit (charge) | (2,864 | ) | - | - | (2,864 | ) | ||||||||||
Income tax benefit (charge) | - | - | (630 | ) | (630 | ) | ||||||||||
Balance at June 30, 2022 | $ | (10,715 | ) | $ | - | $ | (20,393 | ) | $ | (31,108 | ) | |||||
NOTE 9– 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. During the nine-month period ended September 30, 2022 the Company repurchased 24,546 shares for $0.9 million. No shares were repurchased during the three-month period ending September 30, 2022 nor the nine-month period ended September 30, 2021. As of SeptemberJune 30, 2022,2023, the Company had $48.1 million available for repurchase under the share repurchase program. During the six-month period ending June 30, 2023, the Company repurchased 36,105 shares at an average cost per share of $28.51 for a total of $1.0 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 six-month period ending June 30, 2022, the Company repurchased 24,546 shares at an average cost per share of $37.39 for a total of $0.9 million. No shares were repurchased during the three month periods ending June 30, 2023 and 2022.
NOTE 10 – FINANCING ARRANGEMENTS
Debt consisted of:
Debt consisted of: | ||||||||||||
Senior Secured Credit Agreement | September 30, 2022 | June 30, 2023 | December 31, 2022 | |||||||||
Senior term loan facility | $ | 345,625 | $ | 332,500 | $ | 341,250 | ||||||
Credit facility | 5,000 | 17,000 | 17,000 | |||||||||
Subordinated Credit Agreement | ||||||||||||
Subordinated credit facility | 90,000 | 90,000 | 90,000 | |||||||||
Total debt | 440,625 | 439,500 | 448,250 | |||||||||
Unamortized discount and debt issuance fees | (12,045 | ) | (10,595 | ) | (11,423 | ) | ||||||
Total debt, net | 428,580 | 428,905 | 436,827 | |||||||||
Less: current portion of long-term debt | 17,500 | (17,500 | ) | (17,500 | ) | |||||||
Total long-term debt, net | $ | 411,080 | $ | 411,405 | $ | 419,327 | ||||||
MaturitiesThe carrying value of long-termlong term debt, inincluding the next five fiscal years, andcurrent portion, approximates fair value as the remaining years thereafter, are as follows:variable interest rates approximate rates available to other market participants with comparable credit risk.
2022 (three months) | 2023 | 2024 | 2025 | 2026 | 2027 | Total | ||||||||||||||||||||
| $ | 4,375 | $ | 17,500 | $ | 21,875 | $ | 30,625 | $ | 35,000 | $ | 331,250 | $ | 440,625 | |||||||||||||
Senior Secured Credit Agreement
On May 31, 2022, the Company entered into a Senior Secured Credit Agreement with several lenders, which provides a term loan of $350.0 million (“Senior Term Loan Facility”) and a revolving credit facility up to $100.0 million (“Credit Facility”). The Credit Facility has a letter of credit sublimit of up to $15.0 million, as a sublimit of the Credit Facility, and a swing line subfacility of up to $20.0 million, as a sublimit of the Credit Facility. The Company borrowed $5.0 million under the Credit Facility, which, along with the Senior Term Loan Facility, and cash-on-hand and the proceeds of the Subordinated Credit Facility described below, was used to purchase the assets of Fill-Rite as described in “Note 2 – Acquisitions”. The Company has agreed to secure all of its obligations under the Senior Secured Credit Agreement by granting a first priority lien on substantially all of its personal property, and each of Patterson Pump Company, AMT Pump Company, National Pump Company and Fill-Rite Company (collectively, the “Guarantors”) has agreed to guarantee the obligations of the Company under the Senior Secured Credit Agreement and to secure the obligations thereunder by granting a first priority lien in substantially all of such Guarantor’s personal property.
The Senior Secured Credit Agreement has a maturity date of May 31, 2027, with the Senior Term Loan Facility requiring quarterly installment payments commencing on September 30, 2022 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, plus the applicable margin, which ranges from 0.75% to 1.75% for base rate loans and 1.75% to 2.75% for Adjusted Term SOFR Rate loans. The applicable margin is based on the Company’s senior leverage ratio. As of SeptemberJune 30, 2022,2023, the applicable interest rate under the Senior Secured Credit Agreement was Adjusted Term SOFR plus 2.75%2.5%.
The Senior Secured Credit Agreement requiresincludes covenants requiring the Company to maintain certain maximum leverage ratios and a consolidated senior secured net leverageminimum fixed charge coverage ratio. On June 30, 2023, the Senior Secured Credit Agreement was amended to provide the Company with more flexibility by adjusting the minimum fixed charge coverage ratio to not to exceed 4.50less than 1.00 to 1.00 for each of the four consecutive fiscal quarter periods ending June 30, 2022, September 30, 2022, December 31, 2022 and March 31, 2023, decreasing to 4.00 to 1.00 for each of the four consecutive fiscal quarter periods ending June 30, 2023 through and Septemberincluding June 30, 2023,2024 and decreasing to 3.50not less than 1.10 to 1.00 for the four consecutive fiscal quarter period ending December 31, 2023 and each of the four consecutive fiscal quarter periods ending thereafter.
TheSeptember 30, 2024 through and including December 31, 2024. We were in compliance with all of our debt covenants as of June 30, 2023, including those covenants as they were in effect prior to the amendment of the Senior Secured Credit Agreement requires the Company to maintain a consolidated total net leverage ratio not to exceed 5.75 to 1.00 for each of the four consecutive fiscal quarter periods ending June 30, 2022, September 30, 2022, December 31, 2022 and March 31, 2023, decreasing to 5.25 to 1.00 for each of the four consecutive fiscal quarter periods ending June 30, 2023 and September 30, 2023, and decreasing to 4.75 to 1.00 for the four consecutive fiscal quarter period ending December 31, 2023 and each of the four consecutive fiscal quarter periods ending thereafter.
The Senior Secured Credit Agreement requires the Company to maintain a fixed charge coverage ratio (commencing with the fiscal quarter ending June 30, 2022) of not less than 1.20 to 1.00 for any four consecutive fiscal quarter period.
The Senior Secured Credit Agreement contains customary affirmative and negative covenants, including among others, limitations on the Company and its subsidiaries with respect to incurrence of liens and indebtedness, disposition of assets, mergers, transactions with affiliates, and the ability to make or pay dividends in excess of certain thresholds.
The Senior Credit Agreement also contains customary provisions requiring mandatory prepayments, including among others, annual prepayments (beginning with the fiscal year ending December 31, 2023) of a percentage of excess cash flow, prepayments of the net cash proceeds from any non-ordinary course sale of assets, and net cash proceeds of any non-permitted indebtedness.
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 expected to be 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. Agreement.
Subordinated Credit Agreement
On May 31, 2022, the Company entered into an unsecured subordinated credit agreement (“Subordinated Credit Agreement”) with one lender, which provides for a term loan of $90.0 million (the “Subordinated Credit Facility”). Each of the Guarantors has agreed to guarantee the obligations of the Company under the Subordinated Credit Agreement. The proceeds from the Subordinated Credit Facility, along with cash-on-hand and the proceeds of the Senior Term Loan Facility described above, were used to purchase the assets of Fill-Rite as described in “Note 2 – Acquisitions”.
The Subordinated Credit Agreement has a maturity date of December 1, 2027. If the Subordinated Credit Facility is prepaid prior to the second anniversary, such prepayment must be accompanied by a make-whole premium. If the Subordinated Credit Facility is prepaid after the second anniversary but prior to the third anniversary, such prepayment requires a prepayment fee of 2%2%, and if the Subordinated Credit Facility is prepaid after the third anniversary but prior to the fourth anniversary, such prepayment requires a prepayment fee of 1%.
At the option of the Company, borrowings under the Subordinated Credit Facility bear interest at either a base rate plus 8.0%, or at an Adjusted Term SOFR Rate plus 9.1%9.0%. As of SeptemberJune 30, 20222023 borrowings under the Subordinated Credit Facility bear interest at an Adjusted Term SOFR Rate plus 9.1%.
The Subordinated Credit Agreement requires the Companyincludes covenants subject to maintain a consolidated senior secured netmaximum leverage ratio not to exceed 5.40 to 1.00 for eachratios. We were in compliance with all of the four consecutive fiscal quarter periods endingour debt covenants as of June 30, 2022, September 30, 2022, December 31, 20222023.
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 March 31, 2023, decreasing to 4.80 to 1.00 for eachremaining terms of the four consecutive fiscal quarter periods endinginterest swap agreements as of June 30, 2023 and September 30, 2023, and decreasing to 4.20 to 1.00 for the four consecutive fiscal quarter period ending December 31, 2023 and each of the four consecutive fiscal quarter periods ending thereafter.2022:
The Subordinated Credit Agreement requires the Company to maintain a consolidated total net leverage ratio not to exceed 6.90 to 1.00 for each of the four consecutive fiscal quarter periods ending June 30, 2022, September 30, 2022, December 31, 2022 and March 31, 2023, decreasing to 6.30 to 1.00 for each of the four consecutive fiscal quarter periods ending June 30, 2023 and September 30, 2023, and decreasing to 5.70 to 1.00 for the four consecutive fiscal quarter period ending December 31, 2023 and each of the four consecutive fiscal quarter periods ending thereafter.
The Subordinated Credit Agreement contains customary affirmative and negative covenants, including among others, limitations on the Company and its subsidiaries with respect to incurrence of liens and indebtedness, disposition of assets, mergers, transactions with affiliates, and the ability to make or pay dividends in excess of certain thresholds.
The Subordinated Credit Agreement also contains customary provisions requiring mandatory prepayments, including among others, annual prepayments (beginning with the fiscal year ending December 31, 2023) of a percentage of excess cash flow, prepayments of the net cash proceeds from any non-ordinary course sale of assets, and net cash proceeds of any non-permitted indebtedness.
Notional Amount | Average Fixed Rate | |||||||||||||||||
June 30, 2023 | December 31, 2022 | June 30, 2023 | December 31, 2022 | Term | ||||||||||||||
Interest rate swaps | $ | 166,250 | $ | 170,600 | 4.1 | % | 4.1 | % | Extending to May 2027 | |||||||||
Credit Facilities
With the openingThe fair value of the Senior Term Loan Facility, whichCompany’s interest rate swaps was a receivable of $0.6 million as of June 30, 2023 and a payable of $0.8 million as of December 31, 2022. 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 the revolving Credit Facility,in Accumulated Other Comprehensive Loss. The interest rate swap agreements held by the Company terminated as of May 31, 2022 its previously existing $20.0 million line of credit maturing in February 2024, $6.5 million unsecured bank line of credit maturing in May 2024, and $3.0 million bank guarantee datedon June 2016.30, 2023 are expected to continue to be effective hedges.
The Company incurred total issuance costsfollowing table summarizes the fair value of approximately $15.2 million related to the Senior Secured Credit Agreement and Subordinated Credit Agreement. Of this amount, the Company determined that $12.8 million related to the Senior Term Loan facility and the Subordinated Credit Facility and $2.4 million related to the Credit Facility. The portion of the issuance costs related to the Credit Facility is included in Other assetsderivative instruments as recorded in the Consolidated Balance Sheet. These costs are being amortized to interest expense over the respective terms.Sheets:
June 30, 2023 | December 31, 2022 | |||||||
| Current Assets: | ||||||||
Prepaid and Other | $ | 1,879 | $ | 1,203 | ||||
| Long-term liabilities: | ||||||||
Other long-term liabilities | (1,253 | ) | (2,012 | ) | ||||
Total derivatives | $ | 626 | $ | (809 | ) | |||
The Company was in compliance with all debt covenantsfollowing table summarizes total gains (losses) recognized on derivatives:
Derivatives in Cash Flow Hedging Relationships | Location of (Loss) Gain Recognized in Income on Derivatives | Amount of (Loss) Gain Recognized in Income on Derivatives | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||
Interest rate swaps | Interest Expense | $ | 397 | $ | - | $ | 588 | $ | - | |||||||||
The effects of derivative instruments on the Company’s Consolidated Statements of Results of Operations and Comprehensive Income (Loss) for OCI are as of September 30, 2022.follows:
Derivatives in Cash Flow Hedging Relationships | Amount of (Loss) Gain Recognized in AOCI on Derivatives | Location of (Loss) Gain Reclassed from AOCI into Income (Effective Portion) | Amount of (Loss) Gain Reclassed from AOCI into Income (Effective Portion) | ||||||||||||||
Three Months Ended | Three Months Ended | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
Interest rate swaps | $ | 3,842 | $ | - | Interest expense | $ | (397 | ) | $ | - | |||||||
Derivatives in Cash Flow Hedging Relationships | Amount of (Loss) Gain Recognized in AOCI on Derivatives | Location of (Loss) Gain Reclassed from AOCI into Income (Effective Portion) | Amount of (Loss) Gain Reclassed from AOCI into Income (Effective Portion) | ||||||||||||||
Six Months Ended | Six Months Ended | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
Interest rate swaps | $ | 2,023 | $ | - | Interest expense | $ | (588 | ) | $ | - | |||||||
NOTE 11 – GOODWILL AND OTHER INTANGIBLE ASSETSLEASES
ChangesOn June 1, 2023, the Company commenced a lease for a new manufacturing facility in Lenexa Kansas with an initial lease term through August 31, 2043. The Company will vacate its current leased Lenexa manufacturing facility on August 31, 2023, with no additional lease liability after that date. The new lease is considered an operating lease and is subject to annual rent escalations based on the carrying valuegreater of goodwilla set minimum percentage or the Consumer Price Index. As result of this lease, the Company recorded a right-of-use (ROU) asset which is included in Other Assets, and other intangible asset duringa long-term lease liability, which is included in Other Long-Term Liabilities, each of approximately $17.5 million as of June 30, 2023. The impact on the nine months ended September 30, 2022:
Historical Cost of Intangible Assets | December 31, 2021 | Acquisitions | Foreign Currency | September 30, 2022 | ||||||||||||
Customer relationships | $ | 7,769 | $ | 200,900 | $ | (165 | ) | $ | 208,504 | |||||||
Technology and drawings | 6,750 | 39,800 | (17 | ) | 46,533 | |||||||||||
Other intangibles | 1,997 | - | - | 1,997 | ||||||||||||
Total finite-lived intangible assets | 16,516 | 240,700 | (182 | ) | 257,034 | |||||||||||
Trade names | 2,528 | 10,700 | (3 | ) | 13,225 | |||||||||||
Goodwill | 27,243 | 228,725 | (460 | ) | 255,508 | |||||||||||
Total | $ | 46,287 | $ | 480,125 | $ | (645 | ) | $ | 525,767 | |||||||
The major componentsConsolidated Statements of Goodwill and other intangible assets are:
September 30, 2022 | December 31, 2021 | |||||||||||||||
Historical Cost | Accumulated Amortization | Historical Cost | Accumulated Amortization | |||||||||||||
Finite-lived intangible assets: | ||||||||||||||||
Customer relationships | $ | 208,504 | $ | 10,721 | $ | 7,769 | $ | 7,255 | ||||||||
Technology and drawings | 46,533 | 5,179 | 6,750 | 4,305 | ||||||||||||
Other intangibles | 1,997 | 1,814 | 1,997 | 1,641 | ||||||||||||
Total finite-lived intangible assets | 257,034 | 17,714 | 16,516 | 13,201 | ||||||||||||
Trade names and trademarks | 13,225 | - | 2,528 | - | ||||||||||||
Goodwill | 255,508 | - | 27,243 | - | ||||||||||||
Total | $ | 525,767 | $ | 17,714 | $ | 46,287 | $ | 13,201 | ||||||||
Amortization expense was $3.1 million and $0.1 millionIncome for the third quarter of 2022three and 2021, respectively. Amortization expensesix month periods ended June 30, 2023 was $4.5 million and $0.4 million for the nine months ended 2022 and 2021, respectively. The following table summarizes the future estimated amortization expense relating to our intangible assets as of September 30, 2022 (in thousands):not material.
2022 (three months) | 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | |||||||||||||||||||||||
| $ | 3,208 | $ | 12,520 | $ | 12,394 | $ | 12,363 | $ | 12,318 | $ | 12,281 | $ | 174,236 | $ | 239,320 | |||||||||||||||
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, 2021. The coronavirus (COVID-19) pandemic had an adverse effect on the Company’s reported results in 2021 and while our supply chains continue to face challenges, our reported results have continued to improve. The extent to which the Company’s operations will continue to be impacted by the pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the pandemic and actions by government authorities to contain the pandemic or treat its impact, among other things.2022.
Executive Overview
On May 31, 2022, the Company completed its acquisition of Fill-Rite and Sotera (“Fill-Rite”), a division of Tuthill Corporation, for $526.3 million. When adjusted for approximately $80.0 million in expected tax benefits, the net acquisition value is approximately $446.3 million. The Company funded the acquisition with cash on-hand and new debt. The Company incurred $7.0 million of one-time acquisition costs during the nine months ended September 30, 2022 and does not expect to incur material acquisition costs going forward. The results of operations for Fill-Rite from the acquisition date are included in the Company’s Consolidated Statements of Income for the three and nine months ended September 30, 2022.
The following discussion of Results of Operations includes certain non-GAAP financial data and measures such as (1) adjusted earnings per share, which 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 and (2) adjusted earnings before interest, taxes, depreciation and amortization, which 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, and amortization of customer backlog. 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. The Company believes that these non-GAAP financial data and measures also will be useful to investors in assessing the strength of the Company’s underlying operations from period to period. These non-GAAP financial measures are not intended to replace GAAP financial measures, and they are not necessarily standardized or comparable to similarly titled measures used by other companies. Provided below is a reconciliation of adjusted earnings per share and adjusted earnings before interest, taxes, depreciation and amortization.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Adjusted earnings per share: | ||||||||||||||||
Reported earnings per share – GAAP basis | $ | 0.09 | $ | 0.34 | $ | 0.34 | $ | 0.89 | ||||||||
Plus pension settlement charge | 0.14 | 0.01 | 0.19 | 0.06 | ||||||||||||
Plus one-time acquisition costs | - | - | 0.21 | - | ||||||||||||
Plus amortization of step up in value of acquired inventories | - | - | 0.04 | - | ||||||||||||
Plus amortization of acquired customer backlog | 0.02 | - | 0.03 | - | ||||||||||||
Non-GAAP adjusted earnings per share | $ | 0.25 | $ | 0.35 | $ | 0.81 | $ | 0.95 | ||||||||
Adjusted earnings before interest, taxes, depreciation and amortization: | ||||||||||||||||
Reported net income–GAAP basis | $ | 2,221 | $ | 8,782 | $ | 8,768 | $ | 23,308 | ||||||||
Plus interest expense | 7,556 | - | 9,878 | - | ||||||||||||
Plus provision for income taxes | 211 | 2,274 | 1,951 | 5,974 | ||||||||||||
Plus depreciation and amortization | 6,960 | 2,957 | 14,161 | 8,908 | ||||||||||||
Non-GAAP earnings before interest, taxes, depreciation and amortization | 16,948 | 14,013 | 34,758 | 38,190 | ||||||||||||
Plus pension settlement charge | 4,759 | 388 | 6,355 | 2,116 | ||||||||||||
Plus one-time acquisition costs | 154 | - | 7,048 | - | ||||||||||||
Plus amortization of step up in value of acquired inventories | - | - | 1,406 | - | ||||||||||||
Plus amortization of acquired customer backlog | 651 | - | 868 | - | ||||||||||||
Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization | $ | 22,512 | $ | 14,401 | $ | 50,435 | $ | 40,306 | ||||||||
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 protection,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.
AsOn May 31, 2022, the Company acquired the assets of Fill-Rite and Sotera (“Fill-Rite”), a resultdivision of Tuthill Corporation, for $528.0 million. When adjusted for approximately $80.0 million in expected tax benefits, the Fill-Rite acquisition, the Company’s cash position decreased $114.9 million during the first nine months of 2022 to $10.3net transaction value was approximately $448.0 million. The Company generated $50.4funded the transaction with cash on-hand and new debt. The Company incurred $7.1 million in adjusted earnings before interest, taxes, depreciation and amortizationof one-time acquisition costs during the same period.
Capital expendituresyear ended December 31, 2022 and does not expect to incur material acquisition costs in connection with the transaction going forward. The results of operations for the first nine months of 2022 were $11.3 million and consisted primarily of machinery and equipment. Capital expenditures for the full-year 2022Fill-Rite are presently planned to beincluded in the rangeCompany’s Consolidated Statements of $15-$18 million primarily for machinery and equipment purchases, and are expected to be financed through internally-generated funds.Income from the acquisition date.
The Company’s backlog of orders was $266.7$249.8 million at SeptemberJune 30, 2023 compared to $264.7 million at June 30, 2022 compared to $156.5 million at September 30, 2021 and $186.0$267.4 million at December 31, 2021. Fill-Rite added $14.6 million to the backlog at September 30, 2022. Incoming orders during the third quarter of 2022 increased 50.2% when compared to the same period last year, and 10.4% excluding Fill-Rite. Incoming orders increased 35.5% for the first ninesix months of 20222023 were $321.0 million, or an increase of 12.0% compared to the same period in 2021,2022, and 18.7%a decrease of 13.8% excluding Fill-Rite. The increase in backlog for the first nine months of 2022 was primarily driven by strong incoming orders during the first nine months, large municipal orders which are longer term in nature, and the acquisition of Fill-Rite. The backlog aging has remained consistent with historical levels.
On OctoberJuly 27, 2022,2023, the Board of Directors authorized the payment of a quarterly dividend of $0.175 per share on the common stock of the Company, payable December 9, 2022,September 8, 2023, to shareholders of record as of NovemberAugust 15, 2022.2023. This will mark the 291st294th 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
The Company looksCompany’s backlog is down from the record level at the end of the first quarter of 2023 but remains elevated, which positions us well for additional improvementthe remainder of the year. We believe that our inventory levels have peaked and that we will see a reduction in gross margin as the pricing actions that have taken place during the year are realizedsecond-half, which will further contribute to our improvements in cash flow. We remain focused on delivering long term sustained growth and leverage on fixed costs continues. The Company is well positioned for both the fourth quarter and 2023 with strong backlog and continued integration and synergies from Fill-Rite.continuing to improve our debt leverage.
Three Months Ended SeptemberJune 30, 20222023 vs. Three Months Ended SeptemberJune 30, 20212022
Net Sales
Three Months Ended | ||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Net Sales | $ | 153,792 | $ | 102,110 | $ | 51,682 | 50.6 | % | ||||||||
The following table presents the Company’s disaggregated net sales by its end markets for the three months ended June 30, 2023 and June 30, 2022:
Three Months Ended | ||||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Industrial | $ | 22,786 | $ | 18,664 | $ | 4,122 | 22.1 | % | ||||||||
Fire | 36,935 | 27,904 | 9,031 | 32.4 | % | |||||||||||
Agriculture | 5,027 | 5,195 | (168 | ) | (3.2 | )% | ||||||||||
Construction | 11,921 | 10,073 | 1,848 | 18.3 | % | |||||||||||
Municipal | 19,549 | 16,950 | 2,599 | 15.3 | % | |||||||||||
Petroleum | 3,719 | 2,631 | 1,088 | 41.4 | % | |||||||||||
OEM | 9,480 | 9,300 | 180 | 1.9 | % | |||||||||||
Repair parts | 18,722 | 14,809 | 3,913 | 26.4 | % | |||||||||||
Total net sales excluding Fill-Rite | 128,139 | 105,526 | 22,613 | 21.4 | % | |||||||||||
Fill-Rite | 42,885 | 13,541 | 29,344 | 216.7 | % | |||||||||||
Total net sales | $ | 171,024 | $ | 119,067 | $ | 51,957 | 43.6 | % | ||||||||
Net sales for the thirdsecond quarter of 20222023 were $153.8$171.0 million compared to net sales of $102.1$119.1 million for the thirdsecond quarter of 2021,2022, an increase of 50.6%43.6% or $51.7$52.0 million. Domestic sales increased 68.0%50.3% or $46.8$42.9 million and international sales increased 14.8%26.8% or $4.9$9.0 million compared to the same period in 2021. 2022.
Fill-Rite sales which are primarily domestic, were $40.1$42.9 million for the thirdsecond quarter of 2023 compared to $13.5 million from the acquisition date of May 31, 2022 to June 30, 2022. In addition to the increase at Fill-Rite, sales increased $22.6 million, or 21.4%, due to an increase in volume as well as the impact of two pricing increases taken in 2022 and an annual price increase in January 2023. The Company’s two price increases in 2022, as well as the price increase in 2023 averaged between 4.0% - 5.0%. Sales increased $9.0 million in the fire suppression market primarily from increased domestic commercial construction, $4.1 million in the industrial market and $3.9 million in the repair market due to strengthening in the broader industrial economy, $2.6 million in the municipal market due to domestic flood control and wastewater projects related to increased infrastructure investment, $1.9 million in the construction market due to strong overall conditions including infrastructure related projects, $1.1 million in the petroleum market due to increased demand for larger petroleum transfer pumps, and $0.2 million in the OEM market. Partially offsetting these increases was a sales decrease of $0.2 million in the agriculture market primarily driven by weather conditions, where increased snowfall runoff and rain have slowed demand.
Cost of Products Sold and Gross Profit
Three Months Ended | ||||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Cost of products sold | $ | 119,366 | $ | 90,828 | $ | 28,538 | 31.4 | % | ||||||||
% of Net sales | 69.8 | % | 76.3 | % | ||||||||||||
Gross Margin | 30.2 | % | 23.7 | % | ||||||||||||
Gross profit was $51.7 million for the second quarter of 2023, resulting in gross margin of 30.2%, compared to gross profit of $28.2 million and gross margin of 23.7% for the same period in 2022. The 650 basis point increase in gross margin included a 200 basis point improvement on labor and overhead leverage due to increased sales volume and sales mix which includes a full quarter of Fill-Rite. The increase in gross margin also included a 450 basis point improvement in cost of material, which consisted of a reduction in LIFO expense of 210 basis points, a 120 basis point improvement from the realization of selling price increases, and a favorable impact of 120 basis points related to the Fill-Rite inventory step-up that was recorded during the second quarter of 2022 that did not recur in 2023.
Selling, General and Administrative (SG&A) Expenses
Three Months Ended | ||||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Selling, general and administrative expenses | $ | 24,193 | $ | 24,114 | $ | 79 | 0.3 | % | ||||||||
% of Net sales | 14.1 | % | 20.3 | % | ||||||||||||
Selling, general and administrative (“SG&A”) expenses were $24.2 million and 14.1% of net sales for the second quarter of 2023 compared to $24.1 million and 20.3% of net sales for the same period in 2022. SG&A expenses for the second quarter of 2022 included $6.9 million of one-time acquisition costs. Excluding acquisition costs, SG&A expenses were $17.2 million and 14.5 % of net sales for the second quarter of 2022. The increase in SG&A expenses, excluding acquisition costs, was due to the inclusion of a full quarter of Fill-Rite as compared to one month in the same period in 2022, as well as increased expenses to support sales growth. The improvement in SG&A as a percent of sales was primarily due to favorable leverage from increased sales.
Amortization expense
Three Months Ended | ||||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Amortization expense | $ | 3,182 | $ | 1,218 | $ | 1,964 | 161.2 | % | ||||||||
% of Net sales | 1.9 | % | 1.0 | % | ||||||||||||
Amortization expense was $3.2 million for the second quarter of 2023 compared to $1.2 million for the same period in 2022. The increase in amortization expense was due to a full quarter of amortization attributable to the Fill-Rite acquisition compared to one month for the same period in 2022.
Operating Income
Three Months Ended | ||||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Operating Income | $ | 24,283 | $ | 2,907 | $ | 21,376 | 735.3 | % | ||||||||
% of Net sales | 14.2 | % | 2.4 | % | ||||||||||||
Operating income was $24.3 million for the second quarter of 2023, resulting in an operating margin of 14.2%, compared to operating income of $2.9 million and operating margin of 2.4% for the same period in 2022. Operating income for the second quarter of 2022 included $6.9 million of one-time acquisition costs and $1.4 million of inventory step-up amortization. Excluding acquisition costs and inventory step-up totaling together $8.3 million, operating income was $11.2 million for the second quarter 2022 resulting in an operating margin of 9.4% of net sales. Excluding acquisition costs and inventory step-up in the second quarter of 2022 totaling $8.3 million, operating margin in the second quarter of 2023 increased 480 basis points compared to the same period in 2022 due to improved leverage on labor, overhead, and SG&A expenses due to increased sales volumes and improved cost of material partially offset by increased amortization expense.
Interest Expense
Three Months Ended | ||||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Interest Expense | $ | (10,485 | ) | $ | (2,322 | ) | $ | (8,163 | ) | 351.6 | % | |||||
% of Net sales | (6.1 | )% | (2.0 | )% | ||||||||||||
Interest expense was $10.5 million for the second quarter of 2023 compared to $2.3 million for the same period in 2022. The increase in interest expense was due to the inclusion of a full quarter of interest expense and increased interest rates on the debt financing attributable to the Fill-Rite acquisition.
Excluding Fill-Rite, sales in our water markets increased 12.2% or $9.0 million in the third quarter of 2022 compared to the third quarter of 2021. Sales increased $6.2 million in the municipal market, $1.6 million in the fire protection market, $1.5 million in the repair market, and $0.5 million in the construction market. Partially offsetting these increases was a sales decrease of $0.8 million in the agriculture market.Net Income (loss)
Excluding Fill-Rite, sales in our non-water markets increased 9.0% or $2.6 million in the third quarter of 2022 compared to the third quarter of 2021. Sales increased $4.1 million in the industrial market. Partially offsetting this increase were sales decreases of $0.8 million in the OEM market and $0.7 million in the petroleum market.
Cost of Products Sold and Gross Profit
Three Months Ended | ||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Cost of products sold | $ | 113,229 | $ | 76,277 | $ | 36,952 | 48.4 | % | ||||||||
% of Net sales | 73.6 | % | 74.7 | % | ||||||||||||
Gross Margin | 26.4 | % | 25.3 | % | ||||||||||||
Gross profit was $40.6 million for the third quarter of 2022, resulting in gross margin of 26.4%, compared to gross profit of $25.8 million and gross margin of 25.3% for the same period in 2021. The improvement in gross margin was due primarily to leverage from increased sales volume and sales mix which includes a full quarter of Fill-Rite results. The 110 basis point increase in gross margin was driven by a 250 basis point improvement from labor and overhead leverage due to increased sales volume. The increase was partially offset by a 140 basis point increase in cost of material, which included an unfavorable impact of 40 basis points related to the amortization of acquired Fill-Rite customer backlog. The Fill-Rite customer backlog will be amortized within the next three quarters.
Selling, General and Administrative (SG&A) Expenses
Three Months Ended | ||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Selling, general and administrative expenses | $ | 22,076 | $ | 14,173 | $ | 7,903 | 55.8 | % | ||||||||
% of Net sales | 14.4 | % | 13.9 | % | ||||||||||||
Selling, general and administrative (“SG&A”) expenses were $22.1 million and 14.4% of net sales for the third quarter of 2022 compared to $14.2 million and 13.9% of net sales for the same period in 2021. The increase in SG&A expenses and as a percentage of sales is primarily due to a $6.4 million increase in SG&A expenses related to a full quarter of Fill-Rite results.
Amortization Expense
Three Months Ended | ||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Amortization expense | $ | 3,176 | $ | 118 | $ | 3,058 | 2,591.5 | % | ||||||||
% of Net sales | 2.1 | % | 0.1 | % | ||||||||||||
Amortization expense was $3.2 million for the third quarter of 2022 compared to $0.1 million for the same period in 2021. The increase in amortization expense was due to $3.0 million in amortization attributable to the Fill-Rite acquisition.
Operating Income
Three Months Ended | ||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Operating income | $ | 15,311 | $ | 11,542 | $ | 3,769 | 32.7 | % | ||||||||
% of Net sales | 10.0 | % | 11.3 | % | ||||||||||||
Operating income was $15.3 million for the third quarter of 2022, resulting in an operating margin of 10.0%, compared to operating income of $11.5 million and operating margin of 11.3% for the same period in 2021. Operating margin decreased 130 basis points primarily due to increased amortization expense, increase in cost of material, and increased SG&A, but was partially offset by improvement from labor and overhead leverage.
Other Income (Expense), net
Three Months Ended | ||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Other income (expense), net | $ | (5,323 | ) | $ | (486 | ) | $ | (4,837 | ) | (995.3 | )% | |||||
% of Net sales | 3.5 | % | 0.5 | % | ||||||||||||
Other income (expense), net was $5.3 million of expense for the third quarter of 2022 compared to expense of $0.5 million for the same period in 2021. The increase in expense was due primarily to increased non-cash pension settlement charges of $4.8 million in the third quarter of 2022 compared to $0.4 million in the third quarter of 2021. The pension settlement charge is the result of retirees who elect the lump sum payment upon retirement.
Net Income
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | 2023 | 2022 | $ Change | % Change | |||||||||||||||||||||||||
Income before income taxes | $ | 2,432 | $ | 11,056 | $ | (8,624 | ) | (78.0 | )% | |||||||||||||||||||||||
Income (loss) before income taxes | $ | 13,262 | $ | (1,261 | ) | $ | 14,523 | 1151.7 | % | |||||||||||||||||||||||
% of Net sales | 1.6 | % | 10.8 | % | 7.8 | % | (1.1 | %) | ||||||||||||||||||||||||
Income taxes | $ | 211 | $ | 2,274 | $ | (2,063 | ) | (90.7 | )% | $ | 2,785 | $ | (265 | ) | $ | 3,050 | 1150.9 | % | ||||||||||||||
Effective tax rate | 8.7 | % | 20.6 | % | 21.0 | % | 21.0 | % | ||||||||||||||||||||||||
Net income | $ | 2,221 | $ | 8,782 | $ | (6,561 | ) | (74.7 | )% | |||||||||||||||||||||||
Net income (loss) | $ | 10,477 | $ | (996 | ) | $ | 11,473 | 1151.9 | % | |||||||||||||||||||||||
% of Net sales | 1.4 | % | 8.6 | % | 6.1 | % | (0.8 | %) | ||||||||||||||||||||||||
Earnings per share | $ | 0.09 | $ | 0.34 | $ | (0.25 | ) | (73.5 | )% | $ | 0.40 | $ | (0.04 | ) | $ | 0.44 | 1100.0 | % | ||||||||||||||
The Company’s effective tax rate was 8.7%21.0% for both the thirdsecond quarter of 2022 compared to 20.6% for the third quarter of 2021.2023 and 2022.
Net income was $2.2$10.5 million, or $0.09$0.40 per share, for the thirdsecond quarter of 20222023 compared to net incomeloss of $8.8($1.0) million, or ($0.04) per share, in the thirdsecond quarter of 2021, or $0.34 per share.2022. Adjusted earnings per share for the thirdsecond quarter of 20222023 were $0.25$0.41 per share compared to $0.35$0.27 per share for the thirdsecond quarter of 2021.2022. Adjusted earnings per share for the thirdsecond quarter of 20222023 included an unfavorable LIFO impact of $0.11$0.07 per share compared to an unfavorable LIFO impact of $0.08$0.13 per share in the thirdsecond quarter of 2021.2022. Adjusted earnings also included incremental non-cash amortization expense relatedper share is a non-GAAP financial measure; see “Non-GAAP Financial Information” below for a definition of the measure and the reconciliation to Fill-Rite of $0.09 per share.its comparable GAAP financial measure.
NineSix Months Ended SeptemberJune 30, 20222023 vs. NineSix Months Ended SeptemberJune 30, 20212022
Net Sales
Nine Months Ended | ||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Net Sales | $ | 375,026 | $ | 284,152 | $ | 90,874 | 32.0 | % | ||||||||
The following table presents the Company’s disaggregated net sales by its end markets for the six months ended June 30, 2023 and June 30, 2022:
Six Months Ended | ||||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Industrial | $ | 43,731 | $ | 36,518 | $ | 7,213 | 19.8 | % | ||||||||
Fire | 73,074 | 56,326 | 16,748 | 29.7 | % | |||||||||||
Agriculture | 9,776 | 10,207 | (431 | ) | (4.2 | )% | ||||||||||
Construction | 22,949 | 19,238 | 3,711 | 19.3 | % | |||||||||||
Municipal | 36,973 | 31,257 | 5,716 | 18.3 | % | |||||||||||
Petroleum | 7,739 | 6,173 | 1,566 | 25.4 | % | |||||||||||
OEM | 18,490 | 18,031 | 459 | 2.5 | % | |||||||||||
Repair parts | 35,912 | 29,943 | 5,969 | 19.9 | % | |||||||||||
Total net sales excluding Fill-Rite | 248,644 | 207,693 | 40,951 | 19.7 | % | |||||||||||
Fill-Rite | 82,846 | 13,541 | 69,305 | 511.8 | % | |||||||||||
Total net sales | $ | 331,490 | $ | 221,234 | $ | 110,256 | 49.8 | % | ||||||||
Net sales for the first ninesix months of 20222023 were $375.0$331.5 million compared to net sales of $284.2$221.2 million for the first ninesix months of 2021,2022, an increase of 32.0%49.8% or $90.9$110.3 million. Domestic sales increased 39.4%57.2% or $77.1$90.3 million and international sales increased 15.6%31.5% or $13.8$20.0 million compared to the same period in 2021. 2022.
Fill-Rite sales which are primarily domestic, were $53.7$82.8 million for the first six months of 2023 compared to $13.5 million from the acquisition date of May 31, 2022 to SeptemberJune 30, 2022.
Excluding In addition to the increase from Fill-Rite, sales increased $41.0 million, or 19.7%, due to an increase in our water markets increased 13.4% or $27.1 millionvolume as well as the impact of two pricing increases taken in 2022 and an annual price increase in January 2023. The Company’s two price increases in 2022, as well as the first nine months of 2022 compared to the first nine months of 2021.price increase in 2023 averaged between 4.0% - 5.0%. Sales increased $10.3$16.7 million in the fire market $9.3 million in the municipal market, $4.7 million in theprimarily from increased domestic commercial construction, market, and $4.2 million in the repair markets. Partially offsetting these increases was a decrease of $1.4 million in the agriculture market.
Excluding Fill-Rite, sales in our non-water markets increased 12.4% or $10.1 million in the first nine months of 2022 compared to the first nine months of 2021. Sales increased $10.5$7.2 million in the industrial market and $2.3$6.0 million in the repair market due to strengthening in the broader industrial economy, $5.7 million in the municipal market due to domestic flood control and wastewater projects related to increased infrastructure investment, $3.7 million in the construction market due to strong overall conditions including infrastructure related projects, $1.6 million in the petroleum market due to increased demand for larger petroleum transfer pumps, and $0.5 million in the OEM market. Partially offsetting these increases was a decrease of $2.7$0.4 million in the petroleum market.agriculture market primarily driven by weather conditions, where increased snowfall runoff and rain have slowed demand.
Cost of Products Sold and Gross Profit
Nine Months Ended | ||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Cost of products sold | $ | 280,727 | $ | 210,604 | $ | 70,123 | 33.3 | % | ||||||||
% of Net sales | 74.9 | % | 74.1 | % | ||||||||||||
Gross Margin | 25.1 | % | 25.9 | % | ||||||||||||
Six Months Ended | ||||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Cost of products sold | $ | 234,309 | $ | 167,498 | $ | 66,811 | 39.9 | % | ||||||||
% of Net sales | 70.7 | % | 75.7 | % | ||||||||||||
Gross Margin | 29.3 | % | 24.3 | % | ||||||||||||
Gross profit was $94.3$97.2 million for the first ninesix months of 2022,2023, resulting in gross margin of 25.1%29.3%, compared to gross profit of $73.5$53.7 million and gross margin of 25.9%24.3% for the same period in 2021.2022. The 80 basis point decrease in gross margin was driven by a 280500 basis point increase in cost of material, which included an unfavorable LIFO impact of 120 basis points, an unfavorable impact of 40 basis points related to Fill-Rite inventory recorded at fair value and recognized during the second quarter, and an unfavorable impact of 20 basis points related to the amortization of acquired Fill-Rite customer backlog. The full amount of the step-up to record Fill-Rite inventory at fair value was recognized during the second quarter and will not recur, while the Fill-Rite customer backlog will be amortized within the next three quarters. The decrease in gross margin was partially offset byincluded a 200225 basis point improvement fromon labor and overhead leverage due to increased sales volume.volume and sales mix which includes six months of Fill-Rite for 2023 compared to one month for the same period in 2022. The increase in gross margin also included a 275 basis point improvement in cost of material, which consisted of a favorable LIFO impact of 140 basis points, a favorable impact of 60 basis points related to the Fill-Rite inventory step-up that was recorded in 2022 that did not recur in 2023 and a 75 basis point improvement in cost of material from the realization of selling price increases.
Selling, General and Administrative (SG&A) Expenses
Nine Months Ended | ||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Selling, general and administrative expenses | $ | 62,125 | $ | 42,064 | $ | 20,061 | 47.7 | % | ||||||||
% of Net sales | 16.6 | % | 14.8 | % | ||||||||||||
Six Months Ended | ||||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Selling, general and administrative expenses | $ | 47,430 | $ | 39,936 | $ | 7,494 | 18.8 | % | ||||||||
% of Net sales | 14.3 | % | 18.1 | % | ||||||||||||
Selling, general and administrative (“SG&A”) expenses were $62.1$47.4 million and 14.3% of net sales for the first ninesix months of 2023 compared to $39.9 million and 18.1% of net sales for the same period in 2022. SG&A expenses for the first six months of 2022 which included $7.0$6.9 million of one-time acquisition costs. Excluding acquisition costs of $6.9 million, SG&A expenses were $55.1$33.0 million, and 14.7%14.9% of net sales for the first ninesix months of 2022. The increase in SG&A expenses, excluding acquisition costs, was due to the inclusion of Fill-Rite for the full six month period in 2022 as compared to $42.1 million and 14.8% of net sales forone month in the same period in 2021.2022, as well as increased expenses to support sales growth. The decreaseimprovement in SG&A expenses as a percentagepercent of sales excluding acquisition costs, iswas primarily due to favorable leverage from increased sales volume.sales.
Amortization expense
Nine Months Ended | ||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Amortization expense | $ | 4,498 | $ | 356 | $ | 4,142 | 1,163.5 | % | ||||||||
% of Net sales | 1.2 | % | 0.1 | % | ||||||||||||
Six Months Ended | ||||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Amortization expense | $ | 6,373 | $ | 1,435 | $ | 4,938 | 344.1 | % | ||||||||
% of Net sales | 1.9 | % | 0.6 | % | ||||||||||||
Amortization expense was $4.5$6.4 million for the first ninesix months of 20222023 compared to $0.4$1.4 million for the same period in 2021.2022. The increase in amortization expense was due to $4.0 million inthe inclusion of six months of amortization attributable to the Fill-Rite acquisition.acquisition compared to one month for the same period in 2022.
Operating Income
Nine Months Ended | ||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Operating income | $ | 27,676 | $ | 31,128 | $ | (3,452 | ) | (11.1 | )% | |||||||
% of Net sales | 7.4 | % | 11.0 | % | ||||||||||||
Six Months Ended | ||||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Operating Income | $ | 43,378 | $ | 12,365 | $ | 31,013 | 250.8 | % | ||||||||
% of Net sales | 13.1 | % | 5.6 | % | ||||||||||||
Operating income was $27.7$43.4 million for the first ninesix months of 2023, resulting in an operating margin of 13.1%, compared to operating income of $12.4 million and operating margin of 5.6% for the same period in 2022. Operating income for the first six months of 2022 which included $7.0$6.9 million inof one-time acquisition costs and $1.4 million of inventory step up amortization, and $0.9 million of acquired customer backlog amortization. Excluding acquisition costs and inventory step-up and backlog amortization,totaling together $8.3 million, operating income was $37.0$20.7 million for the first ninesix months of 2022 resulting in an operating margin of 9.9%,9.4% of net sales. Excluding acquisition costs and inventory step-up in 2022 totaling $8.3 million operating margin in the first six months of 2023 increased 370 basis points compared to operating incomethe same period in 2022 due to improved leverage on labor, overhead, and SG&A expenses due to increased sales volumes and improved cost of $31.1material partially offset by increased amortization expense.
Interest Expense
Six Months Ended | ||||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Interest Expense | $ | (20,672 | ) | $ | (2,322 | ) | $ | (18,350 | ) | 790.3 | % | |||||
% of Net sales | (6.2 | )% | (1.0 | )% | ||||||||||||
Interest expense was $20.7 million and operating marginfor the first six months of 11.0%2023 compared to $2.3 million for the same period in 2021.2022. The decrease of 110 basis pointsincrease in operating margininterest expense was primarily due to the resultinclusion of six months of interest expense in 2023 compared to one month for the first six months of 2022 on the debt financing attributable to the Fill-Rite acquisition, as well as increased interest rates in 2023 as compared to 2022.
Net Income (loss)
Six Months Ended | ||||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Income (loss) before income taxes | $ | 21,737 | $ | 8,287 | $ | 13,450 | 162.3 | % | ||||||||
% of Net sales | 6.6 | % | 3.7 | % | ||||||||||||
Income taxes | $ | 4,740 | $ | 1,740 | $ | 3,000 | 172.4 | % | ||||||||
Effective tax rate | 21.8 | % | 21.0 | % | ||||||||||||
Net income (loss) | $ | 16,997 | $ | 6,547 | $ | 10,450 | 159.6 | % | ||||||||
% of Net sales | 5.1 | % | 3.0 | % | ||||||||||||
Earnings per share | $ | 0.65 | $ | 0.25 | $ | 0.40 | 160.0 | % | ||||||||
The Company’s effective tax rate was 21.8% for the first six months of 2023 compared to 21.0% for the first six months of 2022.
Net income was $17.0 million, or $0.65 per share, for the first six months of 2023 compared to net income of $6.5 million, or $0.25 per share for the first six months of 2022. Adjusted earnings per share for the first six months of 2023 were $0.68 per share compared to $0.56 per share for the first six months of 2022. Adjusted earnings per share for the first six months of 2023 included an unfavorable LIFO impact.impact of $0.13 per share compared to an unfavorable LIFO impact of $0.18 per share in the first six months of 2022. Adjusted earnings per share is a non-GAAP financial measure; see “Non-GAAP Financial Information” below for a definition of the measure and the reconciliation to its comparable GAAP financial measure.
Non-GAAP Financial Information
The discussion of Results of Operations above includes certain non-GAAP financial data and measures such as adjusted earnings, adjusted earnings per share, and adjusted earnings before interest, taxes, depreciation and amortization. Adjusted earnings is earnings excluding 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 LIFO expense. Management utilizes these adjusted financial data and measures to assess comparative operations against those of prior periods without the distortion of non-comparable factors. The inclusion of these adjusted measures should not be construed as an indication that the Company’s future results will be unaffected by unusual or infrequent items or that the items for which the Company has made adjustments are unusual or infrequent or will not recur. Further, the impact of the LIFO inventory costing method can cause results to vary substantially from company to company depending upon whether they elect to utilize LIFO and depending upon which method they may elect. The Gorman-Rupp Company believes that these non-GAAP financial data and measures also will be useful to investors in assessing the strength of the Company’s underlying operations from period to period. These non-GAAP financial measures are not intended to replace GAAP financial measures, and they are not necessarily standardized or comparable to similarly titled measures used by other companies. Provided below is a reconciliation of adjusted earnings, adjusted earnings per share, and adjusted earnings before interest, taxes, depreciation and amortization.
Other Income (Expense), net
Nine Months Ended | ||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Other income (expense), net | $ | (7,079 | ) | $ | (1,846 | ) | $ | (5,233 | ) | (283.5 | )% | |||||
% of Net sales | 1.9 | % | 0.6 | % | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Adjusted earnings: | ||||||||||||||||
Reported net income (loss) – GAAP basis | $ | 10,477 | $ | (996 | ) | $ | 16,997 | $ | 6,547 | |||||||
Plus pension settlement charge | - | 1,261 | - | 1,261 | ||||||||||||
Plus one-time acquisition costs | - | 5,446 | - | 5,446 | ||||||||||||
Plus amortization of step up in value of acquired inventories | - | 1,111 | - | 1,111 | ||||||||||||
Plus amortization of acquired customer backlog | 344 | 171 | 857 | 171 | ||||||||||||
Non-GAAP adjusted earnings | $ | 10,821 | $ | 6,993 | $ | 17,854 | $ | 14,536 | ||||||||
Other income (expense), net was $7.1 million of expense for the first nine months of 2022 compared to expense of $1.8 million for the same period in 2021. The increase in expense was due primarily to increased non-cash pension settlement charges of $6.4 million for the first nine months of 2022 compared to $2.1 million for the first nine months of 2021.
Net Income
Nine Months Ended | ||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Income before income taxes | $ | 10,719 | $ | 29,282 | $ | (18,563 | ) | (63.4 | )% | |||||||
% of Net sales | 2.9 | % | 10.3 | % | ||||||||||||
Income taxes | $ | 1,951 | 5974 | $ | (4,023 | ) | (67.3 | )% | ||||||||
Effective tax rate | 18.2 | % | 20.4 | % | ||||||||||||
Net income | $ | 8,768 | $ | 23,308 | $ | (14,540 | ) | (62.4 | )% | |||||||
% of Net sales | 2.3 | % | 8.2 | % | ||||||||||||
Earnings per share | $ | 0.34 | $ | 0.89 | $ | (0.55 | ) | (61.8 | )% | |||||||
The Company’s effective tax rate was 18.2% for the first nine months of 2022 compared to 20.4% for the first nine months of 2021 with the decrease primarily related to the effect of permanent items on lower income before tax.
Net income was $8.8 million, or $0.34 per share, for the first nine months of 2022 compared to $23.3 million for the first nine months of 2021, or $0.89 per share. Adjusted earnings per share for the first nine months of 2022 were $0.81 per share compared to $0.95 per share for the first nine months of 2021. Adjusted earnings per share for the first nine months of 2022 included an unfavorable LIFO impact of $0.30 per share compared to an unfavorable LIFO impact of $0.12 per share for the first nine months of 2021. Adjusted earnings also included incremental non-cash amortization expense related to Fill-Rite of $0.12 per share.
Three Months Ended | Six Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Adjusted earnings per share: | ||||||||||||||||
Reported earnings (loss) per share – GAAP basis | $ | 0.40 | $ | (0.04 | ) | $ | 0.65 | $ | 0.25 | |||||||
Plus pension settlement charge | - | 0.05 | - | 0.05 | ||||||||||||
Plus one-time acquisition costs | - | 0.21 | - | 0.21 | ||||||||||||
Plus amortization of step up in value of acquired inventories | - | 0.04 | - | 0.04 | ||||||||||||
Plus amortization of acquired customer backlog | 0.01 | 0.01 | 0.03 | 0.01 | ||||||||||||
Non-GAAP adjusted earnings per share | $ | 0.41 | $ | 0.27 | $ | 0.68 | $ | 0.56 | ||||||||
Adjusted earnings (loss) before interest, taxes, depreciation and amortization: | ||||||||||||||||
Reported net income (loss) –GAAP basis | $ | 10,477 | $ | (996 | ) | $ | 16,997 | $ | 6,547 | |||||||
Plus interest expense | 10,485 | 2,322 | 20,672 | 2,322 | ||||||||||||
Plus provision (benefit) for income taxes | 2,785 | (265 | ) | 4,740 | 1,740 | |||||||||||
Plus depreciation and amortization expense | 7,114 | 4,268 | 14,158 | 7,201 | ||||||||||||
Non-GAAP earnings before interest, taxes, depreciation and amortization | 30,861 | 5,329 | 56,567 | 17,810 | ||||||||||||
Plus pension settlement charge | - | 1,597 | - | 1,597 | ||||||||||||
Plus one-time acquisition costs | - | 6,894 | - | 6,894 | ||||||||||||
Plus amortization of step up in value of acquired inventories | - | 1,406 | - | 1,406 | ||||||||||||
Plus amortization of acquired customer backlog | 434 | 217 | 1,085 | 217 | ||||||||||||
Plus non-cash LIFO expense | 2,409 | 4,200 | 4,440 | 6,004 | ||||||||||||
Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization | $ | 33,704 | $ | 19,643 | $ | 62,092 | $ | 33,928 | ||||||||
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 $10.3$12.2 million at SeptemberJune 30, 2022.2023. The Company had an additional $93.1million$80.9 million available under the revolving credit facility after deducting $5.0$17.0 million drawn and $1.9$2.1 million in outstanding letters of credit primarily related to customer orders. During the nine months ended September 30, 2022, our debt obligations increased by $440.6 million as a result of the Senior Term Loan Facility, revolving Credit Facility and Subordinated Credit Facility entered into in connection with the Fill-Rite acquisition. See Note 10 “Financing Arrangements” in the Notes to our Consolidated Financial Statements.
Free cash flow, a non-GAAP measure for reporting cash flow, is defined by the Company as adjusted earnings before interest, income taxes and depreciation and amortization, less capital expenditures and dividends. The Company believes free cash flow provides investors with an important perspective on cash available for investments, acquisitions and working capital requirements.
The following table reconciles adjusted earnings before interest, income taxes and depreciation and amortization as reconciled above to free cash flow:
Nine Months Ended | ||||||||
2022 | 2021 | |||||||
Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization | $ | 50,435 | $ | 40,306 | ||||
Less capital expenditures | (11,268 | ) | (5,617 | ) | ||||
Less cash dividends | (13,306 | ) | (12,145 | ) | ||||
Non-GAAP free cash flow | $ | 25,861 | $ | 22,544 | ||||
Financial Cash Flow
Nine Months Ended | ||||||||
2022 | 2021 | |||||||
Beginning of period cash and cash equivalents | $ | 125,194 | $ | 108,203 | ||||
Net cash provided by operating activities | 12,508 | 41,535 | ||||||
Net cash used for investing activities | (537,242 | ) | (5,045 | ) | ||||
Net cash provided by financing activities | 411,087 | (13,065 | ) | |||||
Effect of exchange rate changes on cash | (1,259 | ) | (508 | ) | ||||
Net increase (decrease) in cash and cash equivalents | (114,906 | ) | 22,917 | |||||
End of period cash and cash equivalents | $ | 10,288 | $ | 131,120 | ||||
The decrease in cash provided by operating activities in the first nine months of 2022 compared to the same period last year was primarily due to interest expense of $9.9 million and acquisition costs of $7.0 million, as well as increases for the nine month period in accounts receivable and inventory as the result of increased sales and backlog. In addition, deferred revenue and customer deposits have decreased in the first nine months of the current year compared to an increase in the same period of the prior year.
During the first nine months of 2022, investing activities of $537.2 million consisted of $526.3 million for the acquisition of Fill-Rite and $11.3 million for capital expenditures primarily for machinery and equipment. During the first nine months of 2021, investing activities consisted of capital expenditures primarily for machinery and equipment of $5.6 million.
Net cash received from financing activities for the first nine months of 2022 of $415.5 million consisted of proceeds from the new Senior Secured loan of $350.0 million, $90.0 million in unsecured subordinated debt, and $5.0 million from the new revolving credit facility. Partially offsetting these proceeds were debt issuance fees paid of $15.2 million, dividend payments of $13.3 million, payments on bank borrowing of $4.4 million and share repurchases of $0.9 million during the first nine months of 2022. Net cash used from financing activities in 2021 primarily consisted of dividend payments of $12.1 million. There were no share repurchases for the first nine months of 2021.
Maturities of long-term debt in the next five fiscal years, and the remaining years thereafter, are as follows:
2022 (three months) | 2023 | 2024 | 2025 | 2026 | 2027 | Total | ||||||||||||||||||||
| $ | 4,375 | $ | 17,500 | $ | 21,875 | $ | 30,625 | $ | 35,000 | $ | 331,250 | $ | 440,625 | |||||||||||||
The Company was in compliance with its debt covenants, including limits on additional borrowings and maintenance of certain operating and financial ratios, at September 30, 2022 and December 31, 2021. 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 obligationsobligation and financial covenants for at least the next 12 months.
As of June 30, 2023, the Company had $439.5 million in total debt outstanding due in 2027. The Company was in compliance with its debt covenants, including limits on additional borrowings and maintenance of certain operating and financial ratios, at June 30, 2023 and December 31, 2022.
Capital expenditures for the first six months of 2023 were $13.3 million and consisted primarily of machinery and equipment and building improvements. Capital expenditures for the full-year 2023 are presently planned to be in the range of $18-$20 million primarily for building improvements and machinery and equipment purchases, and are expected to be financed through internally-generated funds.
On July 27, 2023, the Board of Directors authorized the payment of a quarterly dividend of $0.175 per share on the common stock of the Company, payable September 8, 2023, to shareholders of record as of August 15, 2023. This will mark the 294th 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 SeptemberJune 30, 2022,2023, the Company had $48.1 million available for repurchase under the share repurchase program.
Financial Cash Flow
Six Months Ended | ||||||||
2023 | 2022 | |||||||
Beginning of period cash and cash equivalents | $ | 6,783 | $ | 125,194 | ||||
Net cash provided by operating activities | 37,856 | 6,692 | ||||||
Net cash used for investing activities | (12,903 | ) | (534,538 | ) | ||||
Net cash provided by (used for) financing activities | (19,461 | ) | 419,983 | |||||
Effect of exchange rate changes on cash | (102 | ) | (503 | ) | ||||
Net increase (decrease) in cash and cash equivalents | $ | 5,390 | $ | (108,366 | ) | |||
End of period cash and cash equivalents | $ | 12,173 | $ | 16,828 | ||||
The increase in cash provided by operating activities in the first six months of 2023 compared to the same period last year was primarily due to increased earnings before depreciation, amortization, and LIFO expense, and improved cash flow from better working capital management.
During the first six months of 2023, investing activities of $12.9 million consisted of $13.3 million for capital expenditures primarily for machinery and equipment. During the first six months of 2022, investing activities of $534.5 million consisted of $526.3 million for the acquisition of Fill-Rite and $8.4 million for capital expenditures primarily for machinery and equipment.
Net cash used for financing activities for the first six months of 2023 primarily consisted of net payments on bank borrowings of $8.8 million, dividend payments of $9.1 million, and share repurchases of $1.0 million. Net cash received for financing activities for the first six months of 2022 consisted of proceeds from the new Senior Term Loan Facility of $350.0 million, $90.0 million in unsecured subordinated debt, and $5.0 million from the new revolving credit facility. Partially offsetting these proceeds were debt issuance fees paid of $15.2 million, dividend payments of $8.9 million and share repurchases of $0.9 million during the first six months of 2022.
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, 20212022 contained in our Annual Report on Form 10-K for the year ended December 31, 2021.2022. 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, 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; (5)(8) defined benefit pension plan settlement expense; (9) LIFO inventory method, and (6)(10) family ownership of common equity; and general risk factors including (7)(11) continuation of the current and projected future business environment, including the impact of inflation and other cost pressures, the duration and scope of the COVID-19 pandemic, the impact of the pandemic and actions taken in response to the pandemic; (8)environment; (12) highly competitive markets; (9)(13) availability and costs of raw materials and labor; (10)(14) cyber security threats; (11)(15) compliance with, and costs related to, a variety of import and export laws and regulations; (12)(16) environmental compliance costs and liabilities; (13)(17) exposure to fluctuations in foreign currency exchange rates; (14)(18) conditions in foreign countries in which The Gorman-Rupp Company conducts business; (15)(19) changes in our tax rates and exposure to additional income tax liabilities; and (16)(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.
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, Credit Facility, and Subordinated 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 0.75% to 1.75%, or at (ii) an Adjusted Term SOFR Rate, plus the applicable margin, which ranges from 1.75% to 2.75%. Borrowings under the Subordinated Credit Facility bear interest at (i) either a base rate plus 8.0%, or at (ii) an Adjusted Term SOFR Rate plus 9.1%. At SeptemberJune 30, 2022,2023, the Company had $345.6$332.5 million in borrowings under the Senior Term Loan Facility, $5.0$17.0 million in borrowingborrowings under the Credit Facility, and $90.0 million in borrowings under the Subordinated Credit Facility. As of June 30, 2023, the applicable interest rates under the Senior Secured Credit Agreement and the Subordinated Credit Facility were Adjusted Term SOFR plus 2.5% and Adjusted Term SOFR plus 9.1%, respectively.
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.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 expected to be 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.
The Company estimates that a hypothetical increase of 100 basis points in interest rates would increase interest expense by approximately $2.7 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 ninesix month periods ending SeptemberJune 30, 20222023 and 20212022 were ($0.2)0.4) million and $0.1 million, respectively, 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 SeptemberJune 30, 2022.2023.
Changes in Internal Control Over Financial Reporting
As of SeptemberJune 30, 2022,2023, we are in the process of integrating the internal controls of the acquired Fill-Rite business into Gorman-Rupp’s existing operations as part of planned integration activities. In addition, we have implemented new processes and internal controls to assist us in the preparation and disclosure of financial information. There were no other changes in Gorman-Rupp’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, Gorman-Rupp’s internal control over financial reporting during the quarter ended SeptemberJune 30, 2022.2023.
PART II. OTHER INFORMATION
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, 2021.2022.
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, 2021. There have been no material changes from the risk factors disclosed in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, except for the following which supplements the Company’s previously disclosed risk factors:
The Company incurred substantial indebtedness, which may impact the Company’s financial condition and the way it operates its business.
In connection with the Company’s acquisition of the assets of Fill-Rite, the Company incurred substantial indebtedness. Such indebtedness includes senior secured first lien credit facilities comprised of a $350 million term loan facility and a $100 million revolving credit facility, and an unsecured senior subordinated term loan facility in an aggregate principal amount of $90 million. The indebtedness could have important negative consequences, including:
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The Company’s ability to satisfy its debt and other obligations will depend principally upon its future operating performance. As a result, prevailing economic conditions and financial, business, legal and regulatory and other factors, many of which are beyond the Company’s control, may affect its ability to make payments on its debt and other obligations.
The Company’s operations are subject to the general risks associated with acquisitions.
The Company has historically made strategic acquisitions of businesses, such as Fill-Rite, and may do so in the future in support of its strategy. The success of past and future acquisitions is dependent on the Company’s ability to successfully integrate acquired and existing operations. If the Company is unable to integrate acquisitions successfully, its financial results could suffer. Additional potential risks associated with acquisitions are the diversion of management’s attention from other business concerns, additional debt leverage, the loss of key employees and customers of the acquired business, the assumption of unknown liabilities, disputes with sellers, and the inherent risk associated with the Company entering new lines of business.
The anticipated benefits from the Fill-Rite acquisition may not be realized.
The Company may not realize the full benefits of the increased sales volume and other benefits that are currently expected to result from the Fill-Rite acquisition, or realize these benefits within the time frame that is currently expected. In addition, the benefits of the Fill-Rite acquisition may be offset by operating losses relating to changes in material or energy prices, inflationary economic conditions, increased competition, or by other risks and uncertainties. If the Company fails to realize the benefits it anticipates from the Fill-Rite acquisition, the Company’s results of operations may be adversely affected.2022.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Issuer purchases of its common shares during the thirdsecond quarter of 20222023 were:
Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced program | Approximate dollar value of shares that may yet be purchased under the program | ||||||||||||
July 1 to July 31, 2022 | - | - | - | $ | 48,067 | |||||||||||
August 1 to August 31, 2022 | - | - | - | 48,067 | ||||||||||||
September 1 to September 30, 2022 | - | - | - | 48,067 | ||||||||||||
Total | - | - | - | $ | 48,067 | |||||||||||
Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced program | Approximate dollar value of shares that may yet be purchased under the program | ||||||||||||
April 1 to April 30, 2023 | - | - | - | $ | 48,067 | |||||||||||
May 1 to May 31, 2023 | - | - | - | 48,067 | ||||||||||||
June 1 to June 30, 2023 | - | - | - | 48,067 | ||||||||||||
Total | - | - | - | $ | 48,067 | |||||||||||
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. |
None.
ITEM 4. | MINE SAFETY DISCLOSURES. |
Not applicable.
ITEM 5. | OTHER INFORMATION. |
During the quarter ended June 30, 2023, 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 10.1 | Amendment No. 1 dated as of June 30, 2023 to the Credit Agreement dated as of May 31, 2022 |
Exhibit 31.1 |
Exhibit 31.2 |
Exhibit 32 |
Exhibit 101 | Financial statements from the Quarterly Report on Form 10-Q of The Gorman-Rupp Company for the quarter ended |
Exhibit 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish to the U.S. Securities and Exchange Commission a copy of any omitted schedule or exhibit upon request.
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.
The Gorman-Rupp Company | ||||
(Registrant) | ||||
Date: | ||||
By: | /s/James C. Kerr | |||
James C. Kerr | ||||
| Executive Vice President and Chief Financial Officer | ||||
(Principal Financial Officer) | ||||