# Gorman Rupp Co: Form 10-Q for the period ended Sep 30, 2024

- Company: [Gorman Rupp Co](/companies/grc.md) (CIK 42682)
- Form: 10-Q
- Filed: 2024-10-28
- Accepted by EDGAR: Oct 28, 2024, 11:12 ET
- Period: 2024-09-30
- Accession: 0001437749-24-032214
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/42682/000143774924032214/grc20240930_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/42682/000143774924032214/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $168.2m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $497.0m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $115.5m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $341.8m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $52.7m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $155.1m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $25.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $75.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $23.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $70.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $7.8m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $26.9m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $3.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $7.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $12.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $29.1m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.49 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $1.11 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $60.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $10.3m | us-gaap:PaymentsToAcquireProductiveAssets |
| Cash and equivalents | at 2024-09-30 | $39.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $240.6m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $883.5m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $100.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $516.1m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $362.5m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $18.5m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | $367.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 29,292 characters.

### (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, 2023.

### Executive Overview

The Gorman-Rupp Company (“we”, “our”, “Gorman-Rupp” or the “Company”) is a leading designer, manufacturer and international marketer of pumps and pump systems for use in diverse water, wastewater, construction, dewatering, industrial, petroleum, original equipment, agriculture, fire suppression, heating, ventilating and air conditioning (HVAC), military and other liquid-handling applications. The Company attributes its success to long-term product quality, applications and performance combined with timely delivery and service, and continually seeks to develop initiatives to improve performance in these key areas.

We regularly invest in training for our employees, in new product development and in modern manufacturing equipment, technology and facilities all designed to increase production efficiency and capacity and drive growth by delivering innovative solutions to our customers. We believe that the diversity of our markets is a major contributor to the generally stable financial growth we have produced historically.

The Company’s backlog of orders was $207.8 million at September 30, 2024 compared to $237.5 million at September 30, 2023 and $218.1 million at December 31, 2023. Incoming orders for the first nine months of 2024 were $496.1 million, or an increase of 4.1%, compared to the same period in 2023.

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

The Company currently expects to continue its exceptional history of paying regular quarterly dividends and increased annual dividends. However, any future dividends will be reviewed individually and declared by our Board of Directors at its discretion, dependent on our assessment of the Company’s financial condition and business outlook at the applicable time.

### Outlook

Our year-to-date incoming orders are exceeding last year’s pace and are up just over 4%. As expected, we reduced our backlog during the quarter, however our backlog still remains at healthy levels as we head into the fourth quarter.

Effective January 3, 2025, his 47th anniversary of working for Gorman-Rupp, Jeffrey S. Gorman, age 72, will transition from Executive Chairman of the Board to Chairman of the Board. In his new role as Chairman of the Board, Mr. Gorman will continue to provide valuable insights and governance oversight while working closely with the Board of Directors and the executive team in supporting the Company’s long-term strategic objectives.

### Three Months Ended September 30, 2024 vs. Three Months Ended September 30, 2023

### Net Sales

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

|  | Three Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Industrial | $30,939 | $34,777 | $(3,838) | (11.0)% |
| Fire | 31,591 | 35,986 | (4,395) | (12.2)% |
| Agriculture | 20,496 | 21,235 | (739) | (3.5)% |
| Construction | 22,255 | 23,388 | (1,133) | (4.8)% |
| Municipal | 24,279 | 18,841 | 5,438 | 28.9% |
| Petroleum | 7,004 | 5,801 | 1,203 | 20.7% |
| OEM | 11,579 | 9,730 | 1,849 | 19.0% |
| Repair parts | 20,039 | 17,698 | 2,341 | 13.2% |
| Total net sales | $168,182 | $167,456 | $726 | 0.4% |

Net sales for the third quarter of 2024 were $168.2 million compared to net sales of $167.5 million for the third quarter of 2023, an increase of 0.4% or $0.7 million. The increase in sales was due to the impact of pricing increases taken in the first quarter of 2024 partially offset by a decrease in volume.

Sales increased $5.4 million in the municipal market due to domestic flood control and wastewater projects related to increased infrastructure investment, $2.3 million in the repair market also related to domestic flood control and wastewater projects, $1.8 million in the OEM market primarily related to computer cooling, and $1.2 million in the petroleum market primarily driven by increased international refueling applications. These increases were offset by a sales decrease of $4.4 million in the fire suppression market primarily resulting from backlog returning to more normal levels. Fire suppression sales in 2023 were up significantly compared to 2022 as the Company was working to return backlog and lead times to normal levels, which resulted in higher 2023 sales and a tougher year-over-year comparison for 2024. Sales for the third quarter of 2024 also decreased $3.8 million in the industrial market and $1.1 million in the construction market due to slower construction activity and $0.7 million in the agriculture market primarily driven by a significant decline in farm income.

### Cost of Products Sold and Gross Profit

|  | Three Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Cost of products sold | $115,521 | $119,322 | $(3,801) | (3.2)% |
| % of Net sales | 68.7% | 71.3% |  |  |
| Gross Margin | 31.3% | 28.7% |  |  |

Gross profit was $52.7 million for the third quarter of 2024, resulting in gross margin of 31.3%, compared to gross profit of $48.1 million and gross margin of 28.7% for the same period in 2023. The 260 basis point increase in gross margin included a 240 basis point improvement in cost of material, which consisted of a reduction in LIFO expense of 40 basis points and a 200 basis point improvement from the realization of selling price increases. The increase in gross margin also included a 20 basis point improvement on labor and overhead leverage.

### Selling, General and Administrative (SG&A) Expenses

|  | Three Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Selling, general and administrative expenses | $25,675 | $23,233 | $2,442 | 10.5% |
| % of Net sales | 15.3% | 13.9% |  |  |

16

SG&A expenses were $25.7 million and 15.3% of net sales for the third quarter of 2024 compared to $23.2 million and 13.9% of net sales for the same period in 2023. SG&A expenses increased due to payroll and payroll related costs, including healthcare costs, as well as increased selling activity.

### Operating Income

|  | Three Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Operating Income | $23,885 | $21,875 | $2,010 | 9.2% |
| % of Net sales | 14.2% | 13.1% |  |  |

Operating income was $23.9 million for the third quarter of 2024, resulting in an operating margin of 14.2%, compared to operating income of $21.9 million and operating margin of 13.1% for the same period in 2023. Operating margin in the third quarter of 2024 increased 110 basis points compared to the same period in 2023 primarily due to improved cost of material, partially offset by increased SG&A expenses.

### Interest Expense

|  | Three Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Interest Expense | $7,766 | $10,475 | $(2,709) | (25.9)% |
| % of Net sales | 4.6% | 6.3% |  |  |

Interest expense was $7.8 million for the third quarter of 2024 compared to $10.5 million for the same period in 2023. The decrease in interest expense was due primarily to a series of refinancing transactions the Company completed on May 31, 2024.

### Net Income

|  | Three Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Income before income taxes | $16,060 | $10,984 | $5,076 | 46.2% |
| % of Net sales | 9.5% | 6.6% |  |  |
| Income taxes | $3,141 | $2,006 | $1,135 | 56.6% |
| Effective tax rate | 19.6% | 18.3% |  |  |
| Net income | $12,919 | $8,978 | $3,941 | 43.9% |
| % of Net sales | 7.7% | 5.4% |  |  |
| Earnings per share | $0.49 | $0.34 | $0.15 | 44.1% |

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

Net income was $12.9 million, or $0.49 per share, for the third quarter of 2024 compared to net income of $9.0 million, or $0.34 per share, in the third quarter of 2023.

Adjusted EBITDA was $32.0 million and 19.0 % of sales for the third quarter of 2024 compared to $30.5 million and 18.2% of sales for the third quarter of 2023.

### Nine Months Ended September 30, 2024 vs. Nine Months Ended September 30, 2023

### Net Sales

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

|  | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Industrial | $99,054 | $103,886 | $(4,832) | (4.7)% |
| Fire | 92,742 | 109,211 | (16,469) | (15.1)% |
| Agriculture | 62,282 | 65,292 | (3,010) | (4.6)% |
| Construction | 65,592 | 66,723 | (1,131) | (1.7)% |
| Municipal | 70,668 | 55,831 | 14,837 | 26.6% |
| Petroleum | 18,351 | 16,440 | 1,911 | 11.6% |
| OEM | 31,420 | 28,223 | 3,197 | 11.3% |
| Repair parts | 56,854 | 53,340 | 3,514 | 6.6% |
| Total net sales | $496,963 | $498,946 | $(1,983) | (0.4)% |

Net sales for the first nine months of 2024 were $496.9 million compared to net sales of $498.9 million for the first nine months of 2023, a decrease of 0.4% or $2.0 million. The decrease in sales was due to a decrease in volume partially offset by the impact of pricing increases taken in the first quarter of 2024.

Sales increased $14.8 million in the municipal market due to domestic flood control and wastewater projects related to increased infrastructure investment, $3.5 million in the repair market also related to domestic flood control and wastewater projects, $3.2 million in the OEM market primarily related to computer cooling, and $1.9 million in the petroleum market primarily driven by increased international refueling applications. Offsetting these increases was a decrease of $16.5 million in the fire suppression market primarily resulting from backlog returning to more normal levels. Fire suppression sales in 2023 were up significantly compared to 2022 as the Company was working to return backlog and lead times to normal levels, which resulted in higher 2023 sales and a tougher year-over-year comparison for 2024. Fire suppression incoming orders for the first nine months of 2024 were up 3.5% when compared to the first nine months of 2023. Sales for the first nine months of 2024 also decreased $4.8 million in the industrial market, and $1.1 million in the construction market due to slower construction activity, and $3.0 million in the agriculture market primarily driven by significant declines in farm income.

### Cost of Products Sold and Gross Profit

|  | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Cost of products sold | $341,828 | $353,631 | $(11,803) | (3.3)% |
| % of Net sales | 68.8% | 70.9% |  |  |
| Gross Margin | 31.2% | 29.1% |  |  |

Gross profit was $155.1 million for the first nine months of 2024, resulting in gross margin of 31.2%, compared to gross profit of $145.3 million and gross margin of 29.1% for the same period in 2023. The 210 basis point increase in gross margin included a 250 basis point improvement in cost of material, which consisted of a reduction in LIFO expense of 60 basis points, a favorable impact of 20 basis points related to the amortization of acquired Fill-Rite customer backlog which occurred in 2023 and did not reoccur in 2024, and a 170 basis point improvement from the realization of selling price increases. These improvements were partially offset by a 40 basis point increase in labor and overhead expenses as a percent of sales.

### Selling, General and Administrative (SG&A) Expenses

|  | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Selling, general and administrative expenses | $75,494 | $70,664 | $4,830 | 6.8% |
| % of Net sales | 15.2% | 14.2% |  |  |

18

SG&A expenses were $75.5 million and 15.2% of net sales for the first nine months of 2024 compared to $70.7 million and 14.2% of net sales for the same period in 2023. SG&A expenses for the first nine months of 2024 included $1.3 million of refinancing transaction costs and a $1.1 million gain on the sale of a fixed asset. SG&A expenses increased due to payroll and payroll related costs, including healthcare costs, as well as increased selling activity.

### Operating Income

|  | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Operating Income | $70,363 | $65,253 | $5,110 | 7.8% |
| % of Net sales | 14.2% | 13.1% |  |  |

Operating income was $70.4 million for the first nine months of 2024, resulting in an operating margin of 14.2%, compared to operating income of $65.3 million and operating margin of 13.1% for the same period in 2023. Operating margin in the first nine months of 2024 increased 110 basis points compared to the same period in 2023 primarily due to improved cost of material, partially offset by increased labor, overhead, and SG&A expenses.

### Interest Expense

|  | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Interest Expense | $26,886 | $31,147 | $(4,261) | (13.7)% |
| % of Net sales | 5.4% | 6.2% |  |  |

Interest expense was $26.9 million for the first nine months of 2024 compared to $31.1 million for the same period in 2023. The decrease in interest expense was due primarily to a series of debt refinancing transactions the Company completed on May 31, 2024. In addition to reducing interest expense, the refinancing also extended and staggered the Company’s debt maturities. The Company upsized, amended, and extended the existing Senior Term Loan Facility from $350.0 million to $370.0 million, amended and extended the existing $100.0 million revolving Credit Facility, and issued $30.0 million in new 6.40% Senior Secured Notes. The proceeds from these transactions, as well as $10.0 million of cash on hand, were used to retire the Company’s $90.0 million unsecured Subordinated Credit Facility.

### Other income (expense), net

|  | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Other Income (Expense), net | $(6,662) | $(1,385) | $(5,277) | (381.0)% |
| % of Net sales | (1.3)% | (0.3)% |  |  |

Other income (expense), net was $6.7 million of expense for the first nine months of 2024 compared to $1.4 million of expense for the same period in 2023. Other expense for the first nine months of 2024 included a $4.4 million write-off of unamortized previously deferred debt financing fees and a $1.8 million prepayment fee related to the early retirement of the unsecured Subordinated Credit Facility.

### Net Income

|  | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Income before income taxes | $36,815 | $32,721 | $4,094 | 12.5% |
| % of Net sales | 7.4% | 6.6% |  |  |
| Income taxes | $7,677 | $6,746 | $931 | 13.8% |
| Effective tax rate | 20.9% | 20.6% |  |  |
| Net income | $29,138 | $25,975 | $3,163 | 12.2% |
| % of Net sales | 5.9% | 5.2% |  |  |
| Earnings per share | $1.11 | $0.99 | $0.12 | 12.1% |

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

Net income was $29.1 million, or $1.11 per share, for the first nine months of 2024 compared to net income of $26.0 million, or $0.99 per share, for the first nine months of 2023. Adjusted earnings per share for the first nine months of 2024 were $1.32 per share compared to $1.02 per share for the first nine months of 2023.

Adjusted EBITDA was $95.6 million and 19.2% of net sales for the first nine months of 2024 compared to $92.6 million and 18.6% of net sales for the first nine months of 2023.

### 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 EBITDA”). Adjusted earnings is earnings excluding amortization of customer backlog, write-off of unamortized previously deferred debt financing fees, and refinancing costs. Adjusted earnings per share is earnings per share excluding amortization of customer backlog per share, write-off of unamortized previously deferred debt financing fees per share, and refinancing costs per share. Adjusted earnings before interest, taxes, depreciation and amortization is net income (loss) excluding interest, taxes, depreciation and amortization, adjusted to exclude amortization of customer backlog, write-off of unamortized previously deferred debt financing fees, refinancing costs, 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 and liquidity from period to period. These non-GAAP financial measures are not intended to replace GAAP financial measures, and they are not necessarily standardized or comparable to similarly titled measures used by other companies. Provided below is a reconciliation of adjusted earnings, adjusted earnings per share, and adjusted EBITDA to their respective corresponding GAAP financial measures, which includes descriptions of actual adjustments made in the current period and the corresponding prior period.

| Adjusted earnings: | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Reported net income – GAAP basis | $12,919 | $8,978 | $29,138 | $25,975 |
| Amortization of acquired customer backlog | - | - | - | 857 |
| Write-off of unamortized previously deferred debt financing fees | - | - | 3,506 | - |
| Refinancing costs | - | - | 2,413 | - |
| Non-GAAP adjusted earnings | $12,919 | $8,978 | $35,057 | $26,832 |

20

| Adjusted earnings per share: | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Reported earnings per share – GAAP basis | $0.49 | $0.34 | $1.11 | $0.99 |
| Amortization of acquired customer backlog | - | - | - | 0.03 |
| Write-off of unamortized previously deferred debt financing fees | - | - | 0.13 | - |
| Refinancing costs | - | - | 0.09 | - |
| Non-GAAP adjusted earnings per share | $0.49 | $0.34 | $1.33 | $1.02 |
| **Adjusted earnings before interest, taxes, depreciation and amortization:** |  |  |  |  |
| Reported net income –GAAP basis | $12,919 | $8,978 | $29,138 | $25,975 |
| Interest expense | 7,766 | 10,475 | 26,886 | 31,147 |
| Provision for income taxes | 3,141 | 2,006 | 7,677 | 6,746 |
| Depreciation and amortization expense | 6,884 | 7,038 | 20,973 | 21,196 |
| Non-GAAP earnings before interest, taxes, depreciation and amortization | 30,710 | 28,497 | 84,674 | 85,064 |
| Amortization of acquired customer backlog | - | - | - | 1,085 |
| Write-off of unamortized previously deferred debt financing fees | - | - | 4,438 | - |
| Refinancing costs | - | - | 3,055 | - |
| Non-cash LIFO expense | 1,318 | 1,974 | 3,445 | 6,414 |
| Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization | $32,028 | $30,471 | $95,612 | $92,563 |

### 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 $39.7 million at September 30, 2024. The Company had an additional $98.7 million available under the revolving credit facility with no amounts borrowed and $1.3 million in outstanding letters of credit primarily related to customer orders. We believe we have adequate liquidity from funds on hand and borrowing capacity to execute our financial and operating strategy, as well as comply with debt obligation and financial covenants for at least the next 12 months.

As of September 30, 2024, the Company had $385.4 million in total debt outstanding with $30.0 million due in 2031 and the remainder due in 2029. The Company was in compliance with its debt covenants, including limits on additional borrowings and maintenance of certain operating and financial ratios, at September 30, 2024 and December 31, 2023. See “Note 9 – Financing Arrangements” in the Notes to Consolidated Financial Statements included in this Form 10-Q for a further description of our outstanding debt.

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

On October 24, 2024, the Board of Directors authorized the payment of a quarterly dividend of $0.185 per share on the common stock of the Company, payable December 10, 2024, to shareholders of record as of November 15, 2024. This will mark the 299th consecutive quarterly dividend paid by The Gorman-Rupp Company. The Company currently expects to continue its exceptional history of paying regular quarterly dividends and increased annual dividends. However, any future dividends will be reviewed individually and declared by our Board of Directors at its discretion, dependent on our assessment of the Company’s financial condition and business outlook at the applicable time.

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 September 30, 2024, the Company had $48.1 million available for repurchase under the share repurchase program.

### Financial Cash Flow

|  | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Beginning of period cash and cash equivalents | $30,518 | $6,783 |
| Net cash provided by operating activities | 60,574 | 71,659 |
| Net cash used for investing activities | (8,031) | (16,309) |
| Net cash used for financing activities | (43,631) | (43,404) |
| Effect of exchange rate changes on cash | 271 | (540) |
| Net increase in cash and cash equivalents | $9,183 | $11,406 |
| End of period cash and cash equivalents | $39,701 | $18,189 |

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

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

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

### 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, 2023 contained in our Annual Report on Form 10-K for the year ended December 31, 2023. 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; (8) defined benefit pension plan settlement expense; (9) LIFO inventory method, and (10) family ownership of common equity; and general risk factors including (11) continuation of the current and projected future business environment; (12) highly competitive markets; (13) availability and costs of raw materials and labor; (14) cybersecurity threats; (15) compliance with, and costs related to, a variety of import and export laws and regulations; (16) environmental compliance costs and liabilities; (17) exposure to fluctuations in foreign currency exchange rates; (18) conditions in foreign countries in which The Gorman-Rupp Company conducts business; (19) changes in our tax rates and exposure to additional income tax liabilities; and (20) risks described from time to time in our reports filed with the Securities and Exchange Commission. Except to the extent required by law, we do not undertake and specifically decline any obligation to review or update any forward-looking statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments or otherwise.

## Market risk

As filed, 2,925 characters.

We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Exposure to foreign exchange rate risk is due to certain costs and revenue being denominated in currencies other than one of the Company’s subsidiaries functional currency. The Company is also exposed to market risk as the result of changes in interest rates which may affect the cost of financing. We continually monitor these risks and regularly develop appropriate strategies to manage them. Accordingly, from time to time, we may enter into certain derivative or other financial instruments. These financial instruments are used to mitigate market exposure and are not used for trading or speculative purposes.

### Interest Rate Risk

The results of operations are exposed to changes in interest rates primarily with respect to borrowings under the Company’s Senior Term Loan Facility and Credit Facility. Borrowings under the Senior Term Loan Facility and Credit Facility may be made either at (i) a base rate plus the applicable margin, which ranges from 0.50% to 1.25%, or at (ii) an Adjusted Term SOFR Rate, plus the applicable margin, which ranges from 1.5% to 2.25%. At September 30, 2024, the Company had $355.4 million in borrowings under the Senior Term Loan Facility and no borrowings under the Credit Facility. As of June 30, 2024, the applicable interest rates under the Senior Secured Credit Agreement were Adjusted Term SOFR plus 2.25%.

To reduce the exposure to changes in the market rate of interest, effective October 31, 2022, the Company entered into interest rate swap agreements for a portion of the Senior Term Loan Facility. Terms of the interest rate swap agreements require the Company to receive a fixed interest rate and pay a variable interest rate. The interest rate swap agreements are designated as a cash flow hedge, and as a result, the mark-to-market gains or losses will be deferred and included as a component of accumulated other comprehensive income (loss) and reclassified to interest expense in the period during which the hedged transactions affect earnings.

The Company estimates that a hypothetical increase of 100 basis points in interest rates would increase interest expense by approximately $2.0 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 nine month period ending September 30, 2023 were ($0.5) million and are reported within Other (expense) income, net on the Consolidated Statements of Income. There were no foreign currency gains (losses) for the nine month period ending September 30, 2024.

## Controls and procedures

As filed, 1,683 characters.

### 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 September 30, 2024.

### Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 2,333 characters.

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, 2023. 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, 2023, except for the following which supplements the Company’s previously disclosed risk factors:

***The Company has substantial indebtedness, which may impact the Company’s financial condition and the way it operates its business***

The Company has substantial indebtedness. Such indebtedness includes senior secured first lien credit facilities comprised of a $370 million term loan facility and a $100 million revolving credit facility, and a $30 million in aggregate principal amount of 6.40% senior secured notes. The indebtedness could have important negative consequences, including:

- higher borrowing costs resulting from fluctuations in our variable benchmark borrowing rates that have adversely affected, and could in the future adversely affect, our interest rates;
- reduced availability of cash for the Company’s operations and other business activities after satisfying interest payments and other requirements under the terms of its debt instruments;
- less flexibility to plan for or react to competitive challenges, and a competitive disadvantage relative to competitors that do not have as much indebtedness;
- limiting the Company’s ability to undertake mergers or dispositions of assets, or pay dividends;
- difficulty in obtaining additional financing in the future;
- inability to comply with covenants in, and potential for default under, the Company’s debt instruments;
- inability to operate our business or to take advantage of business opportunities due to restrictions created from the debt covenants; and
- challenges to repaying or refinancing any of the Company’s debt.

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.

Filed Oct 28, 2024.
Source: SEC EDGAR, the filing index for accession 0001437749-24-032214. Last ingested by Listed: Oct 30, 2026, 07:59 ET. No prices; not investment advice.