The Gorman-Rupp pany(GRC) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Presents unaudited consolidated financial statements for Q2 and H1 2021, reflecting growth in revenue and net income Consolidated Statements of Income Reports increased net sales, operating income, and net income for Q2 and H1 2021, with corresponding EPS growth Consolidated Income Statement Highlights (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $93,015 | $85,814 | $182,042 | $177,485 | | Gross profit | $24,673 | $21,849 | $47,716 | $45,297 | | Operating income | $10,614 | $8,997 | $19,587 | $17,574 | | Net income | $7,097 | $5,634 | $14,526 | $11,120 | | Earnings per share | $0.27 | $0.22 | $0.56 | $0.43 | - Cash dividends per share increased to $0.155 in Q2 2021 from $0.145 in Q2 2020[8] Consolidated Balance Sheets Total assets increased to $416.4 million by June 30, 2021, supported by growth in equity and liabilities Consolidated Balance Sheet Summary (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total current assets | $271,324 | $246,821 | | Total assets | $416,417 | $394,457 | | Total current liabilities | $51,838 | $38,501 | | Total liabilities | $91,461 | $78,944 | | Total equity | $324,956 | $315,513 | Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $28.1 million in H1 2021, boosting cash and equivalents Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $28,111 | $17,074 | | Net cash used for investing activities | ($2,971) | ($3,457) | | Net cash used for financing activities | ($8,984) | ($8,208) | | Net increase in cash and cash equivalents | $16,091 | $5,230 | | End of period cash and cash equivalents | $124,294 | $85,785 | Notes to Consolidated Financial Statements Notes detail GAAP compliance, COVID-19 impact, revenue disaggregation, and a significant increase in order backlog - The ultimate financial impact of the COVID-19 pandemic cannot be reasonably estimated at this time, though it has negatively affected near-term results[19] Net Sales by Geographic Location (in thousands) | Geographic Location | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | United States | $127,097 | $125,020 | | Foreign countries | $54,945 | $52,465 | | Total net sales | $182,042 | $177,485 | - The company's backlog of remaining performance obligations was $153.0 million on June 30, 2021, with substantially all expected to be recognized as revenue within one year[24] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q2 and H1 2021 financial results, highlighting sales growth, strong liquidity, and increased order backlog - The company's backlog of orders was $153.0 million at June 30, 2021, a significant increase from $110.3 million at June 30, 2020, and $113.1 million at December 31, 2020[55] - Incoming orders increased 46.6% during the second quarter of 2021 compared to the same period in 2020[55] - The company had no bank debt as of June 30, 2021, and its cash position increased by $16.1 million during the first six months of 2021 to $124.3 million[41] Results of Operations - Three Months Ended June 30, 2021 vs. 2020 Q2 2021 saw net sales increase 8.4% to $93.0 million, with improved gross margin and significant income growth Q2 2021 vs Q2 2020 Performance (in thousands) | Metric | Q2 2021 | Q2 2020 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $93,015 | $85,814 | 8.4% | | Gross Profit | $24,673 | $21,849 | 13.0% | | Operating Income | $10,614 | $8,997 | 18.0% | | Net Income | $7,097 | $5,634 | 26.0% | - Sales in water markets increased 4.5% ($2.8 million), while non-water markets saw a larger increase of 18.1% ($4.4 million) in Q2 2021 compared to Q2 2020[60][61] - SG&A expenses increased by 9.4% to $14.1 million, attributed to compensation, travel, and other expenses returning to pre-pandemic levels[63] Results of Operations - Six Months Ended June 30, 2021 vs. 2020 H1 2021 net sales grew 2.6% to $182.0 million, with gross margin improvement and 30.6% net income increase H1 2021 vs H1 2020 Performance (in thousands) | Metric | H1 2021 | H1 2020 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $182,042 | $177,485 | 2.6% | | Gross Profit | $47,716 | $45,297 | 5.3% | | Operating Income | $19,586 | $17,574 | 11.5% | | Net Income | $14,526 | $11,120 | 30.6% | - For the first six months, sales in water markets increased 2.7% ($3.4 million) and non-water markets increased 2.2% ($1.1 million) compared to the same period in 2020[68][69] - Earnings per share for H1 2021 included a non-cash pension settlement charge of $0.05 per share, compared to a $0.10 per share charge in H1 2020[74] Liquidity and Capital Resources Maintained strong liquidity with $124.3 million cash and no debt, generating $28.1 million in operating cash flow - The company had $124.3 million in cash and cash equivalents and no outstanding bank debt at June 30, 2021[75] Free Cash Flow (Non-GAAP, in thousands) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Non-GAAP adjusted EBITDA | $25,906 | $23,664 | | Less capital expenditures | ($3,548) | ($3,655) | | Less cash dividends | ($8,095) | ($7,562) | | Non-GAAP free cash flow | $14,263 | $12,447 | Quantitative and Qualitative Disclosures about Market Risk Primary market risk is foreign currency exchange rate fluctuations, managed by invoicing in local currencies, resulting in a $0.2 million gain - The company's main market risk is from foreign currency exchange rate fluctuations, primarily involving the Euro, Canadian Dollar, South African Rand, and British Pound[84] - Foreign currency transaction gains were $0.2 million for the six months ending June 30, 2021, compared to a loss of $(0.5) million for the same period in 2020[84] Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2021, with no material changes - Based on an evaluation, the principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2021[86] - There were no changes in the Company's internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[88] PART II. OTHER INFORMATION Legal Proceedings No material changes reported from legal proceedings previously disclosed in the 2020 Annual Report on Form 10-K - There are no material changes from the legal proceedings previously reported in the Company's 2020 Annual Report on Form 10-K[89] Risk Factors Refers investors to risk factors previously disclosed in the 2020 Annual Report on Form 10-K for comprehensive understanding - The report refers readers to the risk factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020[90] Exhibits Lists exhibits filed with Form 10-Q, including CEO/CFO certifications and iXBRL formatted financial statements - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906[93] - The filing includes financial statements formatted in Inline eXtensible Business Reporting Language (iXBRL) as Exhibit 101[93]