The Gorman-Rupp pany(GRC) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for The Gorman-Rupp Company, prepared under U.S. GAAP, for the three and nine months ended September 30, 2021 and 2020 - The financial statements, prepared under U.S. GAAP for interim reporting, include all necessary adjustments, though the ultimate financial impact of COVID-19 remains uncertain[20][21] Consolidated Statements of Income The company reported increased net sales, net income, earnings per share, and cash dividends per share for both the three and nine-month periods ended September 30, 2021 Consolidated Income Statement Highlights (in thousands, except per share amounts) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $102,110 | $88,982 | $284,152 | $266,467 | | Gross Profit | $25,833 | $22,971 | $73,548 | $68,268 | | Operating Income | $11,542 | $9,743 | $31,128 | $27,317 | | Net Income | $8,782 | $7,261 | $23,308 | $18,381 | | Earnings Per Share | $0.34 | $0.28 | $0.89 | $0.70 | | Cash Dividends Per Share | $0.155 | $0.145 | $0.465 | $0.435 | Consolidated Balance Sheets Total assets increased to $421.9 million from $394.5 million at year-end 2020, driven by cash and receivables, with total liabilities and equity also rising Balance Sheet Summary (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $278,540 | $246,821 | | Total Assets | $421,881 | $394,457 | | Total Current Liabilities | $54,774 | $38,501 | | Total Liabilities | $92,405 | $78,944 | | Total Equity | $329,476 | $315,513 | Consolidated Statements of Cash Flows Net cash provided by operating activities significantly increased to $41.5 million for the nine months ended September 30, 2021, resulting in a $22.9 million net increase in cash and cash equivalents Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $41,535 | $31,428 | | Net cash used for investing activities | $(5,045) | $(6,021) | | Net cash used for financing activities | $(13,065) | $(11,952) | | Net increase in cash and cash equivalents | $22,917 | $13,110 | | End of period cash and cash equivalents | $131,120 | $93,665 | Notes to Consolidated Financial Statements Notes provide detailed disclosures on accounting policies, revenue disaggregation, inventory valuation, and pension costs, including settlement losses Disaggregation of Revenue - Nine Months Ended Sep 30 (in thousands) | Category | 2021 | 2020 | | :--- | :--- | :--- | | Product Category | | | | Pumps and pump systems | $241,038 | $230,581 | | Repair parts and other | $43,114 | $35,886 | | Geographic Location | | | | United States | $195,823 | $188,312 | | Foreign countries | $88,329 | $78,155 | - The company's order backlog was $156.5 million as of September 30, 2021, with most expected to be recognized as revenue within one year[26] - A non-cash pension settlement loss of $2.1 million was recorded for the nine months ended September 30, 2021, down from $4.4 million in 2020[35] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting recovery with increased sales and orders, margin dynamics, robust backlog, strong liquidity, and shareholder returns through dividends and a new share repurchase program - The company's order backlog significantly increased to $156.5 million at September 30, 2021, up from $102.0 million in 2020[60] - The Board authorized a quarterly dividend of $0.17 per share on October 28, 2021, marking the 287th consecutive quarterly dividend[61] - A new share repurchase program of up to $50.0 million was announced on October 29, 2021[63] Results of Operations - Q3 2021 vs Q3 2020 Q3 2021 net sales rose 14.8% to $102.1 million, driven by international and domestic growth, while gross margin slightly decreased, operating margin improved due to SG&A leverage Q3 2021 vs Q3 2020 Performance | Metric | Q3 2021 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $102,110K | $88,982K | 14.8% | | Gross Profit | $25,833K | $22,971K | 12.5% | | Gross Margin | 25.3% | 25.8% | -50 bps | | Operating Income | $11,542K | $9,743K | 18.5% | | Operating Margin | 11.3% | 10.9% | +40 bps | | Net Income | $8,782K | $7,261K | 20.9% | - Sales in water markets increased 14.6% ($9.3 million), led by fire protection, construction, and repair, while non-water markets grew 15.2% ($3.8 million), led by OEM[66][67] Results of Operations - YTD 2021 vs YTD 2020 YTD 2021 net sales grew 6.6% to $284.2 million, with gross margin improving by 30 basis points and operating margin expanding by 70 basis points due to fixed cost leverage YTD 2021 vs YTD 2020 Performance | Metric | YTD 2021 | YTD 2020 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $284,152K | $266,467K | 6.6% | | Gross Profit | $73,548K | $68,268K | 7.7% | | Gross Margin | 25.9% | 25.6% | +30 bps | | Operating Income | $31,128K | $27,317K | 14.0% | | Operating Margin | 11.0% | 10.3% | +70 bps | | Net Income | $23,308K | $18,381K | 26.8% | - Nine-month EPS included an unfavorable LIFO impact of $0.12 per share in 2021 versus $0.04 in 2020, and a non-cash pension settlement charge of $0.06 per share in 2021 versus $0.13 in 2020[83] Liquidity and Capital Resources The company maintained strong liquidity with $131.1 million in cash and no bank debt, with net cash from operations increasing to $41.5 million and non-GAAP free cash flow at $22.5 million - As of September 30, 2021, the company held $131.1 million in cash and equivalents, with no outstanding bank debt and $24.0 million available in credit lines[84] Free Cash Flow (Non-GAAP) - Nine Months Ended Sep 30 (in thousands) | Component | 2021 | 2020 | | :--- | :--- | :--- | | Non-GAAP adjusted EBITDA | $40,306 | $36,978 | | Less capital expenditures | $(5,617) | $(6,258) | | Less cash dividends | $(12,145) | $(11,348) | | Non-GAAP free cash flow | $22,544 | $19,372 | Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is foreign currency exchange rate fluctuations, managed by invoicing customers in the product's source market currency - Foreign currency transaction gains were $0.1 million for the nine months ending September 30, 2021, compared to a $(0.4) million loss in 2020[94] Item 4. Controls and Procedures Management, including the CEO and CFO, deemed disclosure controls and procedures effective as of September 30, 2021, with no material changes in internal control over financial reporting - The principal executive and financial officers concluded the Company's disclosure controls and procedures were effective as of September 30, 2021[96] - No material changes occurred in the Company's internal control over financial reporting during the last fiscal quarter[97] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports no material changes from legal proceedings previously disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 - No material changes from legal proceedings previously reported in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020[98] Item 1A. Risk Factors This section refers investors to the risk factors previously disclosed in Item 1A of the company's Annual Report on Form 10-K for a comprehensive understanding of potential risks - Readers are directed to consider risk factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020[99] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds On October 29, 2021, the company announced a share repurchase program authorizing the buyback of up to $50.0 million of common shares, with no expiration date - A share repurchase program for up to $50.0 million of the Company's common shares was announced on October 29, 2021[100] - As of the report date, no shares had been purchased under this new program[101] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements in iXBRL format - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and financial statements in iXBRL[103]