The Gorman-Rupp pany(GRC) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Financial Statements (Unaudited) The company reported significant growth in net income and EPS for Q2 and H1 2025, driven by increased sales and reduced interest expenses Consolidated Statements of Income Highlights (in thousands, except per share) | Metric | Q2 2025 | Q2 2024 | Change | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Sales | $179,045 | $169,513 | +5.6% | $342,994 | $328,781 | +4.3% | | Gross Profit | $56,053 | $54,079 | +3.6% | $106,385 | $102,473 | +3.8% | | Operating Income | $26,912 | $26,049 | +3.3% | $49,037 | $46,477 | +5.5% | | Net Income | $15,797 | $8,335 | +89.5% | $27,925 | $16,219 | +72.2% | | Earnings Per Share | $0.60 | $0.32 | +87.5% | $1.06 | $0.62 | +71.0% | Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $231,290 | $220,827 | | Total Assets | $861,796 | $858,469 | | Total Current Liabilities | $96,669 | $87,527 | | Total Liabilities | $464,028 | $484,669 | | Total Equity | $397,768 | $373,800 | Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity (Six Months Ended June 30) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $48,888 | $33,397 | | Net cash used for investing activities | ($5,918) | ($4,962) | | Net cash used for financing activities | ($40,931) | ($24,230) | | Net increase in cash and cash equivalents | $2,772 | $3,727 | Notes to Consolidated Financial Statements (Unaudited) Notes detail revenue by market, debt structure, and single-segment operations, highlighting strong municipal and fire market growth Net Sales by End Market (Six Months Ended June 30, in thousands) | End Market | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Industrial | $68,747 | $68,130 | +0.9% | | Fire | $64,730 | $61,249 | +5.7% | | Agriculture | $39,621 | $41,787 | -5.2% | | Construction | $40,748 | $43,389 | -6.1% | | Municipal | $51,845 | $46,419 | +11.7% | | Petroleum | $13,900 | $11,353 | +22.4% | | OEM | $22,019 | $19,842 | +11.0% | | Repair parts | $41,384 | $36,612 | +13.0% | - As of June 30, 2025, the company had a backlog of $224.4 million in remaining performance obligations, substantially all of which is expected to be recognized as revenue within one year[24] - On May 31, 2024, the Company amended and restated its Senior Secured Credit Agreement, providing a $370 million term loan facility and a $100 million revolving credit facility, maturing in May 2029 The company also issued $30.0 million of 6.40% senior secured notes due in 2031[38][45] - The company operates in a single business segment: the design, manufacture, and sale of pumps and pump systems The Chief Operating Decision Maker (CODM) assesses performance on a consolidated basis[53][55] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 and H1 2025 sales growth, substantial net income increase due to debt refinancing, and strong liquidity Executive Overview and Outlook The company's order backlog increased to $224.4 million, with incoming orders up 7.1%, driven by infrastructure and data center demand - The company's order backlog was $224.4 million at June 30, 2025, compared to $206.0 million at December 31, 2024[61] - Incoming orders for the first six months of 2025 increased by 7.1% to $365.7 million compared to the same period in 2024[61] - The Board of Directors authorized a quarterly dividend of $0.185 per share, marking the 302nd consecutive quarterly dividend[62] - The company expects continued strong demand from the municipal market due to infrastructure spending and from data center construction[64] Results of Operations - Three Months Ended June 30, 2025 vs. 2024 Q2 2025 net sales rose 5.6%, with net income surging 89.5% due to lower interest expense and favorable other income Q2 2025 vs Q2 2024 Performance (in thousands) | Metric | Q2 2025 | Q2 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $179,045 | $169,513 | $9,532 | 5.6% | | Gross Profit | $56,053 | $54,079 | $1,974 | 3.6% | | Operating Income | $26,912 | $26,049 | $863 | 3.3% | | Net Income | $15,797 | $8,335 | $7,462 | 89.5% | - The 60 basis point decrease in gross margin was primarily driven by a 120 basis point increase in cost of material, which included higher LIFO expense and unfavorable product mix, partially offset by leverage from increased sales[68] - Interest expense decreased by 33.8% to $6.0 million due to 2024 refinancing transactions and lower outstanding debt[71] - Other expense in Q2 2024 included a $4.4 million write-off of deferred debt financing fees and a $1.8 million prepayment fee, which did not recur in Q2 2025[72] Results of Operations - Six Months Ended June 30, 2025 vs. 2024 H1 2025 net sales grew 4.3%, with net income rising 72.2% due to reduced interest expense and improved operating margin H1 2025 vs H1 2024 Performance (in thousands) | Metric | H1 2025 | H1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $342,994 | $328,781 | $14,213 | 4.3% | | Gross Profit | $106,385 | $102,473 | $3,912 | 3.8% | | Operating Income | $49,037 | $46,477 | $2,560 | 5.5% | | Net Income | $27,925 | $16,219 | $11,706 | 72.2% | - Sales growth was led by the municipal, repair parts, fire suppression, petroleum, and OEM markets, while construction and agriculture markets saw declines[77] - Interest expense decreased by 36.2% to $12.2 million due to debt refinancing in May 2024 and lower debt levels[81] Liquidity and Capital Resources The company maintains strong liquidity with $27.0 million cash and $99.1 million available credit, planning $20.0 million in 2025 capex - Primary liquidity sources are cash from operations and the Credit Facility, with $99.1 million available under the revolver as of June 30, 2025[89] - Net cash from operating activities increased to $48.9 million in H1 2025 from $33.4 million in H1 2024, primarily due to higher net income[94] - Capital expenditures for H1 2025 were $6.0 million, with a full-year plan of approximately $20.0 million[91] - The company has a share repurchase program with $48.1 million available as of June 30, 2025[93] Non-GAAP Financial Information Non-GAAP Adjusted EBITDA for H1 2025 was $65.0 million, providing a clearer operational comparison by excluding specific items Reconciliation of Net Income to Adjusted EBITDA (in thousands) | | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income – GAAP basis | $15,797 | $8,335 | $27,925 | $16,219 | | Interest expense | $5,990 | $9,048 | $12,192 | $19,120 | | Provision for income taxes | $4,587 | $2,335 | $7,994 | $4,535 | | Depreciation and amortization | $6,974 | $7,024 | $13,937 | $14,089 | | Write-off/Refinancing costs | — | $7,493 | — | $7,493 | | Non-cash LIFO expense | $1,928 | $1,134 | $2,923 | $2,127 | | Adjusted EBITDA | $35,276 | $35,369 | $64,971 | $63,583 | Quantitative and Qualitative Disclosures about Market Risk The company faces interest rate risk on its variable-rate debt, partially hedged, with limited foreign currency exposure - The company is exposed to interest rate risk on its $310.8 million Senior Term Loan Facility, which bears interest at a variable rate (Adjusted Term SOFR plus 2.0% at June 30, 2025)[102] - To mitigate interest rate risk, the company uses interest rate swap agreements, designated as cash flow hedges[103] - A hypothetical 100 basis point increase in interest rates is estimated to increase annual interest expense by approximately $1.7 million[104] Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - The principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[107] - There were no changes in internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[108] PART II. OTHER INFORMATION This section covers legal proceedings, new risk factors on trade policy, share repurchase status, and filed exhibits Legal Proceedings No material changes to legal proceedings were reported from the prior Annual Report on Form 10-K - There are no material changes from the legal proceedings previously reported in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024[109] Risk Factors A supplemental risk factor addresses potential adverse effects of U.S. trade policy, including tariffs on materials and sales - A supplemental risk factor was added concerning U.S. trade policy, noting that tariffs could increase the cost of imported materials and that retaliatory tariffs from other countries could apply to the company's products sold internationally[110] Issuer Purchases of Equity Securities No common shares were repurchased in Q2 2025 under the public program, with $48.1 million remaining for future purchases Issuer Purchases of Common Shares (Q2 2025) | Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced program | | :--- | :--- | :--- | :--- | | April 1 to April 30, 2025 | — | — | — | | May 1 to May 31, 2025 | — | — | — | | June 1 to June 30, 2025 | — | — | — | | Total | — | — | — | Exhibits The report includes key exhibits such as CEO and CFO certifications and financial statements in Inline XBRL format - Key exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906[116] - Financial statements and the cover page interactive data file are provided in Inline eXtensible Business Reporting Language (XBRL) format[116]