The Gorman-Rupp Company (NYSE: GRC) reports financial results
for the third quarter and nine months ended September 30, 2020.
Third Quarter 2020 Highlights
- Third quarter earnings per share were $0.28 compared to $0.37
per share for the third quarter of 2019
- Third quarter of 2020 included a non-cash
pension settlement charge of $0.03 per share
- Third quarter earnings per share improved
over second quarter of 2020 due to increased sales and cost
containment efforts
- Net sales decreased 10.4% or $10.3 million compared to the
third quarter of 2019 and increased 3.7% compared to the second
quarter of 2020
- Scott A. King promoted to President and Chief Operating Officer
effective January 1, 2021
Net sales for the third quarter of 2020 were $89.0 million
compared to net sales of $99.3 million for the third quarter of
2019, a decrease of 10.4% or $10.3 million. Domestic sales
decreased 8.9% or $6.2 million and international sales decreased
13.8% or $4.1 million compared to the same period in 2019. Sales
have decreased across all of our markets primarily as a result of
the COVID-19 pandemic, along with a slowdown in the oil & gas
industry. This, together with the overall economic downturn that
has resulted from the pandemic, slowed demand in the third quarter
compared to the prior year. However, net sales increased by 3.7%
compared to the second quarter of 2020. Our facilities and supply
chain have remained operational through the pandemic.
Sales in our water markets decreased 5.2% or $3.5 million in the
third quarter of 2020 compared to the third quarter of 2019. Sales
in the construction market decreased $1.5 million driven primarily
by softness in oil and gas drilling activity. Sales decreased $1.3
million in the repair market, $0.5 million in the municipal market,
$0.1 million in fire protection, and $0.1 million in agriculture
primarily as a result of the COVID-19 pandemic.
Sales in our non-water markets decreased 21.6% or $6.8 million
in the third quarter of 2020 compared to the third quarter of 2019
primarily as a result of the COVID-19 pandemic, along with reduced
demand from midstream oil and gas customers and softness in oil and
gas drilling activity. Sales in the industrial market decreased
$2.5 million, sales in the OEM market decreased $2.3 million and
sales in the petroleum market decreased $2.0 million.
International sales were $25.7 million in the third quarter of
2020 compared to $29.8 million in the same period last year and
represented 29% and 30% of total sales for each respective period.
The decrease in international sales was across most of the markets
the Company serves, most notably in non-water and municipal
markets.
Gross profit was $23.0 million for the third quarter of 2020,
resulting in gross margin of 25.8%, compared to gross profit of
$25.8 million and gross margin of 26.0% for the same period in
2019. Gross margin decreased 20 basis points due to a 120 basis
point favorable LIFO impact in the prior year third quarter which
did not recur in the current year. Gross profit margin compared to
the prior year was negatively impacted from the loss of leverage on
fixed labor and overhead from lower sales volume compared to 2019
which was partially offset by favorable product mix.
Selling, general and administrative (“SG&A”) expenses were
$13.2 million and 14.9% of net sales for the third quarter of 2020
compared to $14.1 million and 14.3% of net sales for the same
period in 2019. SG&A expenses decreased 6.5% or $0.9 million
due to reduced payroll related and travel expenses combined with
overall expense management. SG&A expenses as a percentage of
sales increased 60 basis points primarily as a result of loss of
leverage from lower sales volume.
Operating income was $9.7 million for the third quarter of 2020,
resulting in an operating margin of 10.9%, compared to operating
income of $11.6 million and operating margin of 11.7% for the same
period in 2019. Operating margin decreased 80 basis points
primarily as a result of loss of leverage from lower sales
volume.
Other income (expense), net was $0.7 million of expense for the
third quarter of 2020 compared to income of $0.3 million for the
same period in 2019. The increase to expense was due primarily to a
non-cash pension settlement charge of $1.0 million which occurred
in the third quarter of 2020.
Net income was $7.3 million for the third quarter of 2020
compared to $9.8 million in the third quarter of 2019, and earnings
per share were $0.28 and $0.37 for the respective periods. Earnings
per share for the third quarter of 2020 included a non-cash pension
settlement charge of $0.03 per share. Earnings per share improved
over the second quarter of 2020 due to increased sales and cost
containment efforts.
Net sales for the first nine months of 2020 were $266.5 million
compared to net sales of $304.5 million for the first nine months
of 2019, a decrease of 12.5% or $38.0 million. Domestic sales
decreased 11.2% or $23.7 million and international sales decreased
15.5% or $14.3 million compared to the same period in 2019. Sales
have decreased across most of our markets primarily as a result of
the COVID-19 pandemic, along with a slowdown in the oil and gas
industry.
Sales in our water markets decreased 10.3% or $21.7 million in
the first nine months of 2020 compared to the first nine months of
2019. Sales in the agriculture market increased $0.1 million. This
increase was offset by sales decreases in the construction market
of $12.1 million driven primarily by softness in oil and gas
drilling activity, decreases in the repair market of $4.5 million
due primarily to the COVID-19 pandemic, and decreases in the
municipal market of $3.5 million driven primarily by timing of
shipments related to weather and the COVID-19 pandemic. Also, sales
in the fire protection market decreased $1.7 million driven
primarily by lower international shipments as a result of the
COVID-19 pandemic.
Sales in our non-water markets decreased 17.5% or $16.3 million
in the first nine months of 2020 compared to the first nine months
of 2019 primarily as a result of the COVID-19 pandemic, along with
reduced demand from midstream oil and gas customers and softness in
oil and gas drilling activity. Sales in the OEM market decreased
$7.1 million, sales in the petroleum market decreased $5.8 million
and sales in the industrial market decreased $3.4 million.
International sales were $78.2 million in the first nine months
of 2020 compared to $92.5 million in the same period last year and
represented 29% and 30% of total sales, respectively. The decrease
in international sales was across most of the markets the Company
serves.
Gross profit was $68.3 million for the first nine months of
2020, resulting in gross margin of 25.6%, compared to gross profit
of $77.3 million and gross margin of 25.4% for the same period in
2019. Gross margin improved 20 basis points due principally to
lower material costs of 180 basis points as a result of the
stabilization of material costs and favorable product mix.
Partially offsetting these improvements was loss of leverage on
fixed labor and overhead from lower sales volume compared to the
first nine months of 2019.
SG&A expenses were $41.0 million and 15.4% of net sales for
the first nine months of 2020 compared to $43.5 million and 14.3%
of net sales for the same period in 2019. SG&A expenses
decreased 5.9% or $2.5 million due to reduced payroll related and
travel expenses combined with overall expense management. SG&A
expenses as a percentage of sales increased 110 basis points
primarily as a result of loss of leverage from lower sales
volume.
Operating income was $27.3 million for the first nine months of
2020, resulting in an operating margin of 10.3%, compared to
operating income of $33.8 million and operating margin of 11.1% for
the same period in 2019. Operating margin decreased 80 basis points
primarily as a result of loss of leverage from lower sales volume
partially offset by lower material costs.
Other income (expense), net was $4.4 million of expense for the
first nine months of 2020 compared to income of $0.8 million in
2019. The increase to expense was due primarily to non-cash pension
settlement charges of $4.4 million.
Net income was $18.4 million for the first nine months of 2020
compared to $27.5 million in 2019, and earnings per share were
$0.70 and $1.05 for the respective periods. Earnings per share for
the first nine months of 2020 included non-cash pension settlement
charges of $0.13 per share.
The Company’s backlog of orders was $102.0 million at September
30, 2020 compared to $101.4 million at September 30, 2019 and
$105.0 million at December 31, 2019. Incoming orders decreased
10.1% for the first nine months of 2020 compared to the same period
in 2019. Incoming orders were down across most markets the Company
serves driven primarily by the COVID-19 pandemic and a slowdown in
the oil and gas industry.
Capital expenditures for the first nine months of 2020 were $6.3
million and consisted primarily of machinery and equipment and
building improvements. Capital expenditures for the full-year 2020
are presently planned to be in the range of $8-$10 million.
As part of the Company’s on-going succession planning, effective
January 1, 2021 the role of President will transition from Jeffrey
S. Gorman, who will continue to serve as the Company’s Chairman and
Chief Executive Officer, to Scott A. King, who is currently the
Company’s Vice President and Chief Operating Officer. In addition
to operational and financial oversight of all of Gorman-Rupp’s
divisions and subsidiaries, Mr. King will join Mr. Gorman in
leading the Company’s strategic planning and acquisition efforts.
Mr. King has been with the Company since 2004 and has held various
operational leadership roles during this time.
Jeffrey S. Gorman, Chairman, President and CEO commented, “I am
very pleased to announce that the Board of Directors has approved
the transition of my role as President to Scott A. King effective
January 1, 2021. During his 15 years with the Company, Scott has
developed a deep understanding of the pump industry, as well as the
culture that has contributed to Gorman-Rupp’s success over the
years.”
“The Board and I are also recognizing the contributions of two
other Executive Officers effective January 1, 2021. James C. Kerr,
currently the Company’s Vice President and Chief Financial Officer,
will be promoted to Executive Vice President and Chief Financial
Officer, and Brigette A. Burnell, currently the Company’s Vice
President, General Counsel and Corporate Secretary, will be
promoted to Senior Vice President, General Counsel and Corporate
Secretary.”
Regarding the current quarter, Mr. Gorman stated, “While sales
and incoming orders continue to be negatively impacted by the
global challenges of COVID-19, both our sales and earnings showed
improvement over the second quarter. Although the ongoing impact of
COVID-19 on our economy continues to remain uncertain, we remain
focused on being prepared for the eventual recovery when it does
occur, including maintaining strong inventory levels and focusing
on our long-term strategic initiatives across the numerous end
markets we serve.”
“I would also like to extend my personal gratitude to all the
employees of Gorman-Rupp worldwide. COVID-19 has brought a unique
set of challenges that could not have been addressed without their
cooperation and dedication to our customers, shareholders and
fellow employees.”
About The Gorman-Rupp Company Founded in 1933, The Gorman-Rupp
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, heating,
ventilating and air conditioning (HVAC), military and other
liquid-handling applications.
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 news release 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 factors include, but are not limited to:
(1) continuation of the current and projected future business
environment, including the duration and scope of the COVID-19
pandemic, the impact of the pandemic and actions taken in response
to the pandemic; (2) highly competitive markets; (3) availability
and costs of raw materials; (4) loss of key personnel; (5) cyber
security threats; (6) intellectual property security; (7)
acquisition performance and integration; (8) compliance with, and
costs related to, a variety of import and export laws and
regulations; (9) environmental compliance costs and liabilities;
(10) exposure to fluctuations in foreign currency exchange rates;
(11) conditions in foreign countries in which The Gorman-Rupp
Company conducts business; (12) changes in our tax rates and
exposure to additional income tax liabilities; (13) impairment in
the value of intangible assets, including goodwill; (14) defined
benefit pension plan settlement expense; (15) family ownership of
common equity; and (16) 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.
For additional information, contact James C. Kerr, Chief
Financial Officer, Telephone (419) 755-1548.
The Gorman-Rupp Company Condensed Consolidated Statements of
Income (Unaudited) (thousands of dollars, except per share data)
Three Months Ended September 30, Nine Months Ended September
30,
2020
2019
2020
2019
Net sales
$88,982
$99,298
$266,467
$304,487
Cost of products sold
66,011
73,506
198,199
227,190
Gross profit
22,971
25,792
68,268
77,297
Selling, general and administrative expenses
13,228
14,154
40,951
43,505
Operating income
9,743
11,638
27,317
33,792
Other income (expense), net
(744
)
269
(4,361
)
792
Income before income taxes
8,999
11,907
22,956
34,584
Income taxes
1,738
2,132
4,575
7,107
Net income
$7,261
$9,775
$18,381
$27,477
Earnings per share
$0.28
$0.37
$0.70
$1.05
The Gorman-Rupp Company Condensed Consolidated
Balance Sheets (Unaudited) (thousands of dollars, except share
data) September 30, December 31,
2020
2019
Assets Cash and cash equivalents
$93,665
$80,555
Accounts receivable, net
59,890
65,433
Inventories, net
82,504
75,997
Prepaid and other
5,388
5,680
Total current assets
241,447
227,665
Property, plant and equipment, net
109,401
111,779
Other assets
8,497
8,320
Prepaid pension assets
337
-
Goodwill and other intangible assets, net
33,740
34,996
Total assets
$393,422
$382,760
Liabilities and shareholders'
equity Accounts payable
$14,060
$16,030
Accrued liabilities and expenses
31,948
29,465
Total current liabilities
46,008
45,495
Pension benefits
-
1,040
Postretirement benefits
24,556
24,453
Other long-term liabilities
3,227
3,894
Total liabilities
73,791
74,882
Shareholders' equity
319,631
307,878
Total liabilities and shareholders' equity
$393,422
$382,760
Shares outstanding
26,101,992
26,067,502
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version on businesswire.com: https://www.businesswire.com/news/home/20201023005033/en/
Brigette A. Burnell Corporate Secretary The Gorman-Rupp Company
Telephone (419) 755-1246 NYSE: GRC
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