8-K
GORMAN RUPP CO (GRC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15\(d\) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 21, 2020
THE GORMAN-RUPP COMPANY
(Exact Name of Registrant as Specified in its Charter)
| Ohio | |
|---|---|
| (State or other jurisdiction<br><br> <br>of Incorporation) | |
| 1-6747 | 34-0253990 |
| --- | --- |
| (Commission File Number) | (I.R.S. Employee Identification No.) |
| 600 South Airport Road, Mansfield, Ohio | 44903 |
| --- | --- |
| (Address of Principal Executive Offices) | (Zip Code) |
| (419) 755-1011 | |
| --- | |
| (Registrant’s Telephone Number, Including Area Code) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol | Name of exchange on which registered |
|---|---|---|
| Common Shares, without par value | GRC | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of operations and financial condition |
|---|
On October 23, 2020, The Gorman-Rupp Company (the “Company”) issued a news release announcing its financial results for the third quarter and nine months ended September 30, 2020 and the promotion of Scott A. King to the role of President of the Company effective January 1, 2021. The news release is included as Exhibit 99 and is being furnished, not filed, with this Current Report on Form 8-K.
| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory<br> Arrangements of Certain Officers. |
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On October 21, 2020, as part of the Company’s on-going succession planning, the Board of Directors of the Company determined that, 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 the Company’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, as further described below.
Mr. King, age 46, has served as the Company’s Vice President and Chief Operating Officer since April 2019. Prior to that, he served as Vice President of Operations from March 2018 until March 2019, and as Vice President from April 2017 until February 2018. He previously held positions with the Gorman-Rupp Pumps USA division of the Company as Vice President and General Manager from January 2014 until March 2017, Vice President of Operations from June 2010 until December 2013, Director of Manufacturing from July 2007 until May 2010 and Manufacturing Manager from November 2004 until June 2007. Prior to joining the Company, Mr. King held a series of positions with several international, publicly-traded industrial companies. Mr. King holds an MBA from the University of Michigan and a Bachelor’s degree in Mechanical Engineering from the University of Minnesota.
There are no family relationships, as defined in Item 401 of Regulation S-K, between Mr. King and any of the Company’s executive officers or directors or persons nominated or chosen by the Company to become a director or executive officer. There is no arrangement or understanding between Mr. King and any other person pursuant to which Mr. King was appointed as an officer. There are no transactions in which Mr. King has an interest requiring disclosure under Item 404(a) of Regulation S-K.
| Item 9.01 | Financial Statements and Exhibits |
|---|
(d) Exhibits
Exhibit
(99) News Release dated October 23, 2020
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| THE GORMAN-RUPP COMPANY | ||
|---|---|---|
| By: | /s/ Brigette A. Burnell | |
| Brigette A. Burnell | ||
| Vice President, General Counsel and | ||
| Corporate Secretary | ||
| October 23, 2020 |
EXHIBIT INDEX
| Exhibit |
|---|
| (99) News Release dated October 23, 2020 |
Exhibit 99
Gorman-Rupp Reports Third Quarter 2020 Financial Results and Announces Executive Promotions
MANSFIELD, Ohio--(BUSINESS WIRE)--October 23, 2020--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 |
All values are in US Dollars.
| 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 |
Contacts
Brigette A. Burnell
Corporate Secretary
The Gorman-Rupp Company
Telephone \(419\) 755-1246
NYSE: GRC