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 28, 2021
THE GORMAN-RUPP COMPANY
(Exact Name of Registrant as Specified in its Charter)
| Ohio | |
|---|---|
| (State or other jurisdiction<br> <br>of Incorporation) | |
| 1-6747 | 34-0253990 |
| (Commission<br> <br>File Number) | (I.R.S. Employee<br> <br>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<br> <br>Symbol | Name of exchange<br> <br>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 29, 2021, The Gorman-Rupp Company (the “Company”) issued a news release announcing its financial results for the third quarter and nine months ended September 30, 2021 and the promotion of Scott A. King to the role of Chief Executive Officer of the Company effective January 1, 2022. The news release is included as Exhibit 99.1 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 Arrangements of Certain Officers. |
|---|
On October 28, 2021, the Board of Directors of the Company determined that, effective January 1, 2022, the role of Chief Executive Officer will transition from Jeffrey S. Gorman to Scott A. King, who is currently the Company’s President and Chief Operating Officer. Also effective January 1, 2022, Mr. Gorman will serve as the Company’s Executive Chairman of the Board and will continue to be actively involved with 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 47, has served as the Company’s President and Chief Operating Officer since January 1, 2021. Prior to that, he served as Vice President and Chief Operating Officer from April 2019 to December 2020. He served as Vice President of Operations from March 2018 until March 2019, and as Vice President from April 2017 until February 2018. He also 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 8.01 | Other Events |
|---|
On October 28, 2021, the Board of Directors of the Company authorized a share repurchase program of up to $50.0 million of the Company’s common shares. Shares may be repurchased from time to time by the Company through a variety of methods, which may include open-market transactions, pre-set trading plans designed in accordance with Rule 10b5-1, privately negotiated transactions, accelerated share repurchase transactions, or any combination of such methods. The actual number of shares repurchased will depend on prevailing market conditions, alternative uses of capital and other factors, and will be determined at management’s discretion. The Company is not obligated to make any repurchases under the program, and the program may be suspended or discontinued at any time. The authorization does not have an expiration date.
On October 29, 2021, the Company issued a news release announcing the share repurchase program and the Company’s quarterly cash dividend on its common shares, which is filed as Exhibit 99.2 to this Current Report on Form 8-K.
| Item 9.01 | Financial Statements and Exhibits |
|---|
(d) Exhibits
| Exhibit | |
|---|---|
| (99.1) | News Release dated October 29, 2021 |
| (99.2) | News Release dated October 29, 2021 |
| 104 | The cover page from this Current Report on Form 8-K, formatted in Inline XBRL (included as Exhibit 101) |
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 | |
| Senior Vice President, General Counsel and Corporate Secretary |
October 29, 2021
EX-99.1
Exhibit 99.1
GORMAN-RUPP REPORTS THIRD QUARTER 2021 FINANCIAL RESULTS AND ANNOUNCES PROMOTION OF
SCOTT A. KING TO CEO
Mansfield, Ohio – October 29, 2021 – The Gorman-Rupp Company (NYSE: GRC) reports financial results for the third quarter and nine months ended September 30, 2021.
Third Quarter 2021 Highlights
| • | Third quarter earnings per share were $0.34 compared to $0.28 per share for the third quarter of 2020<br> |
|---|---|
| • | 2021 results included an unfavorable LIFO impact of $0.08 per share due to inflationary pressure<br> |
| --- | --- |
| • | Results included non-cash pension settlement charges of $0.01 and $0.03<br>per share in 2021 and 2020, respectively |
| --- | --- |
| • | Sales increased 14.8% and incoming orders increased 32.0% compared to the third quarter of 2020<br> |
| --- | --- |
| • | Backlog improved to $156.5 million at September 30, 2021 |
| --- | --- |
| • | Scott A. King promoted to Chief Executive Officer effective January 1, 2022 |
| --- | --- |
Net sales for the third quarter of 2021 were $102.1 million compared to net sales of $89.0 million for the third quarter of 2020, an increase of 14.8% or $13.1 million. Domestic sales increased 8.6% or $5.4 million and international sales increased 30.0% or $7.7 million compared to the same period in 2020. As the global economy has started to recover from the COVID-19 pandemic, sales and incoming orders have increased across nearly all of our markets.
Sales in our water markets increased 14.6% or $9.3 million in the third quarter of 2021 compared to the third quarter of 2020. Sales increased $6.0 million in the fire protection market, $3.6 million in the construction market, $2.3 million in the repair market, and $0.8 million in the agriculture market. Partially offsetting these increases was a decrease of $3.4 million in the municipal market. The decrease in municipal market sales is primarily due to timing, as both incoming orders and backlog have increased compared to the prior year.
Sales in our non-water markets increased 15.2% or $3.8 million in the third quarter of 2021 compared to the third quarter of 2020. Sales increased $2.7 million in the OEM market, $0.7 million in the industrial market, and $0.4 million in the petroleum market.
Gross profit was $25.8 million for the third quarter of 2021, resulting in gross margin of 25.3%, compared to gross profit of $23.0 million and gross margin of 25.8% for the same period in 2020. The 50 basis point decrease in gross margin was driven by a 210 basis point increase in cost of material, which included an unfavorable LIFO impact of 250 basis points, partially offset by a 160 basis point improvement on labor and overhead resulting from increased sales volume.
Selling, general and administrative (“SG&A”) expenses were $14.3 million and 14.0% of net sales for the third quarter of 2021 compared to $13.2 million and 14.9% of net sales for the same period in 2020. SG&A expenses increased 8.0% or $1.1 million as a result of compensation, travel and other expense items returning closer to pre-pandemic levels as operational activities return to normal. SG&A expenses as a percentage of sales improved 90 basis points primarily as a result of leverage on fixed costs from increased sales volume.
Operating income was $11.5 million for the third quarter of 2021, resulting in an operating margin of 11.3%, compared to operating income of $9.7 million and operating margin of 10.9% for the same period in 2020. Operating margin improved 40 basis points as a result of improved leverage on fixed costs from increased sales volume partially offset by an unfavorable LIFO impact.
Other income (expense), net was $0.5 million of expense for the third quarter of 2021 compared to expense of $0.7 million for the same period in 2020. The decrease to expense was due primarily to reduced non-cash pension settlement charges of $0.4 million in the third quarter of 2021 compared to $1.0 million in the third quarter of 2020.
Net income was $8.8 million for the third quarter of 2021 compared to $7.3 million in the third quarter of 2020, and earnings per share were $0.34 and $0.28 for the respective periods. Earnings per share for the third quarter of 2021 included an unfavorable LIFO impact of $0.08 per share. Earnings per share for the third quarter included a non-cash pension settlement charge of $0.01 per share in 2021 and $0.03 per share in 2020.
Year to date 2021 Highlights
Net sales for the first nine months of 2021 were $284.2 million compared to net sales of $266.5 million for the first nine months of 2020, an increase of 6.6% or $17.7 million. Domestic sales increased 4.0% or $7.5 million and international sales increased 13.0% or $10.2 million compared to the same period in 2020.
Sales in our water markets increased 6.7% or $12.7 million in the first nine months of 2021 compared to the first nine months of 2020. Sales increased $6.1 million in the repair market, $6.1 million in the fire market, $5.8 million in the construction market, and $1.5 million in the agriculture market. Partially offsetting these increases was a decrease of $6.8 million in the municipal market. The decrease in municipal market sales is primarily due to timing, as both incoming orders and backlog have increased compared to the prior year.
Sales in our non-water markets increased 6.5% or $5.0 million in the first nine months of 2021 compared to the first nine months of 2020. Sales in the OEM market increased $3.7 million and sales in the petroleum market increased $2.6 million. Partially offsetting these increases was a decrease of $1.3 million in the industrial market.
Gross profit was $73.5 million for the first nine months of 2021, resulting in gross margin of 25.9%, compared to gross profit of $68.3 million and gross margin of 25.6% for the same period in 2020. The 30 basis points increase in gross margin compared to the first nine months of 2020 was driven by a 130 basis point improvement on labor and overhead resulting from increased sales volume partially offset by a 100 basis point increase in cost of material, which included an unfavorable LIFO impact of 90 basis points.
SG&A expenses were $42.4 million and 14.9% of net sales for the first nine months of 2021 compared to $41.0 million and 15.4% of net sales for the same period in 2020. SG&A expenses increased 3.6% or $1.4 million but improved 50 basis points as a percentage of sales primarily as a result of leverage on fixed costs from increased sales volume.
Operating income was $31.1 million for the first nine months of 2021, resulting in an operating margin of 11.0%, compared to operating income of $27.3 million and operating margin of 10.3% for the same period in 2020. Operating margin improved 70 basis points primarily as a result of improved leverage on fixed costs from increased sales volume partially offset by an unfavorable LIFO impact.
Other income (expense), net was $1.8 million of expense for the first nine months of 2021 compared to expense of $4.4 million for the same period in 2020. The decrease to expense was due primarily to reduced non-cash pension settlement charges of $2.1 million in 2021 compared to $4.4 million in 2020.
Net income was $23.3 million for the first nine months of 2021 compared to $18.4 million in the first nine months of 2020, and earnings per share were $0.89 and $0.70 for the respective periods. Earnings per share included an unfavorable LIFO impact of $0.12 per share in 2021 compared to $0.04 per share in 2020. Earnings per share included a non-cash pension settlement charge of $0.06 per share in 2021 and $0.13 per share in 2020.
The Company’s backlog of orders was $156.5 million at September 30, 2021 compared to $102.0 million at September 30, 2020 and $113.1 million at December 31, 2020. Incoming orders increased 24.8% for the first nine months of 2021 compared to the same period in 2020. Incoming orders during the third quarter of 2021 increased 32.0% when compared to the same period last year.
Capital expenditures for the first nine months of 2021 were $5.6 million and consisted primarily of machinery and equipment and building improvements. Capital expenditures for the full-year 2021 are presently planned to be approximately $10 million.
Jeffrey S. Gorman, Chairman and Chief Executive Officer commented, “Our sales and incoming orders have continued the positive trends we began to see earlier in the year, and we enter the fourth quarter with a very strong backlog. Our team has continued to do a good job managing the ongoing challenges of the COVID-19 pandemic, including those related to our global supply chain. As sales volumes have returned to more normal levels, we have managed our gross margin and have leveraged our SG&A expenses, resulting in improved earnings. While we continue to manage the uncertainties related to the global economic recovery, our management team also remains focused on long-term growth opportunities and strategic initiatives that will enable us to continue to deliver shareholder value.”
CEO Transition
Effective January 1, 2022, the role of Chief Executive Officer will transition from Jeffrey S. Gorman to Scott A. King, who is currently the Company’s President and Chief Operating Officer. Mr. Gorman, age 69, has served as CEO since 1998 and, following the CEO transition, will continue to serve as the Company’s Executive Chairman of the Board to assist with the Company’s overall strategy and acquisition efforts. Mr. King, age 47, has been with the Company since 2004 and has held various operational leadership roles of increasing responsibility during this time.
Jeffrey S. Gorman, Chairman and Chief Executive Officer commented, “I am very pleased that the Board of Directors has approved the transition of my role as Chief Executive Officer to Scott King. In his current roles as President and Chief Operating Officer, Scott has shown strong leadership and management skills, as well as a dedication to taking care of our customers. These leadership skills, combined with Scott’s in-depth knowledge of the pump industry, will enable him to be a strong and effective CEO.”
Scott A. King stated, “I am honored and humbled to serve as the next CEO of The Gorman-Rupp Company. I appreciate the support from Jeff and our Board of Directors and look forward to working with them and our entire team as we continue to build on the strong foundation and culture that has been developed over our nearly 90-year history.”
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: company specific risk factors including (1) loss of key personnel; (2) intellectual property security; (3) acquisition performance and integration; (4) impairment in the value of intangible assets, including goodwill; (5) defined benefit pension plan settlement expense; and (6) family ownership of common equity; and general risk factors including (7) 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; (8) highly competitive markets; (9) availability and costs of raw materials; (10) cyber security threats; (11) compliance with, and costs related to, a variety of import and export laws and regulations; (12) environmental compliance costs and liabilities; (13) exposure to fluctuations in foreign currency exchange rates; (14) conditions in foreign countries in which The Gorman-Rupp Company conducts business; (15) changes in our tax rates and exposure to additional income tax liabilities; 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.
Brigette A. Burnell
Corporate Secretary
The Gorman-Rupp Company
Telephone (419) 755-1246
NYSE: GRC
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<br>September 30, | Nine Months Ended<br>September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Net sales | $ | 102,110 | $ | 88,982 | $ | 284,152 | $ | 266,467 | ||||
| Cost of products sold | 76,277 | 66,011 | 210,604 | 198,199 | ||||||||
| Gross profit | 25,833 | 22,971 | 73,548 | 68,268 | ||||||||
| Selling, general and administrative expenses | 14,291 | 13,228 | 42,420 | 40,951 | ||||||||
| Operating income | 11,542 | 9,743 | 31,128 | 27,317 | ||||||||
| Other income (expense), net | (486 | ) | (744 | ) | (1,846 | ) | (4,361 | ) | ||||
| Income before income taxes | 11,056 | 8,999 | 29,282 | 22,956 | ||||||||
| Income taxes | 2,274 | 1,738 | 5,974 | 4,575 | ||||||||
| Net income | $ | 8,782 | $ | 7,261 | $ | 23,308 | $ | 18,381 | ||||
| Earnings per share | $ | 0.34 | $ | 0.28 | $ | 0.89 | $ | 0.70 |
The Gorman-Rupp Company
Condensed Consolidated Balance Sheets (Unaudited)
(thousands of dollars, except share data)
| September 30, | December 31, | |||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Assets | ||||
| Cash and cash equivalents | $ | 131,120 | $ | 108,203 |
| Accounts receivable, net | 58,817 | 50,763 | ||
| Inventories, net | 81,413 | 82,686 | ||
| Prepaid and other | 7,190 | 5,169 | ||
| Total current assets | 278,540 | 246,821 | ||
| Property, plant and equipment, net | 104,765 | 108,666 | ||
| Other assets | 5,130 | 4,795 | ||
| Goodwill and other intangible assets, net | 33,446 | 34,175 | ||
| Total assets | $ | 421,881 | $ | 394,457 |
| Liabilities and shareholders’ equity | ||||
| Accounts payable | $ | 15,796 | $ | 9,466 |
| Accrued liabilities and expenses | 38,978 | 29,035 | ||
| Total current liabilities | 54,774 | 38,501 | ||
| Pension benefits | 7,812 | 9,232 | ||
| Postretirement benefits | 28,079 | 28,250 | ||
| Other long-term liabilities | 1,740 | 2,961 | ||
| Total liabilities | 92,405 | 78,944 | ||
| Shareholders’ equity | 329,476 | 315,513 | ||
| Total liabilities and shareholders’ equity | $ | 421,881 | $ | 394,457 |
| Shares outstanding | 26,126,640 | 26,101,992 |
EX-99.2
Exhibit 99.2
GORMAN-RUPP ANNOUNCES 9.7% INCREASE IN QUARTERLY CASH DIVIDEND AND NEW SHARE
REPURCHASE AUTHORIZATION
Mansfield, Ohio – October 29, 2021 – The Board of Directors of The Gorman-Rupp Company (NYSE: GRC) has declared a quarterly cash dividend of $0.17 per share on the common shares of the Company, payable December 10, 2021, to shareholders of record November 15, 2021. The cash dividend will represent a 9.7% increase over the $0.155 dividend per share paid in the previous quarter. This is the 49^th^ consecutive year of increased dividends, which positions Gorman-Rupp in the top 50 of all U.S. public companies with respect to number of years of increased dividend payments.
In addition, the Company announced that its Board of Directors has authorized a share repurchase program of up to $50.0 million of the Company’s common stock. Shares may be repurchased from time to time by the Company through a variety of authorized methods. The actual number of shares repurchased will depend on prevailing market conditions, alternative uses of capital and other factors, and will be determined at management’s discretion. The Company is not obligated to make any purchases under the program, and the program may be suspended or discontinued at any time. The authorization does not have an expiration date.
Jeffrey S. Gorman, Chairman, and CEO commented, “Gorman-Rupp is extremely proud to continue our long history of dividend payments and increased annual dividends. The dividend increase along with the share repurchase program are the continuation of our history of returning capital to shareholders and reflect the strength of our balance sheet and our ongoing confidence in the long-term outlook for Gorman-Rupp.”
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: company specific risk factors including (1) loss of key personnel; (2) intellectual property security; (3) acquisition performance and integration; (4) impairment in the value of intangible assets, including goodwill; (5) defined benefit pension plan settlement expense; (6) family ownership of common equity; and general risk factors including (7) 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; (8) highly competitive markets; (9) availability and costs of raw materials; (10) cyber security threats; (11) compliance with, and costs related to, a variety of import and export laws and regulations; (12) environmental compliance costs and liabilities; (13) exposure to fluctuations in foreign currency exchange rates; (14) conditions in foreign countries in which The Gorman-Rupp Company conducts business; (15) changes in our tax rates and exposure to additional income tax liabilities; 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.
Brigette A. Burnell
Corporate Secretary
The Gorman-Rupp Company
Telephone (419) 755-1246
NYSE: GRC
For additional information, contact James C. Kerr, Chief Financial Officer, Telephone (419) 755-1548.