Gorman-Rupp Company (NYSE: GRC) — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. The company designs and manufactures pumps and pump systems. Financial statements are unaudited.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Net sales | $89.0 million | $91.7 million |
| Gross profit / margin | $23.0 million / 25.9% | $23.4 million / 25.6% |
| Operating income / margin | $9.0 million / 10.1% | $8.6 million / 9.4% |
| Net income | $7.4 million | $5.5 million |
| Diluted earnings per share | $0.28 | $0.21 |
| Operating cash flow | $13.7 million | $8.4 million |
- Cash and cash equivalents were $116.5 million at March 31, 2021, up from $108.2 million at year-end 2020. The company reported no outstanding bank debt and $25.2 million available under bank lines after letters of credit.
- Current assets were $255.8 million and current liabilities $42.8 million. Total liabilities were $82.6 million.
- Capital expenditures were $0.9 million. Company-defined non-GAAP adjusted EBITDA was $12.3 million, versus $11.6 million; non-GAAP free cash flow was $7.4 million, versus $6.1 million.
- Quarterly dividends were $0.155 per share, up from $0.145 in Q1 2020.
Changes versus prior year
- Sales decreased 2.9%; domestic sales fell 4.2%, while international sales were approximately flat. Pumps and pump systems sales declined to $75.3 million from $78.3 million; repair parts and other sales rose to $13.7 million from $13.4 million.
- Water-market sales increased 0.9%, while non-water-market sales declined 11.7%, primarily reflecting pandemic-related impacts and weaker industrial, midstream oil and gas, and drilling demand.
- Gross margin improved 30 basis points, and operating margin rose 70 basis points, reflecting labor and overhead leverage, lower marketing and travel expenses, and expense management.
- Net income increased 35.4%. Q1 2020 included a $1.5 million noncash pension settlement charge and foreign-exchange losses; neither pension settlement losses nor those FX losses recurred in Q1 2021. Q1 2021 included $0.2 million of after-tax FX gains.
- Backlog was $125.5 million, up from $113.8 million a year earlier and $113.1 million at December 31, 2020. Incoming orders rose 1.3% year over year and 9.5% sequentially.
Outlook, risks, and other matters
- Management said first-half sales were expected to be more challenging than second-half sales, while describing the Q1 order trend and backlog as encouraging. The filing provides no specific sales or earnings guidance.
- Full-year 2021 capital expenditures were planned at $15–$20 million, expected to be funded with internally generated cash. Management expected to continue regular quarterly dividends, subject to board review and declaration.
- Management was monitoring longer supply-chain lead times and rising material costs and said it was taking mitigation measures. The duration and financial effects of COVID-19 remained uncertain; facilities and supply chain had remained operational.
- Other disclosed risks include competition, raw-material availability and costs, foreign-exchange exposure, pension costs, acquisitions, cybersecurity, environmental and regulatory matters, and impairment of goodwill or other intangibles. No material change in previously reported legal proceedings was disclosed. Management concluded disclosure controls were effective at March 31, 2021.
- Management noted that Q1 results are not necessarily indicative of full-year results. The 2020 income comparison also reflects unusual pension and foreign-exchange items.
Important facts for investors to verify
- Whether sales and orders recover as management expects, particularly across industrial, OEM, petroleum, and water-related markets.
- Whether supply-chain delays and rising material costs affect production, margins, or the ability to fulfill the $125.5 million backlog.
- The basis and comparability of company-defined non-GAAP adjusted EBITDA and free cash flow measures.
- Planned capital spending, dividend decisions, and continued liquidity and covenant compliance.
- The evolving financial effects of COVID-19, pension obligations, and foreign-exchange movements.