MANSFIELD — The Gorman-Rupp Company (NYSE: GRC) has issued the following report on financial results for the fourth quarter and the calendar year that ended Dec. 31, 2024.
“We are pleased that we achieved an improvement in gross margin and operating income in 2024, as well as a 28% increase in adjusted earnings per share for the year,” said Scott A. King, President and CEO.
“We also reduced our debt by $43 million, which along with our refinancing in the second quarter of 2024, resulted in a significant reduction in interest expense and positions us well to further reduce our debt and interest expense going forward.”
4th quarter 2024 highlights
- Net sales of $162.7 million increased 1.3%, or $2.1 million, compared to the fourth quarter of 2023
- Fourth quarter net income was $11.0 million, or $0.42 per share, compared to net income of $9.0 million, or $0.34 per share, for the fourth quarter of 2023
- Interest expense decreased due to debt refinancing in the second quarter of 2024 and reduced debt levels
- Incoming orders for the fourth quarter of 2024 increased 15.8%, compared to the fourth quarter of 2023
Net sales for the fourth quarter of 2024 were $162.7 million compared to net sales of $160.6 million for the fourth quarter of 2023, an increase of 1.3% or $2.1 million.
The increase in sales was due primarily to the impact of pricing increases taken in the first quarter of 2024.
“In addition to our strong operating results, we were proud to increase our dividend for the 52nd consecutive year, and in January of 2025 we declared our 300th consecutive quarterly dividend, marking 75 years of continued dividends,” King said.
“As we begin 2025 our outlook remains positive. While sales were less than expected in 2024, we continued to see strong incoming orders during the year and ended the year with healthy backlog to begin the new year.”
Sales increased $6.6 million in the municipal market and $2.2 million in the repair market due to domestic flood control and wastewater projects related to increased infrastructure investment. Sales also increased $2.0 million in the agriculture market.
These increases were offset by a sales decrease of $5.8 million in the fire suppression market primarily resulting from backlog returning to more normal levels.
Fire suppression sales in 2023 were up significantly compared to 2022 as the Company was working to return backlog and lead times to normal levels, which resulted in higher 2023 sales and a tougher year-over-year comparison for 2024.
Sales for the fourth quarter of 2024 also decreased $0.9 million in the petroleum market, $0.8 million in the construction market, $0.7 million in the industrial market, and $0.5 million in the OEM market.
“As demonstrated by our increase in municipal sales in 2024, we remain well positioned to continue to benefit from infrastructure spending and the strong demand for flood control and storm water management,” King said. “We remain focused on delivering long-term profitable growth.”
Gross profit was $49.2 million for the fourth quarter of 2024, resulting in gross margin of 30.2%, compared to gross profit of $50.9 million and gross margin of 31.7% for the same period in 2023.
The 150 basis point decrease in gross margin included a 220 basis point increase in labor and overhead expenses driven by increased healthcare costs.
The increase in labor and overhead expenses was partially offset by a 70 basis point improvement in cost of material, which consisted of a 140 basis point improvement from the realization of selling price increases partially offset by an increase in LIFO2 expense of 70 basis points.
Selling, general and administrative (“SG&A”) expenses were $25.0 million and 15.4% of net sales for the fourth quarter of 2024 compared to $26.0 million and 16.2% of net sales for the same period in 2023.
Operating income was $21.1 million for the fourth quarter of 2024, resulting in an operating margin of 13.0%, compared to operating income of $21.8 million and operating margin of 13.6% for the same period in 2023. Operating margin in the fourth quarter of 2024 decreased 60 basis points compared to the same period in 2023 primarily due to increased labor and overhead expenses, partially offset by decreased SG&A expenses.
Interest expense was $6.7 million for the fourth quarter of 2024 compared to $10.1 million for the same period in 2023. The decrease in interest expense was due primarily to a series of refinancing transactions the Company completed on May 31, 2024 as well as a decrease in outstanding debt.
Net income was $11.0 million, or $0.42 per share, for the fourth quarter of 2024 compared to net income of $9.0 million, or $0.34 per share, in the fourth quarter of 2023.
Adjusted EBITDA1 was $29.0 million and 17.8% of sales for the fourth quarter of 2024 compared to $29.1 million and 18.2% of sales for the fourth quarter of 2023.
2024 Highlights
- Net sales of $659.7 million increased 0.1%, or $0.2 million, compared to 2023
- Net income was $40.1 million, or $1.53 per share, compared to net income of $35.0 million, or $1.34 per share, in 2023
- Adjusted earnings per share1 for 2024 and 2023 were $1.75 and $1.37, respectively
- Adjusted EBITDA1 of $124.6 million for 2024 increased $2.9 million, or 2.4%, from $121.7 million in 2023
- Total debt decreased $43.0 million, further improving leverage
Net sales for 2024 were $659.7 million compared to net sales of $659.5 million for 2023, an increase of 0.1% or $0.2 million. The increase in sales was due primarily to the impact of pricing increases taken in the first quarter of 2024.
Sales increased $21.5 million in the municipal market and $5.3 million in the repair market due to domestic flood control and wastewater projects related to increased infrastructure investment, $2.6 million in the OEM market primarily related to computer cooling, and $1 million in the petroleum market primarily driven by increased international refueling applications.
Offsetting these increases was a decrease of $22.1 million in the fire suppression market primarily resulting from backlog returning to more normal levels.
Fire suppression sales in 2023 were up significantly compared to 2022 as the Company was working to return backlog and lead times to normal levels, which resulted in higher 2023 sales and a tougher year-over-year comparison for 2024.
Fire suppression incoming orders for 2024 were up 1.5% when compared to 2023. Sales in 2024 also decreased $5.5 million in the industrial market and $1.8 million in the construction market, and $0.8 million in the agriculture market.
Gross profit was $204.3 million for 2024, resulting in gross margin of 31.0%, compared to gross profit of $196.3 million and gross margin of 29.8% in 2023.
The 120 basis point increase in gross margin included a 200 basis point improvement in cost of material, which consisted of a reduction in LIFO2 expense of 30 basis points, a favorable impact of 20 basis points related to the amortization of acquired Fill-Rite customer backlog which occurred in 2023 and did not reoccur in 2024, and a 150 basis point improvement from the realization of selling price increases.
These improvements were partially offset by an 80 basis point increase in labor and overhead expenses as a percent of sales driven by increased healthcare costs.
SG&A expenses were $100.5 million and 15.2% of net sales in 2024 compared to $96.7 million and 14.7% of net sales in 2023. SG&A expenses for 2024 included $1.3 million of refinancing transaction costs and a $1.1 million gain on the sale of a fixed asset. SG&A expenses increased due to healthcare costs, as well as increased selling activity.
Operating income was $91.4 million for 2024, resulting in an operating margin of 13.9%, compared to operating income of $87.0 million and operating margin of 13.2% in 2023. Operating margin in 2024 increased 70 basis points compared to the same period in 2023 primarily due to improved cost of material, partially offset by increased labor, overhead, and SG&A expenses.
Interest expense was $33.6 million for 2024 compared to $41.3 million in 2023. The decrease in interest expense was due primarily to a series of debt refinancing transactions the Company completed on May 31, 2024. In addition to reducing interest expense, the refinancing also extended and staggered the Company’s debt maturities.
The Company upsized, amended, and extended the existing Senior Term Loan Facility from $350.0 million to $370.0 million, amended and extended the existing $100.0 million revolving Credit Facility, and issued $30.0 million in new 6.40% Senior Secured Notes.
The proceeds from these transactions, as well as $10.0 million of cash on hand, were used to retire the Company’s $90.0 million unsecured Subordinated Credit Facility.
Other income (expense), net was $7.3 million of expense for 2024 compared to $1.8 million of expense in 2023. Other expense for 2024 included a $4.4 million write-off of unamortized previously deferred debt financing fees and a $1.8 million prepayment fee related to the early retirement of the unsecured Subordinated Credit Facility.
Net income was $40.1 million, or $1.53 per share, for 2024 compared to net income of $35.0 million, or $1.34 per share, for 2023. Adjusted earnings per share1 for 2024 were $1.75 per share compared to $1.37 per share for 2023.
Adjusted EBITDA1 was $124.6 million and 18.9% of net sales for 2024 compared to $121.7 million and 18.5% of net sales for 2023.
The Company’s backlog of orders was $206.0 million at December 31, 2024 compared to $218.1 million at December 31, 2023. Incoming orders for 2024 were $659.3 million, or an increase of 6.8%, compared to 2023.
Net cash provided by operating activities for 2024 was $69.8 million compared to $98.2 million for 2023 with the decrease driven primarily by the timing of deferred revenue and customer deposits and accrued liabilities and expenses.
Capital expenditures for 2024 were $14.3 million and consisted primarily of machinery and equipment. Capital expenditures for the full-year 2025 are presently planned to be approximately $20.0 million. Total debt decreased $43.0 million during 2024.
“I appreciate the Gorman-Rupp team’s continued efforts to contribute to another successful year, and I am grateful to our customers, suppliers, and shareholders for their on-going support,” King said.
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 suppression, heating, ventilating and air conditioning (HVAC), military and other liquid-handling applications.