The Gorman-Rupp Company (NYSE MKT: GRC) reports financial results for
the fourth quarter and year ended December 31, 2015.
Net sales during the fourth quarter were $98.8 million compared to a
record $105.0 million during the fourth quarter of 2014. Domestic sales
decreased 10.6% or $7.4 million while international sales increased 3.7%
or $1.2 million between these periods. Sales in water end markets
decreased 4.4% or $3.3 million and sales in non-water end markets
decreased 9.4% or $2.9 million during the quarter. Of the total $6.2
million decrease in net sales in the fourth quarter, $2.0 million or
32.5% of the decrease was due to unfavorable foreign currency
translation. Due to fewer shipping days and normal seasonality in the
Company’s weather-related markets, the fourth quarter typically is the
lowest volume quarter of most years.
The fourth quarter activity in water end market sales included $1.4
million of increased sales in the fire protection market due primarily
to higher domestic sales. Offsetting this increase were decreased sales
of $3.5 million in the construction market due principally to the severe
global decline in drilling of oil and gas and $1.3 million in the
agricultural market due to unseasonably wet weather conditions in most
locations domestically and lower farm products pricing and farm income.
Decreased sales in the non-water end markets during the fourth quarter
of 2015 were due primarily to $3.5 million of lower sales in the
industrial market also largely attributable to the downturn in oil and
gas. This decrease was partially offset by increased sales in the OEM
market related to power generation equipment.
Net sales for the year ended December 31, 2015 were $406.2 million, the
second highest sales year in the Company’s history, compared to a record
$434.9 million during the same period in 2014, a decrease of 6.6% or
$28.7 million, principally due to lower domestic sales. Of the total
decrease in net sales during the year ended December 31, 2015, $8.0
million or 27.9% was due to unfavorable currency translation.
Sales in water end markets decreased 4.4% for the year or $13.3 million.
Activity in the water end markets included $13.3 million of increased
sales in the fire protection market principally from higher
international sales. This increase was offset by $15.0 million of lower
sales in the construction market due primarily to the severe global
decline in new oil and gas drilling which affected both domestic and
international sales. Despite increased shipments of $23.4 million
related to the large New Orleans Permanent Canal Closures and Pumps
(“PCCP”) project, sales in the municipal market decreased $7.1 million
overall driven by reduced demand for large volume pumps for wastewater
and water supply projects. Also, sales decreased $6.4 million in the
agricultural market primarily due to unseasonably wet weather conditions
in most locations domestically and lower farm products pricing and farm
income. Sales decreased 11.8% or $15.4 million in non-water markets due
to $8.4 million of lower sales in the OEM market primarily related to
less power generation equipment and pumps for military applications.
Also, sales in the industrial market decreased $6.6 million largely due
to the downturn in oil and gas.
Due to recent increased employee retirements and a related surge in lump
sum pension payments, the Company recorded a U.S. GAAP-required $0.4
million non-cash pension settlement charge during the fourth quarter of
2015 relating to its defined benefit pension plan. The Company recorded
a total of $3.8 million in non-cash pension settlement charges in 2015.
The rate of retirements was less in 2014 and settlement charges were not
required.
Gross profit was $21.2 million for the fourth quarter of 2015, resulting
in gross margin of 21.5% compared to 23.8% for the same period in 2014.
Operating income was $7.0 million, resulting in operating margin of 7.0%
for the fourth quarter of 2015 compared to 10.6% for the same period in
2014. The quarter’s gross profit and operating income margin declines
were due principally to the sales volume decrease from 2014 to 2015,
sales mix changes due to increased percentages of shipments of lower
margin engine and motor equipped systems, and the non-cash pension
settlement charge described above of approximately 30 and 50 basis
points, respectively. Net income was $5.3 million during the fourth
quarter of 2015 compared to $7.9 million in the fourth quarter of 2014
and earnings per share were $0.21 and $0.30 for the respective periods.
The non-cash pension settlement charge described above negatively
impacted the current quarter earnings per share by $0.01 per share.
Gross profit was $92.6 million for the year ended December 31, 2015,
resulting in gross margin of 22.8% compared to 24.7% for 2014. Operating
income was $36.4 million, resulting in operating margin of 9.0% for the
year compared to 12.3% for 2014. The 2015 gross profit and operating
income margin declines were due principally to the sales volume decrease
from the record level in 2014, sales mix changes due to increased
percentages of shipments of lower margin engine and motor equipped
systems, and the non-cash pension settlement charge described above of
approximately 60 and 90 basis points, respectively. Net income was $25.1
million during the year ended December 31, 2015 compared to a record
$36.1 million for 2014 and earnings per share were $0.96 and $1.38 for
the respective years. The non-cash pension settlement charge described
above negatively impacted 2015 earnings per share by $0.10 per share.
The Company’s backlog of orders was $117.1 million at December 31, 2015
compared to $160.7 million a year ago and $138.8 million at September
30, 2015. The decrease in backlog from a year ago is due primarily to
approximately $37.7 million of shipments related to the PCCP project in
2015. Approximately $10.5 million of orders related to the PCCP project
remain in the December 31, 2015 backlog total and are scheduled to ship
during the first three quarters of 2016. The remainder of the decrease
is a result of lower order rates in 2015 due to unfavorable domestic
weather conditions and global impacts relating to oil pricing and
production.
The Company generated $40.7 million of operating cash flow during 2015
and continues to have a strong and flexible balance sheet. Cash and cash
equivalents totaled $23.7 million at December 31, 2015 and working
capital increased $9.6 million from December 31, 2014 to $145.9 million
at December 31, 2015. Operational reductions in inventories of $11.9
million were equally offset by the Company’s payoff of its $12.0 million
of short-term debt, and most of the remaining working capital increase
was due to a surge in shipments during December, about one-half of which
related to delayed November shipments. Capital additions for 2015 were
reduced from original expectations of $18-$20 million and the Company
invested a total of $9.2 million in buildings, building improvements,
machinery and equipment. Capital additions for 2016 are presently
planned to be in the range of $13-$15 million and are expected to be
financed through internally-generated funds. As expected, the Company
ended the year with no bank debt.
Jeffrey S. Gorman, President and CEO commented, “Although revenue
decreased throughout the year, the Company modestly exceeded reduced
expectations in spite of domestic and global uncertainties, including
extensive currency translation impacts and the non-cash pension
settlement adjustment. The turmoil related to the global price of oil
and the strong U.S. dollar, and extended unfavorable domestic weather
conditions, have caused extensive disruptions for our customers and most
of the diverse markets we serve. While we continue to expect the
near-term including most of 2016 to be similarly challenging, our
outlook for the long-term remains positive as we believe that our
strong, proven business model will drive long-term sales and earnings
growth when global business conditions improve.”
Safe Harbor Statement
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 interest rates,
changes in foreign exchange rates, commodity pricing and capital and
consumer spending and volatility in domestic oil production activity;
(2) competitive factors and competitor responses to initiatives of The
Gorman-Rupp Company; (3) successful development and market introductions
of anticipated new products; (4) stability of government laws and
regulations, including taxes; (5) stable governments and business
conditions in emerging economies; (6) successful penetration of emerging
economies; (7) unforeseen delays or disruptions in the PCCP project,
including any further revisions to the timing of shipments for the
project; (8) continuation of the favorable environment to make
acquisitions, domestic and foreign, including regulatory requirements
and market values of potential candidates and our ability to
successfully integrate and realize the anticipated benefits of completed
acquisitions; and (9) 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.
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The Gorman-Rupp Company and Subsidiaries
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Condensed Consolidated Statements of Income (Unaudited)
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(in thousands of dollars, except per share data)
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Three Months Ended December 31,
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Year Ended December 31,
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2015
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2014
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2015
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2014
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Net sales
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$
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98,796
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$
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104,974
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$
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406,150
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$
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434,925
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Cost of products sold
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77,584
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79,939
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313,570
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327,366
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Gross profit
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21,212
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25,035
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92,580
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107,559
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Selling, general and administrative expenses
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14,256
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13,864
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56,189
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54,254
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Operating income
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6,956
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11,171
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36,391
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53,305
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Other (expense) income - net
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484
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222
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875
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429
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Income before income taxes
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7,440
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11,393
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37,266
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53,734
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Income taxes
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2,128
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3,505
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12,157
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17,593
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Net income
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$
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5,312
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$
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7,888
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$
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25,109
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$
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36,141
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Earnings per share
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$
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0.21
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$
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0.30
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$
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0.96
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$
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1.38
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The Gorman-Rupp Company and Subsidiaries
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Condensed Consolidated Balance Sheets (Unaudited)
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(in thousands of dollars)
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December 31,
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December 31,
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2015
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2014
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Assets
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Cash and cash equivalents
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$
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23,724
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$
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24,491
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Accounts receivable - net
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76,758
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70,734
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Inventories
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82,818
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94,760
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Deferred income taxes and other current assets
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6,091
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10,724
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Total current assets
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189,391
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200,709
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Property, plant and equipment - net
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129,887
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133,964
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Deferred income taxes and other
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3,860
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6,313
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Goodwill and other intangible assets
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41,063
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39,918
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Total assets
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$
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364,201
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$
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380,904
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Liabilities and shareholders' equity
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Accounts payable
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$
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14,529
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$
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17,908
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Short-term debt
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-
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12,000
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Accrued liabilities and expenses
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28,931
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34,438
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Total current liabilities
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43,460
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64,346
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Pension benefits
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9,309
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4,496
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Postretirement benefits
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20,784
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21,297
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Deferred and other income taxes
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3,627
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8,798
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Total liabilities
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77,180
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98,937
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Shareholders' equity
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287,021
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281,967
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Total liabilities and shareholders' equity
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$
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364,201
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$
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380,904
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Shares outstanding
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26,083,623
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26,260,543
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View source version on businesswire.com: http://www.businesswire.com/news/home/20160205005119/en/
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