Gorman-Rupp Reports Third Quarter 2015 Financial Results and Announces Cash Dividend Increase
The Gorman-Rupp Company (NYSE MKT: GRC) reports financial results for
the third quarter and nine months ended September 30, 2015.
Net sales during the third quarter were $104.2 million compared to a
record $110.2 million during the third quarter of 2014. Domestic sales
decreased 7.9% or $6.2 million while international sales were comparable
between periods as they increased $237,000. Sales in the water end
markets decreased 2.9% or $2.2 million and sales in non-water end
markets decreased 10.8% or $3.8 million during the quarter. Of the total
$5.9 million decrease in net sales in the third quarter, $1.7 million or
28.8% of the decrease was due to unfavorable foreign currency
translation.
The third quarter activity in water end market sales included $5.3
million of increased sales in the fire protection market due to higher
international and domestic sales of $3.2 million and $2.1 million,
respectively. Despite increased shipments of $6.4 million related to the
Permanent Canal Closures and Pumps (“PCCP”) project in New Orleans,
sales in the municipal market decreased $3.9 million overall driven
primarily by reduced demand for large volume pumps for wastewater and
flood control projects. Also, sales in the construction market decreased
$3.5 million due primarily to the decline in drilling of oil and gas in
North America. Decreased sales in the non-water end markets during the
third quarter of 2015 were primarily due to $2.3 million of lower sales
in the industrial market also largely due to the downturn in oil and
gas. In addition, sales in the OEM market decreased $1.1 million
primarily due to lower sales of pumps for military applications.
Net sales for the nine months ended September 30, 2015 were $307.4
million compared to a record $330.0 million during the same period in
2014, a decrease of 6.8%. Domestic sales decreased 9.3% or $21.2 million
and international sales decreased 1.3% or $1.4 million. Of the total
decrease in net sales during the nine month period ended September 30,
2015, $6.0 million or 26.7% was due to unfavorable currency translation.
Sales in water end markets decreased 4.6% or $10.7 million. Activity in
the water end markets included $12.0 million of increased sales in the
fire protection market principally due to higher international sales.
This increase was offset by $11.6 million of lower sales in the
construction market due primarily to the global decline in new oil and
gas drilling which affected both domestic and international sales.
Despite increased shipments of $22.9 million related to the PCCP
project, sales in the municipal market decreased $7.7 million overall
driven by reduced demand for large volume pumps for wastewater and water
supply projects. Also, sales decreased $5.1 million in the agricultural
market primarily due to unseasonably wet weather conditions in most
locations domestically and lower commodity prices. Sales decreased 11.9%
or $11.9 million in non-water markets primarily due to lower sales in
the OEM market related to power generation equipment and pumps for
military applications and residential appliances.
Due to recent increased retirements and a related surge in lump sum
pension payments, the Company recorded a U.S. GAAP-required $1.9 million
non-cash pension settlement charge during the third quarter of 2015
relating to its defined benefit pension plan. The Company recorded a
total of $3.3 million in non-cash pension settlement charges during the
first nine months of 2015. We expect that a similar non-cash charge of
approximately $1.0 million will occur during the fourth quarter of this
year as additional expected retirements and related lump sum payments
are made. The rate of retirements was less in 2014 and in the first
quarter of 2015 and settlement charges were not required in those
periods.
Gross profit was $23.3 million for the third quarter of 2015, resulting
in gross margin of 22.4% compared to 25.5% for the same period in 2014.
Operating income was $8.9 million, resulting in operating margin of 8.6%
for the third quarter of 2015 compared to 12.7% for the same period in
2014. The quarter’s gross profit and operating income margin declines
were due principally to the sales volume decreases from 2014 to 2015,
sales mix changes due to increased shipments and percentages of
shipments of lower margin engine and motor equipped systems, and the
non-cash pension settlement charge described above of 120 and 180 basis
points, respectively. Net income was $5.9 million during the third
quarter of 2015 compared to $9.4 million in the third quarter of 2014
and earnings per share were $0.22 and $0.36 for the respective periods.
The non-cash pension settlement charge described above negatively
impacted current quarter earnings per share by $0.05 per share.
Gross profit was $71.4 million for the first nine months of 2015,
resulting in gross margin of 23.2% compared to 25.0% for the same period
in 2014. Operating income was $29.4 million, resulting in operating
margin of 9.6% for the first nine months of 2015 compared to 12.8% for
the same period in 2014. The nine months gross profit and operating
income margin declines were due principally to the sales volume
decreases from the records in 2014, sales mix changes due to increased
shipments and percentages of shipments of lower margin engine and motor
equipped systems, and the non-cash pension settlement charge described
above of 80 and 110 basis points, respectively. Net income was $19.8
million during the first nine months of 2015 compared to a record $28.3
million for 2014 and earnings per share were $0.75 and $1.08 for the
respective periods. The non-cash pension settlement charge described
above and currency translation negatively impacted the first nine months
of 2015 earnings per share by $0.09 and $0.02 per share, respectively.
The Company’s backlog of orders was $138.8 million at September 30, 2015
compared to $170.0 million a year ago and $160.7 million at December 31,
2014. The decrease in backlog from a year ago is due primarily to
approximately $37.5 million of shipments related to the PCCP project in
the last twelve months. Although not yet enough to offset our order
slowness compared to 2014, we did experience our highest amount of
incoming orders of the last four quarters in the current quarter ended
September 30, 2015. Approximately $17.8 million of orders related to the
PCCP project remain in the September 30, 2015 backlog total.
Approximately $8.1 million of the remaining PCCP project orders are
scheduled to ship during the fourth quarter of 2015 and $9.7 million of
related installation services are scheduled during the first three
quarters of 2016.
Cash and cash equivalents totaled $33.8 million and short-term bank debt
was $2.0 million at September 30, 2015, having been reduced by $12.0
million since December 31, 2014. The Company also assumed $2.0 million
in bank debt as part of the previously announced acquisition of Hydro+
SA and Hydro+ Rental SPRL (collectively the “Hydro companies”) in the
third quarter. The Company has generated $44.9 million of operating cash
flow year-to-date and working capital has risen $11.1 million from
December 31, 2014 to $147.4 million at September 30, 2015. Net capital
expenditures for the first nine months of 2015 of $6.6 million consisted
primarily of machinery and equipment, a new operations facility in
Ireland, and other building improvements. The Company also completed the
acquisition of the Hydro companies for $3.4 million. Capital
expenditures for the fourth quarter of 2015 are currently estimated to
be in the range of $2 to $4 million and are expected to be financed
through internally-generated funds.
Jeffrey S. Gorman, President and CEO commented, “During the third
quarter we continued to experience uphill sales challenges across a
number of the markets we serve compared to record prior year periods,
especially those markets with close relationships to oil, gas and
agriculture. However, fire protection pumps remained a positive source
of growth during the quarter as related building construction markets
improved and the Company gained market share, both in domestic and
international areas. While we expect the near-term, including most of
2016, to be challenging, our outlook for the long-term is positive based
on our proven track record of providing industry leading high quality
products, a long-standing commitment to customer service and a very
strong and flexible balance sheet. Our longer range outlook was enhanced
in September by our acquisition of the Hydro companies in Belgium which,
combined with our European operations based in The Netherlands, should
position us well in the recovery of the Euro-zone. We also are proud to
make the following announcement regarding our next dividend increase.”
At its October 22, 2015 meeting, the Board of Directors of the Company
declared a quarterly cash dividend of $0.105 per share on the common
stock of the Company, payable December 10, 2015, to shareholders of
record November 13, 2015. The cash dividend represents a 5.0% increase
over the dividend paid in the previous quarter. This marks the 263rd
consecutive dividend paid by The Gorman-Rupp Company and the 43rd
consecutive year of increased dividends paid to its shareholders.
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.
Brigette A. Burnell
Corporate Secretary
The Gorman-Rupp Company
Telephone
(419) 755-1246
NYSE MKT: GRC
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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 September 30,
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Nine Months Ended September 30,
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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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104,229
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$
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110,159
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$
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307,354
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$
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329,951
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Cost of products sold
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80,917
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82,093
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235,986
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247,427
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Gross profit
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23,312
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28,066
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71,368
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82,524
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Selling, general and
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administrative expenses
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14,363
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14,046
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41,933
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40,390
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Operating income
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8,949
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14,020
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29,435
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42,134
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Other (expense) income - net
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99
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261
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391
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207
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Income before income taxes
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9,048
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14,281
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29,826
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42,341
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Income taxes
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3,155
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4,842
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10,029
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14,088
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Net income
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$
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5,893
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$
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9,439
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$
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19,797
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$
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28,253
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Earnings per share
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$
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0.22
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$
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0.36
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$
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0.75
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$
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1.08
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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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September 30,
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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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33,822
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$
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24,491
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Accounts receivable - net
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74,544
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70,734
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Inventories
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82,790
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94,760
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Deferred income taxes and other current assets
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9,051
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10,724
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Total current assets
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200,207
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200,709
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Property, plant and equipment - net
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131,995
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133,964
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Deferred income taxes and other
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4,481
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6,313
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Goodwill and other intangible assets
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41,141
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39,918
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Total assets
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$
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377,824
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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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16,330
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$
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17,908
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Short-term debt
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1,970
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12,000
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Accrued liabilities and expenses
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34,488
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34,438
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Total current liabilities
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52,788
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64,346
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Pension benefits
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5,666
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4,496
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Postretirement benefits
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21,720
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21,297
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Deferred and other income taxes
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8,834
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8,798
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Total liabilities
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89,008
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98,937
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Shareholders' equity
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288,816
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281,967
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Total liabilities and shareholders' equity
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$
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377,824
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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/20151023005061/en/
Copyright Business Wire 2015