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.
The
Gorman-Rupp Company and Subsidiaries Condensed Consolidated
Statements of Income (Unaudited) (in thousands of dollars, except
per share data) Three Months Ended December 31, Year Ended
December 31, 2015 2014 2015 2014 Net sales $ 98,796 $
104,974 $ 406,150 $ 434,925 Cost of products sold 77,584
79,939 313,570 327,366 Gross profit
21,212 25,035 92,580 107,559
Selling, general and administrative
expenses
14,256 13,864 56,189 54,254
Operating income 6,956 11,171 36,391 53,305 Other (expense)
income - net 484 222 875 429
Income before income taxes 7,440 11,393 37,266 53,734 Income taxes
2,128 3,505 12,157 17,593 Net
income $ 5,312 $ 7,888 $ 25,109 $ 36,141 Earnings per share
$ 0.21 $ 0.30 $ 0.96 $ 1.38 The
Gorman-Rupp Company and Subsidiaries Condensed Consolidated Balance
Sheets (Unaudited) (in thousands of dollars) December 31,
December 31, 2015 2014
Assets
Cash and cash equivalents $ 23,724 $ 24,491 Accounts receivable -
net 76,758 70,734 Inventories 82,818 94,760 Deferred income taxes
and other current assets 6,091 10,724 Total
current assets 189,391 200,709 Property, plant and equipment
- net 129,887 133,964 Deferred income taxes and other 3,860
6,313 Goodwill and other intangible assets 41,063
39,918 Total assets $ 364,201 $ 380,904
Liabilities and
shareholders' equity
Accounts payable $ 14,529 $ 17,908 Short-term debt - 12,000 Accrued
liabilities and expenses 28,931 34,438 Total
current liabilities 43,460 64,346 Pension benefits 9,309
4,496 Postretirement benefits 20,784 21,297 Deferred
and other income taxes 3,627 8,798 Total
liabilities 77,180 98,937 Shareholders' equity
287,021 281,967 Total liabilities and shareholders'
equity $ 364,201 $ 380,904 Shares outstanding 26,083,623
26,260,543
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version on businesswire.com: http://www.businesswire.com/news/home/20160205005119/en/
The Gorman-Rupp CompanyBrigette A. Burnell, Corporate
Secretary419-755-1246orWayne L. Knabel, Chief Financial
Officer419-755-1397
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