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12:15 | 09.02.2018
Gorman-Rupp Reports Fourth Quarter and Full-Year 2017 Financial Results
The Gorman-Rupp Company (NYSE: GRC) reports financial results for the
fourth quarter and year ended December 31, 2017.
Fourth Quarter 2017 Highlights
Current quarter earnings per share were $0.31 compared to $0.19 per
share for the fourth quarter of 2016
Fourth quarter of 2016 included a non-cash impairment charge of
$0.05 per share
Net sales increased 0.8% or $0.7 million. Excluding the PCCP project,
net sales increased 1.3% or $1.2 million
Incoming orders increased 6% compared to the fourth quarter of 2016
The U.S. Tax Cuts and Jobs Act is expected to have a favorable impact
on our future income tax rate
Net sales for the fourth quarter of 2017 were $94.9 million compared to
$94.2 million for the fourth quarter of 2016, an increase of 0.8% or
$0.7 million. Excluding sales from the New Orleans Permanent Canal
Closures & Pumps (“PCCP”) project of $0.5 million for the fourth quarter
of 2016, net sales increased 1.3% or $1.2 million. Domestic sales,
excluding PCCP, decreased 0.2% or $0.1 million while international sales
increased 4.0% or $1.3 million compared to the same period in 2016.
Sales in our larger water markets, excluding PCCP, decreased 1.2% or
$0.8 million in the fourth quarter of 2017 compared to the fourth
quarter of 2016. Sales in the construction market increased $3.2 million
due primarily to sales to rental market customers related to increased
oil and gas drilling activity, and sales in the fire protection market
increased $1.1 million due principally to domestic shipments. These
increases were offset by decreased sales in the municipal market of $4.2
million primarily driven by decreased shipments attributable to flood
control projects and large volume wastewater applications. In addition,
sales in the agriculture market decreased $0.8 million and sales of
repair parts decreased $0.1 million.
Sales in our non-water markets increased 7.3% or $2.0 million in the
fourth quarter of 2017 compared to the fourth quarter of 2016. Sales in
the industrial market increased $2.3 million principally attributable to
increased capital spending related to oil and gas drilling activity, and
sales in the OEM market increased $0.3 million. Partially offsetting
these increases were decreased sales in the petroleum market of $0.6
million.
Gross profit was $25.2 million for the fourth quarter of 2017, resulting
in gross margin of 26.5%, compared to gross profit of $23.2 million and
gross margin of 24.7% for the same period in 2016. The 180 basis point
increase in gross margin was largely driven by favorable sales mix and
lower manufacturing overhead expenses.
Selling, general and administrative expense (“SG&A”) was $13.7 million
and 14.4% of net sales for the fourth quarter of 2017 compared to $14.3
million and 15.2% of net sales for the same period in 2016. SG&A as a
percentage of sales improved 80 basis points due principally to a focus
on cost control and higher sales volume.
Operating income was $11.5 million, resulting in operating margin of
12.1% for the fourth quarter of 2017, compared to operating income of
$7.1 million and operating margin of 7.5% for the same period in 2016.
The fourth quarter of 2016 included a non-cash impairment charge of $1.8
million or 190 basis points. Excluding the non-cash impairment charge,
operating margin improved $2.6 million or 270 basis points due
principally to favorable sales mix and lower manufacturing overhead and
SG&A expenses.
Net income was $7.9 million for the fourth quarter of 2017 compared to
$5.1 million in the fourth quarter of 2016, and earnings per share were
$0.31 and $0.19 for the respective periods. A non-cash goodwill
impairment charge decreased the fourth quarter of 2016 earnings by $0.05
per share.
Net sales for the year ended December 31, 2017 were $379.4 million
compared to $382.1 million for 2016, a decrease of 0.7% or $2.7 million.
Excluding sales from the PCCP project of $0.7 million in 2017 and $9.9
million in 2016, net sales in 2017 increased 1.8% or $6.5 million.
Domestic sales, excluding PCCP, increased $0.1 million while
international sales increased 4.9% or $6.4 million.
Sales in our larger water markets, excluding PCCP, decreased 0.4% or
$1.1 million in 2017 compared to 2016. Sales in the construction market
increased $10.4 million due primarily to sales to rental market
customers, and sales of repair parts increased $2.4 million. These
increases were offset by decreased sales in the municipal market of $7.3
million principally driven by decreased shipments attributable to flood
control projects. In addition, sales in the fire protection market
decreased $4.2 million principally due to market softness in the Middle
East, and sales in the agriculture market decreased $2.4 million
principally due to low farm income and competitive pricing pressure.
Sales in our non-water markets increased 6.9% or $7.6 million in 2017
compared to 2016. Sales increased $7.7 million in the industrial market
driven by an increase in oil and gas drilling activity. Sales in the OEM
market increased $2.5 million primarily related to power generation
equipment and new customers associated with transportation and
alternative energy applications. These increases were partially offset
by decreased shipments of $2.6 million in the petroleum market driven by
challenging market conditions.
Gross profit was $98.7 million for 2017, resulting in gross margin of
26.0%, compared to gross profit of $92.0 million and gross margin of
24.1% for 2016. Gross margin included a non-cash pension settlement
charge of $2.6 million or 70 basis points in 2017 which did not occur in
2016. Excluding the non-cash pension settlement charge, gross margin
increased by 260 basis points due principally to favorable sales mix.
SG&A was $56.8 million and 15.0% of net sales for 2017 compared to $54.5
million and 14.3% of net sales for 2016. SG&A included a non-cash
pension settlement charge of $1.4 million or 40 basis points in 2017
which did not occur last year. SG&A included a gain on the sale of
property, plant and equipment of $1.0 million or 30 basis points in
2016. Excluding these items, SG&A decreased slightly compared to last
year and as a percentage of sales was flat.
Operating income was $37.9 million, resulting in operating margin of
10.0% for 2017, compared to operating income of $35.7 million and
operating margin of 9.3% for 2016. In 2017, operating income included
non-cash impairment charges of $4.1 million or 100 basis points and a
non-cash pension settlement charge of $4.0 million or 110 basis points.
In 2016, operating income included a non-cash impairment charge of $1.8
million or 50 basis points and a gain on the sale of property, plant and
equipment of $0.6 million or 20 basis points. Excluding these items,
operating income improved $9.1 million or 250 basis points due
principally to improved gross margin.
Net income was $26.6 million for 2017 compared to $24.9 million in 2016,
and earnings per share were $1.02 and $0.95 for the respective periods.
Earnings per share for 2017 included non-cash impairment charges of
$0.10 per share and a non-cash pension settlement charge of $0.10 per
share. Earnings per share for 2016 included a non-cash impairment charge
of $0.05 per share.
The Company’s backlog of orders was $114.0 million at December 31, 2017
compared to $98.8 million at December 31, 2016, an increase of 15.4%.
The increase in backlog was primarily due to increases in the fire
protection, municipal and construction markets principally driven by
improved economic conditions both domestically and internationally.
Capital expenditures for 2017 of $7.8 million consisted primarily of
machinery and equipment. Capital additions for 2018 are presently
planned to be in the range of $10-$15 million primarily for machinery
and equipment purchases, and are expected to be financed through
internally-generated funds.
On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Tax Act”) was
enacted. The transitional impacts of the Tax Act resulted in a
provisional net charge of $0.4 million for the fourth quarter of 2017,
comprised of an estimated repatriation tax charge of $2.0 million (which
includes U.S. repatriation taxes and foreign withholding taxes) and a
net deferred tax benefit of approximately $1.6 million. The provisional
estimates are based on the Company’s initial analysis of the Tax Act.
Given the significant complexity of the Tax Act, anticipated guidance
from the U. S. Treasury about implementing the Tax Act, and the
potential for additional guidance from the Securities and Exchange
Commission or the Financial Accounting Standards Board related to the
Tax Act, these estimates may be adjusted during 2018. The Company’s
preliminary estimate of its future effective tax rate attributable to
the Tax Act is between 23% and 26%. The Company continues to evaluate
the impact of the Tax Act, and will update its estimates as appropriate.
Jeffrey S. Gorman, President and CEO commented, “We finished 2017 with
strong fourth quarter results. A continued focus on production
efficiencies and cost control has delivered another quarter of improved
gross and operating margins. While we continue to experience softness in
the agriculture and certain oil and gas driven markets, we enter 2018
with a stronger backlog and sales momentum in many of our other markets.
Increased emphasis on infrastructure improvements at both the federal
and state levels, along with the newly enacted tax legislation, could be
additional positive factors over the next several years. As we celebrate
our 85th anniversary in 2018, we would like to thank our customers,
associates and shareholders for their continued support.”
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 protection, heating,
ventilating and air conditioning (HVAC), military and other
liquid-handling applications.
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; (2) highly competitive
markets; (3) availability of raw materials; (4) loss of key management;
(5) cyber security threats; (6) acquisition performance and integration;
(7) compliance with, and costs related to, a variety of import and
export laws and regulations; (8) environmental compliance costs and
liabilities; (9) exposure to fluctuations in foreign currency exchange
rates; (10) conditions in foreign countries in which The Gorman-Rupp
Company conducts business; (11) changes in our tax rates and exposure to
additional income tax liabilities; (12) impairment in the value of
intangible assets, including goodwill; (13) defined benefit pension plan
settlement expense; (14) family ownership of common equity; and
(15) 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. BurnellCorporate SecretaryThe Gorman-Rupp CompanyTelephone
(419) 755-1246NYSE: GRC
For additional information, contact James C. Kerr, Chief Financial
Officer, Telephone (419) 755-1548.
The Gorman-Rupp Company
Condensed Consolidated Statements of Income (Unaudited)
(thousands of dollars, except per share data)
Three Months Ended December 31,
Year Ended December 31,
2017
2016
2017
2016
Net sales
$
94,938
$
94,203
$
379,389
$
382,071
Cost of products sold
69,732
70,985
280,644
290,046
Gross profit
25,206
23,218
98,745
92,025
Selling, general and administrative expenses
13,682
14,338
56,789
54,528
Impairment of goodwill and other intangible assets
–
1,800
4,098
1,800
Operating income
11,524
7,080
37,858
35,697
Other income, net
770
109
1,520
785
Income before income taxes
12,294
7,189
39,378
36,482
Income taxes
4,354
2,135
12,823
11,599
Net income
$
7,940
$
5,054
$
26,555
$
24,883
Earnings per share
$
0.31
$
0.19
$
1.02
$
0.95
The Gorman-Rupp Company
Condensed Consolidated Balance Sheets (Unaudited)
(thousands of dollars)
December 31,
December 31,
2017
2016
Assets
Cash and cash equivalents
$
79,680
$
57,604
Accounts receivable, net
67,369
71,424
Inventories, net
74,967
69,049
Prepaid and other
5,918
5,823
Total current assets
227,934
203,900
Property, plant and equipment, net
117,071
122,067
Other assets
7,779
7,769
Prepaid pension benefits
4,313
6,211
Goodwill and other intangible assets, net
37,918
42,871
Total assets
$
395,015
$
382,818
Liabilities and shareholders’ equity
Accounts payable
$
15,798
$
16,306
Accrued liabilities and expenses
29,898
33,046
Total current liabilities
45,696
49,352
Postretirement benefits
15,737
20,709
Other long-term liabilities
8,087
9,869
Total liabilities
69,520
79,930
Shareholders’ equity
325,495
302,888
Total liabilities and shareholders’ equity
$
395,015
$
382,818
Shares outstanding
26,106,623
26,093,123
View source version on businesswire.com: http://www.businesswire.com/news/home/20180209005044/en/
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