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Gorman-Rupp Reports Second Quarter 2017 Financial Results

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The Gorman-Rupp Company (NYSE:GRC) reports financial results for the
second quarter and six months ended June 30, 2017.

Second Quarter 2017 Highlights

  • Second quarter earnings per share were $0.30, up 20% or $0.05 per
    share, even with a non-cash pension settlement charge of $0.05 per
    share in the current quarter.
  • Net sales increased 1.7% or $1.6 million. Excluding the PCCP project,
    net sales increased 4.4% or $4.1 million.
  • Incoming orders were up 12% compared to the second quarter of 2016 and
    up 15% compared to the first quarter of 2017.

Net sales during the second quarter were $97.9 million compared to $96.3
million during the second quarter of 2016, an increase of 1.7% or $1.6
million. Excluding sales from the New Orleans Permanent Canal Closures &
Pumps ("PCCP") project of $2.5 million in the second quarter of 2016,
net sales increased 4.4% or $4.1 million. Domestic sales, excluding
PCCP, increased 3.0% or $1.9 million while international sales increased
7.1% or $2.2 million compared to the same period in 2016.

Sales in our larger water markets, excluding PCCP, increased 5.1% or
$3.2 million in the second quarter of 2017 compared to the second
quarter of 2016. Sales in the construction market increased $3.5 million
due primarily to sales to rental market customers related to the oil and
gas industry. Sales in the municipal market, excluding PCCP, increased a
total of $1.1 million primarily driven by increased shipments of large
volume wastewater pumps partially offset by lower shipments attributable
to other flood control projects. Sales of repair parts increased $0.3
million. These increases were partially offset by decreased sales of
$1.7 million in the fire protection market principally due to market
softness in the Middle East.

Sales increased 3.0% or $0.9 million in non-water markets during the
second quarter of 2017 compared to the second quarter of 2016. Sales in
the industrial and petroleum markets increased a combined $1.3 million
principally attributable to an increase in oil and gas drilling
activity. These increases were partially offset by decreased sales of
$0.4 million in the OEM market related to power generation equipment and
services.

Gross profit was $26.1 million for the second quarter of 2017, resulting
in gross margin of 26.7%, compared to gross profit of $23.2 million and
gross margin of 24.1% for the same period in 2016. Gross margin included
a non-cash pension settlement charge of $1.1 million or 120 basis points
in the second quarter of 2017 which did not occur in the second quarter
of 2016. Excluding the non-cash pension settlement charge, gross margin
increased by 380 basis points due principally to favorable sales mix,
labor efficiency, and lower warranty expense.

Selling, general and administrative expense ("SG&A") was $14.7 million
for the second quarter of 2017 and 15.0% of net sales, compared to $13.7
million and 14.2% of net sales for the same period in 2016. SG&A
included a non-cash pension settlement charge of $0.6 million or 60
basis points in the second quarter of 2017 which did not occur in the
second quarter of 2016.

Operating income was $11.5 million, resulting in operating margin of
11.7% for the second quarter of 2017, compared to operating income of
$9.5 million and operating margin of 9.9% for the same period in 2016.
Operating margin included a non-cash pension settlement charge of $1.7
million or 180 basis points in the second quarter of 2017 which did not
occur in the second quarter of 2016. Excluding the non-cash pension
settlement charge, operating margin increased by 360 basis points due
principally to favorable sales mix, and lower labor and overhead costs.

Net income was $7.8 million during the second quarter of 2017 compared
to $6.6 million in the second quarter of 2016, and earnings per share
were $0.30 and $0.25 for the respective periods. Earnings for the second
quarter of 2017 included a non-cash pension settlement charge of $0.05
per share.

Net sales for the six months ended June 30, 2017 were $190.5 million
compared to $196.5 million during the same period in 2016, a decrease of
3.1% or $6.0 million. Excluding sales from the PCCP project of $0.5
million in the first half of 2017 and $7.9 million for the same period
in 2016, net sales for the first half of 2017 increased 0.7% or $1.4
million. Domestic sales, excluding PCCP, decreased 1.4% or $1.7 million
while international sales increased 4.8% or $3.1 million compared to the
same period in 2016.

Sales in the first half of 2017 in our larger water markets, excluding
PCCP, increased 0.5% or $0.7 million compared to the first half of 2016.
Sales in the construction market increased $4.6 million due primarily to
sales to rental market customers, and sales of repair parts increased
$1.4 million. Sales in the fire protection market decreased $3.3 million
principally due to market softness domestically and in the Middle East,
and sales in the agriculture market decreased $1.3 million principally
due to low farm income and competitive pricing pressure. Sales in the
municipal market, excluding PCCP, decreased $0.7 million principally
driven by decreased shipments attributable to other flood control
projects.

Sales in the first half of 2017 in our non-water markets increased 1.1%
or $0.7 million compared to the first half of 2016. Sales increased $2.3
million in the industrial market driven by an increase in oil and gas
drilling activity, and sales in the OEM market increased $0.4 million
driven by infrastructure spending relating to gas production. These
increases were partially offset by decreased shipments of $2.0 million
in the petroleum market driven by challenging market conditions.

Gross profit was $47.3 million for the first six months of 2017,
resulting in gross margin of 24.9%, compared to gross profit of $46.1
million and gross margin of 23.5% for the same period in 2016. Gross
margin included a non-cash pension settlement charge of $2.2 million or
120 basis points in the first half of 2017 which did not occur in the
first half of 2016. Excluding the non-cash pension settlement charge,
gross margin increased by 260 basis points due principally to favorable
sales mix and labor efficiency. Offsetting the sales mix benefit was a
30 basis point increase in healthcare expenses.

Selling, general and administrative expense ("SG&A") was $28.9 million
for the first six months of 2017 and 15.2% of net sales, compared to
$27.4 million and 13.9% of net sales for the same period in 2016. SG&A
included a non-cash pension settlement charge of $1.2 million or 60
basis points in the first half of 2017 which did not occur in the first
half of 2016. The remaining increase in SG&A as a percentage of sales
was due principally to loss of leverage due to lower sales volume.

Operating income was $18.5 million, resulting in operating margin of
9.7% for the first six months of 2017, compared to operating income of
$18.8 million and operating margin of 9.5% for the same period in 2016.
Operating margin included a non-cash pension settlement charge of $3.4
million or 180 basis points in the first half of 2017 which did not
occur in the same period in 2016. Excluding the non-cash pension
settlement charge, operating margin increased by 200 basis points due
principally to favorable sales mix and lower labor costs.

Net income was $12.9 million during both the first six months of 2017
and the first six months of 2016, and earnings per share were $0.49 for
both respective periods. Earnings for the first half of 2017 included a
non-cash pension settlement charge of $0.09 per share.

The Company's backlog of orders was $103.6 million at June 30, 2017
compared to $107.7 million at June 30, 2016 and $98.8 million at
December 31, 2016. Excluding the PCCP project in 2017 and 2016, the
backlog at June 30, 2017 was down 1.6% as compared to June 30, 2016.

The Company generated $24.0 million of operating cash flow during the
first six months of 2017. Cash and cash equivalents totaled $67.0
million at June 30, 2017 and working capital increased $13.0 million
from December 31, 2016 to $167.5 million at June 30, 2017. The Company
had no bank debt as of June 30, 2017. Capital expenditures for the first
six months of 2017 of $3.3 million consisted primarily of machinery and
equipment. Capital expenditures for the full-year 2017 are presently
planned to be in the range of $8 to $10 million and are expected to be
financed through internally-generated funds.

Jeffrey S. Gorman, President and CEO commented, "We are pleased with our
second quarter performance, including continued sales growth in the
construction and industrial markets and higher gross and operating
margins. Our incoming orders also increased 15% over the first quarter,
most notably in the municipal and fire protection markets. Although some
soft spots remain, it is encouraging to see increases in capital
spending within the oil & gas markets as well as what we believe is the
bottoming of the agricultural market. We remain committed to long-term
growth both domestically and internationally along with an equitable
return for our shareholders."

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) impairment in the value of intangible
assets, including goodwill; (12) defined benefit pension plan settlement
expense; (13) family ownership of common equity; and (14) 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: 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 June 30, Six Months Ended June 30,
2017 2016 2017 2016
 
 
Net sales $97,872 $96,265 $190,475 $196,522
Cost of products sold 71,727 73,025 143,135 150,385
 
Gross profit 26,145 23,240 47,340 46,137
 
Selling, general and
administrative expenses 14,651 13,702 28,865 27,371
 
Operating income 11,494 9,538 18,475 18,766
 
Other income, net 313 94 652 125
 
Income before income taxes 11,807 9,632 19,127 18,891
Income taxes 3,959 3,012 6,214 5,989
 
Net income $7,848 $6,620 $12,913 $12,902
 
Earnings per share $0.30 $0.25 $0.49 $0.49
 
                     
The Gorman-Rupp Company
Condensed Consolidated Balance Sheets (Unaudited)
(thousands of dollars)
 
June 30, December 31,
2017 2016

Assets

Cash and cash equivalents $66,974 $57,604
Accounts receivable, net 72,884 71,424
Inventories, net 66,781 69,049
Prepaid and other 8,842 5,823
 
Total current assets 215,481 203,900
 
Property, plant and equipment, net 119,441 122,067
 
Other assets 8,206 7,769
 
Prepaid pension benefits 7,856 6,211
 
Goodwill and other intangible assets, net 42,482 42,871
 
Total assets $393,466 $382,818
 

Liabilities and shareholders' equity

Accounts payable $17,205 $16,306
Accrued liabilities and expenses 30,746 33,046
 
Total current liabilities 47,951 49,352
 
Postretirement benefits 21,055 20,709
 
Other long-term liabilities 10,070 9,869
 
Total liabilities 79,076 79,930
 
Shareholders' equity 314,390 302,888
 
Total liabilities and shareholders' equity $393,466 $382,818
 
Shares outstanding 26,099,123 26,093,123

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