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Gorman-Rupp Reports First Quarter 2018 Financial Results

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The Gorman-Rupp Company (NYSE:GRC) reports financial results for the
first quarter ended March 31, 2018.

First Quarter 2018 Highlights

  • First quarter earnings per share were $0.37 compared to $0.19 per
    share for the first quarter of 2017
    • First quarter of 2018 included a non-cash pension settlement
      charge of $0.01 per share
    • First quarter of 2017 included a non-cash pension settlement
      charge of $0.04 per share
    • Lower effective tax rate due primarily to the U.S. Tax Cuts and
      Job Act
  • Net sales increased 4.3% or $4.0 million
  • Incoming orders increased 21% compared to the first quarter of 2017

Net sales for the first quarter of 2018 were $96.6 million compared to
$92.6 million for the first quarter of 2017, an increase of 4.3% or $4.0
million. Domestic sales increased 8.9% or $5.3 million while
international sales decreased 3.8% or $1.3 million compared to the same
period in 2017.

Sales in our water markets increased 2.4% or $1.5 million in the first
quarter of 2018 compared to the first quarter of 2017. Sales in the
construction market increased $3.6 million due primarily to sales to
rental market customers related to increased oil and gas drilling
activity. In addition, sales of repair parts increased $1.4 million and
sales in the agriculture market increased $0.4 million. These increases
were partially offset by decreased sales in the municipal market of $3.0
million primarily driven by decreased shipments attributable to flood
control projects. Sales in the fire protection market decreased $1.0
million due principally to market softness in the Middle East, although
domestic shipments have increased driven by largely improved economic
factors.

Sales increased 8.6% or $2.5 million in non-water markets during the
first quarter of 2018 compared to the first quarter of 2017. Sales in
the industrial market increased $1.4 million and sales in the petroleum
market increased $1.1 million, with increases in both markets
principally attributable to increased capital spending related to oil
and gas drilling activity.

International sales were $32.2 million in the first quarter of 2018
compared to $33.4 million in the same period last year and represented
33% and 36% of total sales for the Company in each of the two periods,
respectively. International sales increased in the petroleum and repair
markets and continued to be softer in the fire protection market due
primarily to sluggish economic conditions in the Middle East.

Gross profit was $26.2 million for the first quarter of 2018, resulting
in gross margin of 27.1%, compared to gross profit of $22.3 million and
gross margin of 24.0% for the same period in 2017. The 310 basis point
increase in gross margin was largely driven by favorable sales mix.

Selling, general and administrative expenses ("SG&A") was $14.4 million
and 14.9% of net sales for the first quarter of 2018 compared to $13.6
million and 14.7% of net sales for the same period in 2017. SG&A as a
percentage of sales increased 20 basis due principally to personnel
costs.

Operating income was $11.9 million, resulting in operating margin of
12.3% for the first quarter of 2018, compared to operating income of
$8.7 million and operating margin of 9.3% for the same period in 2017.
Operating margin improved 300 basis points due principally to increased
sales and favorable sales mix.

Net income was $9.6 million for the first quarter of 2018 compared to
$5.1 million in the first quarter of 2017, and earnings per share were
$0.37 and $0.19 for the respective periods. The Company's effective tax
rate decreased to 24.0% for the first quarter of 2018 from 30.8% for the
first quarter of 2017, due primarily to the impact of the U.S. Tax Cuts
and Job Act enacted in December 2017. A non-cash pension settlement
charge reduced first quarter of 2018 earnings by $0.01 per share and
first quarter of 2017 earnings by $0.04 per share.

The Company's backlog of orders was $127.3 million at March 31, 2018
compared to $96.9 million at March 31, 2017 and $114.0 million at
December 31, 2017. The backlog at March 31, 2018 increased 31% as
compared to March 31, 2017 driven by increased incoming orders in most
of the markets the Company serves, most notably in the municipal,
industrial and fire protection markets.

Capital expenditures for the quarter ended March 31, 2018 were $2.0
million and consisted primarily of machinery and equipment. Capital
expenditures for the full-year 2018 are presently planned to be in the
range of $10-$15 million and are expected to be financed through
internally generated funds and existing lines of credit.

Jeffrey S. Gorman, President and CEO commented, "We are pleased to be
off to a strong start in 2018 with increased sales plus continued
improvement in gross and operating margins. Incoming orders continue to
increase across many of the markets we serve. Although the agriculture
market has improved somewhat, it remains soft compared to historical
levels. We are closely monitoring the possible effect new tariffs may
have on material costs and international sales. The impact of lower
taxes however will complement our already strong balance sheet and cash
flow. In addition, increased emphasis on infrastructure improvements at
both the federal and state levels could be a positive factor over the
next several years.

"This year, Gorman-Rupp is celebrating its 85th anniversary. Our history
of product excellence, innovation and customer service continue as
catalyst for the future. We look forward to continuing the traditions of
the past into the future."

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. 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 March 31,
2018   2017
 
Net sales $ 96,604 $ 92,603
Cost of products sold   70,398   70,351  
 
Gross profit 26,206 22,252

 

Selling, general and administrative expenses

  14,356   13,594  
 
Operating income 11,850 8,658
 
Other income (expense), net   806   (1,338 )
 
Income before income taxes 12,656 7,320
Income taxes   3,039   2,255  
 
Net income $ 9,617 $ 5,065  
 
Earnings per share $ 0.37 $ 0.19
 
 
The Gorman-Rupp Company
Condensed Consolidated Balance Sheets (Unaudited)
(thousands of dollars)
 
  March 31,   December 31,
2018 2017

Assets

Cash and cash equivalents $ 88,389 $ 79,680
Accounts receivable, net 65,038 67,369
Inventories, net 79,132 74,967
Prepaid and other   5,868   5,918
 
Total current assets 238,427 227,934
 
Property, plant and equipment, net 116,053 117,071
 
Other assets 8,728 7,779
 
Prepaid pension benefits 4,218 4,313
 
Goodwill and other intangible assets, net   37,690   37,918
 
Total assets $ 405,116 $ 395,015
 

Liabilities and shareholders' equity

Accounts payable $ 16,348 $ 15,798
Accrued liabilities and expenses   32,915   29,898
 
Total current liabilities 49,263 45,696
 
Postretirement benefits 15,499 15,737
 
Other long-term liabilities   7,806   8,087
 
Total liabilities 72,568 69,520
 
Shareholders' equity   332,548   325,495
 
Total liabilities and shareholders' equity $ 405,116 $ 395,015
 
Shares outstanding 26,106,623 26,106,623
 

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