MANSFIELD, Ohio– The Gorman-Rupp Company (NYSE MKT: GRC) reports financial results for the fourth quarter and year ended Dec. 31, 2014.
Net sales during the fourth quarter of 2014 increased 14.6% to a record $105.0 million compared to $91.6 million during the same period in 2013. Domestic sales increased 18.9 percent or $11.2 million and international sales increased 6.7 percent or $2.2 million compared to the fourth quarter of 2013.
Sales in water end markets increased 13.7 percent or $8.9 million and sales in non-water end markets increased 16.9 percent or $4.5 million during the quarter.
The fourth quarter increase in water end market sales was largely due to additional sales in the fire protection market of $4.2 million driven primarily by international sales and additional sales in the construction market of $1.4 million principally for pumps for rental businesses. Also, sales increased $2.9 million in the municipal market primarily due to large volume pumps related to flood control, partially offset by decreased sales for smaller infrastructure projects.
Increased sales in non-water markets during the fourth quarter of 2014 were primarily due to added shipments for the industrial market of $5.1 million related to fracking and the contribution from the recent acquisition of Bayou City Pump Company.
Net sales for the year ended Dec. 31 were a record $434.9 million compared to $391.7 million for the year 2013, an increase of 11.0 percent. Domestic sales increased 16.1 percent or $41.3 million while international sales were up 3.2 percent on a constant currency basis but were largely offset by currency translation of $2.4 million.
Sales increased 10.4 percent or $28.6 million in water end markets primarily due to additional sales in the municipal market of $20.0 million driven by large volume pumps related to wastewater and flood control. Also, sales increased in the construction market by $6.1 million principally for pumps for rental businesses and for oil and gas drilling support within North America, and in the fire protection market by $3.8 million driven primarily by domestic sales. These increases were largely offset by lower agriculture market sales of $4.3 million driven by wet weather conditions in several domestic regions.
Sales increased 12.5 percent or $14.7 million for the year ended Dec. 31 in non-water markets primarily due to additional shipments of $13.3 million for the industrial market related to fracking and $8.5 million from the recent acquisition of Bayou City Pump Company.
Gross profit was $25.0 million for the fourth quarter of 2014, resulting in gross margin of 23.8 percent compared to 23.4 percent for the same period in 2013. Operating income was $11.2 million, resulting in operating margin of 10.6 percent for the fourth quarter of 2014 compared to 8.9 percent for the same period in 2013.
The gross margin and operating margin for the fourth quarter of 2013 were reduced by 50 and 70 basis points, respectively, due to a non-cash pension settlement charge which did not recur in the fourth quarter of 2014.
Net income was $7.9 million during the fourth quarter of 2014 compared to $7.2 million in the fourth quarter of 2013 and earnings per share were $0.30 and $0.28 for the respective periods. The fourth quarter of 2013 included a non-recurring asset sale gain of $0.06 per share offset by $0.01 per share due to a non-cash pension settlement charge, both of which did not recur in the fourth quarter of 2014.
Gross profit was a record $107.6 million in 2014 resulting in gross margin of 24.7 percent compared to 23.9 percent for 2013. Operating income also was a record $53.3 million resulting in operating margin of 12.3 percent for 2014 compared to 10.7 percent in 2013. The gross margin and operating margin for 2013 were reduced by 70 and 110 basis points, respectively, due to a non-cash pension settlement charge which did not recur in 2014.
Net income for 2014 was a record $36.1 million compared to $30.1 million for 2013 and earnings per share were $1.38 and $1.15 for the respective years. Earnings per share for 2013 included a reduction of $0.10 due to a non-cash pension settlement charge offset by $0.06 per share for a non-recurring asset sale gain, both of which did not recur in 2014. Currency translation negatively impacted earnings in 2014 by $0.01 per share.
The Company’s backlog of orders was $160.7 million at Dec. 31 compared to $182.2 million a year ago and $170.0 million at Sept. 30, 2014. The decrease in backlog from a year ago is principally due to record shipments during 2014, including approximately $14.4 million related to the Permanent Canal Closure Project (“PCCP”) to supply major flood control pumps to a member of a joint venture construction group for a significant New Orleans flood control project.
Excluding the PCCP project, incoming orders increased 12.3 percent in 2014 compared to 2013. Approximately $43.2 million of the PCCP project remain in the Dec. 31, 2014 backlog total and are expected to be shipped by the end of 2015.
Cash and cash equivalents totaled $24.7 million and short-term bank debt was $12.0 million at December 31, 2014. The Company generated $68.5 million in earnings before interest, taxes, depreciation and amortization during 2014 and invested $14.1 million in buildings and machinery and equipment. Capital additions in 2015 are expected to be $18-$20 million. Working capital rose $6.6 million from December 31, 2013 to $135.1 million at December 31, 2014.
Jeffrey S. Gorman, President and CEO said, “Our fourth quarter results were strong and contributed significantly to another record year of revenue and earnings for the Company accomplished through increased sales in all markets except agriculture. Our notable increases were in municipal projects, construction including rental sales, and fire pump systems. Operationally we continued to perform well during our growth demonstrated by solid gross and operating margins.
“We are pleased with Patterson Pump Company’s performance on the PCCP project for which shipments of the large flood control pumps began this year and will be an even larger contributor in 2015. Also, 2015 results will include a complete year of our Bayou City Pump Company acquisition which adds market diversity for our petroleum handling products and services.
“We have not seen any major order cancellations, but the recent dramatic decline in the price of oil may have a negative impact in the near term on some of the markets we serve such as construction, including rental equipment, and fire protection. Also, there may be additional headwinds for 2015 due to continuing unfavorable exchange rate alignments compounded by ongoing international economic uncertainties.
“Although more cautious than a few months ago, we continue to believe we are well positioned for the year ahead based on our strong and flexible balance sheet, quality products and the diversity and depth of our markets.”
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 and changes in commodity pricing and capital and consumer spending; (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 New Orleans flood control 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.
