The Gorman-Rupp Company reports financial results for the first quarter ended March 31, 2015.
Net sales during the first quarter were $99.2 million compared to $110.1 million during the record first quarter of 2014. Domestic sales decreased 9.3% or $6.6 million and international sales decreased 10.9% or $4.2 million compared to the same period in 2014. Sales in water end markets decreased 11.6% or $9.2 million and sales in non-water end markets decreased 5.3% or $1.6 million during the quarter.
Source: Gorman Rupp
The first quarter decrease in water end market sales was largely due to lower sales in the construction market, including sales to rental companies, of $4.3 million due primarily to the extremely rapid decline in oil and gas production which affected both domestic and international sales. Sales decreased in the agricultural market $3.0 million primarily due to expected low farm income during 2015 and wet weather conditions in certain locations domestically, and sales in the municipal market decreased $1.6 million. These modestly lower municipal market sales were primarily driven by lower comparative sales of large volume pumps for wastewater and water supply projects of $9.0 million, offset by comparative increased shipments related to the Permanent Canal Closures and Pumps (“PCCP”) project of $7.4 million. Also, sales in the fire protection market decreased $1.5 million primarily due to slower domestic commercial building construction. Decreased sales in the non-water end markets during the first quarter of 2015 were primarily due to lower sales in the OEM market of $3.6 million related to power generation equipment. This decrease was partially offset by increased sales in the petroleum market of $1.4 million for mid-stream transmission of refined petrochemical products and the contribution from the mid-2014 acquisition of Bayou City Pump Company.
Due to the referenced decline in oil and natural gas production, combined with adverse winter conditions, net sales in January and February were particularly slower than the final month of the first quarter. Of the total decrease in net sales in the first quarter of 2015 of $10.8 million, $2.2 million or 20.4% of the decrease was due to negative currency translation.
Gross profit was $23.9 million for the first quarter of 2015, resulting in gross margin of 24.1% compared to 25.0% for the same period in 2014. Operating income was $10.6 million, resulting in operating margin of 10.7% for the first quarter of 2015 compared to 13.3% for the same period in 2014. Net income was $7.3 million during the first quarter of 2015 compared to $10.0 million in the first quarter of 2014 and earnings per share were $0.28 and $0.38 for the respective periods. Currency translation negatively impacted current earnings per share by $0.01 per share. The gross profit and operating income margin declines were due principally to the sales volume decreases from 2014 to 2015 and were not otherwise significantly impacted by any unusual cost increases other than increased health care expenses of 59 and 76 basis points, respectively.
The Company’s backlog of orders was $158.9 million at March 31, 2015 compared to $171.7 million a year ago and $160.7 million at December 31, 2014. The decrease in backlog from a year ago is due principally to record shipments during 2014 including approximately $22.0 million related to the PCCP project during the last four quarters. Approximately $39.1 million of orders related to the PCCP project remain in the March 31, 2015 backlog total. The PCCP project contract was increased for several contract additions totaling $4.7 million during the quarter. Approximately $32.9 million of the total remaining PCCP project are scheduled to ship during 2015 and $6.2 million during the first two quarters of 2016. Encouragingly, incoming orders during the first quarter of 2015 were comparable to the same period last year and increased $2.2 million compared to the fourth quarter of 2014 due principally to the beginning of the normal agricultural season, large volume pumps for wastewater and change orders for the PCCP project.
Cash and cash equivalents totaled $27.3 million and short-term bank debt was $9.0 million at March 31, 2015, having been reduced by $3.0 million since December 31, 2014. Working capital rose $5.1 million from December 31, 2014 to a record $141.5 million at March 31, 2015. Net capital expenditures for 2015, consisting primarily of machinery and equipment, a new operations facility in Ireland and other building improvements, are currently estimated to be in the range of $13 to $15 million and are expected to be financed through internally-generated funds.
The Company is very proud to have been recognized for the fourth consecutive year as one of the 100 Most Trustworthy Companies in America by Forbes. To create this list, the year’s public filings for more than 5,500 U.S. publicly-traded companies were reviewed and evaluated in depth to identify the 100 that most “consistently demonstrated transparent accounting practices and solid corporate governance.”
Jeffrey S. Gorman, President and CEO commented, “Multiple headwinds affected our first quarter results, including our comparisons to 2014’s historical record sales and operating results. The economic impacts of the rapid decline in prices and related production of oil directly affected our construction, rental and industrial pumps markets, and indirectly impacted our other markets. Additionally, the strong U.S. dollar worked against export and international sales, and lower commodity prices combined with wet weather conditions in many parts of the country negatively impacted irrigation supply pump sales. On the brighter side we do feel that fire protection and municipal pump sales will continue to improve gradually and our portion of the New Orleans PCCP flood control project will remain on schedule. Although the headwinds may well continue for some time, we will remain focused on our long-term track of solid domestic and international organic growth combined with strategic acquisition opportunities.”