The Gorman-Rupp Company reports financial results for the first quarter ended March 31, 2016.
Net sales during the first quarter were $100.3 million compared to $99.2 million during the first quarter of 2015. Sales in both water end markets and non-water end markets were comparable between periods, increasing 3.2% and 0.8%, respectively.
The first quarter activity in our larger water markets group included increased sales of $1.2 million in the municipal market driven primarily by sales of large volume pumps for flood control and wastewater and $1.3 million in the fire protection market due to domestic sales. These increases were offset by lower construction market sales of $1.5 million due principally to the severe global decline in the drilling of oil and gas. The first quarter activity in our non-water markets included increased sales of $1.7 million in the petroleum market due primarily to timing of long-term infrastructure projects related to mid-stream transmission of refined petrochemical products. This increase was offset by lower industrial market sales of $2.2 million also largely attributable to the downturn in oil and gas production and the related decline in the offloading of oil from barges due to excess inventory. Domestic sales increased $2.6 million or 3.9% driven by the petroleum, municipal and fire protection markets while international sales decreased $1.5 million or 4.5% due to lower sales in most major markets.
Gross profit was $22.9 million for the first quarter of 2016, resulting in gross margin of 22.8%, compared to $23.9 million gross profit and 24.1% gross margin for the same period in 2015. Operating income was $9.2 million, resulting in operating margin of 9.2% for the first quarter of 2016, compared to $10.6 million operating income and 10.7% operating margin for the same period in 2015. The quarter’s gross profit margin decline was due principally to major market sales mix changes from consolidated contributions of increased sales in the fire protection and agricultural markets. The operating margin decline also included higher professional fees during the first quarter of 2016.
The Company’s backlog of orders was $111.0 million at March 31, 2016 compared to $158.9 million a year ago and $117.1 million at December 31, 2015. The decrease in backlog from a year ago is due primarily to approximately $34.2 million of shipments related to the New Orleans Permanent Canal Closures & Pumps (“PCCP”) project in the last twelve months along with lower orders in the construction and industrial markets. Encouragingly, we did experience an increase of $16.3 million in incoming orders in the first quarter of 2016 compared to the fourth quarter of 2015 across most of the major markets the Company serves. Approximately $5.2 million of orders related to the PCCP project remain in the March 31, 2016 backlog total and are expected to ship by the end of the third quarter of 2016. When completed, this flood control project will be one of the largest such projects in the world.
The Company generated $20.1 million of operating cash flow during the first quarter of 2016 and continues to have a strong and flexible balance sheet. Cash and cash equivalents totaled $40.2 million at March 31, 2016 and working capital increased $6.6 million from December 31, 2015 to a record $152.5 million at March 31, 2016. The increase in working capital was due principally to higher cash balances partially offset by lower inventories. The Company invested $1.2 million in the first quarter of 2016 primarily consisting of capital expenditures of machinery and equipment and building improvements. Capital expenditure expectations for 2016 remain in the planned range of $12 to $14 million. The Company had no bank debt as of March 31, 2016.
The Company is very proud to have been recognized for the fifth 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 2,500 publicly-traded non-financial American companies with market capitalizations of $250 million or more were reviewed and evaluated in depth to identify the 100 that most “consistently demonstrated transparent accounting practices and solid corporate governance.” Among the 47 small cap honorees, Gorman-Rupp was tied with three other companies for the highest annual rating, and was tied with one other company for the highest rating over the past four quarters.
Jeffrey S. Gorman, President and CEO commented, “Our financial performance continues to be impacted by multiple challenges, most notably the business confidence instability related to the global price of oil and low commodity prices. While we expect the near-term to be similarly challenging, we are encouraged by the quarter’s growth in incoming orders and are cautiously optimistic that a slow recovery has begun.”