The Gorman-Rupp Company (NYSE: GRC) reports financial results
for the third quarter and nine months ended September 30, 2018.
Third Quarter 2018 Highlights
- Third quarter earnings per share were
$0.41 compared to $0.22 per share for the third quarter of 2017
- Third quarter of 2018 included an
unfavorable LIFO impact of $0.04 per share
- Third quarter of 2017 included non-cash
impairment charges of $0.10 per share
- Lower effective income tax rate in the
third quarter of 2018 due primarily to the U.S. Tax Cuts and Jobs
Act
- Net sales increased 9.5% or $8.9
million
Net sales for the third quarter of 2018 were $102.9 million
compared to $94.0 million for the third quarter of 2017, an
increase of 9.5% or $8.9 million. Domestic sales increased 11.0% or
$6.5 million and international sales increased 7.0% or $2.4 million
compared to the same period in 2017.
Sales in our water markets increased 12.4% or $7.9 million in
the third quarter of 2018 compared to the third quarter of 2017.
Sales in the fire protection market increased $3.7 million driven
primarily by international sales. Sales in the municipal market
increased $2.2 million due primarily to positive municipal economic
sentiment. In addition, sales in the construction market increased
$1.1 million, sales of repair parts increased $0.7 million and
sales in the agriculture market increased $0.2 million.
Sales increased 3.4% or $1.0 million in our non-water markets
during the third quarter of 2018 compared to the third quarter of
2017. Sales in the petroleum and industrial markets increased a
combined $1.4 million due principally to increased capital spending
related to oil and gas drilling activity. These increases were
partially offset by decreased sales in the OEM market of $0.4
million.
International sales were $37.6 million in the third quarter of
2018 compared to $35.2 million in the same period last year and
represented 37% of total sales for the Company in both periods.
International sales increased most notably in the fire protection,
petroleum and construction markets and decreased in the industrial
and OEM markets.
Gross profit was $27.3 million for the third quarter of 2018,
resulting in gross margin of 26.6%, compared to gross profit of
$26.5 million and gross margin of 28.2% for the same period in
2017. The 160 basis points decrease in gross margin was largely
driven by an unfavorable LIFO impact of 140 basis points. The
remaining 20 basis points decrease in gross margin was due
primarily to an increase in material costs as a result of
inflationary pressures and tariffs, partially offset by lower
overhead costs as a percent of sales due to leverage from increased
sales volume.
Selling, general and administrative expenses (“SG&A”) was
$14.2 million and 13.8% of net sales for the third quarter of 2018
compared to $14.1 million and 15.0% of net sales for the same
period in 2017. SG&A as a percentage of sales improved 120
basis points primarily as a result of leverage from increased sales
volume.
Operating income was $13.1 million, resulting in operating
margin of 12.8% for the third quarter of 2018, compared to
operating income of $8.2 million and operating margin of 8.8% for
the same period in 2017. The third quarter of 2017 included
non-cash impairment charges of $4.1 million or 440 basis points due
to decreased demand for barge pumps in the marine transportation
market. Excluding the impairment charges, operating margin
decreased 40 basis points due principally to an unfavorable LIFO
impact.
The Company’s effective tax rate decreased to 21.6% for the
third quarter of 2018 from 28.3% for the third quarter of 2017, due
primarily to the impact of the U.S. Tax Cuts and Jobs Act (“Tax
Act”) enacted in December 2017.
Net income was $10.7 million for the third quarter of 2018
compared to $5.7 million in the third quarter of 2017, and earnings
per share were $0.41 and $0.22 for the respective periods. Earnings
per share for the third quarter of 2018 included an unfavorable
LIFO impact of $0.04 per share. Earnings per share for the third
quarter of 2017 included non-cash impairment charges of $0.10 per
share and a non-cash pension settlement charge of $0.01 per
share.
Net sales for the first nine months of 2018 were $311.3 million
compared to $284.5 million for the first nine months of 2017, an
increase of 9.4% or $26.9 million. Domestic sales increased 10.9%
or $19.8 million and international sales increased 6.9% or $7.1
million compared to the same period in 2017.
Sales in our water markets increased 10.8% or $21.0 million in
the first nine months of 2018 compared to the first nine months of
2017. Sales in the fire protection market increased $8.3 million
due primarily to improved economic conditions domestically and
sales in the construction market increased $5.2 million due
primarily to increased oil and gas drilling activity. Sales of
repair parts increased $3.4 million driven by the overall increase
in sales volume and sales in the municipal market increased $3.2
million due primarily to positive municipal economic sentiment. In
addition, sales in the agriculture market increased $0.9
million.
Sales increased 6.5% or $5.9 million in our non-water markets
during the first nine months of 2018 compared to the first nine
months of 2017. Sales in the industrial and petroleum markets
increased a combined $6.7 million due principally to increased
capital spending related to oil and gas drilling activity. These
increases were partially offset by decreased sales in the OEM
market of $0.8 million.
International sales were $110.1 million in the first nine months
of 2018 compared to $103.0 million in the same period last year and
represented 35% and 36% of total sales for the Company in each of
the two periods, respectively. International sales increased most
notably in the fire protection, petroleum and repair parts markets
and decreased in the OEM and agriculture markets.
Gross profit was $83.4 million for the first nine months of
2018, resulting in gross margin of 26.8%, compared to gross profit
of $76.0 million and gross margin of 26.7% for the same period in
2017. The 10 basis points increase in gross margin was largely
driven by leverage from increased sales volume partially offset by
an increase in material costs primarily as a result of inflationary
pressures and tariffs.
SG&A was $43.4 million and 14.0% of net sales for the first
nine months of 2018 compared to $41.8 million and 14.7% of net
sales for the same period in 2017. SG&A as a percentage of
sales improved 70 basis points as a result of leverage from
increased sales volume.
Operating income was $40.0 million, resulting in operating
margin of 12.8% for the first nine months of 2018, compared to
operating income of $30.1 million and operating margin of 10.6% for
the same period in 2017. The first nine months of 2017 included
non-cash impairment charges in the third quarter of $4.1 million or
140 basis points. Excluding the impairment charges, operating
margin improved 80 basis points due principally to leverage from
increased sales volume.
The Company’s effective tax rate decreased to 21.6% for the
first nine months of 2018 from 31.3% for the first nine months of
2017, due primarily to the impact of the Tax Act enacted in
December 2017. Excluding discrete impacts of pension plan
contributions and transition tax adjustments, the effective tax
rate for the first nine months of 2018 would have been 23.2%.
Net income was $30.5 million for the first nine months of 2018
compared to $18.6 million in the first nine months of 2017, and
earnings per share were $1.17 and $0.71 for the respective periods.
The first nine months of 2018 earnings were reduced by non-cash
pension settlement charges of $0.08 per share. The first nine
months of 2017 earnings were reduced by non-cash impairment charges
of $0.10 per share and non-cash pension settlement charges of $0.10
per share.
The Company’s backlog of orders was $122.4 million at September
30, 2018 compared to $111.4 million at September 30, 2017 and
$114.0 million at December 31, 2017. The backlog at September
30, 2018 increased 9.9% as compared to September 30, 2017 driven by
increased incoming orders in most of the markets the Company
serves, most notably in the municipal, industrial and construction
markets.
Capital expenditures for the first nine months of 2018 were $7.6
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-$12 million.
The Company’s current estimate of its full year effective tax
rate is between 22% and 24%.
Jeffrey S. Gorman, President and CEO commented, “In the third
quarter the Company achieved strong sales growth and earnings
compared to last year while leveraging overhead and SG&A
expenses. As material costs have continued to rise, we remain
focused on profitability and have begun to implement price
increases to offset higher costs. Our backlog remains strong and we
are confident that our solid balance sheet will enable us to
continue to drive long-term shareholder value.”
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 and costs 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. BurnellCorporate SecretaryThe Gorman-Rupp
CompanyTelephone (419) 755-1246NYSE: 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 September 30, Nine
Months Ended September 30, 2018 2017 2018 2017 Net
sales $ 102,893 $ 93,976 $ 311,324 $ 284,451 Cost of products sold
75,566 67,518 227,926
208,496 Gross profit 27,327 26,458 83,398 75,955
Selling, general and administrative
expenses
14,207 14,122 43,435 41,800
Impairment of goodwill and other
intangible assets
- 4,098 - 4,098
Operating income 13,120 8,238 39,963 30,057 Other
income (expense), net 532 (281 ) (1,069 )
(2,973 ) Income before income taxes 13,652 7,957
38,894 27,084 Income taxes 2,951 2,255
8,403 8,469 Net income $ 10,701 $ 5,702
$ 30,491 $ 18,615 Earnings per share $
0.41 $ 0.22 $ 1.17 $ 0.71 The Gorman-Rupp Company
Condensed Consolidated Balance Sheets (Unaudited) (thousands of
dollars) September 30, December 31, 2018 2017
Assets
Cash and cash equivalents $ 101,381 $ 79,680 Accounts receivable,
net 72,662 67,369 Inventories, net 82,044 74,967
Prepaid and other
5,501
5,918
Total current assets 261,588 227,934 Property, plant
and equipment, net 113,466 117,071 Other assets 4,261 7,779
Prepaid pension benefits 7,954 4,313 Goodwill and
other intangible assets, net 36,542 37,918
Total assets $ 423,811 $ 395,015
Liabilities and
shareholders' equity
Accounts payable $ 17,298 $ 15,798 Accrued liabilities and expenses
36,745 29,898 Total current liabilities 54,043
45,696 Postretirement benefits 14,341 15,737 Other
long-term liabilities 7,688 8,087 Total
liabilities 76,072 69,520 Shareholders' equity
347,739 325,495 Total liabilities and shareholders'
equity $ 423,811 $ 395,015 Shares outstanding 26,117,045
26,106,623
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version on businesswire.com: https://www.businesswire.com/news/home/20181026005041/en/
The Gorman-Rupp CompanyJames C. Kerr, 419-755-1548Chief
Financial Officer
Gorman Rupp (NYSE:GRC)
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