Net sales during the fourth quarter 2013 increased 3.3% to $91.6 million compared to $88.7 million during the same period in 2012. Domestic sales increased 6.2% or $3.4 million while international sales decreased 1.6% or $0.5 million. Sales in our water end markets increased $2.4 million largely due to domestic water supply projects. Sales in our non-water end markets were principally unchanged.
Net sales for the year ended December 31, 2013 were a record $391.7 million compared to $375.7 million during the same period in 2012, an increase of 4.3%. Domestic sales increased 7.5% or $17.9 million while international sales decreased 1.4% or $1.9 million. The increase in water end market sales of $13.3 million was primarily due to shipments for the fire and agricultural markets and for Gulf Coast flood control projects in the first half of 2013. This increase was partially offset by reduced construction market demand for pumps from rental businesses as compared to this market?s strong sales early in 2012. Increased shipments for the petroleum and industrial markets were the major contributors to the increase in our non-water market sales of $2.6 million.
Due to continuing lump-sum retirement payments, the Company recorded a GAAP-required $0.7 million non-cash pension settlement charge during the fourth quarter of 2013 relating to its defined benefit pension plan compared to $2.9 million during the same period in 2012. This charge was not required to be recognized in 2012 until the actuarial payments threshold was exceeded in the fourth quarter. In 2013, these charges were required to be recognized in each quarter, as the actuarial payments threshold was exceeded early in the year, and totaled $4.2 million.
Gross profit was $21.5 million for the fourth quarter 2013 resulting in gross margin of 23.4% compared to 21.3% in the same period in 2012. The increase in gross margin was principally due to sales mix changes and the lower non-cash pension settlement charge during the current quarter as described above. Excluding the pension settlement charges, gross margin would have been 23.9% and 23.5%, respectively. Operating income was $8.1 million resulting in operating margin of 8.9% in 2013 compared to 6.0% 2012. Excluding the pension settlement charges, operating margin would have been 9.6% and 9.4%, respectively.
Net income was $7.2 million during the fourth quarter 2013 compared to $3.7 million in the fourth quarter 2012 and earnings per share were $0.28 and $0.14 for the respective periods. Other income includes a non-recurring asset sale gain of $2.4 million in the fourth quarter. Excluding the pension settlement charges described above, earnings per share would have been $0.29 and $0.21 for the fourth quarter 2013 and 2012, respectively.
Gross profit was a record $93.7 million in 2013 resulting in gross margin of 23.9% compared to 24.0% in 2012. Operating income was $41.9 million resulting in operating margin of 10.7% in 2013 compared to 11.2% in 2012. Excluding the previously described pension settlement charges, gross margin would have been 24.6% and 24.5%, respectively, and operating margin would have been 11.8% for 2013 and 12.0% for 2012.
Net income for 2013 was a record $30.1 million compared to $28.2 million in 2012 and earnings per share were $1.15 and $1.07 for the respective periods. Excluding the pension settlement charges, earnings per share would have been $1.25 and $1.15 for 2013 and 2012, respectively.
The Company?s backlog of orders was $182.2 million at December 31, 2013 compared to $143.4 million a year ago and $190.7 million at September 30, 2013. The increase in backlog from a year ago reflects the 2013 award of the Permanent Canal Closure Project (?PCCP?) contract of approximately $60.0 million to supply major flood control pumps to a member of a joint venture construction group for a significant New Orleans flood control project. Approximately $57.6 million of the project remain in the December 31, 2013 backlog total. The pumps for this project are expected to be shipped primarily in the second half of 2014 and first half of 2015.
The Company generated a record $50.4 million in operating cash flow during 2013 and continues to have a strong and flexible balance sheet. Cash and short-term investments totaled $31.4 million and short-term bank debt was $9.0 million at December 31, 2013. Working capital increased 15.9% from December 31, 2012 to $128.5 million at December 31, 2013 principally due to increased 2013 net sales and debt reduction.
?Our financial results showed continued strong operating performance during the quarter and year with improved sales, earnings and cash flow,? said Jeffrey S. Gorman, President and CEO. ?We are beginning to see some evidence of stabilization in key markets Gorman-Rupp serves and, with a strong order backlog, 2014 should be a solid year for the Company.
