ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Amounts in tables in thousands of dollars, except for per share data)
Executive Overview
The Gorman-Rupp Company (“we”, “our”, “Gorman-Rupp” or the “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 suppression, heating, ventilating and air conditioning (HVAC), military and other liquid-handling applications. The Company attributes its success to long-term product quality, applications and performance combined with timely delivery and service, and continually seeks to develop initiatives to improve performance in these key areas.
We regularly invest in training for our employees, in new product development and in modern manufacturing equipment, technology and facilities all designed to increase production efficiency and capacity and drive growth by delivering innovative solutions to our customers. We believe that the diversity of our markets is a major contributor to the generally stable financial growth we have produced historically.
During 2025, based on changes in the agriculture market over the last few years, we took steps intended to optimize our National Pump Company (NPC) footprint. We reduced the number of NPC operating facilities from six to three and expect this change to result in improved profitability by lowering our fixed operating costs with minimal impact on sales. We have transitioned the NPC facility in Olive Branch, MS to our Patterson Pump Company operations to continue to support the growth we have seen in the fire, municipal and industrial markets. During 2025, we recognized $3.0 million in one-time facility optimization costs including inventory rationalization, severance, and facility costs. We expect these changes will result in annualized savings between $2.0 million and $2.5 million in payroll, payroll related, and facility costs. We do not expect future facility optimization costs to be material.
Incoming orders for the year ending December 31, 2025, were $728.4 million, an increase of 10.5%, compared to 2024.
The Company’s backlog of orders was $244.0 million at December 31, 2025 compared to $206.0 million at December 31, 2024, an increase of 18.5%. Approximately 90% of the Company’s backlog of unfilled orders is scheduled to be shipped during 2026, with the remainder principally during the first half of 2027.
On January 22, 2026, the Board of Directors authorized the payment of a quarterly dividend of $0.19 per share, representing the 304 th consecutive quarterly dividend to be paid by the Company. During 2025, the Company again paid increased dividends and thereby attained its 53 rd consecutive year of increased dividends. These consecutive years of increases continue to position Gorman-Rupp in the top 50 of all U.S. public companies with respect to number of years of increased dividend payments.
The Company currently expects to continue its exceptional history of paying regular quarterly dividends and increased annual dividends. However, any future dividends will be reviewed individually and declared by our Board of Directors at its discretion, dependent on our assessment of the Company’s financial condition and business outlook at the applicable time.
Outlook
As we begin 2026 our outlook remains positive. The 10% increase in incoming orders during 2025 increased our backlog to a healthy $244.0 million. We expect our municipal market to continue to benefit from infrastructure spending, including strong demand for flood control and storm water management, and expect a number of our markets to continue to benefit from increased demand related to data center construction. Our strong cash flow positions us well to further reduce our debt and interest expense going forward.
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Results of Operations – Year ended December 31, 2025 compared to year ended December 31, 2024:
Net Sales
End Market
$ Change
% Change
Industrial
Fire
Agriculture
Construction
Municipal
Petroleum
OEM
Repair parts
Total net sales
Net sales for 2025 were $682.4 million compared to net sales of $659.7 million for 2024, an increase of 3.4% or $22.7 million. Sales increased in the majority of our markets, including sales increases of $8.1 million in the industrial market and $6.6 million in the fire suppression market due in part to increased demand related to data centers. Net sales also increased $5.2 million in the repair market, $4.9 million in the OEM market, $3.4 million in the municipal market, $2.4 million in the agriculture market, and $1.5 million in the petroleum market. Offsetting these increases was a decrease of $9.4 million in the construction market due to a general slowdown in construction activity, including sales into the rental market.
Cost of Products Sold and Gross Profit
$ Change
% Change
Cost of products sold
% of Net sales
Gross margin
Gross profit was $209.1 million for 2025, resulting in gross margin of 30.6%, compared to gross profit of $204.3 million and gross margin of 31.0% for the same period in 2024. Gross profit for 2025 included $2.7 million of one-time facility optimization costs. The 40 basis point decrease in gross margin was the result of one-time facility optimization costs recognized in the third quarter of 2025.
Selling, General and Administrative (SG&A) Expenses
$ Change
% Change
Selling, general and administrative expenses
% of Net sales
Selling, general and administrative (“SG&A”) expenses were $101.4 million and 14.9% of net sales for 2025 compared to $100.5 million and 15.2% of net sales for the same period in 2024.
Operating Income
$ Change
% Change
Operating Income
% of Net sales
Operating income was $95.4 million for 2025, resulting in an operating margin of 14.0%, compared to operating income of $91.4 million and an operating margin of 13.9% for the same period in 2024. Operating income for 2025 included $3.0
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million of facility optimization costs. The 10 basis point increase in operating margin compared to the same period in 2024 was driven by improved leverage on labor, overhead, and SG&A expenses partially offset by facility optimization costs.
Interest Expense
$ Change
% Change
Interest Expense
% of Net sales
Interest expense was $23.4 million for 2025 compared to $33.6 million for the same period in 2024. The decrease in interest expense was due to a series of debt refinancing transactions the Company completed on May 31, 2024, as well as a decrease in outstanding debt.
Other Income (Expense), net
$ Change
% Change
Other income (expense), net
% of Net sales
Other income (expense), net was $2.8 million of expense for 2025 compared to $7.3 million of expense for the same period in 2024. Other expense for 2025 included non-cash pension settlement charges of $1.2 million. Other expense for 2024 included a $4.4 million write-off of unamortized previously deferred debt financing fees and a $1.8 million prepayment fee related to the early retirement of a subordinated credit facility.
Net Income
$ Change
% Change
Income before income taxes
% of Net sales
Income taxes
Effective tax rate
Net income
% of Net sales
Earnings per share
Adjusted earnings per share
Net income was $53.0 million, or $2.02 per share, for 2025, compared to net income of $40.1 million, or $1.53 per share, for 2024. Adjusted earnings per share for 2025 and 2024 were $2.14 and $1.75 per share, respectively. Adjusted earnings per share is a non-GAAP financial measure, please see "Non-GAAP Financial information" below.
The Company’s effective tax rate was 23.3% for 2025 compared to 20.6% for 2024. The increase in the rate was driven by changes in U.S. tax regulations passed under the One Big Beautiful Bill Act. The updated tax regulations accelerated temporary tax benefits that reduced our foreign tax benefits and made them permanent, thus increasing our effective tax rate. We expect our effective tax rate for 2026 to be between 21.0% and 23.0%.
Results of Operations – Year ended December 31, 2024 compared to year ended December 31, 2023:
Information pertaining to fiscal year 2023 was included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 beginning on page 15 under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which was filed with the SEC on February 26, 2024.
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Non-GAAP Financial Information:
This discussion of Results of Operations includes certain non-GAAP financial data and measures such as adjusted earnings, adjusted earnings per share, and adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). Adjusted earnings is earnings excluding the write-off of unamortized previously deferred debt financing fees, refinancing costs, facility optimization costs, non-cash pension settlement charges, and amortization of acquired customer backlog. Adjusted earnings per share is earnings per share excluding the write-off of unamortized previously deferred debt financing fees per share, refinancing costs per share, facility optimization costs per share, non-cash pension settlement charges per share, and amortization of acquired customer backlog per share. Adjusted EBITDA is net income (loss) excluding interest, taxes, depreciation and amortization, adjusted to exclude the write-off of unamortized previously deferred debt financing fees, refinancing costs, facility optimization costs, non-cash pension settlement charges, amortization of acquired customer backlog, and non-cash LIFO expense. Management utilizes these adjusted financial data and measures to assess comparative operations against those of prior periods without the distortion of non-comparable factors. The inclusion of these adjusted measures should not be construed as an indication that the Company’s future results will be unaffected by unusual or infrequent items or that the items for which the Company has made adjustments are unusual or infrequent or will not recur. Further, the impact of the LIFO inventory costing method can cause results to vary substantially from company to company depending upon whether they elect to utilize LIFO and depending upon which method they may elect. The Gorman-Rupp Company believes that these non-GAAP financial data and measures also will be useful to investors in assessing the strength of the Company’s underlying operations and liquidity from period to period. These non-GAAP financial measures are not intended to replace GAAP financial measures, and they are not necessarily standardized or comparable to similarly titled measures used by other companies. Provided below is a reconciliation of adjusted earnings, adjusted earnings per share, and Adjusted EBITDA to their respective corresponding GAAP financial measures, which includes a description of actual adjustments made in the current period and the corresponding prior period.
Adjusted earnings:
Reported net income – GAAP basis
Write-off of unamortized previously deferred debt financing fees
Refinancing costs
Facility optimization costs
Pension settlement charges
Amortization of acquired customer backlog
Non-GAAP adjusted earnings
Adjusted earnings per share:
Reported earnings per share - GAAP basis
Write-off of unamortized previously deferred debt financing fees
Refinancing costs
Facility optimization costs
Pension settlement charges
Amortization of acquired customer backlog
Non-GAAP adjusted earnings per share
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Adjusted EBITDA:
Reported net income - GAAP basis
Interest expense
Income taxes
Depreciation and amortization
Non-GAAP earnings before interest, taxes, depreciation and amortization
Write-off of unamortized previously deferred debt financing fees
Refinancing costs
Facility optimization costs
Pension settlement charges
Amortization of acquired customer backlog
Non-cash LIFO expense
Non-GAAP adjusted EBITDA
Liquidity and Capital Resources
Our primary sources of liquidity are cash generated from operations and borrowings under our revolving credit facility. Cash and cash equivalents totaled $35.1 million at December 31, 2025. The Company had $99.4 million of borrowing capacity available under the revolving credit facility after deducting $0.6 million in outstanding letters of credit primarily related to customer orders. See Note 4 - Financing Arrangements in the Notes to our Consolidated Financial Statements.
As of December 31, 2025, the Company had $280.8 million in debt outstanding due in 2029 and $30.0 million due in 2031. The Company was in compliance with its debt covenants, including limits on additional borrowings and maintenance of certain operating and financial ratios, at December 31, 2025.
Capital expenditures in 2025 were $17.4 million and consisted primarily of machinery and equipment and building improvements. Capital expenditures for 2026, which are expected to consist principally of machinery and equipment purchases, are estimated to be approximately $20.0 - $22.0 million and are expected to be financed through cash from operations. During 2025, 2024 and 2023, the Company financed its capital improvements and working capital requirements principally through internally generated funds.
The Company contributed $2.7 million to its defined benefit pension plan in 2025 and expects to contribute up to $2.9 million to its defined benefit pension plan in 2026.
Financial Cash Flow
Beginning of period cash and cash equivalents
Net cash provided by operating activities
Net cash used for investing activities
Net cash used for financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
End of period cash and cash equivalents
The increase in cash provided by operating activities in 2025 compared to 2024 was primarily due to increased net income and an increase in operating liabilities. The increase in cash provided by operating activities in 2024 compared to 2023 was primarily due to increased earnings before depreciation, amortization, and LIFO expense, and improved cash flow from working capital management.
During 2025, net cash used for investing activities of $15.3 million consisted primarily of $17.4 million used for capital expenditures, largely related to machinery and equipment, partially offset by $1.8 million of proceeds from the sale of
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property plant and equipment. During 2024, net cash used for investing activities of $11.9 million consisted primarily of $14.3 million used for capital expenditures, largely related to machinery and equipment, partially offset by $2.5 million in proceeds from the sale of property, plant, and equipment. During 2023, net cash used for investing activities of $20.2 million consisted primarily of $20.8 million used for capital expenditures, largely related to machinery and equipment.
During 2025, net cash used for financing activities of $80.9 million consisted primarily of net payments on bank borrowings of $60.0 million and dividend payments of $19.6 million. During 2024, net cash used for financing activities of $63.1 million consisted primarily of net payments on bank borrowings of $43.0 million and dividend payments of $19.0 million. During 2023, net cash used for financing activities of $54.5 million consisted primarily of net payments on bank borrowings of $34.5 million, dividend payments of $18.4 million.
Maturities of long-term debt in the next five fiscal years, and the remaining years thereafter, are as follows:
Thereafter
Total
The Company was in compliance with its debt covenants, including limits on additional borrowings and maintenance of certain operating and financial ratios at December 31, 2025 and December 31, 2024. We believe we have adequate liquidity from funds on hand and borrowing capacity to execute our financial and operating strategy, as well as comply with debt obligations and financial covenants for at least the next 12 months.
The Company currently expects to continue its exceptional history of paying regular quarterly dividends and increased annual dividends. However, any future dividends will be reviewed individually and declared by our Board of Directors at its discretion, dependent on our assessment of the Company’s financial condition and business outlook at the applicable time.
The Board of Directors has authorized a share repurchase program of up to $50.0 million of the Company’s common shares, of which approximately $48.1 million has yet to be repurchased. The actual number of shares repurchased will depend on prevailing market conditions, alternative uses of capital and other factors, and will be determined at management’s discretion. The Company is not obligated to make any purchases under the program, and the program may be suspended or discontinued at any time.
Contractual Obligations
Capital commitments in the table below include contractual commitments to purchase machinery and equipment that have been approved by the Board of Directors. The capital commitments do not represent the entire anticipated purchases in the future but represent only those substantive items for which the Company is contractually obligated as of December 31, 2025. Also, the Company has operating leases and financing leases for certain offices, manufacturing facilities, land, office equipment and automobiles. Rental expenses relating to these leases were $3.7 million in 2025, $3.6 million in 2024, and $2.8 million in 2023.
The following table summarizes the Company’s contractual obligations at December 31, 2025:
Payment Due By Period
Total
Less
than
1 Year
Years
Years
More
than
5 Years
Capital commitments
Leases
Total
Critical Accounting Policies
The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States. When more than one accounting principle, or the method of its application, is generally accepted, management selects the principle or method that is appropriate in the Company’s specific
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circumstances. Application of these accounting principles requires management to make estimates about the future resolution of existing uncertainties; as a result, actual results could differ from these estimates.
In preparing these Consolidated Financial Statements, management has made its best estimates and judgments of the amounts and disclosures included in the Consolidated Financial Statements, giving due regard to materiality. The Company does not believe there is a great likelihood that materially different amounts would be reported under different conditions or using different assumptions pertaining to the accounting policies described below.
Revenue Recognition
The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers,” under which the unit of account is a performance obligation. Substantially all of our revenue is derived from fixed-price customer contracts and the majority of our customer contracts have a single performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. For customer contracts with multiple performance obligations, the Company allocates revenue to each performance obligation based on its relative standalone selling price, which is generally determined based on standalone selling prices charged to customers or using expected cost plus margin.
The transaction price for a customer contract is allocated to each distinct performance obligation and recognized as revenue when, or as, the Company’s performance obligation is satisfied. All of the Company's performance obligations, and associated revenue, are generally satisfied at a point in time, with the exception of certain highly customized pump products, which are satisfied over time as work progresses.
Accounting for long-term contracts involves the use of various techniques to estimate total contract revenue and costs. For long-term contracts, the Company estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract and recognizes that profit as performance obligations are satisfied. Contract estimates are based on various assumptions to project the outcome of future events that could span longer than one year. These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials and the performance of subcontractors as applicable.
As a significant change in one or more of these estimates could affect the profitability of our contracts, the Company reviews and updates its contract-related estimates regularly. Adjustments in estimated profit on contracts are accounted for under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date on a contract is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate.
Inventories and Related Allowance
Inventories are valued at the lower of cost or market value and have been reduced by an allowance for excess and obsolete inventories. The estimated allowance is based on a variety of factors, including historical inventory usage and management evaluations. Historically, the Company has not experienced substantive write-offs due to obsolescence. The Company uses the last-in, first-out (LIFO) method for the majority of its inventories.
Pension Plans and Other Postretirement Benefit Plans
The Company recognizes the obligations associated with its defined benefit pension plan and defined benefit health care plans in its Consolidated Financial Statements. The measurement of liabilities related to its pension plan and other postretirement benefit plans is based on management’s assumptions related to future events including interest rates, return on pension plan assets, rate of compensation increases and health care cost trend rates. Actual pension plan asset performance will either reduce or increase pension losses included in accumulated other comprehensive loss, which ultimately affects net income. The discount rates used to determine the present value of future benefits are based on estimated yields of investment grade fixed income investments.
The discount rates used to value pension plan obligations were 5.0% at December 31, 2025 and 5.3% at December 31, 2024. The discount rates used to value postretirement obligations were 5.1% at December 31, 2025 and 5.4% at December 31, 2024. The discount rates were determined based on the plan distinct projected cash flow and the Gallagher Regular yield curves. The expected rate of return on pension assets is designed to be a long-term assumption that will be subject to
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year-to-year variability. The rate for 2025 was 6.5% and for 2024 was 7.2%. Actual pension plan asset performance will either reduce or increase unamortized losses included in Accumulated other comprehensive loss, which will ultimately affect net income. The assumed rate of compensation increase was 3.5% in both 2025 and 2024.
Substantially all eligible retirees elect to take lump sum settlements of their pension plan benefits. When interest rates are low, this subjects the Company to the risk of exceeding an actuarial threshold computed on an annual basis and triggering a GAAP-required non-cash pension settlement loss, which occurred in 2025.
The assumption used for the rate of increase in medical costs over the next five years was 5.0% in 2025 and 4.8% in 2024.
Goodwill and Other Intangibles
The Company accounts for goodwill in a purchase business combination as the excess of the cost over the fair value of net assets acquired. Business combinations can also result in other intangible assets being recognized. Amortization of intangible assets, if applicable, occurs over their estimated useful lives.
Goodwill is tested annually for impairment as of October 1, or whenever events or changes in circumstances indicate there may be a possible permanent loss of value in accordance with ASC 350, “Intangibles - Goodwill and Other.”
Goodwill is tested for impairment at the reporting unit level and is based on the net assets for each reporting unit, including goodwill and intangible assets. The Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing a quantitative impairment assessment is unnecessary.
In assessing the qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we identify and assess relevant drivers of fair value and events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances and how these may impact a reporting unit’s fair value or carrying amount involves significant judgments and assumptions. The judgments and assumptions include the identification of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, Company-specific events and share price trends and making the assessment on whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact.
When performing a quantitative assessment of goodwill impairment if necessary, or in years where we elect to do so, a discounted cash flow model and a market based approach are used to estimate the fair value of each reporting unit. The discounted cash flow model considers forecasted cash flows discounted at an estimated weighted-average cost of capital. The forecasted cash flows are based on the Company’s long-term operating plan and the weighted-average cost of capital is an estimate of the overall after-tax rate of return. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the respective reporting units. The market based approach considers market multiples of corporations engaged in the same or similar line of business.
The Company performed qualitative analyses as of October 1, 2025 and 2024 for all of its reporting units except for National Pump Company (“National”) and Fill-Rite, concluding that it was more likely than not that the fair value of the reporting units exceeded the respective carrying amounts.
The Company performed a quantitative impairment analysis as of October 1, 2025 for National and Fill-Rite reporting units and concluded that the fair value of each reporting unit exceeded its carrying value by approximately 22% and 6% respectively, and therefore were not impaired. A sensitivity analysis was performed for each reporting unit, assuming a hypothetical 50 basis point decrease in the expected long-term growth rate or a hypothetical 50 basis point increase in the weighted average cost of capital, and both scenarios independently yielded an estimated fair value above carrying value. If National or Fill-Rite fail to experience growth or revise their long-term projections downward, they could be subject to impairment charges in the future. Goodwill relating to the National reporting unit is $13.6 million, or 1.6% of the Company’s December 31, 2025 total assets, and goodwill relating to the Fill-Rite reporting unit is $230.7 million, or 26.8% of the
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Company’s December 31, 2025 total assets. See Note 9 to the Consolidated Financial Statements, Goodwill and Other Intangible Assets.
Other indefinite-lived intangible assets primarily consist of trademarks and trade names. The fair value of these assets is also tested annually for impairment as of October 1, or whenever events or changes in circumstances indicate there may be a possible permanent loss of value. The fair value of these assets is determined using a royalty relief methodology similar to that employed when the associated assets were acquired, but using updated estimates of future sales, cash flows and profitability. For 2025 and 2024, the fair value of all indefinite lived intangible assets exceeded the respective carrying values.
Finite-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recovered through future net cash flows generated by the assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net undiscounted cash flows estimated to be generated by such assets. The Company was not aware of any events or changes in circumstances that indicate the carrying value of its finite-lived assets may not be recoverable. See Note 9 to the Consolidated Financial Statements, Goodwill and Other Intangible Assets.
Acquisitions
The Company allocates the purchase price of its acquisitions to the assets acquired, liabilities assumed, and noncontrolling interests based upon their respective fair values at the acquisition date. The Company utilizes management estimates and inputs from an independent third-party valuation firm to assist in determining these fair values.
The Company uses the income, market or cost approach (or a combination thereof) for the valuation as appropriate. The valuation inputs in these models and analyses are based on market participant assumptions. Management values property, plant and equipment using the cost approach supported where available by observable market data, which includes consideration of obsolescence. Management values acquired intangible assets using the relief from royalty method or excess earnings method, which are forms of the income approach supported by observable market data for peer companies. The significant assumptions used to estimate the value of the acquired intangible assets include discount rates and certain assumptions that form the basis of future cash flows (such as revenue growth rates, EBITDA margins, customer attrition rates, and royalty rates), which are considered Level 3 assets as the assumptions are unobservable inputs developed by the Company. Acquired inventories are recorded at fair value. For certain items, the carrying value is determined to be a reasonable approximation of fair value based on information available to the Company.
The excess of the acquisition price over estimated fair values is recorded as goodwill. Goodwill is adjusted for any changes to acquisition date fair value amounts made within the measurement period. Acquisition-related transaction costs are recognized separately from the business combination and expensed as incurred.
Other Matters
Certain transactions with related parties occur in the ordinary course of business and are not considered to be material to the Company’s consolidated financial position, net income or cash flows.
The Company does not have any off-balance sheet arrangements, financings or other relationships with unconsolidated “special purpose entities.”
ITEM 7A. QUANTITATIVE AND QUA LITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Exposure to foreign exchange rate risk is due to certain costs and revenue being denominated in currencies other than one of the Company’s subsidiaries functional currency. The Company is also exposed to market risk as the result of changes in interest rates which may affect the cost of financing. We continually monitor these risks and regularly develop appropriate strategies to manage them. Accordingly, from time to time, we may enter into certain derivative or other financial instruments. These financial instruments are used to mitigate market exposure and are not used for trading or speculative purposes.
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Interest Rate Risk
The results of operations are exposed to changes in interest rates primarily with respect to borrowings under the Company’s Senior Term Loan Facility and Credit Facility. Borrowings under the Senior Term Loan Facility and Credit Facility may be made either at (i) a base rate plus the applicable margin, which ranges from 0.50% to 1.25%, or at (ii) an Adjusted Term SOFR Rate, plus the applicable margin, which ranges from 1.5% to 2.25%. At December 31, 2025, the Company had $280.8 million in borrowings under the Senior Term Loan Facility and no borrowings under the Credit Facility. As of December 31, 2025, the applicable interest rates under the Senior Secured Credit Agreement were Adjusted Term SOFR plus 2.0%. See Note 4 - Financing Arrangements in the notes to our Consolidated Financial Statements.
To reduce the exposure to changes in the market rate of interest, effective October 31, 2022, the Company entered into interest rate swap agreements for a portion of the Senior Term Loan Facility. Terms of the interest rate swap agreements require the Company to receive a fixed interest rate and pay a variable interest rate. The interest rate swap agreements are designated as a cash flow hedge, and as a result, the mark-to-market gains or losses will be deferred and included as a component of accumulated other comprehensive income (loss) and reclassified to interest expense in the period during which the hedged transactions affect earnings. See “Derivative Financial Instruments” and “Interest Rate Derivatives” in the Notes to our Consolidated Financial Statements .
The Company estimates that a hypothetical increase of 100 basis points in interest rates would increase interest expense by approximately $1.5 million on an annual basis.
Foreign Currency Risk
The Company’s foreign currency exchange rate risk is limited primarily to the Euro, Canadian Dollar, South African Rand and British Pound. The Company manages its foreign exchange risk principally through invoicing customers in the same currency as is used in the market of the source of products. The foreign currency transaction gains (losses) for 2025, 2024 and 2023 were $(0.3) million, $(0.4) million and $(0.4) million, respectively, and are reported within Other (expense) income, net on the Consolidated Statements of Income.
ITEM 8. FINANCIAL STATEMENT S AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of The Gorman-Rupp Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of The Gorman-Rupp Company (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 2, 2026 expres sed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
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We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Fill-Rite Goodwill Impairment Analysis
Description of the Matter
At December 31, 2025, the Company’s total goodwill was $258.0 million, of which, $230.7 million related to the Fill-Rite reporting unit. As discussed in Note 1 and Note 9 of the consolidated financial statements, goodwill is tested for impairment at least annually on October 1 at the reporting unit level, or when events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company performed a quantitative analysis for the annual impairment testing of the Fill-Rite reporting unit using both a market approach and a discounted cash flow model to estimate the fair value of the reporting unit.
Auditing the Company’s Fill-Rite quantitative goodwill impairment analysis was complex and highly judgmental due to the significant estimation required in determining the fair value of the reporting unit. In particular, the fair value estimate using the discounted cash flow model was sensitive to significant assumptions such as the discount rate, discrete revenue growth rates, long-term growth rate and profitability assumptions. Elements of these significant assumptions are forward-looking and could be affected by future economic conditions and/or changes in customer preferences.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Fill-Rite reporting unit goodwill impairment analysis process, including controls over the significant assumptions mentioned above.
To test the estimated fair value used in the Fill-Rite reporting unit goodwill impairment analysis, we performed audit procedures that included, among others, assessing the fair value methodologies and testing the significant assumptions discussed above and the underlying data used in the analysis. For example, we compared the significant assumptions used by management to current industry and economic trends, changes to the Company’s business model, and other relevant factors, as applicable. We assessed the historical accuracy of management’s estimates. We also performed sensitivity analyses of significant assumptions, including the discount rate, discrete and long-term revenue growth rates, and profitability assumptions, to evaluate the changes in fair value that would result from changes in the assumptions and the potential impact on the Company’s conclusion of whether the goodwill was impaired. In addition, we involved our valuation specialist to assist with our evaluation of the methodology used by the Company and significant assumptions, including the discount rate.
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/s/ Ernst & Young LLP
We have served as the Company’s auditor since at least 1967 , but we are unable to determine the specific year.
Cleveland, Ohio
March 2, 2026
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The Gorman-Rupp Company
Consolidated Statements of Income
Year Ended December 31,
(Dollars in thousands, except share and per share amounts)
Net sales
Cost of products sold
Gross profit
Selling, general and administrative expenses
Amortization expense
Operating income
Interest expense
Other income (expense), net
Income before income taxes
Income taxes
Net income
Earnings per share
Average number of shares outstanding.
See notes to consolidated financial statements.
Consolidated Statements of Comprehensive Income
Year Ended December 31,
(Dollars in thousands)
Net income
Other comprehensive (loss) income, net of tax:
Cumulative translation adjustments
Cash flow hedging activity, net of tax
Pension and postretirement medical liability adjustments, net of tax
Other comprehensive income (loss)
Comprehensive income
See notes to consolidated financial statements.
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The Gorman-Rupp Company
Consolidated Balance Sheets
December 31,
(Dollars in thousands)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventories, net
Prepaid and other
Total current assets
Property, plant and equipment, net
Other assets
Other intangible assets, net
Goodwill
Total assets
Liabilities and equity
Current liabilities:
Accounts payable
Payroll and employee related liabilities
Commissions payable
Deferred revenue and customer deposits
Current portion of long-term debt
Accrued expenses
Total current liabilities
Pension benefits
Postretirement benefits
Long-term debt, net of current portion
Other long-term liabilities
Total liabilities
Equity:
Common shares, without par value:
Authorized - 35,000,000 shares;
Outstanding – 26,312,842 shares at December 31, 2025 and 26,227,540 shares at December 31, 2024 (after deducting treasury shares of 735,954 and 821,256 , respectively), at stated capital amounts
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total equity
Total liabilities and equity
See notes to consolidated financial statements.
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The Gorman-Rupp Company
Consolidated Statements of Cash Flows
Year Ended December 31,
(Dollars in thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
LIFO expense
Pension expense
Contributions to pension plan
Stock based compensation
Amortization of debt issuance fees
Deferred income tax charge (benefit)
Gain on sale of property, plant, and equipment
Other
Changes in operating assets and liabilities:
Accounts receivable, net
Inventories, net
Accounts payable
Commissions payable
Deferred revenue and customer deposits
Accrued expenses and other
Income taxes
Benefit obligations
Net cash provided by operating activities
Cash flows from investing activities:
Capital additions
Proceeds from sale of property, plant, and equipment
Other
Net cash used for investing activities
Cash flows from financing activities:
Cash dividends
Treasury share repurchases
Proceeds from bank borrowings
Payments to banks for borrowings
Debt issuance fees
Other
Net cash used for financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents:
Beginning of year
End of period
See notes to consolidated financial statements.
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The Gorman-Rupp Company
Consolidated Statements of Equity
Common Shares
Additional
Paid-
Retained
Accumulated
Other
Comprehensive
(Dollars in thousands, except share and per share amounts)
Shares
Dollars
In Capital
Earnings
(Loss) Income
Total
Balances December 31, 2022
Net income
Other comprehensive income
Stock based compensation
Treasury share repurchases
Cash dividends - $ 0.71 per share
Balances December 31, 2023
Net income
Other comprehensive loss
Stock based compensation
Treasury share repurchases
Cash dividends - $ 0.73 per share
Balances December 31, 2024
Net income
Other comprehensive loss
Stock based compensation
Treasury share repurchases
Cash dividends - $ 0.75 per share
Balances December 31, 2025
See notes to consolidated financial statements.
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The Gorman-Rupp Company
Notes to Consolidated Financial Statements
(Amounts in tables in thousands of dollars)
Note 1 – Summary of Significant Accounting Policies
General Information and Basis of Presentation
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 suppression, heating, ventilating and air conditioning (HVAC), military and other liquid-handling applications.
The Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. Earnings per share are calculated based on the weighted-average number of common shares outstanding.
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates.
Cash Equivalents and Short-Term Investments
The Company considers highly liquid instruments with maturities of 90 days or less to be cash equivalents. The Company periodically makes short-term investments for which cost approximates fair value.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are stated at the historical carrying amount net of allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for expected losses from the failure of its customers to make required payments for products delivered. The Company estimates this allowance based on knowledge of the financial condition of customers, review of historical receivables and reserve trends, current economic conditions in the company’s major markets and geographies, and other relevant information.
The allowance for doubtful accounts was $ 0.8 million at December 31, 2025 and $ 1.1 million at December 31, 2024 .
Inventories
The majority of the Company’s inventories are valued on the last-in, first-out (LIFO) method and stated at the lower of cost or market. All other inventories are stated at the lower of cost or net realizable value with cost determined using the first-in, first-out (FIFO) method. Cost components include materials, inbound freight costs, labor and allocations of fixed and variable overheads on an absorption costing basis.
The costs for approximately 65 % and 67 % of inventories at December 31, 2025 and 2024 , respectively, were determined using the last-in, first-out (LIFO) method. Current cost approximates replacement cost, or market, and LIFO cost is determined at the end of each fiscal year based on inventory levels on-hand at current replacement cost and a LIFO reserve. The Company uses the simplified LIFO method, under which the LIFO reserve is determined utilizing the inflation factor specified in the Producer Price Index for Machinery and Equipment – Pumps, Compressors and Equipment, as published by the U.S. Bureau of Labor Statistics. Interim LIFO calculations are based on management’s estimate of the expected year-end inflation index and, as such, are subject to adjustment each quarter including the fourth quarter when the inflation index for the year is finalized. When inflation increases, the LIFO reserve and non-cash expense increase.
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Property, plant and equipment
Property, plant and equipment are stated on the basis of cost. Repairs and maintenance costs are expensed as incurred. Depreciation for property, plant and equipment assets is computed using the straight-line method over the estimated useful lives of the assets and is included in Cost of products sold and Selling, general and administrative expenses based on the use of the assets. Depreciation expense was $ 15.3 million, $ 15.5 million, and $ 15.9 million for 2025, 2024, and 2023, respectively.
Depreciation of property, plant and equipment is determined based on the following lives:
Years
Buildings
Machinery and equipment
Software
Property, plant and equipment consist of the following:
Land
Buildings
Machinery and equipment
Less accumulated depreciation
Property, plant and equipment, net
Property, plant and equipment are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount may not be recovered through future net cash flows generated by the assets. Impairment losses may be recorded when the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts based on the excess of the carrying amounts over the estimated fair value of the assets. The Company was not aware of any events or changes in circumstances that indicated the carrying value of its property, plant and equipment may not be recoverable.
Goodwill and Identifiable Intangible Assets
Goodwill
Goodwill represents the excess of the cost of acquired businesses over the fair value of tangible assets and identifiable intangible assets purchased and liabilities assumed.
Goodwill is reviewed annually for impairment as of October 1 or whenever events or changes in circumstances indicate there may be a possible permanent loss of value using either a quantitative or qualitative analysis. For certain reporting units, the Company performs a quantitative analysis using both a market-based approach and a discounted cash flow model to estimate the fair value of our reporting units. This process requires significant judgements, including estimation of future cash flows, which is dependent on internal forecasts. The Company may otherwise elect to perform a qualitative analysis when deemed appropriate. A qualitative analysis may be performed by assessing certain trends and factors, including projected market outlook and growth rates, forecasted and actual sales and operating profit margins, discount rates, industry data and other relevant qualitative factors. These trends and factors are compared to, and based on, the assumptions used in the most recent quantitative assessment.
No impairment charges were recognized in any of the Company’s reporting units in 2025, 2024, or 2023. See Note 9 to the Consolidated Financial Statements, Goodwill and Other Intangible Assets.
Identifiable intangible assets
The Company’s primary identifiable intangible assets include customer relationships, technology and drawings, and trade names and trademarks. Identifiable intangible assets with finite lives are amortized and those identifiable intangible
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assets with indefinite lives are not amortized. Amortization for finite-lived intangible assets is computed using the straight-line method over the estimated useful lives of the assets and is included in Cost of products sold and Selling, general and administrative expenses based on the use of the assets. Amortization of finite-lived intangible assets is determined based on the following lives:
Years
Technology and drawings
Customer relationships
Other intangibles
Identifiable intangible assets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount may not be recovered through future net cash flows generated by the assets. Impairment losses may be recorded when the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts based on the excess of the carrying amounts over the estimated fair value of the assets. The Company was not aware of any events or changes in circumstances that indicated the carrying value of its finite-lived intangible assets may not be recoverable.
Identifiable intangible assets not subject to amortization are tested for impairment annually or more frequently if events warrant. The fair value of these assets is determined using a royalty relief methodology similar to that employed when the associated assets were acquired, but using updated estimates of future sales, cash flows and profitability. For 2025, 2024 and 2023, the fair value of indefinite lived intangible assets exceeded their carrying values.
For additional information about goodwill and other intangible assets, see Note 9 to the Consolidated Financial Statements, Goodwill and Other Intangible Assets.
Acquisitions
The Company allocates the purchase price of its acquisitions to the assets acquired, liabilities assumed, and noncontrolling interests based upon their respective fair values at the acquisition date. The Company utilizes management estimates and inputs from an independent third-party valuation firm to assist in determining these fair values.
The Company uses the income, market or cost approach (or a combination thereof) for the valuation as appropriate. The valuation inputs in these models and analyses are based on market participant assumptions. Management values property, plant and equipment using the cost approach supported where available by observable market data, which includes consideration of obsolescence. Management values acquired intangible assets using the relief from royalty method or excess earnings method, which are forms of the income approach supported by observable market data for peer companies. The significant assumptions used to estimate the value of the acquired intangible assets include discount rates and certain assumptions that form the basis of future cash flows (such as revenue growth rates, EBITDA margins, customer attrition rates, and royalty rates), which are considered Level 3 assets as the assumptions are unobservable inputs developed by the Company. Acquired inventories are recorded at fair value. For certain items, the carrying value is determined to be a reasonable approximation of fair value based on information available to the Company.
The excess of the acquisition price over estimated fair values is recorded as goodwill. Goodwill is adjusted for any changes to acquisition date fair value amounts made within the measurement period. Acquisition-related transaction costs are recognized separately from the business combination and expensed as incurred.
Revenue Recognition
The Company recognizes revenue when it transfers control of promised goods or services to its customers in an amount that reflects the consideration to which it expects to be entitled to in exchange for those goods or services.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct product or service to a customer, and is the unit of account in ASC 606. The transaction price for a customer contract is allocated to each distinct performance obligation and recognized as revenue when, or as, the Company’s performance obligation is satisfied. For product sales, other than
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long-term construction-type contracts, the Company recognizes revenue once control has passed at a point in time, which is generally when products are shipped. Payments received for product sales typically occur following delivery and the satisfaction of the performance obligation based upon the terms outlined in the contracts. Substantially all of our customer contracts are fixed-price contracts and the majority of our customer contracts have a single performance obligation, as the promise to transfer the individual products or services is not separately identifiable from other promises in the contract. For customer contracts with multiple performance obligations, the Company allocates revenue to each performance obligation based on its relative standalone selling price, which is generally determined based on standalone selling prices charged to customers or using expected cost plus margin.
All of the Company's performance obligations, and associated revenue, are generally transferred to customers at a point in time, with the exception of certain highly customized pump products, which are transferred to the customer over time.
The Company offers standard warranties for its products to ensure that its products comply with agreed-upon specifications in its contracts. For standard warranties, these do not give rise to performance obligations and represent assurance-type warranties.
Shipping and handling activities related to products sold to customers, whether performed before or after the customer obtains control of the products, are generally accounted for as activities to fulfill the promise to transfer the products and not as a separate performance obligation.
Contract Estimates
Accounting for long-term contracts involves the use of various techniques to estimate total contract revenue and costs. For long-term contracts, the Company estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract and recognizes that profit as performance obligations are satisfied. Contract estimates are based on various assumptions to project the outcome of future events that could span longer than one year. These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, and the performance of subcontractors as applicable.
As a significant change in one or more of these estimates could affect the profitability of our contracts, the Company reviews and updates its contract-related estimates regularly. Adjustments in estimated profit on contracts are accounted for under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date on a contract is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate.
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheets. For certain highly customized pump products, revenue is recognized over time before the customer is invoiced, resulting in contract assets. Sometimes the Company receives advances or deposits from its customers before revenue is recognized, resulting in contract liabilities. These contract assets and liabilities are reported on the Consolidated Balance Sheets as a component of Other assets and Deferred revenue and customer deposits, respectively, on a contract-by-contract basis at the end of each reporting period.
Income Taxes
Income tax expense includes United States federal, state, local and international income taxes. Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the financial reporting and the tax basis of existing assets and liabilities and for loss carryforwards. The tax rate used to determine the deferred tax assets and liabilities is the enacted tax rate for the year and manner in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.
The Company accounts for the global intangible low-taxed income (“GILTI”) tax in the period in which it is incurred.
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Pension and Other Postretirement Benefits
The Company sponsors a defined benefit pension plan covering certain domestic employees. Additionally, the Company sponsors defined contribution pension plans made available to all domestic and Canadian employees.
The Company also sponsors a non-contributory defined benefit postretirement health care plan that provides health benefits to certain domestic and Canadian retirees and their spouses. The Company funds the cost of these benefits as incurred.
The determination of the Company’s obligation and expense for pension and other postretirement benefits is dependent on its selection of certain assumptions used by actuaries in calculating such amounts, which are described in Note 8, Pensions and Other Postretirement Benefits. The Company recognizes the funded status of its defined benefit pension plan as an asset or liability in the Consolidated Balance Sheets and recognizes the change in the funded status in the year in which the change occurs through accumulated other comprehensive loss in the Consolidated Balance Sheets.
Concentration of Credit Risk
The Company generally does not require collateral from its customers and has a very good collection history. There were no sales to a single customer that exceeded 10% of total net sales for the years ended December 31, 2025, 2024 or 2023 .
Shipping and Handling Costs
The Company classifies all amounts billed to customers for shipping and handling as revenue and reflects related shipping and handling costs in Cost of products sold. Shipping and handling costs that are not billable to customers are included in selling, general and administrative expenses.
Advertising
The Company expenses all advertising costs as incurred, which for the years ended December 31, 2025, 2024 and 2023 totaled $ 4.0 million, $ 4.5 million, and $ 4.3 million, respectively.
Product Warranties
A liability is established for estimated future warranty and service claims based on historical claims experience and specific product failures. The Company expenses warranty costs directly to Cost of products sold. Changes in the Company’s product warranty liability are:
Balance at beginning of year
Provision
Claims
Balance at end of year
Stock based compensation
Expense is recognized for all awards of stock-based compensation by allocating the aggregate grant date fair value over the vesting period. No expense is recognized for any stock options, restricted or deferred shares or restricted stock units ultimately forfeited because the recipients fail to meet vesting requirements. The Company accounts for forfeitures as they occur, rather than estimating expected forfeitures. Refer to Note 12 – Stock based Compensation to the consolidated financial statements for additional details.
Foreign Currency Translation
Assets and liabilities of the Company’s operations outside the United States which are accounted for in a functional currency other than U.S. dollars are translated into U.S. dollars using year-end exchange rates. Revenues and expenses
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are translated at weighted-average exchange rates effective during the year. Foreign currency translation gains and losses are included as a component of Accumulated other comprehensive loss within Equity.
Gains and losses resulting from foreign currency transactions, the amounts of which are not material, are included in Other (expense) income, net.
Fair Value
The carrying value of Cash and cash equivalents, Accounts receivable and Accounts payable approximates fair value based on the short-term nature of these instruments. The carrying value of long term debt, including the current portion, approximates fair value as the variable interest rates approximate rates available to other market participants with comparable credit risk and interest rates as of December 31, 2025 were approximately the same as interest rates at the time the fixed rate agreement was entered. The Company does not recognize any non-financial assets at fair value.
Derivative Financial Instruments
The Company uses interest rate swap agreements to partially reduce risks related to floating rate financing agreements that are subject to changes in the market rate of interest. Terms of the interest rate swap agreements require the Company to receive a variable interest rate and pay a fixed interest rate. The Company’s interest rate swap agreements and its variable rate financings are predominately based upon an Adjusted Term SOFR Rate. For cash flow hedges, the Company formally assesses, both at inception and on a quarterly basis thereafter, whether the designated derivative instrument is highly effective in offsetting changes in cash flows of the hedged item. Changes in the fair value of interest rate swap agreements that are effective as hedges are recorded in Accumulated other comprehensive income (AOCI). Deferred gains or losses are reclassified from AOCI to the Consolidated Statements of Operations in the same period as the gains or losses from the underlying transactions are recorded and are generally recognized in interest expense. The Company discontinues hedge accounting prospectively when the derivative is not highly effective as a hedge, the underlying hedged transaction is no longer probable, or the hedging instrument expires, or is sold, terminated or exercised.
Cash flows from hedging activities are reported in the Consolidated Statements of Cash Flows in the same classification as the hedged item, generally as a component of cash flows from operations.
New Accounting Pronouncements
The Company considers the applicability and impact of all Accounting Standard Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). All recently issued ASUs were assessed and determined either to be not applicable or are expected to have minimal impact on the Company’s Consolidated Financial Statements.
The FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The standard is intended to enhance the transparency and decision usefulness of income tax disclosures. This amendment modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold, (2) the amount of income taxes paid, net of refunds received, disaggregated by federal, state, and foreign taxes, as well as individual jurisdictions in which income taxes paid is equal to or greater than 5 percent of total income taxes paid, (3) the income or loss from continuing operations before income tax expense or benefit disaggregated between domestic and foreign, and (4) income tax expense or benefit from continuing operations disaggregated by federal, state and foreign. The Company adopted ASU 2023-09 retrospectively during the year ended December 31, 2025 . See Note - 7 Income Taxes in the accompanying notes to the consolidated financial statements.
The FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). The standard is intended to enhance the transparency of business expenses in commonly presented expense captions. This amendment requires entities to disclose the following amounts in each relevant income statement expense caption (1) purchases of inventory, (2) employee compensation, (3) depreciation, and (4) intangible asset amortization. Entities are also required to disclose the total amount of selling expense and the entities definition of selling expenses. The standard is effective for annual periods beginning after December 15, 2026. The standard should be applied on a prospective basis, while retrospective application is permitted. The Company is evaluating the impact of the standard on the Company's financial disclosures.
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Note 2 - Revenue
Disaggregation of Revenue
The following tables disaggregate total net sales by end market and geographic location:
End Market
Industrial
Fire
Agriculture
Construction
Municipal
Petroleum
OEM
Repair parts
Total net sales
Geographic Location
United States
Foreign countries
Total net sales
International sales represented approximately 24 % of total net sales for 2025 , 25 % for 2024 and 25 % for 2023, and were made to customers in many different countries around the world.
On December 31, 2025 , the Company had $ 244.0 million of remaining performance obligations, also referred to as backlog. The Company expects to recognize as revenue substantially all of its remaining performance obligations within one year.
The Company’s contract assets and liabilities as of December 31, 2025 and 2024 were as follows:
Contract assets
Contract liabilities
Revenue recognized for the year ended December 31, 2025 that was included in the contract liability balance at December 31, 2024 was $ 6.7 million. Revenue recognized for the year ended December 31, 2024 that was included in the contract liability balance at December 31, 2023 was $ 11.0 million.
Note 3 – Inventories
LIFO inventories are stated at the lower of cost or market and all other inventories are stated at the lower of cost or net realizable value. Replacement cost approximates current cost and the excess over LIFO cost was approximately $ 104.6 million and $ 100.2 million at December 31, 2025 and 2024 , respectively. Allowances for excess and obsolete inventory totaled $ 7.3 million at December 31, 2025 and $ 6.8 million at December 31, 2024.
Pre-tax LIFO expense was $ 4.4 million, $ 5.1 million, and $ 6.9 million for the years ended December 31, 2025, 2024, and 2023, respectively.
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Inventories are comprised of the following:
Raw materials and in-process
Finished parts
Finished products
Total net inventories
Note 4 – Financing Arrangements
Debt consisted of:
Senior Secured Credit Agreement
Credit Facility
6.40% Note Agreement
Total debt
Unamortized discount and debt issuance fees
Total debt, net
Less: current portion of long-term debt
Total long-term debt, net
Maturities of long-term debt in the next five fiscal years, and the remaining years thereafter, are as follows:
Thereafter
Total
Amended and Restated Senior Secured Credit Agreement
On May 31, 2024, the Company entered into an Amended and Restated Senior Secured Credit Agreement (the “Amended and Restated Senior Credit Agreement”) with several lenders, which amended, extended, and restated the Company’s existing Senior Secured Credit Agreement, dated as of May 31, 2022. The Amended and Restated Senior Credit Agreement provides for a term loan facility in an aggregate principal amount of $ 370 million (the “Senior Term Loan Facility”), a revolving credit facility in an aggregate principal amount of up to $ 100 million (the “Credit Facility”), a letter of credit sub-facility in the aggregate available amount of up to $ 30 million, as a sublimit of the Credit Facility, and a swing line sub-facility in the aggregate available amount of up to $ 20 million, as a sublimit of the Credit Facility. The obligations of the Company under the Amended and Restated Senior Credit Agreement are secured by a first priority lien on substantially all of its personal property, and guaranteed by certain of the Company’s direct, wholly-owned subsidiaries (the “Guarantors”), which guarantees are secured by a first priority lien in substantially all of the Guarantors’ personal property.
The Amended and Restated Senior Credit Agreement has a maturity date of May 31, 2029, with the Senior Term Loan Facility requiring quarterly installment payments commencing on September 30, 2024 and continuing on the last day of each consecutive December, March, June and September thereafter.
At the option of the Company, borrowings under the Senior Term Loan Facility and under the Credit Facility bear interest at either a base rate or at an Adjusted Term SOFR Rate (as defined in the Amended and Restated Senior Credit Agreement), plus the applicable margin, which ranges from 0.5 % to 1.25 % for base rate loans and 1.50 % to 2.25 % for Adjusted Term SOFR Rate loans. The applicable margin is based on the Company’s total leverage ratio. At December 31, 2025 , the applicable interest rate under the Amended and Restated Senior Secured Credit Agreement was Adjusted Term SOFR plus 2.00 %, or 5.8 %.
The Amended and Restated Senior Credit Agreement requires the Company to maintain a consolidated total net leverage ratio not to exceed 4.50 to 1.00 for each of the four consecutive fiscal quarter periods ending June 30, 2024 and September 30, 2024, decreasing to 4.25 to 1.00 for each of the four consecutive quarters ending December 31, 2024 and March 31, 2025, decreasing to 4.00 to 1.00 for each of the four consecutive fiscal quarter periods ending June 30, 2025
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and September 30, 2025, and decreasing to 3.50 to 1.00 for the four consecutive fiscal quarter periods ending December 31, 2025 and each of the four consecutive fiscal quarter periods ending thereafter.
The Amended and Restated Senior Credit Agreement requires the Company to maintain an interest coverage ratio of not less than 3.00 to 1.00 for any four consecutive fiscal quarter period.
The Amended and Restated Senior Credit Agreement contains customary affirmative and negative covenants, including among others, limitations on the Company and its subsidiaries with respect to the incurrence of liens and indebtedness, dispositions of assets, mergers, transaction with affiliates, and the ability to make or pay dividends in excess of certain thresholds.
The Amended and Restated Senior Credit Agreement also contains customary provisions requiring certain mandatory prepayments, including, among others, prepayments of the net cash proceeds from any non-ordinary course sale of assets, and net cash proceeds of any non-permitted indebtedness.
6.40% Note Agreement
On May 31, 2024, the Company entered into a Note Agreement (the “6.40% Note Agreement”) whereby the Company issued $ 30.0 million aggregate principal amount of 6.40% senior secured notes (the “6.40% Notes”). The Company’s obligations under the 6.40% Notes are secured by a first priority lien on substantially all of its personal property, and guaranteed by each of the Guarantors, which guarantees are secured by a first priority lien in substantially all of the Guarantors’ personal property. The liens granted under the 6.40% Notes are equal in priority to those granted pursuant to the Amended and Restated Senior Credit Agreement.
The 6.40% Note Agreement has a maturity date of May 31, 2031 and interest is payable semiannually on the last day of May and November in each year.
The 6.40% Note Agreement includes representations, warranties, covenants and events of default, substantially consistent with those contained in the Amended and Restated Senior Credit Agreement.
Subordinated Credit Agreement
On May 31, 2024, using the proceeds from the upsized Amended and Restated Senior Secured Credit Agreement and the issuance of the 6.40% Notes, as well as approximately $ 10.0 million of cash on hand, the Company repaid in full all outstanding indebtedness and terminated all commitments and obligations under its unsecured subordinated credit agreement (the “Subordinated Credit Agreement”), dated as of May 31, 2022.
The Company’s payment to the lenders under the Subordinated Credit Agreement was approximately $ 91.8 million, which included a make-whole payment of approximately $ 1.8 million. This amount satisfied all of the Company’s obligations under the Subordinated Credit Agreement, which would have matured on December 1, 2027.
Other
In 2024, the Company expensed $ 1.3 million of transaction related fees and recorded a non-cash charge of $ 4.4 million to write-off unamortized previously deferred transaction fees related to both the Subordinated Credit Agreement and a portion of the existing Senior Term Loan Facility.
In 2024, the Company incurred total issuance costs of approximately $ 0.7 million related to the Amended and Restated Senior Secured Credit Agreement and the 6.40% Note Agreement. These costs are being amortized to interest expense over the respective terms.
Total cash interest paid was $ 22.2 million in 2025 , $ 33.6 million in 2024 , and $ 35.9 million in 2023.
The Company was in compliance with all debt covenants as of December 31, 2025, 2024 and 2023.
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Interest Rate Derivatives
In 2022, the Company entered into interest rate swaps that hedge interest payments on its Senior Term Loan Facility. All swaps have been designated as cash flow hedges. The following table summarizes the notional amounts, related rates and remaining terms of interest swap agreements as of December 31:
Notional Amount
Average Fixed Rate
Term
Interest rate swaps
Extending to May 2027
The fair value of the Company’s interest rate swaps was a payable of $ 1.3 million as of December 31, 2025 and a payable of $ 0.1 million as of December 31, 2024. The fair value was based on inputs other than quoted prices in active markets for identical assets that are observable either directly or indirectly and therefore considered level 2. The mark-to-market effect of interest rate swap agreements that are considered effective as hedges has been included in Accumulated other comprehensive loss. The interest rate swap agreements held by the Company on December 31, 2025 are expected to continue to be effective hedges.
The following table summarizes the fair value of derivative instruments as of December 31, as recorded in the Consolidated Balance Sheets:
Current Assets:
Prepaid and Other
Current liabilities:
Accrued expenses
Long-term liabilities:
Other long-term liabilities
Total derivatives
The following table summarizes total gains (losses) recognized on derivatives in Accumulated Other Comprehensive Income (Loss) for the years ended December 31, 2025, 2024 and 2023:
Derivatives in Cash Flow Hedging Relationships
Amount of Gain (Loss) Recognized in AOCI on Derivatives
Interest rate swaps
The effects of derivative instruments on the Company’s Consolidated Statements of Results of Operations for the years ended December 31, 2025, 2024 and 2023 are as follows:
Location of Gain (Loss) Reclassed from AOCI into Income (Effective Portion)
Amount of Gain (Loss) Reclassed from AOCI into Income (Effective Portion)
Interest expense
Note 5 – Leases
The Company is currently a lessee under a number of operating leases and finance leases for certain offices, manufacturing facilities, land, office equipment and automobiles, none of which are material to its operations. The Company’s leases generally have remaining lease terms of 1 year to 5 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within one year . The Company entered into 20 year lease agreement for a commercial and industrial building in Lenexa, Kansas to replace its existing building in
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2023. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives, or other build-out clauses. Further, the leases do not contain contingent rent provisions.
Supplemental information related to leases and the Company’s Consolidated Financial Statements is as follows:
Components of lease costs:
Operating lease costs
Short-term lease costs
Finance lease costs
Total lease costs
Weighted average remaining lease term (years):
Operating leases
Finance leases
Weighted average discount rate:
Operating leases
Finance leases
December 31, 2025
Operating
Leases
Financing
Leases
Total
Leases
Other assets - right-of-use assets
Lease liabilities included in:
Accrued expenses - current portion of lease liabilities
Other long-term liabilities - non-current portion of lease liabilities
Total lease liabilities
December 31, 2024
Operating
Leases
Financing
Leases
Total
Leases
Other assets - right-of-use assets
Lease liabilities included in:
Accrued expenses - current portion of lease liabilities
Other long-term liabilities - non-current portion of lease liabilities
Total lease liabilities
Maturities of lease liabilities as of December 31, are as follows:
Thereafter
Thereafter
Total lease payments
Total lease payments
Less: Interest
Less: Interest
Present value of lease liabilities
Present value of lease liabilities
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Note 6 – Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss as reported in the Consolidated Balance Sheets are:
Currency
Translation
Adjustments
Deferred
Gain (Loss)
on Cash Flow
Hedging
Pension and
OPEB
Adjustments
Accumulated
Other
Comprehensive
(Loss) Income
Balance at December 31, 2022
Reclassification adjustments
Current period benefit (charge)
Income tax benefit
Balance at December 31, 2023
Reclassification adjustments
Current period benefit (charge)
Income tax benefit
Balance at December 31, 2024
Reclassification adjustments
Current period benefit (charge)
Income tax benefit
Balance at December 31, 2025
Note 7 – Income Taxes
The components of Income before income taxes are:
United States
Foreign countries
Total
The components of income tax expense are:
Current expense:
Federal
Foreign
State and local
Deferred expense (benefit):
Federal
Foreign
State and local
Income tax expense
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The reconciliation between income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes is:
Amount
Amount
Amount
U.S. federal statutory tax rate
State and local income taxes, net of federal tax benefit
Tax credits:
Research and Development (R&D)
Other
Foreign tax effects
Effect of cross border tax laws:
Foreign-derived intangible income
Other
Unrecognized tax benefits
Nontaxable or nondeductible items
Other
Income tax expense
In 2025, California, Georgia, Kansas, and the City of Mansfield made up the majority of the state and local income taxes, net of federal effect category. In 2024, Illinois, Minnesota, Pennsylvania, Texas and the City of Mansfield made up the majority of the state and local income taxes, net of federal effect category. In 2023, Florida, Illinois, Louisiana, Texas, and the City of Mansfield made up the majority of the state and local income taxes, net of federal effect category.
Income taxes paid consist of:
Federal
Foreign:
Africa
Canada
Ireland
Other
State and local
Total taxes paid
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Deferred income tax assets and liabilities consist of:
December 31,
Deferred tax assets:
Inventories
Accrued liabilities
Postretirement health benefits obligation
Pension obligation
Lease liabilities
Capitalized R&D
Interest
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
Leases - right of use assets
Total deferred tax liabilities
Net deferred tax assets (liabilities)
The Company had state tax credit carryforwards of $ 0.4 million as of both December 31, 2025 and 2024, which will expire incrementally between 2026 and 2037.
The Company had valuation allowances of $ 0.5 m illion at December 31, 2025 and $ 0.4 million at December 31, 2024, against certain of its deferred tax assets. ASC 740, Income Taxes, requires that a valuation allowance be recorded against deferred tax assets when it is more likely than not that some or all of a Company’s deferred tax assets will not be realized based on available positive and negative evidence.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Balance at beginning of year
Additions based on tax positions related to the current year
Additions based on tax positions related to the prior year
Reductions due to lapse of applicable statute of limitations
Balance at end of year
Total unrecognized tax benefits were $ 3.4 million at December 31, 2025 and $ 0.7 million at December 31, 2024. The total amount of unrecognized tax benefits that, if ultimately recognized, would reduce the Company’s annual effective tax rate were $ 0.7 million at December 31, 2025 and $ 0.6 million at December 31, 2024.
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense for all periods presented. The Company accrued approximately $ 0.3 mill ion for the payment of interest and penalties at December 31, 2025 , and $ 0.2 million at each of December 31, 2024 and 2023.
The Company is subject to income taxes in the U.S. federal and various state, local and foreign jurisdictions. Income tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before 2020 .
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Note 8 – Pensions and Other Postretirement Benefits
The Company sponsors a defined benefit pension plan (“GR Plan”) covering certain domestic employees. Benefits are based on each covered employee’s years of service and compensation. The GR Plan is funded in conformity with the funding requirements of applicable U.S. regulations. The GR Plan was closed to new participants effective January 1, 2008. Employees hired after this date, in eligible locations, participate in an enhanced 401(k) plan instead of the defined benefit pension plan. Employees hired prior to this date continue to accrue benefits.
Additionally, the Company sponsors defined contribution pension plans made available to all domestic and Canadian employees. Total contributions to the plans were $ 5.1 million for 2025 , $ 4.8 million for 2024 , and $ 4.3 million for 2023.
The Company also sponsors a non-contributory defined benefit postretirement health care plan that provides medical benefits to certain domestic and Canadian retirees and eligible spouses and dependent children. The Company funds the cost of these benefits as incurred. For measurement purposes, and based on maximum benefits as defined by the plan, a 5.3 % annual rate of increase in the per capita cost of covered health care benefits for all retirees was assumed in estimating the projected postretirement benefit obligation at December 31, 2025 , which is expected to remain constant going forward. A 5.0 % percent annual rate of increase was assumed in estimating the projected benefit obligation at December 31, 2024 and in calculating 2025 periodic benefit cost.
The Company recognizes the obligations associated with its defined benefit pension plan and defined benefit postretirement health care plan in its Consolidated Financial Statements. The following table presents the plans’ funded status as of the measurement date, December 31, reconciled with amounts recognized in the Company’s Consolidated Balance Sheets:
Pension Plan
Postretirement Plan
Accumulated benefit obligation at end of year
Change in projected benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Plan Changes
Settlement
Benefits paid
Settlement Payments
Effect of foreign exchange
Actual expenses
Actuarial (gain)/loss
Benefit obligation at end of year
Change in plan assets:
Plan assets at beginning of year
Actual return on plan assets
Employer contributions
Benefits paid
Settlement Payments
Actual expenses
Plan assets at end of year
Funded status at end of year
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Pension Plan
Postretirement Plan
Amounts recognized in the Consolidated Balance Sheets consist of:
Current liabilities
Noncurrent liabilities
Total assets (liabilities)
Amounts recognized in Accumulated other comprehensive loss consist of:
Net actuarial loss
Deferred tax (benefit) expense
After tax actuarial loss
Components of net periodic benefit cost:
Pension Plan
Service cost
Interest cost
Expected return on plan assets
Recognized actuarial loss
Settlement loss
Net periodic benefit cost
Other changes in pension plan assets and benefit obligations recognized in other comprehensive loss:
Net (gain) loss
Total expense recognized in net periodic benefit cost and other comprehensive income
Postretirement Plan
Service cost
Interest costs
Prior service cost recognition
Recognized actuarial loss (gain)
Net periodic benefit cost
Other changes in postretirement plan assets and benefit obligations recognized in other comprehensive loss:
Net loss (gain)
Total expense (benefit) recognized in net periodic benefit cost and other comprehensive income
The components of net periodic benefit cost other than the service cost component are included in Other income (expense), net in the Consolidated Statements of Income.
In 2025 , the Company recorded pre-tax non-cash pension settlement charges of $ 1.2 million driven by lump-sum distributions discussed above. These charges were the result of lump-sum payments to retirees which exceeded the GR Plan’s actuarial service and interest cost thresholds. The re was no pension settlement charges recorded in 2024 or 2023.
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The prior service cost is amortized on a straight-line basis over the average estimated remaining service period of active participants. The unrecognized actuarial gain or loss in excess of the greater of 10 % of the benefit obligation or the market value of plan assets is also amortized on a straight-line basis over the average estimated remaining service period of active participants.
Pension Plan
Postretirement
Plan
Weighted-average assumptions used to determine benefit obligations at December 31:
Discount rate
Rate of compensation increase
Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31:
Discount rate
Expected long-term rate of return on plan assets
Rate of compensation increase
To enhance the Company’s efforts to mitigate the impact of the GR Plan on its financial statements, the Company utilizes a liability driven investing model to more closely align assets with liabilities based on when the liabilities are expected to come due. Currently, based on 2025 funding levels, equities may comprise between 5 % and 35 % of the GR Plan’s market value. Fixed income investments may comprise between 49 % and 70 % of the GR Plan’s market value. Alternative investments may comprise between 3 % and 13 % of the GR Plan’s market value. Cash and cash equivalents (including all senior debt securities with less than one year to maturity) may comprise between 0 % and 20 % of the GR Plan’s market value.
Financial instruments included in pension plan assets are categorized into a fair value hierarchy of three levels, based on the degree of subjectivity inherent in the valuation methodology. Level 1 assets are based on unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets. Level 2 assets are valued at inputs other than quoted prices in active markets for identical assets that are observable either directly or indirectly for substantially the full term of the assets. Level 3 assets are valued based on unobservable inputs for the asset (i.e., supported by little or no market activity). These inputs include management’s own assessments about the assumptions that market participants would use in pricing assets (including assumptions about risk). The level in the fair value hierarchy within which the fair value measurement is classified is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The following tables set forth by asset class the fair value of plan assets for the years ended December 31, 2025 and 2024:
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Plan Assets
at December
Equity
Fixed income
Mutual funds
Money funds and cash
Total fair value of Plan assets
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Quoted
Prices in
Active
Markets
for Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Plan Assets
at December
Equity
Fixed income
Mutual funds
Money funds and cash
Total fair value of Plan assets
Contributions
The Company expects to contribute up to $ 2.9 m illion to the GR Plan in 2026.
Expected future benefit payments
The following benefit payments are expected to be paid as follows based on actuarial calculations:
Thereafter
Pension
Postretirement
For measurement purposes and based on maximum benefits as defined by the GR Plan, a 5.0 % annual rate of increase in the per capita cost of covered health care benefits for all retirees was assumed as of December 31, 2025 and 5.1 % in 2024 and is expected to remain constant going forward .
A one percentage point change in the assumed rate of return on the GR Plan assets is estimated to have an approximate $ 0.5 million effect on net periodic benefit cost. Additionally, a one percentage point increase in the discount rate is estimated to have a $ 1.2 million decrease in net periodic benefit cost, while a one percentage point decrease in the discount rate is estimated to have a $ 1.5 milli on increase in net periodic benefit cost.
Note 9 – Goodwill and Other Intangible Assets
Changes in the carrying value of goodwill and other intangible asset during 2025:
Historical Cost of Intangible Assets
December 31, 2024
Foreign
Currency
December 31, 2025
Customer relationships
Technology and drawings
Other intangibles
Total finite-lived intangible assets
Trade names
Goodwill
Total
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The major components of Goodwill and other intangible assets are:
Historical
Cost
Accumulated
Amortization
Historical
Cost
Accumulated
Amortization
Finite-lived intangible assets:
Customer relationships
Technology and drawings
Other intangibles
Total finite-lived intangible assets
Trade names and trademarks
Goodwill
Total
Amortization of intangible assets was $ 12.4 million, $ 12.4 million and $ 12.6 million in 2025, 2024 and 2023 , respectively. The following table summarizes the future estimated amortization expense relating to our intangible assets as of December 31, 2025 (in thousands):
Thereafter
Total
For 2025, the Company used a quantitative analysis for the annual goodwill impairment testing as of October 1 for its National and Fill-Rite reporting units. The fair values of these reporting units was estimated using both a discounted cash flow model and a market-based approach. The discounted cash flow model considered forecasted cash flows discounted at an estimated weighted-average cost of capital. The forecasted cash flows were based on the Company’s long-term operating plan and a terminal value was used to estimate the cash flows beyond the period covered by the operating plan. The weighted-average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt market holders of a business enterprise. The market-based approach considers market prices of corporations engaged in the same or similar line of business. These analyses require the exercise of significant judgments, including judgments about appropriate discount rate, discrete revenue growth rates, expected long term growth rate, and profitability assumptions. Sensitivity analyses were performed around these assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values.
The results of these goodwill impairment tests indicated that no impairment existed at National or Fill-Rite. The Company’s annual impairment analysis performed as of October 1, 2025 concluded that the fair value of National and Fill-Rite exceeded carrying value by 22 % and 6 %, respectively. Sensitivity analyses were performed for the National and Fill-Rite reporting units using a discounted cash flow model, assuming a hypothetical 50 basis point decrease in the expected long-term growth rate or a hypothetical 50 basis point increase in the weighted average cost of capital, and both scenarios independently yielded estimated fair values above carrying value for both the National and Fill-Rite reporting units. If National or Fill-Rite fails to experience growth or revises its long-term projections downward, they could be subject to impairment charges in the future. Goodwill relating to the National reporting unit is $ 13.6 million, or 1.6 % of the Company’s December 31, 2025 total assets and goodwill relating to the Fill-Rite reporting unit is $ 230.7 million, or 26.8 % of the Company’s December 31, 2025 total assets.
For 2025, for all other reporting units, the Company used a qualitative analysis for goodwill impairment testing as of October 1. This qualitative assessment included consideration of current industry and market conditions and circumstances as well as any mitigating factors that would most affect the fair value of the Company and these reporting units. Based on the assessment and consideration of the totality of the facts and circumstances, including the business environment in the fourth quarter of 2025 , the Company determined that it was not more likely than not that the fair value of the Company or these reporting units is less than their respective carrying amounts. As such, no goodwill impairments for these reporting units were recorded for the year ended December 31, 2025.
Other indefinite-lived intangible assets primarily consist of trademarks and trade names. The fair value of these assets is also tested annually for impairment as of October 1, or whenever events or changes in circumstances indicate there may be a possible permanent loss of value. The fair value of these assets is determined using a royalty relief methodology
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similar to that employed when the associated assets were acquired, but using updated estimates of future sales, cash flows and profitability. For 2025 and 2024 the fair value of all indefinite lived intangible assets exceeded the respective carrying values.
Finite-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recovered through future net cash flows generated by the assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net undiscounted cash flows estimated to be generated by such assets. The Company was not aware of any events or changes in circumstances that indicate the carrying value of its finite-lived intangible assets may not be recoverable.
Note 10 – Business Segment Information
The Company operates in one business segment comprising the design, manufacture and sale of pumps and pump systems. The Company’s products are used in water, wastewater, construction, industrial, petroleum, original equipment, agriculture, fire suppression, heating, ventilation and air conditioning (HVAC), military and other liquid-handling applications.
The pumps and pump systems are marketed in the United States and worldwide through a broad network of distributors, through manufacturers’ representatives (for sales to many original equipment manufacturers), through third-party distributor catalogs, and by direct sales. International sales are made primarily through foreign distributors and representatives.
The Company's chief operating decision maker ("CODM") is its chief executive officer , who reviews financial information presented on a consolidated basis. The CODM uses consolidated operating income and net income to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the allocation of capital between reinvestment in the business, the payment of dividends, paying down debt, and/or acquisitions. The measure of segment assets is reported on the balance sheet as total consolidated assets.
The following table presents selected financial information with respect to the Company’s single operating segment for the years ended December 31, 2025, 2024 and 2023:
Net sales
Less
Cost of material
Labor
Overhead
Selling
General and administrative
Amortization expense
Operating income
Other income (expense):
Interest expense
Other income (expense)
Income before income taxes
Income taxes
Net income
The Company sells to approximately 140 countries around the world. The Company attributes revenues to individual countries based on the customer location to which finished products are shipped. The following tables disaggregate total net sales by geographic location:
Geographic Location
United States
Foreign Countries
Total net sales
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As of the years ending December 31, 2025 and 2024, 88.5 % and 90.2 %, respectively, of the Company’s long-lived assets were located in the United States. For the years ended De cember 31, 2025 and 2024 , no individual foreign country held more than 10% of consolidated long-lived assets nor was responsible for more than 10% of consolidated revenue.
Note 11 – Common Share Repurchases
During the years ended December 31, 2025 and 2024 , the Company repurchased 30,371 and 7,348 shares for $ 1.2 million and $ 0.3 million, respectively, in the surrender of common shares to cover taxes in connection with the vesting of stock awards. The shares repurchased to cover taxe s were not part of the share purchase program. As of December 31, 2025 , the Company had $ 48.1 million available for repurchase under the share repurchase program.
Note 12 – Stock Based Compensation
On April 25, 2024, the shareholders of the Company approved the 2024 Omnibus Incentive Plan ("2024 Plan"), which replaced the 2015 Omnibus Incentive Plan (“2015 Plan”) and 2016 Non-Employee Directors’ Compensation Plan (the “Directors’ Plan”). The 2024 Incentive Plan reserves for issuance under equity awards 800,000 common shares together with the 424,771 shares and the 14,500 shares that were then-remaining available under the 2015 Plan and the Directors’ Plan, respectively, at the time the 2024 Plan was approved. Under the 2024 Plan, the Company is authorized to grant restricted stock, restricted stock units, performance-based awards, stock options, stock appreciation rights, and other share based awards. At December 31, 2025 , there were 1,074,463 common shares available for future grant under the 2024 Plan.
Restricted Stock Units ("RSUs") and Performance Share Units ("PSUs")
The Company has awarded Restricted Stock Units (“RSU’s) and Performance Stock Units (“PSU’s”) under the Plans. The following table summarizes RSU and PSU activity for the year ended December 31, 2025 under all Plans:
Number of Units
Weighted Average Fair Value
Balance at beginning of the year
Units granted
Units vested
Units forfeited
Balance at the end of year
The number of shares outstanding in the table above for PSUs with remaining performance obligations are presented at the maximum payout level.
RSUs are valued at the closing market price of the Company’s common shares on the grant date. The majority of RSUs vest in annual installments over a period of three years . The Company issues common shares from treasury upon the vesting of RSUs. The remaining weighted average vesting period of all non-vested RSUs is 0.7 years as of December 31, 2025.
PSUs are valued at the closing market price of the Company’s common shares on the grant date. PSUs vest after three years in amounts determined based on the Company’s achievement of appropriate performance metrics over a two-year performance period. The Company issues common stock from treasury upon the vesting of PSUs. The remaining weighted average vesting period of all non-vested PSUs is 1.0 years as of December 31, 2025.
Stock-Based Compensation Expense
Expense is recognized for all awards of stock-based compensation by allocating the aggregate grant date fair value over the vesting period. No expense is recognized for any RSUs or PSUs ultimately forfeited because recipients fail to meet vesting requirements. The Company recognized stock based compensation expense of $ 3.6 million, $ 4.0 million, and $ 3.3 million for the year ended December 31, 2025, 2024, and 2023, respectively. As of December 31, 2025 , total unrecognized stock-based compensation expense related to non-vested RSUs and PSUs was $ 3.7 million, which is expected to be recognized over a weighted average period of approximately 1.4 years.
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ITEM 9. CHANGES IN AND DIS AGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AN D PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. The Company’s disclosure controls and procedures are also designed to ensure that information required to be disclosed in Company reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to the Company’s management, including the principal executive officer and the principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
An evaluation was carried out under the supervision and with the participation of the Company’s management, including the principal executive officer and the principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report on Form 10-K. Based on the evaluation, the principal executive officer and the principal financial officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2025.
Report of Management on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and affected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and Directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO Criteria).
Based on its evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2025.
The independent registered public accounting firm of Ernst & Young LLP that has audited the consolidated financial statements included in this annual report on Form 10-K, has also issued an attestation report on the Company’s internal control over financial reporting as of December 31, 2025. This report is included on the following page.
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/s/ Scott A. King
Scott A. King
President and Chief Executive Officer
/s/ James C. Kerr
James C. Kerr
Executive Vice President and Chief Financial Officer
March 2, 2026
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of The Gorman-Rupp Company
Opinion on Internal Control Over Financial Reporting
We have audited The Gorman-Rupp Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, The Gorman-Rupp Company (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2024 consolidated financial statements of the Company and our report dated March 2, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
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unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Cleveland, Ohio
March 2, 2026
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter of the year ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFO RMATION
During the quarter ended December 31, 2025 , no director or officer of the Company adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading agreement, each as defined in Item 408 of Regulation S-K.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE O FFICERS AND CORPORATE GOVERNANCE
Attention is directed to the sections captioned “Election of Directors,” “Board of Directors and Board Committees,” “Audit Committee Report,” “Beneficial Ownership of Shares,” “Delinquent Section 16(a) Reports” and “Insider Trading Policies and Procedures” in the Company’s definitive Notice of 2026 Annual Meeting of Shareholders and related Proxy Statement (as filed with the SEC pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K), which are incorporated herein by this reference.
With respect to Executive Officers, attention is directed to Part I of this Form 10-K.
The Company has adopted a Code of Ethics that applies to its Directors, officers and all employees. The Code of Ethics is set forth as an exhibit to this Form 10-K. In addition, the Code of Ethics is posted on the Company’s website accessible through its Internet address of www.gormanrupp.com (under the heading “Governance & Leadership” and the sub-heading “Governance Documents”), including any amendments.
ITEM 11. EXECUTIVE CO MPENSATION
Attention is directed to the sections “Board of Directors and Board Committees,” “Executive Compensation,” “Compensation Discussion and Analysis,” “Pension Benefits,” “Summary Compensation Table,” “Grants of Plan Based Awards,” “Outstanding Equity Awards at December 31, 2025,” "Stock Vested During Fiscal Year 2025," "Post-Employment Value of Equity Incentive Compensation," “Non-Employee Director Compensation,” “Risk Oversight,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Report,” and “CEO Pay Ratio” in the Company’s definitive Notice of 2026 Annual Meeting of Shareholders and related Proxy Statement (as filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K), which are incorporated herein by this reference.
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