GRC 10-K & 10-Q changes, risk factors and insider trading

The Company possesses a wide array of intellectual property rights, including patents, trademarks, copyrights, and applications for the above, as well as other proprietary information. There is a risk that third parties would attempt to copy, in full or in part, the Company’s products, technologies or industrial designs, or to obtain unauthorized access and use of Company technological know-how or other protected intellectual property rights. Also, other companies could successfully develop technologies, products or industrial designs similar to the Company’s, and thus potentially compete with the Company. From time to time, the Company has been faced with instances where competitors have infringed or unfairly used its intellectual property or taken advantage of its design and development efforts. The ability to protect and enforce intellectual property rights varies across jurisdictions. Competitors have attempted, and may in the future attempt to copy the Company’s products, technologies or industrial designs are becoming more prevalent, particularly in Asia.designs. If the Company is unable to adequately enforce and protect its intellectual property rights, it could adversely affect its revenues and profits and hamper its ability to grow.

The Company’s historical growth has depended, and its future growth is likely to continue to depend, in part on its acquisition strategy and the successful integration of acquired businesses into existing operations. The Company intends to continue to seek additional domestic and international acquisition opportunities that have the potential to support and strengthen its operations. The Company cannot assure it will be able to successfully identify suitable acquisition opportunities, prevail against competing potential acquirers, negotiate appropriate acquisition terms, obtain financing that may be needed to consummate such acquisitions, complete proposed acquisitions, successfully integrate acquired businesses into existing operations or expand into new markets. In addition, the Company cannot assure that any acquisition, even if successfully integrated, will perform as planned, be accretive to earnings, or prove to be beneficial to the Company’s operations and cash flows. Additional potential risks associated with acquisitions are the diversion of management's attention from other business concerns, additional debt leverage, the loss of key employees and customers of the acquired business, the assumption of unknown liabilities, disputes with sellers, and the inherent risk associated with the Company entering new lines of business.

The Company has substantial indebtedness. Such indebtedness includes senior secured first lien credit facilities comprised of a $370 million term loan facility and a $100 million revolving credit facility, and a $30 million in aggregate principal amount of 6.40% senior secured notes. The indebtedness could have important negative consequences, including:

In 2025, the Company recorded pre-tax non-cash pension settlement charges of $1.2 million, driven by lump-sum distributions discussed above. There was no pension settlement charge recorded in 2024 or 2023. In 2022, the Company recorded pre-tax non-cash pension settlement charges of $6.4 million, driven by lump-sum distributions discussed above. See Note 98 to the Consolidated Financial Statements, Pensions and Other Postretirement Benefits.

The effects of recent executive actions and executive orders by the President in connection with, among other areas, energy production, trade, immigration and administrative agencies, as well as any tandem regulatory changes pursued by the current administration, are highly uncertain and may adversely impact our business.

On January 24,22, 2025,2026, the Board of Directors authorized the payment of a quarterly dividend of $0.185$0.19 per share, representing the 300th304th consecutive quarterly dividend to be paid by the Company. During 2024,2025, the Company again paid increased dividends and thereby attained its 52nd53rd 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 regular dividend yield at December 31, 2024 was 1.9%.

Information pertaining to fiscal year 20222023 was included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20222023 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 MarchFebruary 8,26, 2023.2024.

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.amortization (“Adjusted EBITDA”). Adjusted earnings is earnings excluding non-cash pension settlement charges, one-time acquisition costs, amortization of step up in value of acquired inventories, amortization of customer backlog,the write-off of unamortized previously deferred debt financing fees, refinancing costs, facility optimization costs, non-cash pension settlement charges, and refinancingamortization costs.of acquired customer backlog. Adjusted earnings per share is earnings per share excluding non-cash pension settlement charges per share, one-time acquisition costs per share, amortization of step up in value of acquired inventories per share, amortization of customer backlog per share,the write-off of unamortized previously deferred debt financing fees,fees andper share, refinancing costs.costs Adjustedper earningsshare, beforefacility interest,optimization taxes,costs depreciationper 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 non-cash pension settlement charges, one-time acquisition costs, amortization of step up in value of acquired inventories, amortization of customer backlog,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 adjustedAdjusted earningsEBITDA beforeto interest,their taxes,respective depreciationcorresponding GAAP financial measures, which includes a description of actual adjustments made in the current period and amortization.the corresponding prior period.

Capital expenditures in 20242025 were $14.3$17.4 million and consisted primarily of machinery and equipment and building improvements. Capital expenditures for 2025,2026, 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 2024,2025, 20232024 and 2022,2023, the Company financed its capital improvements and working capital requirements principally through internally generated funds.

The Company contributed $5.1$2.7 million to its defined benefit pension plansplan in 20242025 and expects to contribute up to $2.9 million to its defined benefit pension plan in 2025.2026.

The decreaseincrease 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 the timing of deferred revenue and customer deposits and accrued liabilities and expenses. The increase in cash provided by operating activities in 2023 compared to 2022 was primarily due 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 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 equipmentequipment, 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 2022, net cash used for investing activities of $545.7 million consisted primarily of $528.0 million for the acquisition of Fill-Rite and $18.0 million for capital expenditures, largely related to machinery and equipment.

The Company recognizes the obligations associated with its defined benefit pension plansplan and defined benefit health care plans in its Consolidated Financial Statements. The measurement of liabilities related to its pension plansplan 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 and 4.7% at December 31, 2023.2024. The discount rates used to value postretirement obligations were 5.1% at December 31, 2025 and 5.4% at December 31, 2024 and 4.9% at December 31, 2023.2024. The discount rates were determined bybased constructingon athe zero-couponplan spotdistinct projected cash flow and the Gallagher Regular yield curve derived from a universe of high-quality bonds as of the measurement date.curves. The expected rate of return on pension assets is designed to be a long-term assumption that will be subject to year-to-year variability. The rate for 20242025 was 7.2%6.5% and for 20232024 was 6.2%.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 20242025 and 2023.2024.

When performing a quantitative assessment of goodwill impairment if necessary, or in years where we elect to do so, a discounted cash flow model isand a market based approach are used to estimate the fair value of each reporting unit,unit. whichThe 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. Other valuation techniques including comparative market multiples are used when appropriate. 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 a quantitative impairment analysis as of October 1, 20242025 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 waswere not impaired. A sensitivity analysis was performed for each reporting unit, assuming a hypothetical 10050 basis point decrease in the expected long-term growth rate or a hypothetical 10050 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, 20242025 total assets, and goodwill relating to the Fill-Rite reporting unit is $230.7 million, or 26.9%26.8% of the Company’s December 31, 20242025 total assets. See Note 109 to the Consolidated Financial Statements, Goodwill and Other Intangible Assets.

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. See Note 2 to the Consolidated Financial Statements, Acquisitions.

Incoming orders forFor the first threesix months of 20262026, net sales were $187.5$362.7 million, or an increase of 5.5%,5.7%, or $19.7 million compared to the samefirst periodsix inmonths of 2025. TheNet Company’s backlog of ordersincome was $247.9$37.3 millionmillion, ator March$1.41 31,per 2026share, compared to $217.8net income of $27.9 million, or $1.06 per share, for the same period last year. Total debt decreased $33.0 million atduring Marchthe 31,first 2025six andmonths $244.0of million at December 31, 2025.2026.

On AprilJuly 23, 2026, the Board of Directors authorized the payment of a quarterly dividend of $0.19 per share on the common stock of the Company, payable JuneSeptember 10, 2026, to shareholders of record as of MayAugust 15,14, 2026. This will mark the 305th306th consecutive quarterly dividend paid by The Gorman-Rupp Company.

Three Months Ended MarchJune 31,30, 2026 vs. Three Months Ended MarchJune 31,30, 2025

SalesNet increasedsales for the second quarter of 2026 were $186.1 million compared to net sales of $179.0 million for the second quarter of 2025, an increase of 3.9%, or $7.1 million. The increase was driven by volume growth as well as price increases taken in the majorityfirst quarter of our2026. markets,Sales includingincreased increases of $6.3$4.7 million in the construction market due to increased demand in mining and sales of rental equipment,equipment $4.4and $4.2 million in the agriculture market due to broad basedbroad-based improvement across Fill-Rite's salesales channels,channels. $3.5In addition, sales increased $1.6 million in the industrial market due to increased domestic investment, $2.9 million in the municipal market due to increased water and wastewater projects related to infrastructure investment, and $1.7$0.9 million in the OEM market due to increased demand related to data centers. These increases were partially offset by a sales decreasedecreases of $5.5$2.2 million in the fire suppression market primarily due to reduced international shipments.shipments, Sales$1.1 alsomillion decreasedin $0.3the municipal market, $0.6 million in the repair market, and $0.4 million in the petroleum market and $0.3 million in the repair market.

Gross profit was $57.4$60.6 million for the firstsecond quarter of 2026, resulting in gross margin of 32.5%,32.6%, compared to gross profit of $50.3$56.1 million and gross margin of 30.7%31.3% for the same period in 2025. The 180130 basis point increase in gross margin was driven by aimproved 100margin basison pointmaterial improvement in labor and overhead leverage from increased sales andincluding an 80 basis point improvement indue costto the realization of materialprice dueincreases in part toand favorable product mix.mix, as well as a 50 basis point reduction in LIFO costs.

Selling, general and administrative (“SG&A”) expenses were $26.8$27.1 million and 15.2%14.6% of net sales for the firstsecond quarter of 2026 compared to $25.1$26.0 million and 15.3%14.5% of net sales for the same period in 2025. SG&A expenses increased due to higher advertising expenses related to trade show activity as well as increased freight out costs driven by increased sales.

Operating income was $27.5$30.4 million for the firstsecond quarter of 2026, resulting in an operating margin of 15.6%,16.3%, compared to operating income of $22.1$26.9 million and an operating margin of 13.5%15.0% for the same period in 2025. The 210130 basis point increase in operating margin was driven by improvedprice leverageincrease on labor, overhead, and SG&A expenses due to increased sales andrealization, favorable product mix.mix, and a reduction in LIFO costs.

Interest expense was $5.0$4.7 million for the firstsecond quarter of 2026 compared to $6.2$6.0 million for the same period in 2025. The decrease in interest expense was due primarily to a decrease in outstanding debt.

AdjustedThe EBITDACompany’s effective tax rate was $35.5 million and 20.1% of sales23.4% for the firstsecond quarter of 2026 compared to $29.7 million and 18.1% of sales22.5% for the firstsecond quarter of 2025.

The discussion of Results of Operations above includes certain non-GAAP financial data and measures such as adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). Adjusted earnings before interest, taxes, depreciation and amortizationEBITDA is net income (loss) excluding interest, taxes, depreciation and amortization, adjusted to exclude 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 LIFO 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 EBITDA to its corresponding GAAP financial measure, which includes a description of actual adjustments made in the current period and the corresponding prior period.

Our primary sources of liquidity are cash generated from operations and borrowings under our Credit Facility. Cash and cash equivalents totaled $29.9$43.6 million at MarchJune 31,30, 2026. The Company had an additional $99.6 million available under the revolving credit facility after deducting $0.4 million in outstanding letters of credit primarily related to customer orders. 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 has made payments on the Senior Term Loan Facility in excess of the required minimum installment payments and, as a result, has no required quarterly installment payments due on the Senior Term Loan Facility within the next 12 months.

As of MarchJune 31,30, 2026, the Company had $295.8$277.8 million in total debt outstanding with $265.8$247.8 million 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 MarchJune 31,30, 2026 and December 31, 2025. See “Note 9 – Financing Arrangements” in the Notes to Consolidated Financial Statements included in this Form 10-Q for a further description of our outstanding debt.

Capital expenditures for the first quartersix months of 2026 were $4.3$7.9 million consistingand consisted primarily of machinery and equipment and a building.equipment. Capital expenditures for the full-year 2026 are presently planned to be approximately $22.0 - $24.0 million primarily for machinery and equipment, and are expected to be financed through cash from operations.

On AprilJuly 23, 2026, the Board of Directors authorized the payment of a quarterly dividend of $0.19 per share on the common stock of the Company, payable JuneSeptember 10, 2026, to shareholders of record as of MayAugust 15,14, 2026. This will mark the 305th306th consecutive quarterly dividend paid by The Gorman-Rupp Company. 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. 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. As of MarchJune 31,30, 2026, the Company had $48.1 million available for repurchase under the share repurchase program.

The increase in cash provided by operating activities in the first threesix months of 2026 compared to the same period last year was primarily due to increased net income as well as an increase in taxes payable, an increase in customer deposits, and a decrease in inventory, partially offset by increasedan workingincrease capitalin foraccounts receivable during the threesix month periodmonths ended MarchJune 31,30, 2026 compared to the same period last year.

During the first threesix months of 2026, investing activities includedof $4.3$7.7 million consisted of capital expenditures for machinery and equipment and a building.equipment. During the first threesix months of 2025, investing activities of $3.0$5.9 million consisted of capital expenditures primarily for machinery and equipment.

Net cash used for financing activities of $22.7$45.7 million for the first threesix months of 2026 primarily consisted of net payments on bank borrowings of $15.0$33.0 million, dividend payments of $5.0$10.0 million, and $2.6 million of payments in the surrender of common shares to cover taxes upon the vesting of stock awards. Net cash used for financing activities of $20.6$40.9 million for the first threesix months of 2025 primarily consisted of net payments on bank borrowings of $14.6$30.0 million,million and dividend payments of $4.9$9.7 million, and $1.1$1.2 million of payments in the surrender of common shares to cover taxes upon the vesting of stock awards.

Such uncertainties include, but are not limited to, our estimates of future earnings and cash flows, general economic conditions and supply chain conditions and any related impact on costs and availability of materials, retention of supplier and customer relationships and key employees, and the ability to service and repay indebtedness. Other factors include, but are not limited to: company specific risk factors including (1) loss of key personnel; (2) intellectual property security; (3) growth through acquisitions; (4) the Company’s indebtedness and how it may impact the Company’s financial condition and the way it operates its business; (5) impairment in the value of intangible assets, including goodwill; (6) defined benefit pension plan settlement expense; (7) LIFO inventory method; and (8) family ownership of common equity; and general risk factors including (9) continuation of the current and projected future business environment;; (10) highly competitive markets; (11) availability and costs of raw materials and labor; (12) cybersecurity threats; (13) artificial intelligence risk and challenges that can impact our business; (14) compliance with, and costs related to, a variety of import and export laws and regulations; (15) the impact of U.S. trade policy, including resulting tariffs; (16) environmental compliance costs and liabilities; (17) exposure to fluctuations in foreign currency exchange rates; (18) conditions in foreign countries in which The Gorman-Rupp Company conducts business; (19) changes in our tax rates and exposure to additional income tax liabilities; and (20) risks described from time to time in our reports filed with the Securities and Exchange Commission. Except to the extent required by law, we do not undertake and specifically decline any obligation to review or update any forward-looking statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments or otherwise.