The Gorman-Rupp pany(GRC) - 2025 Q4 - Annual Report

Financial Performance - Incoming orders for the year ending December 31, 2025, were $728.4 million, an increase of 10.5% compared to 2024[96] - The Company's backlog of orders was $244.0 million at December 31, 2025, an increase of 18.5% from $206.0 million at December 31, 2024[96] - Net sales for 2025 were $682.4 million, a 3.4% increase or $22.7 million compared to $659.7 million in 2024[100] - Gross profit for 2025 was $209.1 million, resulting in a gross margin of 30.6%, down from 31.0% in 2024[101] - Operating income for 2025 was $95.4 million, with an operating margin of 14.0%, compared to $91.4 million and 13.9% in 2024[103] - Net income for 2025 was $53.0 million, or $2.02 per share, a 32.2% increase from $40.1 million, or $1.53 per share, in 2024[107] - Reported net income for 2025 was $53.0 million, an increase of 32.1% from $40.1 million in 2024[111] - Non-GAAP adjusted earnings per share for 2025 was $2.14, up 22.3% from $1.75 in 2024[111] - Adjusted EBITDA for 2025 was $128.8 million, a slight increase from $124.6 million in 2024[112] Cash Flow and Capital Expenditures - Cash and cash equivalents at the end of 2025 totaled $35.1 million, up from $24.2 million at the end of 2024[113] - Net cash provided by operating activities in 2025 was $106.2 million, an increase of 52.0% compared to $69.8 million in 2024[117] - Capital expenditures in 2025 were $17.4 million, with an expected increase to $20.0 - $22.0 million in 2026[115] Debt and Interest Expenses - Interest expense decreased by 30.4% to $23.4 million in 2025 from $33.6 million in 2024 due to debt refinancing[105] - The company had $280.8 million in debt outstanding due in 2029 and $30.0 million due in 2031, remaining compliant with debt covenants[114] - The Company had $280.8 million in borrowings under the Senior Term Loan Facility as of December 31, 2025, with interest rates ranging from 0.50% to 1.25% for base rate plus margin or 1.5% to 2.25% for Adjusted Term SOFR[151] - A hypothetical increase of 100 basis points in interest rates would increase interest expense by approximately $1.5 million annually[153] Tax and Pension Contributions - The effective tax rate increased to 23.3% in 2025 from 20.6% in 2024, influenced by changes in U.S. tax regulations[108] - The company expects to contribute up to $2.9 million to its defined benefit pension plan in 2026, following a $2.7 million contribution in 2025[116] Shareholder Returns - The company authorized a share repurchase program of up to $50.0 million, with approximately $48.1 million remaining to be repurchased[123] Market Outlook - The outlook for 2026 remains positive, with expectations of continued demand in municipal markets and data center construction[99] Goodwill and Impairment Analysis - The Company performed a quantitative impairment analysis for National and Fill-Rite reporting units, concluding that the fair value exceeded carrying value by approximately 22% and 6% respectively[143] - Goodwill related to the National reporting unit is $13.6 million, representing 1.6% of the Company's total assets as of December 31, 2025, while goodwill for Fill-Rite is $230.7 million, or 26.8% of total assets[143] - The Company utilizes a discounted cash flow model and market-based approach for goodwill impairment assessments, considering forecasted cash flows and market multiples[141] - The fair value of all indefinite-lived intangible assets exceeded their respective carrying values for 2025 and 2024[145] - The Company assesses qualitative factors to determine if the fair value of reporting units is less than their carrying amounts, involving significant judgments and assumptions[140] Foreign Currency and Off-Balance Sheet Arrangements - Foreign currency transaction losses for 2025, 2024, and 2023 were $(0.3) million, $(0.4) million, and $(0.4) million respectively, reported within Other (expense) income[154] - The Company does not have any off-balance sheet arrangements or relationships with unconsolidated special purpose entities[150] Interest Rate Hedging - The Company entered into interest rate swap agreements effective October 31, 2022, to hedge against interest rate fluctuations[152]