UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September~~June 30, ~~2017~~2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission File Number1-6747

The Gorman-Rupp Company

(Exact name of registrant as specified in its ~~charter)~~charter)


Ohio		34-0253990
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


600 South Airport Road, Mansfield, Ohio		44903
(Address of principal executive offices)		(Zip Code)

~~Registrant’s~~Registrant’s telephone number, including area code(419)755-1011

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, without par value	GRC	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”,~~filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

~~There~~

On July 31, 2023 there were ~~26,106,623~~26,193,998 common shares, ~~of common stock,~~ without par value, ~~outstanding at October 27, 2017.~~

of The Gorman-Rupp Company outstanding.

Three and ~~nine months ended September~~Six Months Ended June 30, ~~2017~~2023 and ~~2016~~2022

	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in thousands)	2023		2022			2023		2022
Net income (loss)	$	10,477	$	(996	)	$	16,997	$	6,547
Other comprehensive income (loss), net of tax:
Cumulative translation adjustments		23		(2,828	)		278		(2,864	)
Cash flow hedging activity		2,626		-			1,094		-
Pension and postretirement medical liability adjustments		233		1,663			366		2,086
Other comprehensive income (loss)		2,882		(1,165	)		1,738		(778	)
Comprehensive income (loss)	$	13,359	$	(2,161	)	$	18,735	$	5,769

								(unaudited)
(Thousands of dollars)	September 30, 2017			December 31, 2016
(Dollars in thousands)								June 30, 2023			December 31, 2022
Assets							Assets
Current assets:
Cash and cash equivalents	$	75,958		$	57,604			$	12,173		$	6,783
Accounts receivable, net		67,964			71,424				101,875			93,059
Inventories, net		73,803			69,049				115,816			111,133
Prepaid and other		7,398			5,823				10,957			14,551

Total current assets		225,123			203,900				240,821			225,526
Property, plant and equipment, net		117,471			122,067				136,047			128,640
Other assets		8,451			7,769				26,133			11,579
Prepaid pension assets		7,740			6,211
Goodwill and other intangible assets, net		37,879			42,871

Other intangible assets, net									242,989			249,361
Goodwill									257,660			257,724
Total assets	$	396,664		$	382,818			$	903,650		$	872,830

Liabilities and equity							Liabilities and equity
Current liabilities:
Accounts payable	$	16,624		$	16,306			$	29,161		$	24,697
Payroll and employee related liabilities		14,961			11,336				21,281			17,132
Commissions payable		6,822			11,163				10,352			10,116
Deferred revenue		551			1,361
Deferred revenue and customer deposits									9,097			6,740
Current portion of long-term debt									17,500			17,500
Accrued expenses		8,322			9,186				8,796			9,028

Total current liabilities		47,280			49,352				96,187			85,213
Pension benefits									10,368			9,352
Postretirement benefits		21,238			20,709				22,092			22,413
Long-term debt, net of current portion									411,405			419,327
Other long-term liabilities		9,137			9,869				22,239			5,331

Total liabilities		77,655			79,930				562,291			541,636
Equity:
Common shares outstanding: 26,106,623 at September 30, 2017 and 26,093,123 at December 31, 2016 (net of treasury shares of 942,173 and 955,673, respectively), at stated capital amounts		5,100			5,097
Common shares, without par value:
Authorized - 35,000,000 shares;
Outstanding - 26,178,248 shares at June 30, 2023 and 26,094,865 shares at December 31, 2022 (after deducting treasury shares of 870,548 and 953,931, respectively), at stated capital amounts									5,115			5,097
Additional paid-in capital		526			215				4,165			3,912
Retained earnings		327,701			318,041				354,815			346,659
Accumulated other comprehensive loss		(14,318	)		(20,465	)

Accumulated other comprehensive (loss)									(22,736	)		(24,474	)
Total equity		319,009			302,888				341,359			331,194

Total liabilities and equity	$	396,664		$	382,818			$	903,650		$	872,830

							Six Months Ended June 30,
	Nine Months Ended September 30,
(Thousands of dollars)	2017			2016
(Dollars in thousands)							2023			2022
Cash flows from operating activities:
Net income	$	18,615		$	19,829		$	16,997		$	6,547
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		11,406			11,604			14,158			7,201
LIFO expense								4,440			6,004
Pension expense		5,696			2,737			1,617			3,357
Pension contributions		(2,000	)		(8,000	)
Impairment of goodwill and other intangible assets		4,098			—
Gain on sale of property, plant and equipment		(48	)		(974	)
Stock based compensation								1,606			1,413
Amortization of debt issuance fees								1,481			237
Other								30			-
Changes in operating assets and liabilities:
Accounts receivable, net		4,570			2,869			(8,645	)		(11,713	)
Inventories, net		(3,377	)		8,294			(8,959	)		(10,687	)
Accounts payable		(278	)		467			4,435			938
Commissions payable		(4,593	)		3,260			142			392
Deferred revenue		(810	)		492
Deferred revenue and customer deposits								2,365			(1,269	)
Income taxes		909			(568	)		2,374			(1,045	)
Accrued expenses and other		(4,117	)		9,776			2,235			1,273
Benefit obligations		3,341			2,423			3,580			4,044

Net cash provided by operating activities		33,412			52,209			37,856			6,692
Cash used for investing activities:
Cash flows from investing activities:
Capital additions		(4,840	)		(5,613	)		(13,270	)		(8,445	)
Proceeds from sale of property, plant and equipment		294			1,284
Purchase of short-term investments, net		(2,975	)		—

Payment for acquisitions								-			(526,301	)
Other								367			208
Net cash used for investing activities		(7,521	)		(4,329	)		(12,903	)		(534,538	)
Cash used for financing activities, cash dividends		(9,004	)		(8,217	)
Cash flows from financing activities:
Cash dividends								(9,148	)		(8,869	)
Treasury share repurchases								(1,029	)		(918	)
Proceeds from bank borrowings								5,000			445,000
Payments to banks for borrowings								(13,750	)		-
Debt issuance fees								-			(15,165	)
Other								(534	)		(65	)
Net cash provided by (used for) financing activities								(19,461	)		419,983
Effect of exchange rate changes on cash		1,467			294			(102	)		(503	)

Net increase in cash and cash equivalents		18,354			39,957
Net increase (decrease) in cash and cash equivalents								5,390			(108,366	)
Cash and cash equivalents:
Beginning of period		57,604			23,724			6,783			125,194

End of period	$	75,958		$	63,681		$	12,173		$	16,828

	Six Months Ended June 30, 2023
(Dollars in thousands, except	Common Shares						Additional Paid-In			Retained			Accumulated Other Comprehensive
share and per share amounts)	Shares			Dollars			Capital			Earnings			(Loss) Income			Total
Balances December 31, 2022		26,094,865		$	5,097		$	3,912		$	346,659		$	(24,474	)	$	331,194
Net income											6,520						6,520
Other comprehensive loss														(1,144	)		(1,144	)
Stock based compensation, net		119,488			26			1			438						465
Treasury share repurchases		(36,105	)		(8	)		(889	)		(131	)					(1,028	)
Cash dividends - $0.175 per share											(4,567	)					(4,567	)
Balances March 31, 2023		26,178,248		$	5,115		$	3,024		$	348,919		$	(25,618	)	$	331,440
Net income											10,477						10,477
Other comprehensive income														2,882			2,882
Stock based compensation, net								1,141									1,141
Treasury share repurchases																	-
Cash dividends - $0.175 per share											(4,581	)					(4,581	)
Balances June 30, 2023		26,178,248		$	5,115		$	4,165		$	354,815		$	(22,736	)	$	341,359

	Six Months Ended June 30, 2022
(Dollars in thousands, except	Common Shares						Additional Paid-In			Retained			Accumulated Other Comprehensive
share and per share amounts)	Shares			Dollars			Capital			Earnings			(Loss) Income			Total
Balances December 31, 2021		26,103,661		$	5,099		$	1,838		$	353,369		$	(30,330	)	$	329,976
Net income											7,543						7,543
Other comprehensive income														387			387
Stock based compensation, net								682									682
Treasury share repurchases		(24,546	)		(5	)		(822	)		(91	)					(918	)
Cash dividends - $0.17 per share											(4,436	)					(4,436	)
Balances March 31, 2022		26,079,115		$	5,094		$	1,698		$	356,385		$	(29,943	)	$	333,234
Net income (loss)											(996	)					(996	)
Other comprehensive loss														(1,165	)		(1,165	)
Stock based compensation, net								730									730
Treasury share repurchases																	0
Cash dividends - $0.17 per share											(4,433	)					(4,433	)
Balances June 30, 2022		26,079,115		$	5,094		$	2,428		$	350,956		$	(31,108	)	$	327,370

(Amounts in tables in thousands of ~~dollars)~~dollars, except for per share amounts)

The accompanying unaudited ~~consolidated financial statements~~Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The ~~consolidated financial statements~~Consolidated Financial Statements include the accounts of The Gorman-Rupp Company (the “Company” or “Gorman-Rupp”) and its ~~wholly-owned~~wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results. In the opinion of management of the Company, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 are not necessarily indicative of results that may be expected for the year ending December 31, ~~2017.~~2023. For further information, refer to the ~~consolidated financial statements~~Consolidated Financial Statements and accompanying notes ~~thereto~~ included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2022, from which related information herein has been derived.

On May 31, 2022, the Company acquired the assets of Fill-Rite and Sotera (“Fill-Rite”), a division of Tuthill Corporation, for cash consideration of $528.0 million. The transaction was funded with new debt consisting of $350.0 million from a senior secured term loan, $90.0 million from a subordinated unsecured loan, $5.0 million from the new revolving Credit Facility, and $83.0 million of cash on hand. Refer to “Note 10 – Financing Arrangements” for further details related to the financing completed as part of the transaction.

The Company ~~considers~~accounted for the ~~applicability~~Fill-Rite transaction in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations”. The results of operations for Fill-Rite are included in the accompanying Consolidated Statements of Income from the acquisition date. Fill-Rite had $13.5 million in net sales and ~~impact of all Accounting Standard Updates (“ASUs”). ASUs not listed below were assessed and determined either to be not applicable or are expected to have minimal impact on~~$0.2 million in operating income that was included in the Company’s consolidated financial ~~statements.~~statements for the three and six months ended June 30, 2022. Operating income included $1.4 million of inventory step up amortization and $0.2 million of acquired customer backlog amortization in addition to the $1.0 million in amortization on customer relationships and developed technology.

Under the ~~FASB issued ASU No. 2017-07, “Compensation – Retirement Benefits (Topic 715) – Improving~~acquisition method of accounting, the ~~Presentation of Net Periodic Pension Cost~~assets and Net Periodic Postretirement Benefit Cost,” which provides additional guidance on the presentation of net periodic pension and postretirement benefit costs in the income statement and on the components eligible for capitalization. The amendments in this ASU require that an employer report the service cost componentliabilities have been recorded at their respective estimated fair values as of the ~~net periodic benefit costs in the same income statement line item as other compensation costs arising from services rendered by employees during the period. The non-service-cost components~~date of net periodic benefit costs are to be presented in the income statement separately from the service cost components and outside a subtotal of income from operations. The ASU also allows for the capitalizationcompletion of the ~~service cost components, when applicable (i.e., as a cost of internally manufactured inventory or a self-constructed asset). The ASU is effective for fiscal years,~~acquisition and interim periods within those years, beginning after December 15, 2017 and early adoption is permitted. The amendments in this ASU are to be applied retrospectively. The adoption of ASU 2017-07 will result in a change within operating income with a corresponding change in other income (expense), net to reflect the impact of presenting all components of net benefit cost, except for service cost, outside of operating income. See Note 6 for the components ofreported into the Company’s ~~net benefit costs.~~Consolidated Balance Sheets. The ~~Company does not expect the adoption of ASU-2017-07 to have a material impact on its consolidated financial statements.~~

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment,” which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The ASU is effective for impairment tests performed in fiscal years, and interim periods within those years, beginning after December 15, 2019 and early adoption is permitted. The amendments in this ASU are to be applied on a prospective basis. The Company early adopted this new guidance during the three months ended September 30, 2017. The Company concluded that ASU 2017-04 is preferable to the current guidance due to efficiency, since ASU 2017-04 eliminates the requirement to determinefollowing table presents the fair value of ~~individual~~assets acquired and liabilities assumed. No adjustments to the preliminary purchase price allocation were made during the second quarter of 2023 and the purchase price allocation is now final:

For tax purposes, the Fill-Rite acquisition was treated as an asset purchase. As such, the Company received a step-up in tax basis of the net Fill-Rite assets, equal to the purchase price, including goodwill which is deductible for tax purposes.

The transaction costs related to the acquisition approximated $6.9 million for the three and six months ended June 30, 2022. These costs were expensed as incurred and recorded within selling, general, and administrative expenses.

The following is supplemental pro-forma net sales, operating income, net income, and earnings per share had the Fill-Rite Acquisition occurred as of January 1, 2021 (in millions):

The supplemental pro forma information presented above is being provided for information purposes only and may not necessarily reflect the future results of operations of the Company or what the results of operations would have been had the Company owned and operated Fill-Rite since January 1, 2021.

The following tables disaggregate total net sales by end market and geographic location:

International sales represented approximately 25% and 28% of total net sales for the second quarter of 2023 and 2022, respectively, and were made to customers in many different countries around the world.

On June 30, 2023, the Company had $249.8 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 ~~a reporting unit to measure goodwill impairment. The Company believes~~June 30, 2023 and December 31, 2022 were as follows:

Revenue recognized for the ~~adoption of ASU 2017-04 did not change the amount of impairment charges recorded~~six months ended June 30, 2023 and 2022 that was included in the ~~third quarter of 2017. See Note 8 – Impairment Charges for additional information on our interim goodwill and other intangible asset impairment tests performed.~~

~~In February 2016,~~contract liabilities balance at the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with a term of more than one year. Accounting by lessors will remain similar to existing U.S. GAAP. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 and early adoption is permitted. The Company currently does not expect the adoption of ASU 2016-02 will have a material impact on its consolidated financial statements as its future minimum lease commitments are not material.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes most current revenue recognition guidance, including industry-specific guidance, and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. Subsequent accounting standards updates have been issued, which amend and/or clarify the application of ASU 2014-09. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company is still finalizing its assessment of this ASU, but it does not currently expect it to have a material impact on its consolidated financial statements. Based on the evaluation of its current revenue streams and contracts, most will be recorded consistently under both the current and new standard. The Company has determined it will use the modified retrospective method as its transition method in the adoption of the ~~new revenue standard. The Company will continue to accumulate information that will be necessary for implementation~~period was $3.7 million and to identify and implement any changes needed to processes and controls to meet the ASU’s updated reporting and disclosure requirements. The Company will continue its evaluation of this new guidance through the date of adoption.$8.2 million, respectively.

LIFO inventories are stated at the lower of cost or ~~market. The costs for approximately 72%~~market and all other inventories are stated at the lower of inventories at September 30, 2017 and December 31, 2016 are determined using the last-in, first-out (“LIFO”) method, with the remainder determined using the first-in, first-out (FIFO) method applied on a consistent basis.cost or net realizable value. Replacement cost approximates current cost and the excess over LIFO cost ~~was~~is approximately ~~$59.7~~$92.6 million and ~~$58.4~~$88.2 million at ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively. Allowances for excess and obsolete inventory totaled $7.2 million at June 30, 2023 and December 31, 2022, respectively. An actual valuation of inventory under the LIFO method is made at the end of each year based on the inventory levels and costs at that time. Interim LIFO calculations are based on management’s estimate of expected year-end inventory levels and costs, and are subject to the final year-end LIFO inventory valuation.

~~Allowances for excess and obsolete inventory totaled $4.9 million and $4.5 million at September 30, 2017 and December 31, 2016, respectively.~~

~~The major components~~Inventories are comprised of ~~net inventories are as follows:~~the following:

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~~Cost of products sold. Changes in the Company’s product ~~warranty~~warranties liability are:

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 ~~Plan.~~defined benefit pension plan. Employees hired prior to this date continue to accrue benefits.

The Company established a defined benefit pension plan for certain Fill-Rite employees (“Fill-Rite Plan”) upon the acquisition as of June 1, 2022. The activity is included in the tables within this footnote.

Additionally, the Company sponsors defined contribution pension plans made available to all domestic and Canadian employees. The Company funds the cost of these benefits as incurred.

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.~~eligible spouses and dependent children. The Company funds the cost of these benefits as incurred.

The following tables present the components of net periodic benefit ~~cost:~~costs:

During the three and six months ended June 30, 2022, the Company recorded a settlement loss relating to retirees that received lump-sum distributions from the Company’s defined benefit pension plan totaling $1.6 million. There were no settlement losses recorded for the three or six month periods ended June 30, 2023. These changes were the result of lump-sum payments to retirees exceeding the Plan’s actuarial service and interest cost.

The components of Accumulated other comprehensive income (loss) as reported in the Consolidated Balance Sheets are:

The Company has a share repurchase program with the authorization to purchase up to $50.0 million of the Company’s common shares. As of June 30, 2023, the Company had $48.1 million available for repurchase under the share repurchase program. During the six-month period ending June 30, 2023, the Company repurchased 36,105 shares at an average cost per share of $28.51 for a total of $1.0 million in the surrender of common shares to cover taxes in connection with the vesting of stock awards, which were not part of the share repurchase program. During the six-month period ending June 30, 2022, the Company repurchased 24,546 shares at an average cost per share of $37.39 for a total of $0.9 million. No shares were repurchased during the three month periods ending June 30, 2023 and 2022.

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.

On May 31, 2022, the Company entered into a Senior Secured Credit Agreement with several lenders, which provides a term loan of $350.0 million (“Senior Term Loan Facility”) and a revolving credit facility up to $100.0 million (“Credit Facility”). The Credit Facility has a letter of credit sublimit of up to $15.0 million, as a sublimit of the Credit Facility, and a swing line subfacility of up to $20.0 million, as a sublimit of the Credit Facility. The Company borrowed $5.0 million under the Credit Facility, which, along with the Senior Term Loan Facility, and cash-on-hand and the proceeds of the Subordinated Credit Facility described below, was used to purchase the assets of Fill-Rite as described in “Note 2 – Acquisitions”. The Company has agreed to secure all of its obligations under the Senior Secured Credit Agreement by granting a first priority lien on substantially all of its personal property, and each of Patterson Pump Company, AMT Pump Company, National Pump Company and Fill-Rite Company (collectively, the “Guarantors”) has agreed to guarantee the obligations of the Company under the Senior Secured Credit Agreement and to secure the obligations thereunder by granting a first priority lien in substantially all of such Guarantor’s personal property.

The Senior Secured Credit Agreement has a maturity date of May 31, 2027, with the Senior Term Loan Facility requiring quarterly installment payments commencing on September 30, 2022 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, plus the applicable margin, which ranges from 0.75% to 1.75% for base rate loans and 1.75% to 2.75% for Adjusted Term SOFR Rate loans. The applicable margin is based on the Company’s senior leverage ratio. As of June 30, 2023, the applicable interest rate under the Senior Secured Credit Agreement was Adjusted Term SOFR plus 2.5%.

The Senior Secured Credit Agreement includes covenants requiring the Company to maintain certain maximum leverage ratios and a minimum fixed charge coverage ratio. On June 30, 2023, the Senior Secured Credit Agreement was amended to provide the Company with more flexibility by adjusting the minimum fixed charge coverage ratio to not less than 1.00 to 1.00 for each four consecutive fiscal quarter periods ending June 30, 2023 through and including June 30, 2024 and not less than 1.10 to 1.00 for each four consecutive fiscal quarter periods ending September 30, 2024 through and including December 31, 2024. We were in compliance with all of our debt covenants as of June 30, 2023, including those covenants as they were in effect prior to the amendment of the Senior Secured Credit Agreement.

On May 31, 2022, the Company entered into an unsecured subordinated credit agreement (“Subordinated Credit Agreement”) which provides for a term loan of $90.0 million (the “Subordinated Credit Facility”). Each of the Guarantors has agreed to guarantee the obligations of the Company under the Subordinated Credit Agreement. The proceeds from the Subordinated Credit Facility, along with cash-on-hand and the proceeds of the Senior Term Loan Facility described above, were used to purchase the assets of Fill-Rite as described in “Note 2 – Acquisitions”.

The Subordinated Credit Agreement has a maturity date of December 1, 2027. If the Subordinated Credit Facility is prepaid prior to the second anniversary, such prepayment must be accompanied by a make-whole premium. If the Subordinated Credit Facility is prepaid after the second anniversary but prior to the third anniversary, such prepayment requires a prepayment fee of 2%, and if the Subordinated Credit Facility is prepaid after the third anniversary but prior to the fourth anniversary, such prepayment requires a prepayment fee of 1%.

At the option of the Company, borrowings under the Subordinated Credit Facility bear interest at either a base rate plus 8.0%, or at an Adjusted Term SOFR Rate plus 9.0%. As of June 30, 2023 borrowings under the Subordinated Credit Facility bear interest at an Adjusted Term SOFR Rate plus 9.1%.

The Subordinated Credit Agreement includes covenants subject to maximum leverage ratios. We were in compliance with all of our debt covenants as of June 30, 2023.

The Company entered into interest rate swaps that hedge interest payments on its SOFR borrowing during the fourth quarter of 2022. 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 June 30, 2023 and December 31, 2022:

The fair value of the Company’s interest rate swaps was a receivable of $0.6 million as of June 30, 2023 and a payable of $0.8 million as of December 31, 2022. 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 June 30, 2023 are expected to continue to be effective hedges.

The following table summarizes ~~reclassifications out~~the fair value of ~~accumulated other comprehensive income (loss):~~derivative instruments as recorded in the Consolidated Balance Sheets:

The following ~~tables summarize changes in balances for each component of accumulated other comprehensive income (loss):~~table summarizes total gains (losses) recognized on derivatives:

   Currency
Translation
Adjustments Pension and
Other
Postretirement
Benefits Accumulated
Other
Comprehensive
Income (Loss)
Balance at January 1, 2016
   $ (9,057 ) $ (13,358 ) $ (22,415 )
Reclassification adjustments
   —   1,053 1,053
Current period credit
   1,487 —   1,487
Income tax expense
   —   (343 ) (343 )


Balance at September 30, 2016
   $ (7,570 ) $ (12,648 ) $ (20,218 )

The ~~decreasing demand for barge pumps for the marine transportation market, driven by low oil prices and overcapacity~~effects of inland barges, has continued to negatively affect the Bayou City Pump Company (“Bayou”) reporting unit, leading management to reconsider its estimates for future profitability of this reporting unit during the third quarter of 2017 and thereby increasing the likelihood that the associated goodwill and other intangible assets could be impaired. As such, the Company performed an interim discounted cash flow analysis to test for potential impairment of goodwill pursuant to ASU 2017-04 and performed a recoverability test related to Bayou’s customer relationship intangible asset. As a result of these impairment tests, the Company concluded that the goodwill and customer relationships were impaired and recorded non-cash impairment charges of $0.9 million and $3.2 million, respectively, which represented the full remaining amounts of both of these intangible assets. These impairment charges are included in Impairment of goodwill and other intangible assetsderivative instruments on the ~~Condensed~~Company’s Consolidated Statements of ~~Income.~~Results of Operations and Comprehensive Income (Loss) for OCI are as follows:

On June 1, 2023, the Company commenced a lease for a new manufacturing facility in Lenexa Kansas with an initial lease term through August 31, 2043. The Company will vacate its current leased Lenexa manufacturing facility on August 31, 2023, with no additional lease liability after that date. The new lease is considered an operating lease and is subject to annual rent escalations based on the greater of a set minimum percentage or the Consumer Price Index. As result of this lease, the Company recorded a right-of-use (ROU) asset which is included in Other Assets, and a long-term lease liability, which is included in Other Long-Term Liabilities, each of approximately $17.5 million as of June 30, 2023. The impact on the Consolidated Statements of Income for the three and six month periods ended June 30, 2023 was not material.

(~~Amounts in tables~~Dollars in thousands, ~~of dollars)~~except for per share amounts)

The following discussion and analysis of the Company’s financial condition and Results of Operations ~~includes certain non-GAAP~~should be read in conjunction with the Consolidated Financial Statements, and notes thereto, and the other financial data included elsewhere in this Quarterly Report on Form 10-Q. The following discussion should also be read in conjunction with the Company’s audited Consolidated Financial Statements and ~~measures such as adjusted earnings before interest, taxes, depreciation~~accompanying notes, and ~~amortization~~Management’s Discussion and ~~adjusted earnings per share amounts which exclude a 2017 non-cash pension settlement charge~~Analysis of Financial Condition and ~~non-cash impairment charges relating to goodwill and other intangible assets. Management utilizes these adjusted financial data and measures to assess comparative operations against those~~Results of ~~prior periods without~~Operations included in its Annual Report on Form 10-K for the ~~distortion of non-comparable factors.~~ year ended December 31, 2022.

The Gorman-Rupp Company ~~believes that these non-GAAP financial data and measures will be useful to investors as well as to assess~~(“we”, “our”, “Gorman-Rupp” or the continuing strength of the Company’s underlying operations from period to period. Provided below is a reconciliation of adjusted earnings per share amounts and adjusted earnings before interest, taxes, depreciation and amortization.

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2017    2016    2017    2016
Adjusted earnings per share:

Reported earnings per share – GAAP basis
   $ 0.22    $ 0.27    $ 0.71    $ 0.76
Plus pension settlement charge
   0.01    —      0.10    —
Plus impairment of goodwill and other intangible asset charges
   0.10    —      0.10    —








Non-GAAP adjusted earnings per share
   $ 0.33    $ 0.27    $ 0.91    $ 0.76








Adjusted earnings before interest, taxes, depreciation
and amortization:

Reported net income – GAAP basis
   $ 5,702    $ 6,927    $ 18,615    $ 19,829
Plus income taxes
   2,255    3,475    8,469    9,464
Plus depreciation and amortization
   3,973    3,827    11,406    11,604








Non-GAAP earnings before interest, taxes, depreciation and amortization
   11,930    14,229    38,490    40,897
Plus pension settlement charge
   448    —      3,841    —
Plus impairment of goodwill and other intangible asset charges
   4,098    —      4,098    —








Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization
   $ 16,476    $ 14,229    $ 46,429    $ 40,897

~~The Gorman-Rupp Company~~“Company”) is a leading designer, manufacturer and international marketer of pumps and pump systems for use in diverse water, wastewater, construction, dewatering, industrial, petroleum, original equipment, agriculture, fire ~~protection,~~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.

~~Gorman-Rupp actively pursues growth opportunities through organic growth, international business expansion and acquisitions.~~

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 ~~over~~historically.

Company acquired the assets of Fill-Rite and Sotera (“Fill-Rite”), a division of Tuthill Corporation, for $528.0 million. When adjusted for approximately $80.0 million in expected tax benefits, the net transaction value was approximately $448.0 million. The Company ~~places a strong emphasis on~~funded the transaction with cash ~~flow generation~~on-hand and having excellent liquidity and financial flexibility. This focus has afforded us the ability to reinvest our cash resources and preserve a strong balance sheet to position us for future acquisition and product development opportunities.new debt. The Company ~~had no bank debt as~~incurred $7.1 million of ~~September 30, 2017.~~

~~Net sales~~one-time acquisition costs during the ~~third quarter~~year ended December 31, 2022 and does not expect to incur material acquisition costs in connection with the transaction going forward. The results of ~~2017 were $94.0 million compared to $91.3 million during~~operations for Fill-Rite are included in the ~~third quarter~~Company’s Consolidated Statements of ~~2016, an increase of 2.9% or $2.6 million. Excluding sales~~Income from the New Orleans Permanent Canal Closures & Pumps (“PCCP”) project of $0.3 million in the third quarter of 2017 and $1.6 million for the same period in 2016, net sales increased 4.4% or $4.0 million. Domestic sales, excluding PCCP, increased 3.5% or $2.0 million while international sales increased 6.0% or $2.0 million compared to the same period in 2016.acquisition date.

Gross profit was $26.2 million for the third quarter of 2017, resulting in gross margin of 27.9%, compared to gross profit of $22.7 million and gross margin of 24.8% for the same period in 2016. Gross margin included a non-cash pension settlement charge of $0.3 million or 30 basis points in the third quarter of 2017 which did not occur in the third quarter of 2016. Excluding the non-cash pension settlement charge, the 340 basis point increase in gross margin was largely driven by favorable sales mix and lower manufacturing overhead expenses.

Selling, general and administrative expense (“SG&A”) was $14.2 million and 15.2% of net sales for the third quarter of 2017 compared to $12.8 million and 14.0% of net sales for the same period in 2016. SG&A included a non-cash pension settlement charge of $0.1 million or 20 basis points in the third quarter of 2017. SG&A included a gain on the sale of property, plant and equipment of $1.0 million or 110 basis points in the third quarter of 2016. Excluding these items, SG&A as a percentage of sales improved 10 basis points due principally to higher sales volume.

Company recorded non-cash impairment charges of $4.1 million or 440 basis points related to its Bayou City Pump Company reporting unit. These charges represented the full remaining amounts of the reporting unit’s goodwill and customer relationship intangible assets. The third quarter of 2017 also included a non-cash pension settlement charge of $0.4 million or 50 basis points which did not occur in the same period last year. In the third quarter of 2016, operating margin included a gain on the sale of property, plant and equipment of $1.0 million or 110 basis points. Excluding these items, operating margin improved 360 basis points due principally to increased sales, favorable sales mix and lower manufacturing overhead expenses.

Net income was $5.7 million during the third quarter of 2017 compared to $6.9 million in the third quarter of 2016, and earnings per share were $0.22 and $0.27 for the respective periods. Earnings per share for the third quarter of 2017 included non-cash impairment charges of $0.10 per share and a non-cash pension settlement charge of $0.01 per share. Conversely, the third quarter of 2016 included a gain on the sale of property, plant and equipment of $0.03 per share.

Net sales for the nine months ended September 30, 2017 were $284.5 million compared to $287.9 million during the same period in 2016, a decrease of 1.2% or $3.4 million. Excluding sales from the PCCP project of $0.8 million in the first nine months of 2017 and $9.5 million for the same period in 2016, net sales for the first nine months of 2017 increased 1.9% or $5.3 million. Domestic sales, excluding PCCP, increased by 0.1% or $0.2 million while international sales increased 5.2% or $5.1 million compared to the same period in 2016.

Gross profit was $73.5 million for the first nine months of 2017, resulting in gross margin of 25.9%, compared to gross profit of $68.8 million and gross margin of 23.9% for the same period in 2016. Gross margin included a non-cash pension settlement charge of $2.5 million or 90 basis points in the first nine months of 2017 which did not occur in the first nine months of 2016. Excluding the non-cash pension settlement charge, gross margin increased by 290 basis points due principally to favorable sales mix, labor efficiency and lower warranty expense.

SG&A was $43.1 million and 15.2% of net sales for the first nine months of 2017 compared to $40.2 million and 14.0% of net sales for the same period in 2016. SG&A included a non-cash pension settlement charge of $1.3 million or 50 basis points in the first nine months of 2017 which did not occur in the same period last year. SG&A included a gain on the sale of property, plant and equipment of $1.0 million or 40 basis points in the first nine months of 2016. Excluding these items, SG&A as a percentage of sales increased 30 basis points due principally to lower sales volume.

Operating income was $26.3 million, resulting in operating margin of 9.3% for the first nine months of 2017, compared to operating income of $28.6 million and operating margin of 9.9% for the same period in 2016. In the first nine months of 2017, operating margin included non-cash impairment charges of $4.1 million or 140 basis points and a non-cash pension settlement charge of $3.8 million or 140 basis points. In the first nine months of 2016, operating margin included a gain on the sale of property, plant and equipment of $1.0 million or 30 basis points. Excluding these items, operating margin improved 250 basis points due principally to favorable sales mix, and lower labor and manufacturing overhead costs.

Net income was $18.6 million during the first nine months of 2017 compared to $19.8 million in the first nine months of 2016, and earnings per share were $0.71 and $0.76 for the respective periods. Earnings per share for the first nine months of 2017 included non-cash impairment charges of $0.10 per share and a non-cash pension settlement charge of $0.10 per share. Conversely, the first nine months of 2016 included a gain on the sale of property, plant and equipment of $0.03 per share.

The Company’s backlog of orders was ~~$111.4~~$249.8 million at ~~September~~June 30, ~~2017~~2023 compared to ~~$102.8~~$264.7 million at ~~September~~June 30, ~~2016~~2022 and ~~$98.8~~$267.4 million at December 31, ~~2016. Excluding~~2022. Incoming orders for the ~~PCCP project in 2016, the backlog at September 30, 2017 increased 9.6% as~~first six months of 2023 were $321.0 million, or an increase of 12.0% compared to ~~September 30, 2016.~~the same period in 2022, and a decrease of 13.8% excluding Fill-Rite.

On ~~October 26, 2017,~~July 27, 2023, the Board of Directors authorized the payment of a quarterly dividend of ~~$0.125~~$0.175 per share on the common stock of the Company, payable ~~December~~September 8, ~~2017,~~2023, to shareholders of record ~~November~~as of August 15, ~~2017. The cash dividend will represent an 8.7% increase over the dividend paid in the previous quarter.~~2023. This will mark the ~~271st~~294th consecutive quarterly dividend paid by The Gorman-Rupp ~~Company and the 45th consecutive year of increased dividends paid to its shareholders. The dividend yield at September 30, 2017 was 1.4%.~~

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.

Domestic and foreign uncertainties, including instability related to the production and price of oil and low commodity prices have made 2017 challenging. In addition, with the completion of the PCCP project, comparisons of revenue with 2016 will need to be appropriately adjusted during 2017. Overall business conditions have continued to improve and we are optimistic about our incoming order rate. We are also encouraged to see capital spending increase in industries related to oil and gas drilling activity and are hopeful the momentum is sustainable. The Company remains focused on operational efficiencies and will continue to manage expenses closely. Our underlying fundamentals remain strong and we remain well positioned to drive long-term growth. Our strong balance sheet provides us with the flexibility to continue to evaluate acquisition opportunities and new product development that we expect will help add value to our operations over the longer-term.

~~Three Months Ended September 30, 2017 vs. Three Months Ended September 30, 2016~~

Net sales during the third quarter of 2017 were $94.0 million compared to $91.3 million during the third quarter of 2016, an increase of 2.9% or $2.6 million. Excluding sales from the New Orleans Permanent Canal Closures & Pumps (“PCCP”) project of $0.3 million in the third quarter of 2017 and $1.6 million for the same period in 2016, net sales increased 4.4% or $4.0 million. Domestic sales, excluding PCCP, increased 3.5% or $2.0 million while international sales increased 6.0% or $2.0 million compared to the same period in 2016.

Sales in our larger water markets, excluding PCCP, decreased 2.2% or $1.4 million in the third quarter of 2017 compared to the third quarter of 2016. Sales in the construction market increased $2.6 million due primarily to sales to rental market customers related to increased oil and gas drilling activity. This increase was offset by decreased sales in the municipal market of $2.2 million primarily driven by decreased shipments attributable to flood control projects, clean water and wastewater applications. In addition, sales in the fire protection market decreased $1.8 million due principally to market softness in the Middle East.

Sales increased 21.7% or $5.4 million in non-water markets during the third quarter of 2017 compared to the third quarter of 2016. Sales in the industrial and petroleum markets increased a combined $3.2 million principally attributable to increased capital spending related to oil and gas drilling activity. Sales in the OEM market increased $2.2 million primarily related to power generation equipment and services.

SG&A was $14.2 million and 15.2% of net sales for the third quarter of 2017 compared to $12.8 million and 14.0% of net sales for the same period in 2016. SG&A included a non-cash pension settlement charge of $0.1 million or 20 basis points in the third quarter of 2017. SG&A included a gain on the sale of property, plant and equipment of $1.0 million or 110 basis points in the third quarter of 2016. Excluding these items, SG&A as a percentage of sales improved 10 basis points due principally to higher sales volume.

Operating income was $7.9 million, resulting in operating margin of 8.4% for the third quarter of 2017, compared to operating income of $9.9 million and operating margin of 10.8% for the same period in 2016. In the third quarter of 2017, due to decreasing demand for barge pumps for the marine transportation market, driven by low oil prices and overcapacity of inland barges, the Company recorded non-cash impairment charges of $4.1 million or 440 basis points related to its Bayou City Pump Company reporting unit. These charges represented the full remaining amounts of the reporting unit’s goodwill and customer relationship intangible assets. The third quarter of 2017 also included a non-cash pension settlement charge of $0.4 million or 50 basis points which did not occur in the same period last year. In the third quarter of 2016, operating margin included a gain on the sale of property, plant and equipment of $1.0 million or 110 basis points. Excluding these items, operating margin improved 360 basis points due principally to increased sales, favorable sales mix and lower manufacturing overhead expenses.

The decrease in net income in the third quarter of 2017 compared to the third quarter of 2016 was due primarily to increased sales and gross margin offset by non-cash impairment charges in the third quarter of 2017 of $2.7 million, net of income taxes, and a non-cash pension settlement charge of $0.3 million, net of income taxes. The decrease in the effective tax rate between the two periods was due primarily to the impact of lower income in domestic jurisdictions with higher tax rates driven by the goodwill and other intangible asset impairment charges.

Earnings per share for the third quarter of 2017 included non-cash impairment charges of $0.10 per share and a non-cash pension settlement charge of $0.01 per share. Conversely, the third quarter of 2016 included a gain on the sale of property, plant and equipment of $0.03 per share.

~~Nine Months Ended September 30, 2017 vs. Nine Months Ended September 30, 2016~~

Sales in the first nine months of 2017 in our larger water markets, excluding PCCP, decreased 0.3% or $0.7 million compared to the first nine months of 2016. Sales in the construction market increased $7.2 million due primarily to sales to rental market customers, and sales of repair parts increased $1.8 million. Sales in the fire protection market decreased $5.1 million principally due to market softness domestically and in the Middle East, and sales in the agriculture market decreased $1.6 million principally due to low farm income and competitive pricing pressure. Sales in the municipal market decreased $3.0 million principally driven by decreased shipments attributable to flood control projects.

Sales in the first nine months of 2017 in our non-water markets increased 7.2% or $6.0 million compared to the first nine months of 2016. Sales increased $5.4 million in the industrial market driven by an increase in oil and gas drilling activity. Sales in the OEM market increased $2.6 million primarily related to power generation equipment and services and infrastructure spending driven by gas production. These increases were partially offset by decreased shipments of $2.0 million in the petroleum market driven by challenging market conditions.

The decrease in net income in the first nine months of 2017 compared to the first nine months of 2016 was due primarily to increased gross profit offset by a non-cash pension settlement charge in the first nine months of 2017 of $2.6 million, net of income taxes, and non-cash impairment charges of $2.7 million, net of income taxes. The decrease in the effective tax rate between the two periods was due primarily to the impact of lower income in domestic jurisdictions with higher tax rates driven by the goodwill and other intangible asset impairment charges.

Earnings per share for the first nine months of 2017 included non-cash impairment charges of $0.10 per share and a non-cash pension settlement charge of $0.10 per share. Conversely, the first nine months of 2016 included a gain on the sale of property, plant and equipment of $0.03 per share.

Cash and cash equivalents totaled $76.0 million and there was no outstanding bank debt at September 30, 2017. In addition, the Company had $22.3 million available in bank lines of credit after deducting $8.7 million in outstanding letters of credit primarily related to customer orders. The Company was in compliance with its debt covenants, including limits on additional borrowings and maintenance of certain operating and financial ratios, at September 30, 2017 and December 31, 2016.

Working capital increased $23.3 million from December 31, 2016 to $177.8 million at September 30, 2017. The increase in working capital was due principally to positive operating results and related increased inventory, and reduced commissions payable driven by product mix and timing of payments.

Free cash flow, a non-GAAP financial measure for reporting cash flow, is defined by the Company as adjusted earnings before interest, income taxes and depreciation and amortization, less capital expenditures and dividends. The Company believes free cash flow provides the Company and investors with an important perspective on cash available for investments, acquisitions and working capital requirements.

~~The following table reconciles adjusted earnings before interest, income taxes and depreciation and amortization as reconciled above to free cash flow:~~

The primary drivers of operating cash flows during the first nine months of 2017 were operating income partially offset by reduced commissions payable due to product mix and timing of payments. During this same period in 2016, operating cash flows were primarily driven by reduced inventories and increased customer deposits partially offset by $8.0 million of contributions to the pension plan.

During the first nine months of 2017, investing activities of $7.5 million primarily consisted of a $3.0 million increase in short-term investments and $4.8 million of capital expenditures for machinery and equipment offset by $0.3 million of proceeds from the sale of property, plant and equipment. Capital expenditures for the full-year 2017 are presently planned to be in the range of $6 to $8 million and are expected to be financed through internally-generated funds. During the first nine months of 2016, investing activities of $4.3 million primarily consisted of capital expenditures for machinery and equipment, a new operations facility in Africa, and other building improvements totaling $5.6 million offset by proceeds from the sale of property, plant, and equipment of $1.3 million.

~~Net cash used for financing activities for the first nine months of 2017 and 2016 consisted of dividend payments of $9.0 million and $8.2 million, respectively.~~

On October 26, 2017, the Board of Directors of the Company declared a quarterly cash dividend of $0.125 per share on the common stock of the Company, payable December 8, 2017, to shareholders of record November 15, 2017. The cash dividend will represent an 8.7% increase over the dividend paid in the previous quarter. This will mark the 271st consecutive quarterly dividend paid by The Gorman-Rupp Company and the 45th consecutive year of increased dividends paid to its shareholders.

The Company’s backlog is down from the record level at the end of the first quarter of 2023 but remains elevated, which positions us well for the remainder of the year. We believe that our inventory levels have peaked and that we will see a reduction in the second-half, which will further contribute to our improvements in cash flow. We remain focused on delivering long term sustained growth and continuing to improve our debt leverage.

The following table presents the Company’s disaggregated net sales by its end markets for the three months ended June 30, 2023 and June 30, 2022:

Net sales for the second quarter of 2023 were $171.0 million compared to net sales of $119.1 million for the second quarter of 2022, an increase of 43.6% or $52.0 million. Domestic sales increased 50.3% or $42.9 million and international sales increased 26.8% or $9.0 million compared to the same period in 2022.

Fill-Rite sales were $42.9 million for the second quarter of 2023 compared to $13.5 million from the acquisition date of May 31, 2022 to June 30, 2022. In addition to the increase at Fill-Rite, sales increased $22.6 million, or 21.4%, due to an increase in volume as well as the impact of two pricing increases taken in 2022 and an annual price increase in January 2023. The Company’s two price increases in 2022, as well as the price increase in 2023 averaged between 4.0% - 5.0%. Sales increased $9.0 million in the fire suppression market primarily from increased domestic commercial construction, $4.1 million in the industrial market and $3.9 million in the repair market due to strengthening in the broader industrial economy, $2.6 million in the municipal market due to domestic flood control and wastewater projects related to increased infrastructure investment, $1.9 million in the construction market due to strong overall conditions including infrastructure related projects, $1.1 million in the petroleum market due to increased demand for larger petroleum transfer pumps, and $0.2 million in the OEM market. Partially offsetting these increases was a sales decrease of $0.2 million in the agriculture market primarily driven by weather conditions, where increased snowfall runoff and rain have slowed demand.

Gross profit was $51.7 million for the second quarter of 2023, resulting in gross margin of 30.2%, compared to gross profit of $28.2 million and gross margin of 23.7% for the same period in 2022. The 650 basis point increase in gross margin included a 200 basis point improvement on labor and overhead leverage due to increased sales volume and sales mix which includes a full quarter of Fill-Rite. The increase in gross margin also included a 450 basis point improvement in cost of material, which consisted of a reduction in LIFO expense of 210 basis points, a 120 basis point improvement from the realization of selling price increases, and a favorable impact of 120 basis points related to the Fill-Rite inventory step-up that was recorded during the second quarter of 2022 that did not recur in 2023.

Selling, general and administrative (“SG&A”) expenses were $24.2 million and 14.1% of net sales for the second quarter of 2023 compared to $24.1 million and 20.3% of net sales for the same period in 2022. SG&A expenses for the second quarter of 2022 included $6.9 million of one-time acquisition costs. Excluding acquisition costs, SG&A expenses were $17.2 million and 14.5 % of net sales for the second quarter of 2022. The increase in SG&A expenses, excluding acquisition costs, was due to the inclusion of a full quarter of Fill-Rite as compared to one month in the same period in 2022, as well as increased expenses to support sales growth. The improvement in SG&A as a percent of sales was primarily due to favorable leverage from increased sales.

Amortization expense was $3.2 million for the second quarter of 2023 compared to $1.2 million for the same period in 2022. The increase in amortization expense was due to a full quarter of amortization attributable to the Fill-Rite acquisition compared to one month for the same period in 2022.

Operating income was $24.3 million for the second quarter of 2023, resulting in an operating margin of 14.2%, compared to operating income of $2.9 million and operating margin of 2.4% for the same period in 2022. Operating income for the second quarter of 2022 included $6.9 million of one-time acquisition costs and $1.4 million of inventory step-up amortization. Excluding acquisition costs and inventory step-up totaling together $8.3 million, operating income was $11.2 million for the second quarter 2022 resulting in an operating margin of 9.4% of net sales. Excluding acquisition costs and inventory step-up in the second quarter of 2022 totaling $8.3 million, operating margin in the second quarter of 2023 increased 480 basis points compared to the same period in 2022 due to improved leverage on labor, overhead, and SG&A expenses due to increased sales volumes and improved cost of material partially offset by increased amortization expense.

Interest expense was $10.5 million for the second quarter of 2023 compared to $2.3 million for the same period in 2022. The increase in interest expense was due to the inclusion of a full quarter of interest expense and increased interest rates on the debt financing attributable to the Fill-Rite acquisition.

The Company’s effective tax rate was 21.0% for both the second quarter of 2023 and 2022.

Net income was $10.5 million, or $0.40 per share, for the second quarter of 2023 compared to net loss of ($1.0) million, or ($0.04) per share, in the second quarter of 2022. Adjusted earnings per share for the second quarter of 2023 were $0.41 per share compared to $0.27 per share for the second quarter of 2022. Adjusted earnings per share for the second quarter of 2023 included an unfavorable LIFO impact of $0.07 per share compared to an unfavorable LIFO impact of $0.13 per share in the second quarter of 2022. Adjusted earnings per share is a non-GAAP financial measure; see “Non-GAAP Financial Information” below for a definition of the measure and the reconciliation to its comparable GAAP financial measure.

The following table presents the Company’s disaggregated net sales by its end markets for the six months ended June 30, 2023 and June 30, 2022:

Net sales for the first six months of 2023 were $331.5 million compared to net sales of $221.2 million for the first six months of 2022, an increase of 49.8% or $110.3 million. Domestic sales increased 57.2% or $90.3 million and international sales increased 31.5% or $20.0 million compared to the same period in 2022.

Fill-Rite sales were $82.8 million for the first six months of 2023 compared to $13.5 million from the acquisition date of May 31, 2022 to June 30, 2022. In addition to the increase from Fill-Rite, sales increased $41.0 million, or 19.7%, due to an increase in volume as well as the impact of two pricing increases taken in 2022 and an annual price increase in January 2023. The Company’s two price increases in 2022, as well as the price increase in 2023 averaged between 4.0% - 5.0%. Sales increased $16.7 million in the fire market primarily from increased domestic commercial construction, $7.2 million in the industrial market and $6.0 million in the repair market due to strengthening in the broader industrial economy, $5.7 million in the municipal market due to domestic flood control and wastewater projects related to increased infrastructure investment, $3.7 million in the construction market due to strong overall conditions including infrastructure related projects, $1.6 million in the petroleum market due to increased demand for larger petroleum transfer pumps, and $0.5 million in the OEM market. Partially offsetting these increases was a decrease of $0.4 million in the agriculture market primarily driven by weather conditions, where increased snowfall runoff and rain have slowed demand.

Gross profit was $97.2 million for the first six months of 2023, resulting in gross margin of 29.3%, compared to gross profit of $53.7 million and gross margin of 24.3% for the same period in 2022. The 500 basis point increase in gross margin included a 225 basis point improvement on labor and overhead leverage due to increased sales volume and sales mix which includes six months of Fill-Rite for 2023 compared to one month for the same period in 2022. The increase in gross margin also included a 275 basis point improvement in cost of material, which consisted of a favorable LIFO impact of 140 basis points, a favorable impact of 60 basis points related to the Fill-Rite inventory step-up that was recorded in 2022 that did not recur in 2023 and a 75 basis point improvement in cost of material from the realization of selling price increases.

Selling, general and administrative (“SG&A”) expenses were $47.4 million and 14.3% of net sales for the first six months of 2023 compared to $39.9 million and 18.1% of net sales for the same period in 2022. SG&A expenses for the first six months of 2022 included $6.9 million of one-time acquisition costs. Excluding acquisition costs of $6.9 million, SG&A expenses were $33.0 million, and 14.9% of net sales for the first six months of 2022. The increase in SG&A expenses, excluding acquisition costs, was due to the inclusion of Fill-Rite for the full six month period in 2022 as compared to one month in the same period in 2022, as well as increased expenses to support sales growth. The improvement in SG&A as a percent of sales was primarily due to favorable leverage from increased sales.

Amortization expense was $6.4 million for the first six months of 2023 compared to $1.4 million for the same period in 2022. The increase in amortization expense was due to the inclusion of six months of amortization attributable to the Fill-Rite acquisition compared to one month for the same period in 2022.

Operating income was $43.4 million for the first six months of 2023, resulting in an operating margin of 13.1%, compared to operating income of $12.4 million and operating margin of 5.6% for the same period in 2022. Operating income for the first six months of 2022 included $6.9 million of one-time acquisition costs and $1.4 million of inventory step up amortization. Excluding acquisition costs and inventory step-up totaling together $8.3 million, operating income was $20.7 million for the first six months of 2022 resulting in an operating margin of 9.4% of net sales. Excluding acquisition costs and inventory step-up in 2022 totaling $8.3 million operating margin in the first six months of 2023 increased 370 basis points compared to the same period in 2022 due to improved leverage on labor, overhead, and SG&A expenses due to increased sales volumes and improved cost of material partially offset by increased amortization expense.

Interest expense was $20.7 million for the first six months of 2023 compared to $2.3 million for the same period in 2022. The increase in interest expense was primarily due to the inclusion of six months of interest expense in 2023 compared to one month for the first six months of 2022 on the debt financing attributable to the Fill-Rite acquisition, as well as increased interest rates in 2023 as compared to 2022.

The Company’s effective tax rate was 21.8% for the first six months of 2023 compared to 21.0% for the first six months of 2022.

Net income was $17.0 million, or $0.65 per share, for the first six months of 2023 compared to net income of $6.5 million, or $0.25 per share for the first six months of 2022. Adjusted earnings per share for the first six months of 2023 were $0.68 per share compared to $0.56 per share for the first six months of 2022. Adjusted earnings per share for the first six months of 2023 included an unfavorable LIFO impact of $0.13 per share compared to an unfavorable LIFO impact of $0.18 per share in the first six months of 2022. Adjusted earnings per share is a non-GAAP financial measure; see “Non-GAAP Financial Information” below for a definition of the measure and the reconciliation to its comparable GAAP financial measure.

The discussion of Results of Operations above 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 earnings is earnings excluding non-cash pension settlement charges, one-time acquisition costs, amortization of step up in value of acquired inventories, and amortization of 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, and amortization of customer backlog per share. Adjusted earnings before interest, taxes, depreciation and amortization 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, 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 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 earnings before interest, taxes, depreciation and amortization.

Our primary sources of liquidity are cash generated from operations and borrowings under our Credit Facility. Cash and cash equivalents totaled $12.2 million at June 30, 2023. The Company had an additional $80.9 million available under the revolving credit facility after deducting $17.0 million drawn and $2.1 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 obligation and financial covenants for at least the next 12 months.

As of June 30, 2023, the Company had $439.5 million in total debt outstanding due in 2027. The Company was in compliance with its debt covenants, including limits on additional borrowings and maintenance of certain operating and financial ratios, at June 30, 2023 and December 31, 2022.

Capital expenditures for the first six months of 2023 were $13.3 million and consisted primarily of machinery and equipment and building improvements. Capital expenditures for the full-year 2023 are presently planned to be in the range of $18-$20 million primarily for building improvements and machinery and equipment purchases, and are expected to be financed through internally-generated funds.

On July 27, 2023, the Board of Directors authorized the payment of a quarterly dividend of $0.175 per share on the common stock of the Company, payable September 8, 2023, to shareholders of record as of August 15, 2023. This will mark the 294th 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 June 30, 2023, 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 six months of 2023 compared to the same period last year was primarily due to increased earnings before depreciation, amortization, and LIFO expense, and improved cash flow from better working capital management.

During the first six months of 2023, investing activities of $12.9 million consisted of $13.3 million for capital expenditures primarily for machinery and equipment. During the first six months of 2022, investing activities of $534.5 million consisted of $526.3 million for the acquisition of Fill-Rite and $8.4 million for capital expenditures primarily for machinery and equipment.

Net cash used for financing activities for the first six months of 2023 primarily consisted of net payments on bank borrowings of $8.8 million, dividend payments of $9.1 million, and share repurchases of $1.0 million. Net cash received for financing activities for the first six months of 2022 consisted of proceeds from the new Senior Term Loan Facility of $350.0 million, $90.0 million in unsecured subordinated debt, and $5.0 million from the new revolving credit facility. Partially offsetting these proceeds were debt issuance fees paid of $15.2 million, dividend payments of $8.9 million and share repurchases of $0.9 million during the first six months of 2022.

Our critical accounting policies are described in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in the notes to our Consolidated Financial Statements for the year ended December 31, ~~2016~~2022 contained in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2022. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been discussed in the notes to our ~~Condensed~~ Consolidated Financial Statements in this Quarterly Report on Form 10-Q. The application of our critical accounting policies may require management to make judgments and estimates about the amounts reflected in the Consolidated Financial Statements. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, The Gorman-Rupp Company provides the following cautionary statement: This Form 10-Q contains various forward-looking statements based on assumptions concerning The Gorman-Rupp Company’s operations, future results and prospects. These forward-looking statements are based on current expectations about important economic, political, and technological factors, among others, and are subject to risks and uncertainties, which could cause the actual results or events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions.

Such 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, integration of the Fill-Rite business in a timely and cost effective manner, retention of supplier and customer relationships and key employees, the ability to achieve synergies and cost savings in the amounts and within the time frames currently anticipated and the ability to service and repay indebtedness incurred in connection with the transaction. Other factors include, but are not limited to: company specific risk factors including (1) loss of key personnel; (2) intellectual property security; (3) acquisition performance and integration; (4) the Company’s indebtedness and how it may impact the Company’s financial condition and the way it operates its business; (5) general risks associated with acquisitions; (6) the anticipated benefits from the Fill-Rite transaction may not be realized; (7) impairment in the value of intangible assets, including goodwill; (8) defined benefit pension plan settlement expense; (9) LIFO inventory method, and (10) family ownership of common equity; and general risk factors including (11) continuation of the current and projected future business ~~environment; (2)~~environment; (12) highly competitive markets; ~~(3)~~(13) availability and costs of raw ~~materials; (4) loss of key management; (5)~~materials and labor; (14) cyber security threats; ~~(6) acquisition performance and integration; (7)~~(15) compliance with, and costs related to, a variety of import and export laws and regulations;

~~(8)~~ (16) environmental compliance costs and liabilities; ~~(9)~~(17) exposure to fluctuations in foreign currency exchange rates; ~~(10)~~(18) conditions in foreign countries in which ~~the~~The Gorman-Rupp Company conducts business; ~~(11) impairment~~(19) changes in ~~the value of intangible assets, including goodwill; (12) defined benefit pension plan settlement expense; (13) family ownership of common equity;~~our tax rates and ~~(14)~~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.

We are exposed to various market ~~risk associated principally with~~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.

The results of operations are exposed to changes in interest rates primarily with respect to borrowings under the Company’s Senior Term Loan Facility, Credit Facility, and Subordinated 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 0.75% to 1.75%, or at (ii) an Adjusted Term SOFR Rate, plus the applicable margin, which ranges from 1.75% to 2.75%. Borrowings under the Subordinated Credit Facility bear interest at (i) either a base rate plus 8.0%, or at (ii) an Adjusted Term SOFR Rate plus 9.1%. At June 30, 2023, the Company had $332.5 million in borrowings under the Senior Term Loan Facility, $17.0 million in borrowings under the Credit Facility, and $90.0 million in borrowings under the Subordinated Credit Facility. As of June 30, 2023, the applicable interest rates under the Senior Secured Credit Agreement and the Subordinated Credit Facility were Adjusted Term SOFR plus 2.5% and Adjusted Term SOFR plus 9.1%, respectively.

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.

The Company estimates that a hypothetical increase of 100 basis points in interest rates would increase interest expense by approximately $2.7 million on an annual basis.

The Company’s foreign currency exchange rate risk is limited primarily to the Euro, ~~the~~ Canadian Dollar, ~~the~~ South African Rand and ~~the~~ 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 the ~~first nine months of 2017~~six month periods ending June 30, 2023 and ~~the first nine months of 2016~~2022 were ~~$0.4~~($0.4) million ~~for both periods,~~and $0.1 million, respectively, and are reported within Other (expense) income, ~~and Other expense~~net on the Consolidated Statements of Income.

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,~~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,~~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-Q. Based on that evaluation, the principal executive officer and the principal financial officer have concluded that the Company’s disclosure controls and procedures were effective as of ~~September~~June 30, ~~2017.~~2023.

As of June 30, 2023, we are in the process of integrating the internal controls of the acquired Fill-Rite business into Gorman-Rupp’s existing operations as part of planned integration activities. In addition, we have implemented new processes and internal controls to assist us in the preparation and disclosure of financial information. There were no other changes in ~~the Company’s~~Gorman-Rupp’s internal control over financial reporting ~~that occurred during~~(as defined in Rule 13a-15(f) under the ~~last fiscal quarter~~Exchange Act) that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~Gorman-Rupp’s internal control over financial ~~reporting.~~reporting during the quarter ended June 30, 2023.

There are no material changes from the legal proceedings previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2022.

In addition to the information set forth in this report, you should carefully consider the risk factors ~~previously reported~~disclosed in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~

During the quarter ended June 30, 2023, no director or officer of the Company adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, each as defined in Item 408 of Regulation S-K.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements (Unaudited)

		Consolidated Statements of Income - Three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 - ~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022			3

		Consolidated Statements of Comprehensive Income - Three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 - ~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022			3

		Consolidated Balance Sheets - ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022			4

		Consolidated Statements of Cash Flows - ~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022			5

		Consolidated Statements of Equity - Six months ended June 30, 2023 and 2022	6
	Notes to Consolidated Financial Statements (Unaudited)			6
			7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			10
			14
Item 3.		Quantitative and Qualitative Disclosures about Market Risk			19
			22
Item 4.		Controls and Procedures	23
		19

PART II. OTHER INFORMATION

Item 1.		Legal Proceedings			19
			23
Item 1A.		Risk Factors			19	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Information	24
Item 5.	Other Information	24
Item 6.	Exhibits	~~Exhibits~~			20
			25
EX-31.1		Section 302 Principal Executive Officer (PEO) Certification			22

EX-31.2		Section 302 Principal Financial Officer (PFO) Certification			23

EX-32		Section 1350 Certifications			24

									Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,				Nine Months Ended September 30,
(Thousands of dollars, except per share amounts)		2017		2016		2017		2016
(Dollars in thousands, except per share amounts)									2023			2022			2023			2022
Net sales	$	93,976	$	91,346	$	284,451	$	287,868	$	171,024		$	119,067		$	331,490		$	221,234
Cost of products sold		67,777		68,676		210,912		219,061		119,366			90,828			234,309			167,498

Gross profit		26,199		22,670		73,539		68,807		51,658			28,239			97,181			53,736
Selling, general and administrative expenses		14,242		12,819		43,107		40,190		24,193			24,114			47,430			39,936
Impairment of goodwill and other intangible assets		4,098		—		4,098		—

Amortization expense										3,182			1,218			6,373			1,435
Operating income		7,859		9,851		26,334		28,617		24,283			2,907			43,378			12,365
Other income, net		98		551		750		676

Income before income taxes		7,957		10,402		27,084		29,293
Income taxes		2,255		3,475		8,469		9,464

Net income	$	5,702	$	6,927	$	18,615	$	19,829

Earnings per share	$	0.22	$	0.27	$	0.71	$	0.76
Interest expense										(10,485	)		(2,322	)		(20,672	)		(2,322	)
Other income (expense), net										(536	)		(1,846	)		(969	)		(1,756	)
Income (loss) before income taxes										13,262			(1,261	)		21,737			8,287
Provision (benefit) from income taxes										2,785			(265	)		4,740			1,740
Net income (loss)									$	10,477		$	(996	)	$	16,997		$	6,547
Earnings (loss) per share									$	0.40		$	(0.04	)	$	0.65		$	0.25
Cash dividends per share	$	0.115	$	0.105	$	0.345	$	0.315	$	0.175		$	0.170		$	0.350		$	0.340
Average number of shares outstanding		26,106,623		26,091,123		26,098,925		26,086,141		26,178,248			26,079,115			26,154,196			26,085,006

Account receivable	$	21,273
Inventory		12,214
Customer backlog (amortized over 1 year)		2,600
Other current assets		914
Property, plant, and equipment		24,505
Customer relationships (amortized over 20 years)		200,900
Technology (amortized over 20 years)		39,800
Tradenames (unamortized)		10,700
Goodwill		230,688
Total assets acquired	$	543,594
Current liabilities assumed		(15,601	)
Allocated purchase price	$	527,993

	End market
	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Industrial	$	22,786	$	18,664	$	43,731	$	36,518
Fire		36,935		27,904		73,074		56,326
Agriculture		5,027		5,195		9,776		10,207
Construction		11,921		10,073		22,949		19,238
Municipal		19,549		16,950		36,973		31,257
Petroleum		3,719		2,631		7,739		6,173
OEM		9,480		9,300		18,490		18,031
Repair parts		18,722		14,809		35,912		29,943
Total net sales excluding Fill-Rite		128,139		105,526		248,644		207,693
Fill-Rite		42,885		13,541		82,846		13,541
Total net sales	$	171,024	$	119,067	$	331,490	$	221,234

	Geographic Location
	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
United States	$	128,289	$	85,375	$	248,039	$	157,766
Foreign countries		42,735		33,692		83,451		63,468
Total net sales	$	171,024	$	119,067	$	331,490	$	221,234

	Six Months Ended June 30, 2022
Net sales	$	286.3
Operating income	$	27.7
Net income	$	9.5
Earnings per share	$	0.36

	June 30, 2023		December 31, 2022
Contract assets	$	-	$	-
Contract liabilities	$	9,097	$	6,740

							June 30,
	September 30,						2023			2022
	2017			2016
Balance at beginning of year	$	1,435		$	1,380
Balance of beginning of year							$	1,973		$	1,637
Provision		1,058			1,572			2,130			593
Acquired								-			645
Claims		(1,360	)		(1,418	)		(1,741	)		(665	)

Balance at end of period	$	1,133		$	1,534		$	2,362		$	2,210


	Pension Benefits						Postretirement Benefits						Pension Benefits						Postretirement Benefits
	Three Months Ended September 30,						Three Months Ended September 30,						Three Months Ended June 30,						Three Months Ended June 30,
	2017			2016			2017			2016			2023			2022			2023			2022
Service cost	$	655		$	709		$	312		$	298		$	530		$	482		$	209		$	287
Interest cost		599			659			203			210			635			711			299			190
Expected return on plan assets		(1,138	)		(982	)		—			—			(657	)		(692	)		-			-
Recognized actuarial loss (gain)		436			525			(168	)		(174	)
Amortization of prior service cost														-			-			(249	)		(283	)
Recognized actuarial loss														301			481			(9	)		92
Settlement loss		448			—			—			—			-			1,597			-			-

Net periodic benefit cost	$	1,000		$	911		$	347		$	334

Net periodic benefit cost (a)													$	809		$	2,579		$	250		$	286

	Currency Translation Adjustments			Deferred Gain (Loss) on Cash Flow Hedging			Pension and OPEB Adjustments			Accumulated Other Comprehensive (Loss) Income
Balance at December 31, 2022	$	(10,619	)	$	(617	)	$	(13,238	)	$	(24,474	)
Reclassification adjustments		-			(588	)		583			(5	)
Current period benefit (charge)		278			2,023			(72	)		2,229
Income tax benefit (charge)		-			(341	)		(145	)		(486	)
Balance at June 30, 2023	$	(10,341	)	$	477		$	(12,872	)	$	(22,736	)

Debt consisted of:
Senior Secured Credit Agreement	June 30, 2023			December 31, 2022
Senior term loan facility	$	332,500		$	341,250
Credit facility		17,000			17,000
Subordinated Credit Agreement
Subordinated credit facility		90,000			90,000
Total debt		439,500			448,250
Unamortized discount and debt issuance fees		(10,595	)		(11,423	)
Total debt, net		428,905			436,827
Less: current portion of long-term debt		(17,500	)		(17,500	)
Total long-term debt, net	$	411,405		$	419,327


	Currency Translation Adjustments			Pension and Other Postretirement Benefits			Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2017	$	(8,842	)	$	(11,623	)	$	(20,465	)
Reclassification adjustments		—			4,720			4,720
Current period credit		3,119			54			3,173
Income tax expense		—			(1,746	)		(1,746	)

Balance at September 30, 2017	$	(5,723	)	$	(8,595	)	$	(14,318	)

Derivatives in Cash Flow Hedging Relationships	Location of (Loss) Gain Recognized in Income on Derivatives	Amount of (Loss) Gain Recognized in Income on Derivatives
		Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
Interest rate swaps	Interest Expense	$	397	$	-	$	588	$	-

Derivatives in Cash Flow Hedging Relationships	Amount of (Loss) Gain Recognized in AOCI on Derivatives				Location of (Loss) Gain Reclassed from AOCI into Income (Effective Portion)	Amount of (Loss) Gain Reclassed from AOCI into Income (Effective Portion)
	Three Months Ended June 30,					Three Months Ended June 30,
	2023		2022			2023			2022
Interest rate swaps	$	3,842	$	-	Interest expense	$	(397	)	$	-

Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced program		Approximate dollar value of shares that may yet be purchased under the program
April 1 to April 30, 2023		-		-		-	$	48,067
May 1 to May 31, 2023		-		-		-		48,067
June 1 to June 30, 2023		-		-		-		48,067
Total		-		-		-	$	48,067

Exhibit 10.1		Amendment No. 1 dated as of June 30, 2023 to the Credit Agreement dated as of May 31, 2022

Exhibit 31.1		Certification of ~~Jeffrey S. Gorman,~~Scott A. King, President and Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2		Certification of James C. Kerr, Executive Vice President and Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32		Certification pursuant to 18 U.S.C Section 1350, as adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of ~~2002.~~2002


	The Gorman-Rupp Company
		(Registrant)

Date: ~~October~~July 31, ~~2017~~2023

	By:	/s/James C. Kerr
		James C. Kerr
		Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company ☐