GORMAN RUPP CO
For the period ended Dec 31, 2024. Filed Mar 3, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 3, 2025
GRC$67.76-0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-26.
0001437749-24-005519
Item 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-03.
0001437749-25-005856
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 81 previous paragraphs and 77 current paragraphs.
49 unchanged; 22 reworded; 6 added; 10 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 14 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
Strong incoming orders in 2024 and a healthy backlog as of December 31, 2024 position us well to begin the new year. We remain well positioned to benefit from infrastructure spending and the strong demand for flood control and storm water management. We remain focused on delivering long-term profitable growth.
Current report
Sales increased $21.5 million in the municipal market and $5.3 million in the repair market due to domestic flood control and wastewater projects related to increased infrastructure investment, $2.6 million in the OEM market primarily related to computer cooling, and $1.0 million in the petroleum market primarily driven by increased international refueling applications. Offsetting these increases was a decrease of $22.1 million in the fire suppression market primarily resulting from backlog returning to more normal levels. Fire suppression sales in 2023 were up significantly compared to 2022 as the Company was working to return backlog and lead times to normal levels, which resulted in higher 2023 sales and a tougher year-over-year comparison for 2024. Fire suppression incoming orders for 2024 were up 1.5% when compared to 2023. Sales in 2024 also decreased $5.5 million in the industrial market and $1.8 million in the construction market, and $0.8 million in the agriculture market.
Current report
SG&A expenses were $100.5 million and 15.2% of net sales in 2024 compared to $96.7 million and 14.7% of net sales in 2023. SG&A expenses for 2024 included $1.3 million of refinancing transaction costs and a $1.1 million gain on the sale of a fixed asset. SG&A expenses increased due to healthcare costs, as well as increased selling activity.
Current report
Operating income was $91.4 million for 2024, resulting in an operating margin of 13.9%, compared to operating income of $87.0 million and operating margin of 13.2% in 2023. Operating margin in 2024 increased 70 basis points compared to the same period in 2023 primarily due to improved cost of material, partially offset by increased labor, overhead, and SG&A expenses.
Current report
Interest expense was $33.6 million for 2024 compared to $41.3 million in 2023. The decrease in interest expense was due to a series of debt refinancing transactions the Company completed on May 31, 2024 as well as a decrease in outstanding debt. In addition to reducing interest expense, the refinancing also extended and staggered the Company’s debt maturities. The Company upsized, amended, and extended the existing Senior Term Loan Facility from $350.0 million to $370.0 million, amended and extended the existing $100.0 million revolving Credit Facility, and issued $30.0 million in new 6.40% Senior Secured Notes. The proceeds from these transactions, as well as $10.0 million of cash on hand, were used to retire the Company’s $90.0 million unsecured Subordinated Credit Facility.
Current report
Other income (expense), net was $7.3 million of expense for 2024 compared to $1.8 million of expense in 2023. Other expense for 2024 included a $4.4 million write-off of unamortized previously deferred debt financing fees and a $1.8 million prepayment fee related to the early retirement of the unsecured Subordinated Credit Facility.
Removed paragraphs (10)
Previous report
On May 31, 2022, the 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 is approximately $448.0 million. The Company funded the transaction with cash on-hand and new debt. The Company incurred $7.1 million of one-time acquisition costs during the year ended December 31, 2022. The results of operations for Fill-Rite from the acquisition date going forward are included in the Company’s Consolidated Statements of Income.
Previous report
Our backlog has come down from the record levels that we saw in early 2023 but remains elevated as we enter 2024. We expect backlog to return to more normal levels during 2024. Our diverse markets continue to be a strength and we remain well positioned to benefit from infrastructure spending and the increased demand for flood control and storm water management.
Previous report
Sales increased $36.2 million in the industrial market primarily due to the inclusion of a full year of Fill-Rite sales in 2023 compared to seven months of sales included in the prior year. In addition to the increase from Fill-Rite, industrial sales increased $14.2 million due to the strengthening in the broader industrial economy. Sales increased $25.4 million in the agriculture market due entirely to the inclusion of a full year of Fill-Rite sales compared to seven months of sales in the prior year. Sales increased $26.4 million in the construction market primarily due to the inclusion of a full year of Fill-Rite sales compared to seven months of sales included in the prior year. In addition to the increase from Fill-Rite, construction sales increased $8.9 million due to overall strong conditions including infrastructure related projects. Sales increased $22.6 million in the fire market primarily from increased domestic commercial construction, $9.6 million in the repair market due to strengthening in the broader industrial economy, $8.8 million in the municipal market due to domestic flood control and wastewater projects related to increased infrastructure investment, and $2.8 million in the OEM market. Sales in the petroleum market increased $6.7 million primarily due to the inclusion of a full year of Fill-Rite sales compared to seven months of sales included in the prior year as well as increased demand for larger petroleum transfer pumps.
Previous report
For further discussion on the LIFO inventory costing method, see Note 1 “Summary of Significant Accounting Policies” and Note 4 “Inventories” in the Notes to our Consolidated Financial Statements.
Previous report
Selling, general and administrative (“SG&A”) expenses were $96.7 million and 14.7% of net sales in 2023 compared to $83.1 million and 16.0% of net sales in 2022. SG&A expenses in 2022 included $7.1 million of one-time acquisition costs. Excluding acquisition costs of $7.1 million, SG&A expenses were $76.0 million and 14.6% of net sales in 2022. The increase in SG&A expenses, excluding acquisition costs, was due to the inclusion of Fill-Rite expenses for the full year in 2023 as compared to seven months in 2022, as well as increased expenses to support sales growth.
Previous report
Amortization Expense
Previous report
Amortization expense was $12.6 million in 2023 compared to $7.6 million in 2022. The increase in amortization expense was due to the inclusion of a full year of amortization attributable to the Fill-Rite acquisition in 2023 compared to seven months in 2022.
Previous report
Operating income was $87.0 million in 2023, resulting in an operating margin of 13.2%, compared to operating income of $40.2 million and operating margin of 7.7% in 2022. Operating income in 2022 included $7.1 million of one-time acquisition costs, and $1.4 million of inventory step-up amortization. Excluding acquisition costs and inventory step-up totaling $8.5 million, operating income was $48.7 million in 2022 resulting in an operating margin of 9.3% of net sales. Operating margin in 2023 increased 390 basis points compared to 2022, excluding acquisition costs and inventory step-up in 2022, due to improved margin on material costs, and improved leverage on SG&A expense due to increased sales volumes partially offset by increased amortization expense.
Previous report
Interest expense was $41.3 million in 2023 compared to $19.2 million in 2022. The increase in interest expense was primarily due to the inclusion of a full year of interest expense in 2023 compared to seven months in 2022 on the debt financing attributable to the Fill-Rite acquisition, as well as increased interest rates in 2023 as compared to 2022.
Previous report
Other income (expense), net was $1.8 million of expense in 2023 compared to $7.1 million of expense in 2022. The $7.1 million of expense in 2022 included non-cash pension settlement charges of $6.4 million, which did not recur in 2023.
Reworded paragraphs (22)
Previous wording
The Company’s backlog of orders was $218.1 million at December 31, 2023 compared to $267.4 million at December 31, 2022, a decrease of 18.4%. The backlog was reduced from record levels towards the end of 2022 and beginning of 2023. The backlog aging in 2023 was consistent with historical levels. Approximately 90% of the Company’s backlog of unfilled orders is scheduled to be shipped during 2024, with the remainder principally during the first half of 2025.
Current wording
The Company’s backlog of orders was $206.0 million at December 31, 2024 compared to $218.1 million at December 31, 2023, a decrease of 5.6%. Approximately 90% of the Company’s backlog of unfilled orders is scheduled to be shipped during 2025, with the remainder principally during the first half of 2026.
Previous wording
Incoming orders for the year ending December 31, 2023, were $617.6 million, an increase of 4.4%, compared to 2022.
Current wording
Incoming orders for the year ending December 31, 2024, were $659.3 million, an increase of 6.8%, compared to 2023.
Previous wording
On January 25, 2024, the Board of Directors authorized the payment of a quarterly dividend of $0.18 per share, representing the 296th consecutive quarterly dividend to be paid by the Company. During 2023, the Company again paid increased dividends and thereby attained its 51st consecutive year of increased dividends. These consecutive years of increases continue to position Gorman-Rupp in the top 50 of all U.S. public companies with respect to number of years of increased dividend payments. The regular dividend yield at December 31, 2023 was 2.0%.
Current wording
On January 24, 2025, the Board of Directors authorized the payment of a quarterly dividend of $0.185 per share, representing the 300th consecutive quarterly dividend to be paid by the Company. During 2024, the Company again paid increased dividends and thereby attained its 52nd consecutive year of increased dividends. These consecutive years of increases continue to position Gorman-Rupp in the top 50 of all U.S. public companies with respect to number of years of increased dividend payments. The regular dividend yield at December 31, 2024 was 1.9%.
Previous wording
Net sales for 2023 of $659.5 million increased 26.6% or $138.5 million compared to net sales of $521.0 million in 2022. The increase in sales was due to the inclusion of a full year of Fill-Rite sales compared to seven months of sales included in the prior year as well as an increase in volume and the impact of pricing increases taken in 2022 and an annual price increase in the first quarter of 2023. The Company’s two price increases in 2022, as well as the price increase in 2023 averaged between 4%-5%. Domestic sales increased 30.4% or $116.1 million and international sales increased 16.0% or $22.4 million compared to 2022.
Current wording
Net sales for 2024 were $659.7 million compared to net sales of $659.5 million for 2023, an increase of 0.1% or $0.2 million. The increase in sales was due primarily to the impact of pricing increases taken in the first quarter of 2024.
Previous wording
Gross profit was $196.3 million for 2023, resulting in gross margin of 29.8%, compared to gross profit of $130.9 million and gross margin of 25.1% in 2022. The 470 basis point increase in gross margin included a 380 basis point improvement in cost of material, which consisted of a favorable LIFO impact of 240 basis points, a favorable impact of 30 basis points related to the Fill-Rite inventory step-up that was recognized in 2022 that did not recur in 2023 and a 110 basis point improvement from the realization of selling price increases. The increase in gross margin also included a 90 basis point improvement on labor and overhead leverage due to increased sales volume and sales mix which includes a full year of Fill-Rite sales in 2023 compared to seven months in 2022.
Current wording
Gross profit was $204.3 million for 2024, resulting in gross margin of 31.0%, compared to gross profit of $196.3 million and gross margin of 29.8% in 2023. The 120 basis point increase in gross margin included a 200 basis point improvement in cost of material, which consisted of a reduction in LIFO expense of 30 basis points, a favorable impact of 20 basis points related to the amortization of acquired Fill-Rite customer backlog which occurred in 2023 and did not reoccur in 2024, and a 150 basis point improvement from the realization of selling price increases. These improvements were partially offset by an 80 basis point increase in labor and overhead expenses as a percent of sales driven by increased healthcare costs.
Previous wording
Net income was $35.0 million, or $1.34 per share, in 2023 compared to net income of $11.2 million, or $0.43 per share in 2022. Adjusted earnings per share in 2023 were $1.37 per share compared to $0.94 per share in 2022. Adjusted earnings per share in 2023 included an unfavorable LIFO impact of $0.21 per share compared to an unfavorable LIFO impact of $0.56 per share in 2022. Adjusted earnings per share is a non-GAAP financial measure- please see “Non-GAAP Financial Information” below.
Current wording
Net income was $40.1 million, or $1.53 per share, for 2024 compared to net income of $35.0 million, or $1.34 per share, for 2023. Adjusted earnings per share for 2024 were $1.75 per share compared to $1.37 per share for 2023. Adjusted earnings per share is a non-GAAP financial measure, please see “Non-GAAP Financial Information” below.
Previous wording
The Company’s effective tax rate was 20.5% for 2023 compared to 19.3% for 2022. The effective tax rate for 2022 was impacted by similar benefits from credits and permanent items as the prior year on lower pretax income. We expect our effective tax rate for 2024 to be between 20.0% and 22.0%.
Current wording
The Company’s effective tax rate was 20.6% for 2024 compared to 20.5% for 2023. We expect our effective tax rate for 2025 to be between 20.0% and 22.0%.
Previous wording
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.
Current wording
This discussion of Results of Operations includes certain non-GAAP financial data and measures such as adjusted earnings, adjusted earnings per share, and adjusted earnings before interest, taxes, depreciation and amortization. Adjusted earnings is earnings excluding non-cash pension settlement charges, one-time acquisition costs, amortization of step up in value of acquired inventories, amortization of customer backlog, write-off of unamortized previously deferred debt financing fees, and refinancing costs. Adjusted earnings per share is earnings per share excluding non-cash pension settlement charges per share, one-time acquisition costs per share, amortization of step up in value of acquired inventories per share, amortization of customer backlog per share, write-off of unamortized previously deferred debt financing fees, and refinancing costs. 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, write-off of unamortized previously deferred debt financing fees, refinancing costs, 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.
Previous wording
Our primary sources of liquidity are cash generated from operations and borrowings under our revolving credit facility. Cash and cash equivalents totaled $30.5 million at December 31, 2023. The Company had an additional $98.0 million available under the revolving credit facility after deducting $2.0 million in outstanding letters of credit primarily related to customer orders. See Note 5 “Financing Arrangements” in the Notes to our Consolidated Financial Statements.
Current wording
Our primary sources of liquidity are cash generated from operations and borrowings under our revolving credit facility. Cash and cash equivalents totaled $24.2 million at December 31, 2024. The Company had $98.9 million of borrowing capacity available under the revolving credit facility after deducting $1.1 million in outstanding letters of credit primarily related to customer orders. See Note 5 - Financing Arrangements in the Notes to our Consolidated Financial Statements.
Previous wording
As of December 31, 2023, the Company had $413.8 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 December 31, 2023.
Current wording
As of December 31, 2024, the Company had $340.8 million in debt outstanding due in 2029 and $30.0 million due in 2031. The Company was in compliance with its debt covenants, including limits on additional borrowings and maintenance of certain operating and financial ratios, at December 31, 2024.
Previous wording
Capital expenditures in 2023 were $20.8 million and consisted primarily of machinery and equipment and building improvements. Capital expenditures for 2024, which are expected to consist principally of machinery and equipment purchases, are estimated to be in the range of $18 - $20 million and are expected to be financed through internally generated funds. During 2023, 2022 and 2021, the Company financed its capital improvements and working capital requirements principally through internally generated funds.
Current wording
Capital expenditures in 2024 were $14.3 million and consisted primarily of machinery and equipment and building improvements. Capital expenditures for 2025, which are expected to consist principally of machinery and equipment purchases, are estimated to be approximately $20.0 million and are expected to be financed through cash from operations. During 2024, 2023 and 2022, the Company financed its capital improvements and working capital requirements principally through internally generated funds.
Previous wording
The Company contributed $2.3 million to its defined benefit pension plans in 2023 and expects to contribute up to $3.0 million to its defined benefit pension plans in 2024.
Current wording
The Company contributed $5.1 million to its defined benefit pension plans in 2024 and expects to contribute up to $2.9 million to its defined benefit pension plan in 2025.
Previous wording
The increase in cash provided by operating activities in 2023 compared to 2022 was primarily due to increased earnings before depreciation, amortization, and LIFO expense, and improved cash flow from working capital management. The decrease in cash provided by operating activities in 2022 compared to 2021 was primarily due to interest expense of $19.2 million and acquisition costs of $7.1 million as well as increases in accounts receivable and inventory as the result of increased sales and backlog. In addition, cash flow from accounts payable decreased $11.0 million from 2021 to 2022 and deferred revenue and customer deposits have decreased in the current year compared to an increase in the prior year.
Current wording
The decrease in cash provided by operating activities in 2024 compared to 2023 was primarily due to the timing of deferred revenue and customer deposits and accrued liabilities and expenses. The increase in cash provided by operating activities in 2023 compared to 2022 was primarily due increased earnings before depreciation, amortization, and LIFO expense, and improved cash flow from working capital management.
Previous wording
During 2023, net cash used for investing activities of $20.2 million consisted primarily of $20.8 million used for capital expenditures, largely related to machinery and equipment. During 2022, net cash used for investing activities of $545.7 million consisted primarily of $528.0 million for the acquisition of Fill-Rite and $18.0 million for capital expenditures largely related to machinery and equipment. During 2021, net cash used for investing activities of $9.2 million consisted primarily of capital expenditures of $9.8 million, largely related to machinery and equipment.
Current wording
During 2024, net cash used for investing activities of $11.9 million consisted primarily of $14.3 million used for capital expenditures, largely related to machinery and equipment partially offset by $2.5 million in proceeds from the sale of property, plant, and equipment. During 2023, net cash used for investing activities of $20.2 million consisted primarily of $20.8 million used for capital expenditures, largely related to machinery and equipment. During 2022, net cash used for investing activities of $545.7 million consisted primarily of $528.0 million for the acquisition of Fill-Rite and $18.0 million for capital expenditures, largely related to machinery and equipment.
Previous wording
During 2023, net cash used for financing activities of $54.5 million consisted primarily of net payments on bank borrowings of $34.5 million, dividend payments of $18.4 million and $1.0 million of payments in the surrender of common shares to cover taxes upon the vesting of stock awards. During 2022, net cash received from financing activities of $414.1 million consisted primarily of proceeds from the Senior Secured Term Loan Facility of $350.0 million, $90.0 million from the unsecured Subordinated Credit Facility, and $17.0 million from the revolving Credit Facility. Partially offsetting these proceeds were debt issuance fees paid of $15.2 million, dividend payments of $17.9 million, payments on borrowings of $8.9 million and share repurchases of $0.9 million during 2022. During 2021, net cash used for financing activities of $18.6 million consisted primarily of dividend payments of $16.6 million and open market share repurchases of $1.2 million. See Note 5 “Financing Arrangements” in the Notes to our Consolidated Financial Statements.
Current wording
During 2024, net cash used for financing activities of $63.1 million consisted primarily of net payments on bank borrowings of $43.0 million and dividend payments of $19.0 million. During 2023, net cash used for financing activities of $54.5 million consisted primarily of net payments on bank borrowings of $34.5 million, dividend payments of $18.4 million and $1.0 million of payments in the surrender of common shares to cover taxes upon the vesting of stock awards. During 2022, net cash received from financing activities of $414.1 million consisted primarily of proceeds from the Senior Secured Term Loan Facility of $350.0 million, $90.0 million from the unsecured Subordinated Credit Facility, and $17.0 million from the revolving Credit Facility. Partially offsetting these proceeds were debt issuance fees paid of $15.2 million, dividend payments of $17.9 million, payments on borrowings of $8.9 million and share repurchases of $0.9 million during 2022.
Previous wording
The Company was in compliance with its debt covenants, including limits on additional borrowings and maintenance of certain operating and financial ratios at December 31, 2023 and December 31, 2022. 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.
Current wording
The Company was in compliance with its debt covenants, including limits on additional borrowings and maintenance of certain operating and financial ratios at December 31, 2024 and December 31, 2023. We believe we have adequate liquidity from funds on hand and borrowing capacity to execute our financial and operating strategy, as well as comply with debt obligations and financial covenants for at least the next 12 months.
Previous wording
Capital commitments in the table below include contractual commitments to purchase machinery and equipment that have been approved by the Board of Directors. The capital commitments do not represent the entire anticipated purchases in the future but represent only those substantive items for which the Company is contractually obligated as of December 31, 2023. Also, the Company has operating leases and financing leases for certain offices, manufacturing facilities, land, office equipment and automobiles. Rental expenses relating to these leases were $2.8 million in 2023, $1.4 million in 2022, and $0.9 million in 2021.
Current wording
Capital commitments in the table below include contractual commitments to purchase machinery and equipment that have been approved by the Board of Directors. The capital commitments do not represent the entire anticipated purchases in the future but represent only those substantive items for which the Company is contractually obligated as of December 31, 2024. Also, the Company has operating leases and financing leases for certain offices, manufacturing facilities, land, office equipment and automobiles. Rental expenses relating to these leases were $3.6 million in 2024, $2.8 million in 2023, and $1.4 million in 2022.
Previous wording
The discount rates used to value pension plan obligations were 4.7% at December 31, 2023 and 4.9% at December 31, 2022, respectively. The discount rates used to value postretirement obligations were 4.9% at December 31, 2023 and 5.2% at December 31, 2022, respectively. The discount rates were determined by constructing a zero-coupon spot yield curve derived from a universe of high-quality bonds as of the measurement date. The expected rate of return on pension assets is designed to be a long-term assumption that will be subject to year-to-year variability. The rate for 2023 was 6.2% and for 2022 was 5.0%. Actual pension plan asset performance will either reduce or increase unamortized losses included in Accumulated other comprehensive loss, which will ultimately affect net income. The assumed rate of compensation increase was 3.5% in both 2023 and 2022.
Current wording
The discount rates used to value pension plan obligations were 5.3% at December 31, 2024 and 4.7% at December 31, 2023. The discount rates used to value postretirement obligations were 5.4% at December 31, 2024 and 4.9% at December 31, 2023. The discount rates were determined by constructing a zero-coupon spot yield curve derived from a universe of high-quality bonds as of the measurement date. The expected rate of return on pension assets is designed to be a long-term assumption that will be subject to year-to-year variability. The rate for 2024 was 7.2% and for 2023 was 6.2%. Actual pension plan asset performance will either reduce or increase unamortized losses included in Accumulated other comprehensive loss, which will ultimately affect net income. The assumed rate of compensation increase was 3.5% in both 2024 and 2023.
Previous wording
Substantially all retirees elect to take lump sum settlements of their pension plan benefits. When interest rates are low, this subjects the Company to the risk of exceeding an actuarial threshold computed on an annual basis and triggering a GAAP-required non-cash pension settlement loss, which occurred in 2023 and 2022.
Current wording
Substantially all eligible retirees elect to take lump sum settlements of their pension plan benefits. When interest rates are low, this subjects the Company to the risk of exceeding an actuarial threshold computed on an annual basis and triggering a GAAP-required non-cash pension settlement loss, which occurred in 2022.
Previous wording
The assumption used for the rate of increase in medical costs over the next five years was 5.0% in both 2023 and 2022.
Current wording
The assumption used for the rate of increase in medical costs over the next five years was 4.8% in 2024 and 5.0% in 2023.
Previous wording
The Company performed qualitative analyses as of October 1, 2023 and 2022 for all of its reporting units except for National Pump Company (“National”) in 2023 and 2022 and Fill-Rite in 2023 concluding that it was more likely than not that the fair value of the reporting units exceeded the respective carrying amounts.
Current wording
The Company performed qualitative analyses as of October 1, 2024 and 2023 for all of its reporting units except for National Pump Company (“National”) and Fill-Rite, concluding that it was more likely than not that the fair value of the reporting units exceeded the respective carrying amounts.
Previous wording
The Company performed a quantitative impairment analysis as of October 1, 2023 for National and Fill-Rite reporting units and concluded that the fair value of each reporting unit exceeded its carrying value and therefore was not impaired. A sensitivity analysis was performed for each reporting unit, assuming a hypothetical 100 basis point decrease in the expected long-term growth rate or a hypothetical 100 basis point increase in the weighted average cost of capital, and both scenarios independently yielded an estimated fair value above carrying value. If National or Fill-Rite fail to experience growth or revise their long-term projections downward, they could be subject to impairment charges in the future. Goodwill relating to the National reporting unit is $13.6 million, or 1.5% of the Company’s December 31, 2023 total assets, and goodwill relating to the Fill-Rite reporting unit is $230.7 million, or 25.9% of the Company’s December 31, 2023 total assets. See Note 10 to the Consolidated Financial Statements, “Goodwill and Other Intangible Assets”.
Current wording
The Company performed a quantitative impairment analysis as of October 1, 2024 for National and Fill-Rite reporting units and concluded that the fair value of each reporting unit exceeded its carrying value and therefore was not impaired. A sensitivity analysis was performed for each reporting unit, assuming a hypothetical 100 basis point decrease in the expected long-term growth rate or a hypothetical 100 basis point increase in the weighted average cost of capital, and both scenarios independently yielded an estimated fair value above carrying value. If National or Fill-Rite fail to experience growth or revise their long-term projections downward, they could be subject to impairment charges in the future. Goodwill relating to the National reporting unit is $13.6 million, or 1.6% of the Company’s December 31, 2024 total assets, and goodwill relating to the Fill-Rite reporting unit is $230.7 million, or 26.9% of the Company’s December 31, 2024 total assets. See Note 10 to the Consolidated Financial Statements, Goodwill and Other Intangible Assets.