##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Quarterly Period Ended June 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 1-6747
 The Gorman-Rupp Company
 
 Ohio
    
    34-0253990(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)305 Bowman Street, Mansfield, Ohio
    
    44903(Address of principal executive offices)
    
    (Zip Code)
 (419) 755-1011
 þ o
  Large accelerated filer
o
    
    Accelerated filer
þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ
 16,703,035
 *****************




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##### 



The Gorman-Rupp Company and Subsidiaries
Three and Six Months Ended June 30, 2008 and 2007
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Statements of Income-Three months ended June 30, 2008 and 2007-Six months ended June 30, 2008 and 2007Condensed Consolidated Balance Sheets-June 30, 2008 and December 31, 2007Condensed Consolidated Statements of Cash Flows-Six months ended June 30, 2008 and 2007Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures about Market RiskItem 4. Controls and ProceduresPART II. OTHER INFORMATIONItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 4. Submission of Matters to a Vote of Security HoldersItem 6. ExhibitsEX-3 Articles of Incorporation and By-lawsEX-4 Instruments Defining the Rights of Security Holders, including IndenturesEX-10 Material ContractsEX-31.1 302 CEO CertificationEX-31.2 302 CFO CertificationEX-32 Section 1350 CEO and CFO CertificationsEX-31.1EX-31.2EX-32
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1FINANCIAL STATEMENTS (UNAUDITED)
 THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(Thousands of dollars, except per share amounts)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    84,031
    
    
    $
    79,647
    
    
    $
    165,465
    
    
    $
    154,108Cost of products sold
    
    
    63,625
    
    
    
    61,548
    
    
    
    125,215
    
    
    
    119,944Gross profit
    
    
    20,406
    
    
    
    18,099
    
    
    
    40,250
    
    
    
    34,164Selling, general and
administrative expenses
    
    
    9,356
    
    
    
    8,286
    
    
    
    18,855
    
    
    
    16,726Operating income
    
    
    11,050
    
    
    
    9,813
    
    
    
    21,395
    
    
    
    17,438Other income
    
    
    947
    
    
    
    639
    
    
    
    1,563
    
    
    
    1,068Other expense
    
    
    (64
    )
    
    
    (14
    )
    
    
    (137
    )
    
    
    (25
    )Income before income taxes
    
    
    11,933
    
    
    
    10,438
    
    
    
    22,821
    
    
    
    18,481Income taxes
    
    
    4,038
    
    
    
    3,900
    
    
    
    7,774
    
    
    
    6,851Net income
    
    $
    7,895
    
    
    $
    6,538
    
    
    $
    15,047
    
    
    $
    11,630Basic and diluted
earnings per share
    
    $
    0.47
    
    
    $
    0.39
    
    
    $
    0.90
    
    
    $
    0.69Dividends paid per share
    
    $
    0.100
    
    
    $
    0.096
    
    
    $
    0.200
    
    
    $
    0.192Average shares outstanding
    
    
    16,703,035
    
    
    
    16,699,285
    
    
    
    16,703,035
    
    
    
    16,699,285
 Shares outstanding and per share data reflect the 5 for 4 stock split effective December 10, 2007.
See notes to condensed consolidated financial statements.
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THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 UnauditedJune 30,
    
    
    December 31,(Thousands of dollars)
    
    2008
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    30,660
    
    
    $
    24,604Short-term investments
    
    
    6,423
    
    
    
    5,586Accounts receivable  net
    
    
    46,503
    
    
    
    47,256Inventories  net
    
    
    54,971
    
    
    
    53,223Deferred income taxes and other current assets
    
    
    2,550
    
    
    
    4,619Total current assets
    
    
    141,107
    
    
    
    135,288Property, plant and equipment
    
    
    158,085
    
    
    
    155,379Less allowances for depreciation
    
    
    96,434
    
    
    
    95,409Property, plant and equipment  net
    
    
    61,651
    
    
    
    59,970Deferred income taxes and other assets
    
    
    19,309
    
    
    
    16,276Total assets
    
    $
    222,067
    
    
    $
    211,534Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    11,101
    
    
    $
    14,162Payrolls and related liabilities
    
    
    8,835
    
    
    
    7,122Accrued expenses
    
    
    11,839
    
    
    
    12,197Total current liabilities
    
    
    31,775
    
    
    
    33,481Income taxes payable
    
    
    823
    
    
    
    823Postretirement benefits
    
    
    27,387
    
    
    
    26,661Deferred income taxes
    
    
    436
    
    
    
    609Total liabilities
    
    
    60,421
    
    
    
    61,574Minority interest
    
    
    632
    
    
    
    520Shareholders equityCommon shares, without par value:Authorized - 35,000,000 shares
Outstanding - 16,703,035 shares in 2008 and
2007 (after deducting treasury shares
of 609,183 in 2008 and 2007) at
stated capital amount
    
    
    5,098
    
    
    
    5,098Retained earnings
    
    
    163,175
    
    
    
    151,467Accumulated other comprehensive loss
    
    
    (7,259
    )
    
    
    (7,125
    )Total shareholders equity
    
    
    161,014
    
    
    
    149,440Total liabilities and shareholders equity
    
    $
    222,067
    
    
    $
    211,534
 Shares outstanding reflect the 5 for 4 stock split effective December 10, 2007.
See notes to condensed consolidated financial statements.
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THE GORMAN-RUPP COMPANY AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 Six Months EndedJune 30,(Thousands of dollars)
    
    2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    15,047
    
    
    $
    11,630Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation and amortization
    
    
    3,882
    
    
    
    3,583Changes in operating assets and liabilities
    
    
    (3,411
    )
    
    
    4,588Net cash provided by operating activities
    
    
    15,518
    
    
    
    19,801Cash flows from investing activities:Capital additions, net
    
    
    (5,232
    )
    
    
    (4,894
    )Change in short-term investments
    
    
    (838
    )
    
    
    (581
    )Payments for acquisition, net of cash acquired
    
    
    
    
    
    
    (3,412
    )Net cash used for investing activities
    
    
    (6,070
    )
    
    
    (8,887
    )Cash flows from financing activities:Net cash used for financing activities, cash dividends
    
    
    (3,341
    )
    
    
    (3,206
    )Effect of exchange rate changes on cash
    
    
    (51
    )
    
    
    (514
    )Net increase in cash
and cash equivalents
    
    
    6,056
    
    
    
    7,194Cash and cash equivalents:Beginning of year
    
    
    24,604
    
    
    
    12,654June 30,
    
    $
    30,660
    
    
    $
    19,848
 See notes to condensed consolidated financial statements.
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PART I
 ITEM 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE A  BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
  NEW ACCOUNTING PRONOUNCEMENTS
 Accounting for Uncertainty in Income Taxes-An
Interpretation of FASB Statement No. 109 (FIN 48)
 Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans (FAS 158),
 Fair Value Measurements (FAS 157)
 The Fair Value Option for Financial Assets and
Financial Liabilities-Including an Amendment of SFAS 115
 6




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PART I  CONTINUED
 ITEM 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  CONTINUED
 NOTE A  BASIS OF PRESENTATION OF FINANCIAL STATEMENTS  CONTINUED
 Business Combinations (FAS 141(R)).
 , Noncontrolling Interests in Consolidated Financial
Statements (FAS 160) an amendment of Accounting Research Bulletin No. 51, Consolidated Financial
Statements (ARB 51).
 NOTE B  INVENTORIES
   June 30,
    
    December 31,(Thousands of dollars)
    
    2008
    
    2007Raw materials and in-process
    
    $
    29,278
    
    
    $
    27,917Finished parts
    
    
    21,941
    
    
    
    21,348Finished products
    
    
    3,752
    
    
    
    3,958Total inventories
    
    $
    54,971
    
    
    $
    53,223
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PART I  CONTINUED
 ITEM 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  CONTINUED
 NOTE C  PRODUCT WARRANTIES
  Six Months EndedJune 30,(Thousands of dollars)
    
    2008
    
    2007Balance at beginning of year
    
    $
    1,682
    
    
    $
    1,216Warranty costs
    
    
    1,522
    
    
    
    1,495Settlements
    
    
    (1,374
    )
    
    
    (1,204
    )Balance at end of quarter
    
    $
    1,830
    
    
    $
    1,507
 NOTE D  COMPREHENSIVE INCOME
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(Thousands of dollars)
    
    2008
    
    2007
    
    2008
    
    2007Net income
    
    $
    7,895
    
    
    $
    6,538
    
    
    $
    15,047
    
    
    $
    11,630Changes in cumulative
foreign currency
translation adjustment
    
    
    38
    
    
    
    898
    
    
    
    (110
    )
    
    
    953Pension benefit adjustments
    
    
    170
    
    
    
    282
    
    
    
    (24
    )
    
    
    281Total comprehensive income
    
    $
    8,103
    
    
    $
    7,718
    
    
    $
    14,913
    
    
    $
    12,864
 NOTE E
 INCOME TAXES
 Accounting for Uncertainty in Income
Taxes Accounting for Contingencies Accounting for Income Taxes
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PART I
 CONTINUED
 ITEM 1.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  CONTINUED
 NOTE E
 INCOME TAXES  CONTINUED
       NOTE F  PENSION AND OTHER POSTRETIREMENT BENEFITS
   9




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PART I
 CONTINUED
 ITEM 1.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  CONTINUED
 NOTE F  PENSION AND OTHER POSTRETIREMENT BENEFITS  CONTINUED
  Pension Benefits
    
    Postretirement BenefitsSix Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(Thousands of dollars)
    
    2008
    
    2007
    
    2008
    
    2007Service cost
    
    $
    1,317
    
    
    $
    1,239
    
    
    $
    596
    
    
    $
    625Interest cost
    
    
    1,529
    
    
    
    1,341
    
    
    
    831
    
    
    
    805Expected return on plan assets
    
    
    (2,097
    )
    
    
    (1,709
    )
    
    
    
    
    
    
    Amortization of loss
    
    
    340
    
    
    
    461
    
    
    
    
    
    
    
    Benefit cost
    
    $
    1,089
    
    
    $
    1,332
    
    
    $
    1,427
    
    
    $
    1,430
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
   Second Quarter 2008 Compared to Second Quarter 2007
 Net Sales
 Three Months EndedJune 30,(Thousands of Dollars)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeNet sales
    
    $
    84,031
    
    
    $
    79,647
    
    
    $
    4,384
    
    
    
    5.5
    %
  10




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PART I
 CONTINUED
 ITEM
2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
  Cost of Products Sold
 Three Months EndedJune 30,(Thousands of Dollars)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeCost of products sold
    
    $
    63,625
    
    
    $
    61,548
    
    
    $
    2,077
    
    
    
    3.4
    %% of Net sales
    
    
    75.7
    %
    
    
    77.3
    %
  Selling, General, and Administrative Expenses (SG&A)
 Three Months EndedJune 30,(Thousands of Dollars)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeSelling, general, and
administrative
expenses (SG&A)
    
    $
    9,356
    
    
    $
    8,286
    
    
    $
    1,070
    
    
    
    12.9
    %% of Net sales
    
    
    11.1
    %
    
    
    10.4
    %
  Other Income
 Three Months EndedJune 30,(Thousands of Dollars)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeOther income
    
    $
    947
    
    
    $
    639
    
    
    $
    308
    
    
    
    48.2
    %% of Net sales
    
    
    1.1
    %
    
    
    0.8
    %
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PART I
 CONTINUED
 ITEM
2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
  Net Income
 Three Months EndedJune 30,(Thousands of Dollars)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeIncome before income taxes
    
    $
    11,933
    
    
    $
    10,438
    
    
    $
    1,495
    
    
    
    14.3
    %% of Net sales
    
    
    14.2
    %
    
    
    13.1
    %Income taxes
    
    $
    4,038
    
    
    $
    3,900
    
    
    $
    138
    
    
    
    3.5
    %Effective tax rate
    
    
    33.8
    %
    
    
    37.4
    %Net income
    
    $
    7,895
    
    
    $
    6,538
    
    
    $
    1,357
    
    
    
    20.8
    %% of Net sales
    
    
    9.4
    %
    
    
    8.2
    %Earnings per share
    
    $
    0.47
    
    
    $
    0.39
    
    
    $
    0.08
    
    
    
    20.5
    %
   Six Months 2008 Compared to Six Months 2007
 Net Sales
 Six Months EndedJune 30,(Thousands of Dollars)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeNet sales
    
    $
    165,465
    
    
    $
    154,108
    
    
    $
    11,357
    
    
    
    7.4
    %
 12




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PART I  CONTINUED
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
   Cost of Products Sold
 Six Months EndedJune 30,(Thousands of Dollars)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeCost of products sold
    
    $
    125,215
    
    
    $
    119,944
    
    
    $
    5,271
    
    
    
    4.4
    %% of Net sales
    
    
    75.7
    %
    
    
    77.8
    %
  Selling, General, and Administrative Expenses (SG&A)
 Six Months EndedJune 30,(Thousands of Dollars)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeSelling, general, and
administrative
expenses (SG&A)
    
    $
    18,855
    
    
    $
    16,726
    
    
    $
    2,129
    
    
    
    12.7
    %% of Net sales
    
    
    11.4
    %
    
    
    10.9
    %
  13




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PART I  CONTINUED
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
 Other Income
 Six Months EndedJune 30,(Thousands of Dollars)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeOther income
    
    $
    1,563
    
    
    $
    1,068
    
    
    $
    495
    
    
    
    46.3
    %% of Net sales
    
    
    0.9
    %
    
    
    0.7
    %
  Net Income
 Six Months EndedJune 30,(Thousands of Dollars)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeIncome before income taxes
    
    $
    22,821
    
    
    $
    18,481
    
    
    $
    4,340
    
    
    
    23.5
    %% of Net sales
    
    
    13.8
    %
    
    
    12.0
    %Income taxes
    
    $
    7,774
    
    
    $
    6,851
    
    
    $
    923
    
    
    
    13.5
    %Effective tax rate
    
    
    34.1
    %
    
    
    37.1
    %Net income
    
    $
    15,047
    
    
    $
    11,630
    
    
    $
    3,417
    
    
    
    29.4
    %% of Net sales
    
    
    9.1
    %
    
    
    7.5
    %Earnings per share
    
    $
    0.90
    
    
    $
    0.69
    
    
    $
    0.21
    
    
    
    30.4
    %
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PART I  CONTINUED
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
 Liquidity and Sources of Capital
 Six Months EndedJune 30,(Thousands of Dollars)
    
    2008
    
    2007
    
    $ ChangeNet cash provided by operating activities
    
    $
    15,518
    
    
    $
    19,801
    
    
    $
    (4,283
    )Net cash used for investing activities
    
    
    6,070
    
    
    
    8,887
    
    
    
    (2,817
    )Net cash used for financing activities
    
    
    3,341
    
    
    
    3,206
    
    
    
    135
     
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation
of Disclosure Controls and Procedures
  15




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PART I  CONTINUED
 ITEM 4. CONTROLS AND PROCEDURES  CONTINUED
  Changes
in Internal Control Over Financial Reporting
  
 PART II OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  1.
    
    Fix the number of Directors of the Company at seven and elect seven Directors to hold office
until the next annual meeting of shareholders and until their successors are elected and
qualified.
 Number of votesFor
    
    
    
    Abstain/WithheldJames C. Gorman
    
    
    14,508,343
    
    
    
    90,530Jeffrey S. Gorman
    
    
    14,514,839
    
    
    
    84,034Thomas E. Hoaglin
    
    
    14,449,573
    
    
    
    149,300Christopher H. Lake
    
    
    14,284,865
    
    
    
    314,008Dr. Peter B. Lake
    
    
    14,479,673
    
    
    
    119,200Rick R. Taylor
    
    
    14,481,817
    
    
    
    117,056W. Wayne Walston
    
    
    14,517,064
    
    
    
    81,809
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PART II OTHER INFORMATION  CONTINUED
 ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  CONTINUED
 2.
    
    Ratify the appointment by the Audit Review Committee of the Board of Directors of Ernst &
Young LLP as independent public accountants for the Company during
the year ending December 31, 2008.
 Number of votesFor
    
    Against
    
    Abstain/Withheld14,477,126
    
    
    101,188
    
    
    
    20,559
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ITEM 6. EXHIBITS
 (a)
    
    Exhibits
       SIGNATURES
  Date:  July 25, 2008

    The Gorman-Rupp
Company
(Registrant)By:
    /s/Judith L. SovineJudith L. SovineCorporate Treasurer By:
    /s/Robert E. KirkendallRobert E. KirkendallSenior Vice President and
Chief Financial Officer 18