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

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

The Gorman-Rupp Company

(Exact name of registrant as specified in its charter)

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)

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

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 þ   No o

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

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller Reporting Company o

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

Common shares, without par value, outstanding at June 30, 2008. 16,703,035

 

 

The Gorman-Rupp Company and Subsidiaries
Three and Six Months Ended June 30, 2008 and 2007

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income
-Three months ended June 30, 2008 and 2007
-Six months ended June 30, 2008 and 2007
Condensed Consolidated Balance Sheets
-June 30, 2008 and December 31, 2007
Condensed Consolidated Statements of Cash Flows
-Six months ended June 30, 2008 and 2007
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits
EX-3 Articles of Incorporation and By-laws
EX-4 Instruments Defining the Rights of Security Holders, including Indentures
EX-10 Material Contracts
EX-31.1 302 CEO Certification
EX-31.2 302 CFO Certification
EX-32 Section 1350 CEO and CFO Certifications
EX-31.1
EX-31.2
EX-32

PART I. FINANCIAL INFORMATION

ITEM 1—FINANCIAL STATEMENTS (UNAUDITED)

THE GORMAN-RUPP COMPANY AND SUBSIDIARIES

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(Thousands of dollars, except per share amounts)		2008				2007				2008				2007
Net sales		$	84,031			$	79,647			$	165,465			$	154,108
Cost of products sold			63,625				61,548				125,215				119,944
Gross profit			20,406				18,099				40,250				34,164
Selling, general and administrative expenses			9,356				8,286				18,855				16,726
Operating income			11,050				9,813				21,395				17,438
Other income			947				639				1,563				1,068
Other expense			(64	)			(14	)			(137	)			(25	)
Income before income taxes			11,933				10,438				22,821				18,481
Income taxes			4,038				3,900				7,774				6,851
Net income		$	7,895			$	6,538			$	15,047			$	11,630
Basic and diluted earnings per share		$	0.47			$	0.39			$	0.90			$	0.69
Dividends paid per share		$	0.100			$	0.096			$	0.200			$	0.192
Average 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.

THE GORMAN-RUPP COMPANY AND SUBSIDIARIES

		Unaudited
		June 30,				December 31,
(Thousands of dollars)		2008				2007
Assets
Current assets:
Cash and cash equivalents		$	30,660			$	24,604
Short-term investments			6,423				5,586
Accounts receivable — net			46,503				47,256
Inventories — net			54,971				53,223
Deferred income taxes and other current assets			2,550				4,619
Total current assets			141,107				135,288
Property, plant and equipment			158,085				155,379
Less allowances for depreciation			96,434				95,409
Property, plant and equipment — net			61,651				59,970
Deferred income taxes and other assets			19,309				16,276
Total assets		$	222,067			$	211,534
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable		$	11,101			$	14,162
Payrolls and related liabilities			8,835				7,122
Accrued expenses			11,839				12,197
Total current liabilities			31,775				33,481
Income taxes payable			823				823
Postretirement benefits			27,387				26,661
Deferred income taxes			436				609
Total liabilities			60,421				61,574
Minority interest			632				520
Shareholders’ equity
Common 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				5,098
Retained earnings			163,175				151,467
Accumulated other comprehensive loss			(7,259	)			(7,125	)
Total shareholders’ equity			161,014				149,440
Total 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.

THE GORMAN-RUPP COMPANY AND SUBSIDIARIES

		Six Months Ended
		June 30,
(Thousands of dollars)		2008				2007
Cash flows from operating activities:
Net income		$	15,047			$	11,630
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			3,882				3,583
Changes in operating assets and liabilities			(3,411	)			4,588
Net cash provided by operating activities			15,518				19,801
Cash 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				7,194
Cash and cash equivalents:
Beginning of year			24,604				12,654
June 30,		$	30,660			$	19,848

See notes to condensed consolidated financial statements.

PART I

ITEM 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A — BASIS OF PRESENTATION OF FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles for complete financial statements. The consolidated financial statements include the accounts of the Company and it’s wholly and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2008 are not necessarily indicative of results that may be expected for the year ending December 31, 2008. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

NEW ACCOUNTING PRONOUNCEMENTS

The Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement No. 109 (FIN 48) January 1, 2007. FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

In September, 2006 the FASB issued FAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (FAS 158), which was adopted for the fiscal year ending December 31, 2006. FAS 158 requires employers to fully recognize the obligations associated with single-employer defined benefit pension, retiree healthcare and other postretirement plans in their consolidated financial statements.

In September, 2006 the FASB issued FAS No. 157, Fair Value Measurements (FAS 157) which provides guidance for using fair value to measure assets and liabilities. FAS 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value, and does not expand the use of fair value in any new circumstances. FAS 157, as originally issued, was effective for fiscal years beginning after November 15, 2007 and was adopted by the Company on January 1, 2008 with no impact on its consolidated financial position or results of operations.

In February, 2007 the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of SFAS 115, which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses arising subsequent to adoption are reported in earnings. SFAS 159 is effective for the Company in fiscal 2008. The Company adopted this statement as of January 1, 2008 and elected not to apply the fair value to any of its financial instruments.

PART I — CONTINUED

ITEM 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

NOTE A — BASIS OF PRESENTATION OF FINANCIAL STATEMENTS — CONTINUED

In December, 2007 the FASB issued FAS No. 141(R), Business Combinations (FAS 141(R)). FAS 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquired company and the goodwill acquired. This statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. FAS 141(R) is effective for business combinations for which the acquisition date is on or after the first annual reporting period beginning on or after December 15, 2008. The Company does not expect the impact to be material on its consolidated financial position or results of operations.

In December, 2007 the FASB issued FAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (FAS 160) an amendment of Accounting Research Bulletin No. 51, Consolidated Financial Statements (ARB 51). FAS 160 changes the accounting and reporting for minority interests, which will be recharacterized as non-controlling interests and classified as a component of equity. This new consolidation method significantly changes the accounting for transactions with minority interest holders. FAS 160 is effective for fiscal years beginning after December 15, 2008. The Company plans to adopt FAS 160 beginning in the first quarter of fiscal 2009. The Company does not expect the impact to be material on its consolidated financial position or results of operations.

NOTE B — INVENTORIES

Inventories are stated at the lower of cost or market. The costs for substantially all inventories are determined using the last-in, first-out (LIFO) method, with the remainder determined using the first-in, first-out (FIFO) method. 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.

The major components of inventories are as follows (net of LIFO reserves):

		June 30,				December 31,
(Thousands of dollars)		2008				2007
Raw materials and in-process		$	29,278			$	27,917
Finished parts			21,941				21,348
Finished products			3,752				3,958
Total inventories		$	54,971			$	53,223

PART I — CONTINUED

ITEM 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

NOTE C — PRODUCT WARRANTIES

A liability is established for estimated future warranty and service claims based on historical claims experience, specific product failures and sales volume. The Company expenses warranty costs directly to cost of products sold. Changes in the Company’s product warranty liability are as follows:

		Six Months Ended
		June 30,
(Thousands of dollars)		2008				2007
Balance at beginning of year		$	1,682			$	1,216
Warranty costs			1,522				1,495
Settlements			(1,374	)			(1,204	)
Balance at end of quarter		$	1,830			$	1,507

NOTE D — COMPREHENSIVE INCOME

Comprehensive income and its components, net of tax, are as follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(Thousands of dollars)		2008				2007				2008				2007
Net income		$	7,895			$	6,538			$	15,047			$	11,630
Changes in cumulative foreign currency translation adjustment			38				898				(110	)			953
Pension benefit adjustments			170				282				(24	)			281
Total comprehensive income		$	8,103			$	7,718			$	14,913			$	12,864

NOTE E — INCOME TAXES

The Company adopted the provisions of FASB Interpretation 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. Previously, the Company had accounted for tax contingencies in accordance with Statement of Financial Accounting Standards 5, Accounting for Contingencies. As required by Interpretation 48, which clarifies Statement 109, Accounting for Income Taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, the Company applied Interpretation 48 to all tax positions for which the statute of limitations remained open. As a result of the implementation of Interpretation 48, the Company recognized an increase of approximately $260,000 in the liability for unrecognized tax benefits, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings.

The amount of unrecognized tax benefits as of January 1, 2008 was $997,000. That amount includes $794,000 of unrecognized tax benefits which, if ultimately recognized, will reduce the Company’s annual effective tax rate.

At June 30, 2008 the balance of unrecognized tax benefits had increased to approximately $1.0 million. The increase in the current quarter is related primarily to a $27,000 settlement with state taxing authorities and a $69,000 increase in prior period tax positions. The June 30, 2008 balance of unrecognized tax benefits includes $825,000 of unrecognized tax benefits which, if ultimately realized, will reduce the Company’s annual effective tax rate.

The statute of limitations in several jurisdictions will expire in the next 12 months. The Company has unrecognized tax benefits of $65,000 which would be recognized if the statute of limitations expires without the relevant taxing authority examining the applicable returns.

The effective tax rate for the six months ending June 30, 2008 was 34.1% compared to 37.1% in 2007. This decline was due to a deferred tax benefit of $170,000 recorded in 2008, and a lower effective foreign tax rate primarily due to the inclusion in 2008 of Gorman-Rupp Europe B.V. acquired in the second quarter of 2007.

The Company is subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before 2004.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense for all periods presented. The Company had accrued approximately $154,000 for the payment of interest and penalties at January 1, 2008. An additional accrual of interest and penalties of approximately $41,000 was recorded for the six months ended June 30, 2008.

The Company sponsors a defined benefit pension plan covering substantially all employees. Additionally, the Company sponsors a defined contribution pension plan at one location not participating in the defined benefit pension plan. A 401(k) plan that includes a partial Company match is also available. The Company also sponsors a non-contributory defined benefit health care plan that provides health benefits to substantially all retirees and their spouses. (See Note F – Pensions and Other Postretirement Benefits for the year ended December 31, 2007 included in the Form 10-K.)

For substantially all United States employees hired after January 1, 2008, an enhanced 401(k) plan is available instead of the Company’s defined benefit pension plan. Benefits are based on age and years of service. Employees hired prior to January 1, 2008 are not affected by the change.

The following table presents the components of net periodic benefit cost:

		Pension Benefits								Postretirement Benefits
		Six Months Ended								Six Months Ended
		June 30,								June 30,
(Thousands of dollars)		2008				2007				2008				2007
Service cost		$	1,317			$	1,239			$	596			$	625
Interest cost			1,529				1,341				831				805
Expected return on plan assets			(2,097	)			(1,709	)			—				—
Amortization of loss			340				461				—				—
Benefit cost		$	1,089			$	1,332			$	1,427			$	1,430

Certain statements in this section and elsewhere herein contain various forward-looking statements and include assumptions concerning The Gorman-Rupp Company’s operations, future results and prospects. These forward-looking statements are based on current expectations and are subject to risk and uncertainties. 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 identifying important economic, political, and technological factors, among others, the absence of 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 factors include the following: (1) continuation of the current and projected future business environment, including interest rates and capital and consumer spending; (2) competitive factors and competitor responses to Gorman-Rupp initiatives; (3) successful development and market introductions of anticipated new products; (4) stability of government laws and regulation, including taxes; (5) stable governments and business conditions in emerging economies; (6) successful penetration of emerging economies; and (7) continuation of the favorable environment to make acquisitions, domestic and foreign, including regulatory requirements and market values of candidates.

		Three Months Ended
		June 30,
(Thousands of Dollars)		2008				2007				$ Change				% Change
Net sales		$	84,031			$	79,647			$	4,384				5.5	%

The increase in net sales was primarily due to increased international sales which included Gorman-Rupp Europe B.V. that was acquired in the second quarter of 2007.

Additional strength in sales was due to increased fire protection pump sales and fabricated component sales from the Company’s Patterson Pump Company subsidiary totaling $8.1 million, which more than offset the reduction of $6.8 million in custom pump revenues for a flood control project shipped in 2007. Also, increased product sales of $1.6 million in the municipal market contributed to the record quarter.

		Three Months Ended
		June 30,
(Thousands of Dollars)		2008				2007				$ Change				% Change
Cost of products sold		$	63,625			$	61,548			$	2,077				3.4	%
% of Net sales			75.7	%			77.3	%

The 3.4% increase in cost of products sold in the second quarter of 2008 compared to 2007 was partially due to $623,000 of higher LIFO expense related to increased inventory levels and inflation. Manufacturing costs included increases in labor of $576,000 due to increased production levels and normal wage increases, and supplies, patterns and tooling of $398,000 due to higher sales volume. As a percent of net sales, cost of sales were 75.7% in 2008 and 77.3% in 2007, with the reduction in cost of sales as a percent of net sales due primarily to product mix and increased operating leverage on sales volume, partially offset by the addition of Gorman-Rupp Europe B.V. in the current quarter.

		Three Months Ended
		June 30,
(Thousands of Dollars)		2008				2007				$ Change				% Change
Selling, general, and administrative expenses (SG&A)		$	9,356			$	8,286			$	1,070				12.9	%
% of Net sales			11.1	%			10.4	%

The 12.9% increase in SG&A expenses is partially due to increased advertising costs of $297,000 related to the Construction Expo trade show and the International Trade Fair for Water – Sewage – Refuse – Recycling, both of which are held every three years. Salaries and payroll taxes increased $280,000 principally as a result of normal compensation increases and profit sharing expense based on increased operating income rose by $224,000.

		Three Months Ended
		June 30,
(Thousands of Dollars)		2008				2007				$ Change				% Change
Other income		$	947			$	639			$	308				48.2	%
% of Net sales			1.1	%			0.8	%

PART I — CONTINUED

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS —
 CONTINUED

The 48.2% increase in other income is principally due to the final accounting for insurance proceeds related to property damage caused by flooding of a facility at the Company’s Mansfield Division in August 2007.

Net Income

		Three Months Ended
		June 30,
(Thousands of Dollars)		2008				2007				$ Change				% Change
Income 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	%

The decline in the effective tax rate to 33.8% in 2008 from 37.4% in 2007 was primarily due to a lower effective foreign tax rate as a result of the inclusion in 2008 of Gorman-Rupp Europe B.V. that was acquired in the second quarter of 2007.

Earnings per share reflect the five-for-four stock split distributed December 10, 2007.

Six Months 2008 Compared to Six Months 2007

Net Sales

		Six Months Ended
		June 30,
(Thousands of Dollars)		2008				2007				$ Change				% Change
Net sales		$	165,465			$	154,108			$	11,357				7.4	%

PART I — CONTINUED

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS —
 CONTINUED

The record sales for the six months were principally due to increased international sales of $8.0 million, which included Gorman-Rupp Europe B.V. acquired in the second quarter of 2007. Additional strength in sales was due to increased fire protection pump sales and increased fabricated component sales from the Company’s Patterson Pump Company subsidiary totaling $11.8 million, which more than replaced the $11.1 million in custom pump revenues for a flood control project shipped in 2007.

The backlog at June 30, 2008 was $119.6 million compared to $98.0 million at June 30, 2007, representing a 22% increase primarily due to orders in the fire protection and original equipment markets.

Cost of Products Sold

		Six Months Ended
		June 30,
(Thousands of Dollars)		2008				2007				$ Change				% Change
Cost of products sold		$	125,215			$	119,944			$	5,271				4.4	%
% of Net sales			75.7	%			77.8	%

The increase in cost of products sold was primarily due to higher sales volume, which resulted in increased material costs of $3.1 million. Manufacturing costs increased $2.2 million primarily due to the addition of Gorman-Rupp Europe B.V. purchased in the second quarter of 2007, and supplies, patterns and tooling due to higher sales volume. Partially offsetting these increases are reduced healthcare costs of $567,000 due to reduced claims experience and a subrogation settlement of $300,000 received from a third-party carrier. The reduction in cost of sales as a percent of net sales was due primarily to product mix, increased operating leverage on added sales volume and the inclusion of Gorman-Rupp Europe B.V.

Selling, General, and Administrative Expenses (SG&A)

		Six Months Ended
		June 30,
(Thousands of Dollars)		2008				2007				$ Change				% Change
Selling, general, and administrative expenses (SG&A)		$	18,855			$	16,726			$	2,129				12.7	%
% of Net sales			11.4	%			10.9	%

The increase in SG&A expenses is principally due to increases in advertising costs of $506,000 and travel and supplies of $269,000 related to the Construction Expo trade show held every three years. Also, profit sharing based on increased operating income rose by $477,000, and salaries and payroll taxes increased $476,000 primarily as a result of normal compensation increases.

PART I — CONTINUED

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS —
 CONTINUED

Other Income

		Six Months Ended
		June 30,
(Thousands of Dollars)		2008				2007				$ Change				% Change
Other income		$	1,563			$	1,068			$	495				46.3	%
% of Net sales			0.9	%			0.7	%

The increase in other income is primarily due to the final accounting for insurance proceeds related to property damage caused by flooding of a facility at the Company’s Mansfield Division in August 2007.

Net Income

		Six Months Ended
		June 30,
(Thousands of Dollars)		2008				2007				$ Change				% Change
Income 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	%

The decline in the effective tax rate was due to a deferred tax benefit of $170,000 recorded in 2008, and a lower effective foreign tax rate due to the inclusion in 2008 of Gorman-Rupp Europe B.V. acquired in the second quarter of 2007.

Earnings per share reflect the five-for-four stock split distributed December 10, 2007.

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 Ended
		June 30,
(Thousands of Dollars)		2008				2007				$ Change
Net 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

The decrease in cash provided by operating activities is principally due to reducing accounts payable by $7.6 million and reducing prepaid income taxes by $4.3 million for the six months ended June 30, 2008 compared to the same period last year; these amounts were partially offset by reduced accounts receivable of $6.8 million.

Investing activities for the six months ended June 30, 2008 primarily consisted of capital expenditures related to the consolidation and expansion of the Mansfield, Ohio facilities of $2.7 million and machinery and equipment additions of $2.9 million. Total capital expenditures of $5.0 million have been incurred as of June 30, 2008 related to the consolidation and expansion of the Mansfield, Ohio facilities.

Financing activities consisted of payments for dividends, which were $3.3 million and $3.2 million for the six months ended June 30, 2008 and 2007, respectively.

The Company continues to finance its capital expenditures and working capital requirements principally through internally generated funds, available unsecured lines of credit and proceeds from short-term investments. The ratio of current assets to current liabilities was 4.4 to 1 at June 30, 2008 and 3.6 to 1 at June 30, 2007.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK

The Company’s foreign operations do not involve material risks due to their relative size, both individually and collectively. The Company is not exposed to material market risks as a result of its export sales or operations outside of the United States. Export sales are denominated predominately in U.S. dollars and made on open account or under letters of credit.

ITEM 4. CONTROLS AND PROCEDURES

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. An evaluation was carried out under the supervision and with the participation of the Company’s Management, including the principal executive officer and the principal financial officer, of the effectiveness of the design and

PART I — CONTINUED

ITEM 4. CONTROLS AND PROCEDURES — CONTINUED

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 did maintain effective internal control over financial reporting as of June 30, 2008.

There were no changes in the Company’s disclosure controls and procedures that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Subsequent to the date of the evaluation, there have been no significant changes in the Company’s disclosure controls and procedures that could significantly affect the Company’s internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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, 2007.

ITEM 1A. RISK FACTORS

There are no material changes from the risk factors previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The annual meeting of the shareholders of the Company was held on April 24, 2008. At this meeting the shareholders approved the following management proposals:

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 votes
			For				Abstain/Withheld
James C. Gorman			14,508,343				90,530
Jeffrey S. Gorman			14,514,839				84,034
Thomas E. Hoaglin			14,449,573				149,300
Christopher H. Lake			14,284,865				314,008
Dr. Peter B. Lake			14,479,673				119,200
Rick R. Taylor			14,481,817				117,056
W. Wayne Walston			14,517,064				81,809

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 votes
For		Against				Abstain/Withheld
14,477,126			101,188				20,559

(a)

Exhibits

Exhibits 3 and 4 (articles of incorporation) are incorporated herein by this reference from Exhibits (3) and (4) of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.

Exhibits 3, 4 and 10 (by-laws; instruments defining the rights of security holders, including indentures; and material contracts) are incorporated herein by this reference from Exhibits (3), (4) and (10) of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

Exhibit 31.1 Certification of Jeffrey S. Gorman, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2 Certification of Robert E. Kirkendall, 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.

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.