• Net sales for the second quarter of $23,915 were up 4% compared with the second quarter of the fiscal year ended March 31, 2008, referred to as "fiscal 2008," when sales were $23,060. Net sales for the first six months of fiscal 2009 were $51,562, an increase of 20%, compared with $43,047 for the six months ended September 30, 2007.

• Orders placed with us in the three and six-month periods of fiscal 2009 were $17,451 and $45,251, respectively, compared with the three and six-month periods of fiscal 2008 of $20,528 and $45,371, respectively. We believe orders for the current quarter were down 15% compared with the same period of the prior fiscal year as a result of a hesitation in the capital construction markets caused by the current global economic crises. For the comparative six month-periods, orders were level.

• Backlog grew to $69,673 at September 30, 2008, representing a 23% increase compared with September 30, 2007, when backlog was $56,839. However, as a result of the second quarter decline in new orders, backlog was down from $75,971 at the end of the first quarter of fiscal 2009.

• Gross profit margin was 44% for both the three and six-month periods ended September 30, 2008 compared with 43% and 39% for the three and six-month periods ended September 30, 2007, respectively.

• Operating margins for the quarter and six-month periods ended September 30, 2008 were 27% and 29%, respectively, compared with 28% and 23%, respectively, for the quarter and six-month periods ended September 30, 2007.

• Cash and short-term investments at September 30, 2008 were $42,855, up 16% as compared with $36,793 at March 31, 2008.

We expect that the current global economic crisis has caused a slow-down in spending by our customers as they evaluate the current and future economic impact to their project plans. However, we believe the principal market drivers that have driven our growth over the last two years are unchanged and that ultimately they will continue to drive long-term growth.
We believe the principal market drivers that have led to increased capital spending by our customers and that are contributing to our sales growth include:
• Global consumption of crude oil is estimated to expand over the next decade.

• There is a shortage of global oil refining capacity, which is being addressed through refinery upgrades, revamps, new builds and expansions.

• There is a differential in raw material prices for higher quality sweet and lower quality sour crude oil. To lower production costs, many refineries are upgrading facilities in order to be able to process sour crude oil, which requires an upgrade of vacuum and heat transfer equipment of the types we design and manufacture.

• The expansion of the middle class in Asia is driving increasing demand for power, refinery and petrochemical products.

• The high cost of natural gas in North America and Europe is leading to the construction of new petrochemical plants in the Middle East, where natural gas is plentiful and less expensive.

• There is an increased demand for geothermal electrical power plants to meet increased electricity demand.

• Refineries in the United States are being upgraded to process synthetic crude oil from oil sands located in Alberta, Canada.

Forward-Looking Statements
This report and other documents we file with the Securities and Exchange Commission include "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results implied by the forward-looking statements. Such factors include, but are not limited to, the risks and uncertainties identified by us under the heading "Risk Factors" in Item 1A of our Annual Report on Form 10-K for fiscal 2008 and in Item 1A of this Report. Forward-looking statements may also include, but are not limited to, statements about:
• the current and future economic environments affecting us and the markets we serve;

• sources of revenue and anticipated revenue, including the contribution from the growth of new products, services and markets;

• plans for future products and services and for enhancements to existing products and services;

• estimates regarding our liquidity and capital requirements;

• our ability to attract or retain customers;

• the outcome of any existing or future litigation; and

• our ability to increase our productivity and capacity.

Forward-looking statements are usually accompanied by words such as "anticipate," "believe," "estimate," "may," "intend," "project," "expect" and similar expressions. Actual results could differ materially from historical results or those implied by the forward-looking statements contained in this report.
Undue reliance should not be placed on these forward-looking statements. Except as required by law, we undertake no obligation to update or announce any revisions to forward-looking statements contained in this report, whether as a result of new information, future events or otherwise. Results of Operations
For an understanding of the significant factors that influenced our performance, the following discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the notes to our condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.
The following table summarizes our results of operations for the periods indicated:

                                       Three Months Ended         Six Months Ended
                                         September 30,              September 30,
                                       2008          2007         2008         2007
         Net sales                   $ 23,915     $ 23,060     $ 51,562     $ 43,047
         Net income                     4,412        4,422       10,096        7,080
         Diluted income per share        0.43         0.44         0.99         0.71
         Identifiable assets           83,318       54,878       83,318       54,878

The Second Quarter of Fiscal 2009 Compared With the Second Quarter of Fiscal 2008
Sales for the second quarter of fiscal 2009 were $23,915, a 4% increase as compared with sales of $23,060 for the second quarter of fiscal 2008. A $2,058 increase in sales of pumps combined with a $996 and $806 increase in sales of condensers and heat exchangers, respectively, more than offset the $3,314 decline in sales of ejectors. The second quarter of fiscal 2008 included two large ejector orders for the refinery market. Aftermarket sales were up $309 in the current quarter compared with the same period last year.
Sales for the six-month period ended September 30, 2008 were $51,562, up 20%, compared with $43,047 for the first six months of fiscal 2008. Heat exchanger sales increased $1,484, condenser sales increased $2,957, pump package sales increased $3,410 and aftermarket sales increased $6,335 for the first half of fiscal 2009. The increases in pump package and aftermarket sales were due to three large refinery projects. These increases more than offset the $5,671 decrease in ejector sales in the six month-period ended September 30, 2008 compared with the first half of our prior fiscal year.

International sales accounted for 37% and 33% of total sales for the second quarters of fiscal 2009 and fiscal 2008, respectively. International sales increased $1,450 in the current quarter compared with the three-month period ended September 30, 2007 with increases of $2,498 and $1,242 from the Middle East and Western Europe, respectively, more than offsetting declines in Asia, South America and other areas. We believe this trend of international sales comprising a larger percentage of our total sales will continue into fiscal 2010. For the six months ended September 30, 2008, international orders were 35% of total sales compared with 43% for the six-month period ended September 30, 2007. International sales dollars of $18,026 for the current six-month period compared with the six months ended September 30, 2007 were relatively unchanged.
Fluctuations in sales among products and geographic locations can vary measurably from period to period based on timing and magnitude of projects. Sales in the three months ended September 30, 2008 were 47% to the refining industry, 27% to the chemical and petrochemical industries, 8% to the power industry and 18% to other industrial applications. Sales in the three months ended September 30, 2007 were 52% to the refining industry, 28% to the chemical and petrochemical industries, 2% to the power industry and 18% to other industrial applications. Increased sales to the power industry included applications for fossil fuels while other industrial applications included heating, ventilation and air conditioning requirements and sales to the pulp and paper industry. For the six-month periods ended September 30, 2008 and 2007, sales were, respectively, 50% and 50% to the refinery industry, 23% and 26% to the chemical and petrochemical industries, 6% and 3% to the power industry and 21% and 21% to other industrial applications. For additional information on future sales and our markets, see "Orders and Backlog" below.
Our gross profit percentage for the second quarter of fiscal 2009 was 44% compared with 43% for the second quarter of fiscal 2008. Gross profit percentage for the six-month periods ended September 30, 2008 and 2007 was 44% and 39%, respectively. Gross profit dollars for the first half of fiscal 2009 increased 37% compared with fiscal 2008, primarily as a result of a 20% increase in sales. The higher gross profit percentage and dollars were due mostly to improved product mix achieved by increased selectivity on orders accepted and higher volume. We were able to increase our sales volume through productivity improvements made in engineering and manufacturing by process improvements, technology and new equipment. The efficiencies we have gained have enabled us to control our fixed cost structure on higher sales volumes.
Selling, general and administrative ("SG&A") expenses, expressed as a percent of sales, for the three-month periods ended September 30, 2008 and 2007 were 16% and 15%, respectively. SG&A expense, expressed as a percent of sales, was 15% for both the six-month periods ended September 30, 2008 and 2007. Actual costs for fiscal 2009 for the three and six-month periods ended September 30, 2008, compared with the same respective periods in fiscal 2008, increased $493, or 14%, and $1,237, or 19%, respectively. Higher SG&A expenses were due to increased sales commissions related to higher sales and to increased variable compensation as a result of a 43% increase in net income for the six-month period. In addition, we incurred consulting costs for information technology, engineering and manufacturing projects which we believe will lead to reduced cycle time, greater efficiencies and capacity expansion.
Interest income for the three month-periods ended September 30, 2008 and 2007 was $172 and $264, respectively. For the six-month periods ended September 30, 2008 and 2007, interest income was $303 and $494, respectively. Decreased interest income was due to lower interest rates and investing in lower risk and yield instruments. Our investments at September 30, 2008 consisted solely of fixed income debt securities issued by the United States Treasury.

Interest expense was $2 for each of the quarters ended September 30, 2008 and 2007. For the six-month periods ended September 30, 2008 and 2007, respectively, interest expense was $3 and $8. The decrease was due to lower interest rates and a decline in capital lease obligations outstanding.
Our effective income tax rate in fiscal 2009 is projected to be 33%. However, for the six months ended September 30, 2008, our actual effective income tax rate was 34% due to our Chinese subsidiary's taxable loss at September 30, 2008 for which the related tax benefit was recognized at the lower foreign statutory rate. Our effective tax rate for fiscal 2008 was 33%.
Net income for the fiscal 2009 second quarter was $4,412, relatively unchanged from $4,422 for the fiscal 2008 second quarter as increased expenses offset the effect of higher sales. For the six-month period of fiscal 2009, net income was up 43% to $10,096 compared with $7,080 for the six month-period of fiscal 2008. Income per diluted share was $0.43 and $0.99 for the three and six month-periods ended September 30, 2008, respectively, compared with $0.44 and $0.71 for the three and six-month periods ended September 30, 2007, respectively. The increase in the weighted average shares outstanding in the fiscal 2009 second quarter resulted in slightly lower diluted earnings per share.
Liquidity and Capital Resources
The following discussion should be read in conjunction with our Condensed Consolidated Statements of Cash Flows: