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: 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 about important economic, political, and technological factors, among others, and are subject to risk and uncertainties, 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 regulations, 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. Second Quarter 2009 Compared to Second Quarter 2008

Net Sales

                                      Three Months Ended
                                           June 30,
          (Thousands of dollars)      2009          2008       $ Change      % Change

          Net sales                 $ 68,345     $ 84,031     $ (15,686 )     (18.7 )%

The global economic downturn continues to have a negative impact on the Company's business, as evident by the decline in sales for the quarter which was across most of the markets the Company

PART I - CONTINUED
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS - CONTINUED


serves. The largest declines were in the construction and rental markets of
$3.9 million, the OEM market of $3.8 million, the fire protection market of
$2.9 million and wastewater of $1.6 million.
Cost of Products Sold

                                      Three Months Ended
                                           June 30,
          (Thousands of dollars)      2009          2008       $ Change      % Change

          Cost of products sold     $ 52,555     $ 63,625     $ (11,070 )     (17.4 )%
          % of Net sales                76.9 %       75.7 %

The decrease in cost of products sold was primarily due to lower sales volume which resulted in decreased material costs of $8.3 million, including a $2.0 million decrease in LIFO expense primarily due to reduced inventory levels resulting in partial liquidation of LIFO quantities carried at lower costs from earlier years compared to current year costs and lower inflation expectations for the remainder of 2009. Primarily due to lower production levels, manufacturing costs included decreases in compensation and payroll taxes of $1.8 million and supplies, patterns and tooling of $497,000. Partially offsetting these decreases were increases in pension expense of $465,000 resulting from the significant market value declines in the worldwide equity markets in 2008 and in healthcare expense of $397,000 due to increased medical claims and higher medical costs. The overall increase in cost of products sold as a percent of net sales was due primarily to decreased operating leverage on lower sales volume.
Selling, General, and Administrative Expenses (SG&A)

                                                    Three Months Ended
                                                         June 30,
(Thousands of dollars)                             2009             2008            $ Change         % Change

Selling, general, and administrative
expenses (SG&A)                                 $  8,790          $ 9,356          $   (566 )          (6.1 )%
% of Net sales                                      12.9 %           11.1 %

The decrease in SG&A expenses is principally due to lower advertising and travel expenses of $295,000 and $245,000, respectively, as the previous year included expenses related to the Construction Expo and IFAT trade shows held every three years. In addition, these types of expenses have been curtailed due to the economic downturn. Also, profit sharing expense decreased $215,000 related to lower operating income. Partially offsetting these decreases is increased healthcare expense of $215,000 due to increased medical claims and higher medical costs.

Other Income

Other income $ 144 $ 947 $ (803 ) (84.8 )% % of Net sales 0.2 % 1.1 %

The decrease in other income is primarily due to the final accounting in the second quarter of 2008 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)          2009          2008       $ Change     % Change

        Income before income taxes    $  7,202     $ 11,933     $ (4,731 )     (39.7 )%
        % of Net sales                    10.5 %       14.2 %
        Income taxes                  $  2,335     $  4,038     $ (1,703 )     (42.2 )%
        Effective tax rate                32.4 %       33.8 %
        Net income                    $  4,867     $  7,895     $  3,028       (38.4 )%
        % of Net sales                     7.1 %        9.4 %
        Earnings per share            $   0.29     $   0.47     $  (0.18 )     (38.3 )%

Six Months 2009 Compared to Six Months 2008

Net Sales

                                      Six Months Ended
                                          June 30,
         (Thousands of Dollars)      2009          2008        $ Change      % Change

         Net sales                $ 139,943     $ 165,465     $ (25,522 )     (15.4 )%

The global economic downturn continues to have a negative impact on the Company's business, as declines in sales in the first six months of 2009 were across most of the markets the Company serves. The largest declines were in the construction and rental markets of $8.0 million, the fire protection market of $4.1 million, the OEM market of $3.7 million and wastewater of $2.5 million. The backlog at June 30, 2009 was $82.9 million compared to $119.6 million at June 30, 2008, representing a 31% decrease primarily due to a lessening of orders in the fire protection and original equipment markets.

Cost of Products Sold

Cost of products sold $ 108,808 $ 125,215 $ (16,407 ) (13.1 )% % of Net sales 77.8 % 75.7 %

The decrease in cost of products sold was primarily due to lower sales volume, which resulted in decreased material costs of $12.5 million, including a $1.4 million decrease in LIFO expense due to reduced inventory levels resulting in partial liquidation of LIFO quantities carried at lower costs from earlier years compared to current year costs and lower inflation expectations for the remainder of 2009. Manufacturing costs included decreases in compensation and payroll taxes of $2.8 million and supplies, patterns and tooling of $840,000 primarily due to lower production levels. Also, profit sharing expense decreased $510,000 related to lower operating income. Partially offsetting these decreases are increases in pension expense of $929,000 resulting from the significant market value declines in the worldwide equity markets in 2008 and in healthcare expense of $420,000 due to increased medical claims and higher medical costs. The overall increase in cost of products sold as a percent of net sales was due primarily to decreased operating leverage on lower sales volume. Selling, General, and Administrative Expenses (SG&A)

                                                      Six Months Ended
                                                          June 30,
(Thousands of Dollars)                             2009              2008            $ Change         % Change

Selling, general, and administrative
expenses (SG&A)                                 $ 17,778          $ 18,855          $ (1,077 )          (5.7 )%
% of Net sales                                      12.7 %            11.4 %

The decrease in SG&A expenses is principally due to lower advertising and travel expenses of $428,000 and $365,000, respectively, as the previous year included expenses related to the Construction Expo and IFAT trade shows held every three years. In addition, these types of expenses have been curtailed due to the economic downturn. Also, profit sharing expense decreased $316,000 related to lower operating income and business tax decreased $213,000 due to an amended franchise tax return. Partially offsetting these decreases are increases in pension expense of $361,000 resulting from the significant market value declines in the worldwide equity markets in 2008 and in healthcare expense of $316,000 due to increased medical claims and higher medical costs.

Other Income

(Thousands of Dollars) 2009 2008 $ Change % Change

Other income $ 909 $ 1,563 $ (654 ) (41.8 )% % of Net sales 0.7 % 0.9 %

The decrease in other income is primarily due to lower interest income due to a decline in interest rates.

Net Income

                                         Six Months Ended
                                             June 30,

         (Thousands of Dollars)          2009         2008       $ Change     % Change

         Income before income taxes   $ 14,070     $ 22,821     $ (8,751 )     (38.4 )%
         % of Net sales                   10.1 %       13.8 %
         Income taxes                 $  4,697     $  7,774     $ (3,077 )     (39.6 )%
         Effective tax rate               33.4 %       34.1 %
         Net income                   $  9,373     $ 15,047     $ (5,674 )     (37.7 )%
         % of Net sales                    6.7 %        9.1 %
         Earnings per share           $   0.56     $   0.90     $  (0.34 )     (37.8 )%



Liquidity and Sources of Capital

                                                      Six Months Ended
                                                          June 30,

(Thousands of dollars)                             2009              2008            $ Change         % Change

Net cash provided by operating activities       $ 27,147          $ 15,518          $ 11,629             74.9 %
Net cash used for investing activities            21,994             6,070            15,924            262.3
Net cash provided by (used for) financing
activities                                        13,492            (3,341 )          16,833            503.8

Cash provided by operating activities resulted primarily from cash being made available due to reduced inventory levels of $9.0 million and lower accounts receivable balances of $7.1 million due to lower sales volume. Partially offsetting these increases to cash was a decrease in accounts payable of $6.3 million.
Investing activities for the six months ended June 30, 2009 primarily consisted of capital expenditures related to the consolidation and expansion of the Mansfield, Ohio facilities of $19.6 million and

machinery and equipment additions of $3.8 million. Total capital expenditures for the previously announced expansion of the Mansfield, Ohio facilities (facilities) of $42.9 million have been incurred as of June 30, 2009. Financing activities for the six months ended June 30, 2009 consisted of short-term borrowings of $16.8 million at LIBOR plus 75 basis points to partially finance the above mentioned facilities. Also included were payments for dividends of $3.3 million. The ratio of current assets to current liabilities was 2.8 to 1 at June 30, 2009 and 4.4 to 1 at June 30, 2008. As well publicized, a severe global recession is underway and negatively impacted the Company in the fourth quarter 2008 and the six months ended June 30, 2009. Current consensus expectations are that this recession will persist throughout most of 2009 and possibly into 2010. It is expected that the Company's operations and financial results will continue to be negatively impacted in similar fashion during the balance of 2009.