10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2007

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

(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 St., Mansfield, Ohio	44903
(Address of principal executive offices)	(Zip Code)

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of each class	Name of each exchange on which registered
Common Shares, without par value	American Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o      No þ

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o      No þ

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, and (2) has been subject to such filing requirements for the past 90 days.
Yes þ      No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in the definitive proxy statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

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 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

State the aggregate market value of the voting common equity held by non-affiliates of the Registrant. The aggregate market value is computed by reference to the price at which the common equity was sold as of June 30, 2007. $247,341,299

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock as of March 1, 2008.

Common Shares, without par value—16,703,035

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 2007 Annual Report to Shareholders incorporated by reference into Part II (Items 5-9B).

Portions of Notice of 2008 Annual Meeting of Shareholders and related Proxy Statement incorporated by reference into Part III (Items 10-14).

**************

The Exhibit Index is located at Page 17

TABLE OF CONTENTS

PART I
	ITEM 1. BUSINESS
	ITEM 1A. RISK FACTORS
	ITEM 1B. UNRESOLVED STAFF COMMENTS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
	ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
	ITEM 6. SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	ITEM 9A. CONTROLS AND PROCEDURES
	ITEM 9B. OTHER INFORMATION
PART III
	ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
	ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
	ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EX-13
EX-14
EX-21
EX-23
EX-24
EX-31A
EX-31B
EX-32

PART I

ITEM 1. BUSINESS

Registrant (“Gorman-Rupp” or the “Company”) designs, manufactures and sells pumps and related equipment (pump and motor controls) for use in water, wastewater, construction, industrial, petroleum, original equipment, agriculture, fire protection, heating, ventilating and air conditioning (“HVAC”), military and other liquid-handling applications.

PRODUCTS

The principal products of the Company are pumps and fluid control products. (The Company operates principally in one business segment, the manufacture and sale of pumps and related fluid control equipment.) The following table sets forth, for the years 2005 through 2007, the total net sales, income before income taxes and identifiable assets ($000 omitted) of the Company.

	2007		2006		2005
Net Sales	$	305,562	$	270,910	$	231,249
Income Before Income Taxes		35,383		27,726		17,138
Identifiable Assets		211,534		187,540		179,541

The Company’s product line consists of pump models ranging in size from ¹/4" to 84" and ranging in rated capacity from less than one gallon per minute up to 500,000 gallons per minute. The types of pumps which the Company produces include self priming centrifugal, standard centrifugal, magnetic drive centrifugal, axial and mixed flow, rotary gear, diaphragm, bellows and oscillating.

The pumps have drives that range from 1/35 horsepower electric motors up to much larger electric motors or internal combustion engines. Many of the larger units comprise encased, fully integrated sewage pumping stations. In certain cases, units are designed for the inclusion of customer-supplied drives.

The Company’s larger pumps are sold principally for use in the construction, industrial, sewage and waste handling fields; for boosting low residential water pressure; for pumping refined petroleum products, including the ground refueling of aircraft; for heating and cooling in heating, ventilating and air conditioning (HVAC) applications; and for various agricultural purposes. Additionally, pumps manufactured for fire protection are used for sprinkler systems, fire hydrants, stand pipes, fog systems and deluge systems at hotels, banks, factories, airports, schools, public buildings and hundreds of other facilities throughout the world. Pumps are also utilized for dewatering and flood control purposes.

Many of the Company’s smallest pumps are sold to customers for incorporation into such products as food processing, chemical, photo processing, waste treatment, and HVAC equipment, appliances, and for automated explosives detection systems in airports.

ACQUISITIONS

On April 2, 2007, The Gorman-Rupp International Company (a wholly-owned subsidiary of the Company) acquired a 90% controlling interest in Wavo Pompen B.V. in The Netherlands, which was subsequently renamed Gorman-Rupp Europe B.V. The addition of the pump line will complement and expand the Gorman-Rupp family of pumps currently offered in international markets.

2

PART I—Continued

ITEM 1. BUSINESS—Continued

MARKETING

Except for government and export sales, the Company’s pumps are marketed in the United States and Canada through a network of about 1,000 distributors, through manufacturers’ representatives (for sales to many original equipment manufacturers), through third-party distributor catalogs, and by direct sales. The Company is continuously seeking alliances to further enhance marketing opportunities. Government sales are handled directly by the Company; and export sales are made primarily through foreign distributors and representatives. During 2007, 2006 and 2005, there were no shipments to any single customer that exceeded 10% of total net sales.

Over the last twelve years, Gorman-Rupp has actively pursued international business opportunities by, among other efforts, opening facilities outside North America. In 1996, the Company established an office in Greece to improve access to Middle East and European markets. In 1998, Patterson Pump Company’s majority-owned subsidiary, Patterson Pump Ireland Limited, started the assembly of pumps in Ireland to better serve the European market. (In March 2002, Patterson Pump Company acquired the balance of the equity interest in Patterson Pump Ireland Limited.) In January 2002, the Mansfield Division opened a warehouse near Leeuwarden, The Netherlands to further enhance marketing opportunities in Europe. In April 2007, the Company’s wholly owned subsidiary, The Gorman-Rupp International Company, purchased a 90% controlling equity interest in Wavo Pompen B.V. located in The Netherlands, which was subsequently renamed Gorman-Rupp Europe B.V. During 2006, the Company began shipping pumps from a leased warehouse in Bangkok, Thailand principally to its Asian customers. The Company’s foreign operations do not involve material market risks due to their small size, both individually and collectively.

As a result of this active pursuit of international business, approximately $88.1 million of 2007 sales were made to customers in over 100 nations outside the United States, as compared to $82.4 million in 2006 and $59.6 million in 2005. International sales represented 29%, 30% and 26% of total sales in 2007, 2006 and 2005, respectively. No sales made to customers in any one foreign country amounted to more than 5% of total sales during 2007; however in 2006, sales to customers in Kuwait represented 7% of total sales. The Company continues its efforts to penetrate international markets principally by its aggressive response to worldwide pumping needs.

COMPETITION

Since the late 1990’s, a number of consolidations have occurred within the highly competitive pump industry. As a consequence, numerous pump competitors now exist as subsidiaries, divisions or departments within larger corporations. Foreign sourced pumps have also increasingly penetrated into the Company’s domestic markets.

Gorman-Rupp estimates that 80 other companies selling pumps and pump units compete in one or more of the lines of business and applications in which comparable products of the Company are utilized. Many pumps are specifically designed and engineered for a particular customer’s application. The Company believes that proper application, product performance, and quality of delivery and service are the principal methods of competition, and attributes its success to its continued emphasis in these areas.

3

PART I—Continued

ITEM 1. BUSINESS—Continued

PURCHASING AND PRODUCTION

Virtually all materials, supplies, components and accessories used by the Company in the fabrication of its products, including all castings (for which most patterns are made and owned by the Company), structural steel, bar stock, motors, solenoids, engines, seals, and plastic and elastomeric components are purchased by the Company from other suppliers and manufacturers. No purchases are made under long-term contracts and the Company is not dependent upon a single source for any materials, supplies, components or accessories which are of material importance to its business.

The Company purchases motors for its polypropylene bellows pumps and magnetic drive pumps from several alternative vendors, and motor components for its large submersible pumps from a limited number of suppliers. Small motor requirements are also currently sourced from alternative suppliers.

The other production operations of the Company consist of the machining of castings, the cutting, shaping and welding of bar stock and structural members, the manufacture of a few minor components, and the assembling, painting and testing of its products. Virtually all of the Company’s products are tested prior to shipment.

OTHER ASPECTS

As of December 31, 2007, the Company employed approximately 1,065 persons, of whom approximately 649 were hourly employees. The Company has no collective bargaining agreements, has never experienced a strike and considers its labor relations to be satisfactory.

Although the Company owns a number of patents, and several of them are important to its business, Gorman-Rupp believes that the business of the Company is not materially dependent upon any one or more patents. The Company’s patents, trademarks and other intellectual property are adequate for its business purposes.

The backlog of orders at December 31, 2007 was valued at $116.4 million compared to $109.5 million at December 31, 2006. Over 97% of the Company’s backlog of unfilled orders is scheduled to be shipped during 2008, with the remainder during 2009. The original equipment market, fire protection market and municipal market represent 40%, 20% and 20%, respectively of the total order backlog at December 31, 2007.

AVAILABLE INFORMATION

The Company maintains a website accessible through its Internet address of www.gormanrupp.com. Gorman-Rupp makes available free of charge on or through www.gormanrupp.com its annual reports on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K, and any amendments thereto, as soon as reasonably practicable after those reports (and any amendments) are electronically filed with or furnished to the Securities and Exchange Commission. (As noted in Gorman-Rupp’s Annual Report to Shareholders, a paper copy of the Company’s Form 10-K is also available free of charge upon written request to the Company’s Corporate Secretary.) However, the information contained on the

4

PART I—Continued

ITEM 1. BUSINESS—Continued

Company’s website is not a part of this Form 10-K or any other report filed with or furnished to the Commission.

ITEM 1A. RISK FACTORS

Market influences and cost pressures

The overall pump industry is cyclical in nature, and business activity is somewhat related to conditions in the durable goods and capital equipment markets. The Company cannot predict the timing or extent of future economic or market swings. Additionally, raw material and energy purchases are major drivers of costs in the manufacture of pumps, and these costs are highly unpredictable. While efforts are made to recoup higher production costs through increased prices, the future acceptability of such price increases by customers is not guaranteed due to the highly competitive market place.

Family ownership of common equity

A substantial percentage of the Company’s Common Shares is held by various members of the Gorman and Rupp families and their affiliates. These family holdings do not typically trade; therefore, the Common Shares, in part because of these circumstances, as a general matter, have a history of relatively thin trading experiences on the American Stock Exchange.

ITEM 1B. UNRESOLVED STAFF COMMENTS

The Company has not received any written comments from the Commission staff regarding its periodic or current reports under the Securities Exchange Act of 1934 within 180 days before the end of its fiscal year to which this Form10-K relates.

ITEM 2. PROPERTIES

All of the production operations of the Company are conducted at its plants located in Mansfield and Bellville, Ohio; Toccoa, Georgia; Royersford, Pennsylvania; St. Thomas, Ontario, Canada; County Westmeath, Ireland; and Leeuwarden, The Netherlands. All of these properties, except the plants in Leeuwarden, The Netherlands and County Westmeath, Ireland are owned in fee without any material encumbrance. The Company similarly owns a facility in Sparks, Nevada comprising a training center and warehouse, and a former production plant in Oklahoma now used for warehousing and office space. In addition, the Company leases warehouse facilities in Bangkok, Thailand and Culomberg, The Netherlands to house pumps and pump parts. The Company’s various production facilities and warehouses are described below in more detail.

5

PART I—Continued

ITEM 2. PROPERTIES—Continued

			Company
	Square		Operation
Location	Footage		Start Date		Description of Production Activity
Mansfield, Ohio		238,000		1947	Assembly, Warehousing and Office (1)
		134,200		1968	Assembly, Warehousing and Office (2)
		11,500		1979	Training, Personnel and Advertising
		83,500		1983	Warehousing (3)
		360,000		2000	Machining, Assembly and Warehousing (4)
Bellville, Ohio		93,200		1953	Assembly, Warehousing and Office (5)
Toccoa, Georgia		171,750		1988	Manufacturing, Warehousing and Office (6)
		31,800		2006	Assembly and Warehousing (7)
St. Thomas, Ontario, Canada		52,600		1960	Manufacturing, Warehousing and Office (8)
County Westmeath, Ireland		10,000		1998	Manufacturing (9)
Royersford, Pennsylvania		78,400		2002	Manufacturing, Warehousing and Office (10)
		43,100		2002	Warehousing (11)
Sand Springs, Oklahoma		28,200		1977	Warehousing and Office (12)
Leeuwarden, The Netherlands		16,210		2002	Warehousing (13)
		10,193		2007	Assembly, Warehousing and Office (14)
Culomberg, The Netherlands		10,150		2007	Warehousing and Office (15)
		2,691		2007	Warehousing (16)
Sparks, Nevada		26,000		1972	Warehousing (17)
Bangkok, Thailand		3,000		2006	Warehousing (18)

(1)	The original production plant, located on a 26 acre site, was built in 1917 and has been expanded on several occasions, the latest in 1973.
(2)	This facility, also situated on the foregoing 26 acre site, has been frequently expanded, most recently in 1994 and includes a modern testing facility.
(3)	This facility was built in 1920 and is located on 3.4 acres adjacent to the Company’s 26 acre site. This facility was renovated in 1983.
(4)	In 1997, the Company purchased 90 acres of undeveloped land near the Mansfield Lahm Airport for future expansion and consolidation of facilities for the Mansfield Division and the Corporate Office. In 1998, design work and site preparation began on the new consolidated facilities project. In 2000, the first phase of the manufacturing and warehousing facility was completed, and the machining, weld and fabrication operations of the Mansfield Division were relocated to this facility. Planning for the second phase began in 2006, with design work and site preparation underway in 2007. No date has, however, been established to begin construction.

6

PART I—Continued

ITEM 2. PROPERTIES—Continued

(5)	This facility, which comprises the production operations of the Industries Division, is situated on an 8.5 acre site. The initial portion of this plant was built in 1953 and has been expanded on several occasions, most recently in 1973-74.
(6)	This facility, which supports Patterson Pump Company, is situated on a 31 acre site. Between 1989 and 2000, the facility was expanded on several occasions, including the addition of a modern 400,000 gallon testing facility and office.
(7)	This newly constructed facility adjacent to the current plant is operated by Patterson Pump Company and is utilized for light manufacturing and inventory warehousing purposes.
(8)	The plant in St. Thomas, Ontario is operated by Gorman-Rupp of Canada, Ltd. It is situated on an 11 acre site and has undergone a number of expansions since it was established in 1960, the latest being completed in 1998.
(9)	This leased manufacturing facility is occupied by Patterson Pump Ireland Limited and consists of 8,000 square feet of manufacturing space and 2,000 square feet of office space. The lease is for a 20 year term ending March 31, 2022, with certain lease termination options throughout the time period.
(10)	This facility supports the operations of American Machine and Tool Co., Inc. of Pennsylvania. It is located on a 3.25 acre site and has undergone a number of expansions since it was established in 1962.
(11)	This facility also supports the operations of American Machine and Tool Co., Inc. of Pennsylvania. It is located on a 2.2 acre site and has undergone two expansions since it was established in 1982. Ten thousand square feet of this facility is leased to an unrelated company under a 60 month agreement ending April 1, 2009.
(12)	The Oklahoma facility is located on 4.5 acres of land. Originally built in 1973, the facility was expanded four times between 1978 and 1991. In 1980, a contiguous parcel of two acres of undeveloped land was purchased for future needs. Starting in 1977, this plant comprised the Company’s Ramparts Division (manufacturer of chemical pumps). In 2003, the Ramparts Division was integrated into the Mansfield Division and manufacturing operations were relocated to Mansfield, Ohio.
(13)	This leased warehousing facility near Leeuwarden, The Netherlands is used by Gorman-Rupp Europe B.V. for storage of product, and by the Mansfield Division as a warehouse for distributing product principally to European customers. The ending date for the lease agreement is December 31, 2012.
(14)	This leased warehousing facility near Leeuwarden, The Netherlands is used by Gorman-Rupp Europe B.V. for office facilities, the assembly of pumps and the storage of product. The ending date for the lease agreement is December 31, 2012.
(15)	This leased warehousing facility in Culomberg, The Netherlands is used by Gorman-Rupp Europe B.V. for storage of product. The ending date for the lease agreement is December 31, 2012.
(16)	This leased warehousing facility in Culomberg, The Netherlands is used by Gorman-Rupp Europe B.V. for storage of product. The ending date for the lease agreement is July 31, 2012.
(17)	The Sparks facility consists of office and warehouse space. The Company utilizes 13,000 square feet of the facility, and 13,000 square feet is leased on a month to month basis to an unrelated party.
(18)	This leased warehousing facility is used by the Mansfield Division for distributing product principally to customers in Asia. The lease is on a month to month basis.

Gorman-Rupp considers its plants, machinery and equipment to be well maintained, in good operating condition and adequate for the present uses and business requirements of the Company.

7

PART I—Continued

ITEM 3. LEGAL PROCEEDINGS

Numerous business entities in the pump and fluid-handling industries, as well as a multitude of companies in many other industries, continue to be targeted in a series of lawsuits in several jurisdictions by various individuals seeking redress to claimed injury as a result of the entities’ alleged use of asbestos in their products. The Company and three of its subsidiaries remain drawn into this mass-scaled litigation, typically as one of hundreds of co-defendants in a particular proceeding. (The vast majority of these cases are against Patterson Pump Company.) The allegations in the lawsuits involving the Company and/or its subsidiaries are vague, general and speculative, and most cases have not advanced beyond the early stage of discovery. In certain situations, the plaintiffs have voluntarily dismissed the Company and/or its subsidiaries from some of the lawsuits after the plaintiffs have acknowledged that there is no basis for their claims. In other situations, the Company and/or its subsidiaries have been dismissed from some of the lawsuits as a result of court rulings in favor of motions to dismiss and/or motions for summary judgment. In eleven cases, the Company and/or its subsidiaries have entered into nominal economic settlements recommended and paid for by insurers, coupled with dismissal of the lawsuits. Insurers of the Company have engaged legal counsel to represent the Company and its subsidiaries and to protect their interests.

In addition, the Company and/or its subsidiaries are parties in a small number of legal proceedings arising out of the ordinary course of business. Management does not currently believe that these proceedings, or the industry-wide asbestos litigation, will materially impact the Company’s results of operations, liquidity or financial condition.

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

During the fourth quarter of the fiscal year covered by this Form 10-K, no matter was submitted to a vote of the Company’s shareholders, through the solicitation of proxies or otherwise.

************************

8

EXECUTIVE OFFICERS OF THE REGISTRANT

Pursuant to General Instruction G(3), the information regarding executive officers called for by Item 401 of Regulation S-K and by Item 10 of this Form 10-K is set forth below.

				Date
				Elected to
Name	Age		Office	Position
James C. Gorman		83	Chairman		1989
Jeffrey S. Gorman		55	President and Chief Executive Officer		1998
Robert E. Kirkendall		65	Senior Vice President, Chief Financial Officer and Assistant Corporate Secretary		2003
William D. Danuloff		60	Vice President and Chief Information Officer		2005
Judith L. Sovine		63	Treasurer		2001
David P. Emmens		59	Corporate Counsel and Corporate Secretary		2002
Lee A. Wilkins		53	Vice President Human Resources		2006

Except as noted, each of the above-named officers has held his or her executive position with the Company for the past five years. Mr. J. C. Gorman served as the Company’s President from 1964 until 1989, and as Chief Executive Officer from 1964 until 1996. (He has served as a Director of the Company continuously since 1946.) Mr. J. S. Gorman was elected President and Chief Executive Officer effective May 1, 1998, after having served as Senior Vice President since 1996. Mr. J. S. Gorman also held the position of General Manager of the Mansfield Division from 1989 through 2005. He served as Assistant General Manager from 1986 to 1988; and he held the office of Corporate Secretary from 1982 to 1990. (He has served as a Director of the Company continuously since 1989.) Mr. Kirkendall was elected Senior Vice President, Chief Financial Officer and Assistant Corporate Secretary in 2003. He was elected Senior Vice President and Assistant Corporate Secretary in 2002; and he served as Vice President Corporate Development from 1999 to 2002, Corporate Secretary from 1990 to 2002 and Assistant Treasurer from 1982 to 1999. Mr. Danuloff was elected Vice President and Chief Information Officer in 2005. He previously served as Vice President Information Technology from 1991 to 2005, after having served as Director of Information Services from 1981 to 1991. Ms. Sovine was elected Treasurer in 2001. She served as Assistant Treasurer from 1999 to 2001 and prior to 1999 held a variety of financial management positions within the Company. Mr. Emmens joined the Company as Corporate Counsel in 1997, and was elected as Corporate Secretary in 2002. He served as Assistant Corporate Secretary from 1999 to 2002. Mr. Wilkins joined the Company in 1990 and most recently (beginning in 2002 ) served as Corporate Director of Human Resources. Mr. J. S. Gorman is the son of Mr. J. C. Gorman. Mr. Christopher H. Lake, a Director of the Company, is the son of Dr. Peter B. Lake, also a Director. There are no other family relationships among any of the Executive Officers and Directors of the Company.

9

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Attention is directed to the section “Ranges of Stock Prices” and the data immediately below pertaining to the shareholder information reported by the Transfer Agent and Registrar on page 52 in the Company’s 2007 Annual Report to Shareholders, which is incorporated herein by this reference.

Attention is also directed to the section “Shareholder Return Performance Presentation” on page 52 in the Company’s 2007 annual report to shareholders, which is incorporated herein by this reference.

None of the Company’s Common Shares were sold by the Company during the period covered by this Form 10-K that were not registered under the Securities Act of 1933.

The Company did not repurchase any of its Common Shares during the fourth quarter of the period covered by this Form 10-K.

ITEM 6. SELECTED FINANCIAL DATA

Attention is directed to the section “Eleven Year Summary of Selected Financial Data” on pages 48 and 49 in the Company’s 2007 Annual Report to Shareholders, which is incorporated herein by this reference.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Attention is directed to the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 40-45, and to the “Safe Harbor Statement” on page 53, in the Company’s 2007 Annual Report to Shareholders, which are incorporated herein by this reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Attention is directed to the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 40-45, and to the “Safe Harbor Statement” on page 53, in the Company’s 2007 Annual Report to Shareholders, which are incorporated herein by this reference. The Company’s foreign operations do not involve material market risks due to their small size, both individually and collectively. As indicated in paragraph 1 on page 43 referenced above, the Company has no material market risk exposures required to be reported by Item 305 of Regulation S-K.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Attention is directed to the Company’s consolidated financial statements, the notes thereto and the report of the independent registered public accounting firm thereon on pages 26-39, and to the section “Summary of Quarterly Results of Operations” on pages 48 and 49, in the Company’s 2007 Annual Report to Shareholders, which are incorporated herein by this reference.

10

PART II—Continued

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

The Company has not changed its independent public accountants and there have been no reportable disagreements with such accountants regarding accounting principles or practices or financial disclosure matters.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure 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 operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report on Form 10-K. Based on that evaluation, the principal executive officer and the principal financial officer have concluded that the Company’s disclosure controls and procedures maintained effective internal control over financial reporting as of December 31, 2007.

Management’s Report on Internal Control Over Financial Reporting

There were no material weaknesses identified at any Division or Subsidiary of the Company during 2007. The 2007 Report of Management on Internal Control Over Financial Reporting and the related Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting are incorporated herein by this reference from pages 46 and 47 of the Company’s 2007 Annual Report to Shareholders.

Changes in Internal Control Over Financial Reporting

There were no other changes in the Company’s disclosure controls and procedures that occurred during the most recent fiscal year 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.

ITEM 9B. OTHER INFORMATION

The Company has no information required to be disclosed in a report on Form 8-K during the fourth quarter of the year covered by this report on Form 10-K that has not otherwise been reported on a Form 8-K.

11

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

With respect to Directors, attention is directed to the sections “Election of Directors”, “Board of Directors and Directors’ Committees” and “Audit Review Committee Report” in the Company’s definitive Notice of 2008 Annual Meeting of Shareholders and related Proxy Statement (filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K), which are incorporated herein by this reference.

With respect to executive officers, attention is directed to Part I of this Form 10-K.

The Company has adopted a Code of Ethics that applies to its President and Chief Executive Officer, Senior Vice President and Chief Financial Officer, and Treasurer (as well as to all employees, officers and Directors). The Code of Ethics is set forth as an exhibit to this Form 10-K. In addition, the Code of Ethics is posted on the Company’s website accessible through its Internet address of www.gormanrupp.com (under the heading “Investor Relations” and the sub-heading “Corporate Governance”).

ITEM 11. EXECUTIVE COMPENSATION

Attention is directed to the sections “Board of Directors and Directors’ Committees”, “Executive Compensation”, “Compensation Discussion and Analysis”, “Pension Benefits” and “Compensation Committee Report” in the Company’s definitive Notice of 2008 Annual Meeting of Shareholders and related Proxy Statement (filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K), which are incorporated herein by this reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Attention is directed to the sections “Principal Shareholders”, “Election of Directors” and “Shareholdings by Named Executive Officers” in the Company’s definitive Notice of 2008 Annual Meeting of Shareholders and related Proxy Statement (filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K), which are incorporated herein by this reference.

On May 22, 1997, the Company’s Board of Directors adopted a Non-Employee Directors’ Compensation Plan. This Plan became effective without shareholder approval and constitutes the Company’s only equity compensation plan. The Plan provides (originally through 2006) for share compensation for regular services performed by each of the Company’s non-employee Directors. In addition to cash compensation, non-employee Directors receive an automatic award of 500 Common Shares (from the Company’s treasury) on each July 1. On July 27, 2006, the Company’s Board of Directors adopted a resolution extending the Non-Employee Directors’ Compensation plan for an additional term until the earlier of (i) May 21, 2017, (ii) at such time as all of the Company’s Common Shares authorized for award under the Plan and registered under Form S-8 Registration Statement No. 333-30159 shall have been awarded and issued, (iii) at such time as the Company deregisters any Common Shares not issued under the foregoing Registration Statement, or (iv) at such time as the Plan is terminated by action of the Board of Directors. The number of Common Shares which may be awarded under the Plan cannot exceed 50,000, subject to certain conditions (e.g. stock splits, stock dividends).

12

PART III—Continued

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS—Continued

As of December 31, 2007, 31,500 Common Shares had been issued to non-employee Directors and 40,585 Common Shares remained available for future issuance. (6,875 Common Shares were added as a result of the 5 for 4 stock split effective September 10, 2004; 7,093 Common Shares were added as a result of the 5 for 4 stock split effective December 8, 2006; and 8,117 Common Shares were added as a result of the 5 for 4 stock split effective December 10, 2007). No options, warrants or rights are available for issuance under the Plan. Attention is directed to the section “Board of Directors and Directors’ Committees” in the Company’s definitive Notice of 2008 Annual Meeting of Shareholders and related Proxy Statement (filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K), which is incorporated herein by this reference.

EQUITY COMPENSATION PLAN INFORMATION

	Number of securities
	to be issued upon		Weighted average
	exercise of outstanding		exercise price of		Number of securities
	options, warrants and		outstanding options,		remaining available
Plan Category	rights		warrants and rights		for future issuance
Non-Employee Directors’ Compensation Plan (not approved by shareholders)		-0-		$    -0-		40,585
Equity compensation plans approved by shareholders		—		—		—
Total		-0-		$    -0-		40,585

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Attention is directed to the section “Board of Directors and Directors’ Committees” in the Company’s definitive Notice of 2008 Annual Meeting of Shareholders and related Proxy Statement (filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K), which is incorporated herein by this reference.

The Company has no relationships or transactions required to be reported by Item 404 of Regulation S-K.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Attention is directed to the section “Appointment of Independent Registered Public Accounting Firm” in the Company’s definitive Notice of 2008 Annual Meeting of Shareholders and related Proxy Statement (filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K), which is incorporated herein by this reference.

13

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

1.	Financial Statements
	With respect to the audited consolidated financial statements of the Registrant and its subsidiaries, the following documents have been incorporated by reference into this report:

(i)	Consolidated balance sheets—December 31, 2007 and 2006
(ii)	Consolidated statements of income—Years ended
	December 31, 2007, 2006 and 2005
(iii)	Consolidated statements of shareholders’ equity—Years ended
	December 31, 2007, 2006 and 2005
(iv)	Consolidated statements of cash flows—Years ended
	December 31, 2007, 2006 and 2005
(v)	Notes to consolidated financial statements
(vi)	2007 Report of independent registered public accounting firm on consolidated financial statements
(vii)	2007 Report of management on internal control over financial reporting
(viii)	2007 Report of independent registered public accounting firm on internal control over financial reporting

2.	Financial Statement Schedules
	All financial statement schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.
3.	Exhibits
	The exhibits listed below are submitted in a separate section of this report immediately following the Exhibit Index.

(3)	(i) Articles of incorporation and (ii) By-laws
(4)	Instruments defining the rights of security holders, including indentures
(10)	Material contracts
(13)	Annual report to security holders
(14)	Code of ethics
(21)	Subsidiaries of the registrant
(23)	Consents of experts
(24)	Powers of attorney
(31)	Rule 13a-14(a)/15d-14(a) Certifications
(32)	Section 1350 Certifications

14

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

THE GORMAN-RUPP COMPANY

*By: DAVID P. EMMENS
David P. Emmens
Attorney-In-Fact

Date: March 10, 2008

15

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

*JEFFREY S. GORMAN	President, Principal Executive
Jeffrey S. Gorman	Officer and Director
* ROBERT E. KIRKENDALL	Senior Vice President and Principal Financial
Robert E. Kirkendall	and Accounting Officer
*JAMES C. GORMAN   James C. Gorman	Director
*THOMAS E. HOAGLIN   Thomas E. Hoaglin	Director
*CHRISTOPHER H. LAKE   Christopher H. Lake	Director
Peter B. Lake	Director
*RICK R. TAYLOR   Rick R. Taylor	Director
*W. WAYNE WALSTON   W. Wayne Walston	Director
*JOHN A. WALTER   John A. Walter	Director

*The undersigned, by signing his name hereto, does sign and execute this Annual Report on Form 10-K on behalf of The Gorman-Rupp Company and on behalf of each of the above-named Officers and Directors of The Gorman-Rupp Company pursuant to Powers of Attorney executed by The Gorman-Rupp Company and by each such Officer and Director and filed with the Securities and Exchange Commission.

March 10, 2008

By: /s/ DAVID P. EMMENS
David P. Emmens
Attorney-In-Fact

16

ANNUAL REPORT ON FORM 10-K

THE GORMAN-RUPP COMPANY

For the Year Ended December 31, 2007

EXHIBIT INDEX		pg.no.
	EXHIBIT
(3) (4)	Amended Articles of Incorporation, as amended		*
(3) (4)	Regulations		*
(10) (a)	Form of Indemnification Agreement between the Company and its Directors and Officers		*	*
(10) (b)	Non-Employee Directors’ Compensation Plan		*	**
(13)	Incorporated Portions of 2007 Annual Report to Shareholders		18
(14)	Code of Ethics		44
(21)	Subsidiaries of the Company		47
(23)	Consent of Independent Registered Public Accounting Firm		48
(24)	Powers of Attorney		49
(31) (a)	Certification of Chief Executive Officer (Section 302 of the Sarbanes-Oxley Act of 2002)		52
(31) (b)	Certification of Chief Financial Officer (Section 302 of the Sarbanes-Oxley Act of 2002)		54
(32)	Certification Pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		56

*	Incorporated herein by this reference from Exhibit (3) (4) of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.
**	Incorporated herein by this reference from Exhibit (10) (a) of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.
***	Incorporated herein by this reference from Exhibit (10) (b) of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

17

EX-13

Exhibit 13

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of The Gorman-Rupp Company

We have audited the accompanying consolidated balance sheets of The Gorman-Rupp Company and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Gorman-Rupp Company and subsidiaries at December 31, 2007 and 2006, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.

As discussed in Note F to the Consolidated Financial Statements, the Company adopted Statement of Financial Accounting Standards No. 158 on December 31, 2006.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of The Gorman-Rupp Company’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2007 expressed an unqualified opinion thereon.

Cleveland, Ohio
February 28, 2008

18

Consolidated Statements of Income

	Year ended December 31,
(Thousands of dollars, except per share amounts)	2007			2006			2005
Net sales	$	305,562		$	270,910		$	231,249
Cost of products sold		238,110			212,234			184,178
Gross Profit		67,452			58,676			47,071
Selling, general and administrative expenses		34,567			32,411			30,368
Operating Income		32,885			26,265			16,703
Other income		2,574			1,527			892
Other expense		(76	)		(66	)		(457	)
Income Before Income Taxes		35,383			27,726			17,138
Income taxes		12,524			8,654			6,235
Net Income	$	22,859		$	19,072		$	10,903
Basic and Diluted Earnings Per Share	$	1.37		$	1.14		$	0.66
Average number of shares outstanding		16,701,175			16,696,962			16,692,273

Shares outstanding and per share data reflect the 5 for 4 stock split effective December 10, 2007.

See notes to consolidated financial statements.

19

Consolidated Balance Sheets

	December 31,
(Thousands of dollars)	2007		2006
Assets
Current Assets:
Cash and cash equivalents	$	24,604	$	12,654
Short-term investments		5,586		4,201
Accounts receivable		47,256		45,135
Inventories:
Raw materials and in-process		27,917		22,423
Finished parts		21,348		23,491
Finished products		3,958		4,385
		53,223		50,299
Deferred income taxes		1,567		1,981
Prepaid and other		3,052		5,848
Total Current Assets		135,288		120,118
Property, Plant and Equipment
Land		1,694		1,694
Buildings		51,022		47,951
Machinery and equipment		102,663		92,256
		155,379		141,901
Less accumulated depreciation		95,409		89,550
Property, Plant and Equipment — Net		59,970		52,351
Deferred Income Taxes		4,510		5,977
Other		11,766		9,094
	$	211,534	$	187,540

Shares outstanding reflect the 5 for 4 stock split effective December 10, 2007.

See notes to consolidated financial statements.

20

	December 31,
	2007			2006
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable	$	14,162		$	10,417
Payrolls and related liabilities		7,122			6,095
Commissions payable		5,008			4,175
Accrued expenses		4,925			4,432
Accrued postretirement and medical benefits		2,264			2,527
Total Current Liabilities		33,481			27,646
Income Taxes Payable		823			—
Retirement Benefits		—			4,185
Postretirement Benefits		26,661			27,567
Deferred Income Taxes		609			—
Minority Interest		520			—
Shareholders’ Equity
Common Shares, without par value: Authorized — 35,000,000 shares;
Outstanding — 16,703,035 shares in 2007 and 16,699,285 shares in 2006 (after deducting treasury shares of 609,183 in 2007 and 612,933 in 2006) at stated capital amount		5,098			5,097
Retained earnings		151,467			135,268
Accumulated other comprehensive loss		(7,125	)		(12,223	)
Total Shareholders’ Equity		149,440			128,142
	$	211,534		$	187,540

21

Consolidated Statements of Shareholders’ Equity

						Accumulated Other
						Comprehensive Income (Loss)
									Foreign
						Pension and			Currency
	Common		Retained			OPEB			Translation
(Thousands of dollars, except per share amounts)	Shares		Earnings			Adjustments			Adjustments			Total
Balances January 1, 2005	$	5,093	$	117,261			—		$	(456	)	$	121,898
Comprehensive income:
Net income				10,903									10,903
Other comprehensive income										166			166
Total comprehensive income													11,069
Issuance of 3,000 common shares from treasury		2		62									64
Cash dividends — $.36 a share				(5,983	)								(5,983	)
Balances December 31, 2005		5,095		122,243			—			(290	)		127,048
Comprehensive income:
Net income				19,072									19,072
Other comprehensive income										80			80
Total comprehensive income													19,152
Adjustment for initial application of FAS 158, net of tax ($7,168)						$	(12,013	)					(12,013	)
Issuance of 3,000 common shares from treasury		2		79									81
Cash dividends — $.37 a share				(6,126	)								(6,126	)
Balances December 31, 2006		5,097		135,268			(12,013	)		(210	)		128,142
Adoption of FASB Interpretation No. 48				(253	)								(253	)
Comprehensive income:
Net income				22,859									22,859
Other comprehensive income							2,846			2,252			5,098
Total comprehensive income													27,957
Issuance of 3,000 common shares from treasury		1		96									97
Cash dividends — $.39 a share				(6,503	)								(6,503	)
Balances December 31, 2007	$	5,098	$	151,467		$	(9,167	)	$	2,042		$	149,440

Shares outstanding and per share data reflect the 5 for 4 stock split effective December 10, 2007.

See notes to consolidated financial statements.

22

Consolidated Statements of Cash Flows

	Year ended December 31,
(Thousands of dollars)	2007			2006			2005
Cash flows from operating activities:
Net income	$	22,859		$	19,072		$	10,903
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,597			6,688			6,808
Proceeds from insured loss		2,470			—			—
Deferred income taxes		2,490			(5,558	)		2,465
Changes in operating assets and liabilities:
Accounts receivable		(1,103	)		(3,662	)		(8,485	)
Inventories		(1,773	)		2,104			(14,169	)
Accounts payable		3,376			582			3,220
Commissions payable		833			(1,220	)		2,586
Income taxes		570			(821	)		250
Postretirement benefits		53			2,624			1,053
Other		(2,537	)		(1,065	)		(1,588	)
Net cash provided by operating activities		34,835			18,744			3,043
Cash flows from investing activities:
Capital additions — net		(12,826	)		(7,258	)		(3,189	)
Proceeds from insured loss		530			—			—
(Purchases) Redemption of short-term investments		(1,385	)		584			(2,089	)
Payment for acquisitions		(3,693	)		—			(1,331	)
Net cash used for investing activities		(17,374	)		(6,674	)		(6,609	)
Cash flows from financing activities:
Cash dividends		(6,503	)		(6,126	)		(5,983	)
Proceeds from revolving credit facility		—			—			1,182
Payments on revolving credit facility		—			—			(1,182	)
Net cash used for financing activities		(6,503	)		(6,126	)		(5,983	)
Effect of exchange rate changes on cash		992			(45	)		102
Net increase (decrease) in cash and cash equivalents		11,950			5,899			(9,447	)
Cash and cash equivalents:
Beginning of year		12,654			6,755			16,202
End of year	$	24,604		$	12,654		$	6,755

See notes to consolidated financial statements.

23

Notes to Consolidated
Financial Statements

Note A — Summary of Major Accounting Policies

Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Earnings per share are calculated in accordance with FAS 128 and are based on the weighted-average number of shares outstanding.

Cash Equivalents and Short-Term Investments

The Company considers highly liquid instruments with maturities of 90 days or less to be cash equivalents. The Company periodically makes short-term investments for which cost approximates market value.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at the historical carrying amount net of allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated losses from the failure of its customers to make required payments for products delivered. The Company estimates this allowance based on knowledge of the financial condition of customers, review of historical receivables and reserve trends and other pertinent information.

Inventories

     Inventories are stated at the lower of cost or market. The costs for approximately 91% and 92% of inventories at December 31, 2007 and 2006, respectively, are determined using the last-in, first-out (LIFO) method, with the remainder determined using the first-in, first-out method. Cost is comprised of materials, inbound freight costs, labor and an appropriate proportion of fixed and variable overheads, on an absorption costing basis.

Property, Plant and Equipment

Property, plant and equipment are stated on the basis of cost. Repairs and maintenance costs are expensed as incurred. Depreciation is computed principally by the straight-line method over the estimated useful lives of the assets. The estimated useful life ranges from 20 to 50 years for buildings and 5 to 10 years for machinery and equipment. Long-lived assets are reviewed for impairment losses whenever events or changes in circumstances indicate the carrying amount may not be recovered through future net cash flows generated by the assets. Impairment losses are recorded when the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amounts.

Goodwill and Intangibles

Goodwill in the amount of $4,053,000 resulted from an acquisition that occurred in 2002 and $750,000 due to the preliminary allocation of the purchase price from an acquisition in 2007. Intangible assets in the amount of $4,832,000 relate to acquisitions that occurred in 2002, 2005 and 2007, including $1,509,000 that resulted from the acquisition of Wavo Pompen B.V. (subsequently renamed Gorman-Rupp Europe B.V.) that occurred on April 2, 2007. The remainder of $3,323,000 in intangible assets relates to acquisitions that occurred in 2002 and 2005 and small currency fluctuations. The value of goodwill is tested as of October 1 of each year or more frequently if events or circumstances change that would likely reduce the fair value below carrying value. The Company uses the fair market value approach to test for impairment. The fair market valuations used for the impairment tests can be affected by changes in the estimates of revenue multiples and the discount rate used in the calculations. Losses, if any, resulting from impairment tests will be reflected in operating income in the Company’s income statement. No impairment resulted from the annual reviews performed in 2007 or 2006.

Amortization of other intangible assets is calculated on the straight-line basis using the following lives:

Sales contracts	18 years
Drawings	15 years
Program logic	10 years
Customer relationships	9 years
Non-compete agreements	2-3 years

24

Revenue Recognition

Revenue from product sales is recognized when the risks and rewards of ownership and title passes, which generally occurs upon shipment to the customer.

Concentration of Credit Risk

The Company does not require collateral from its customers and has generally had a good collection history. There were no sales to a single customer that exceeded 10% of total net sales for the years ended December 31, 2007, 2006 and 2005.

Shipping and Handling Costs

The Company classifies all amounts billed to customers for shipping and handling as revenue and reflects shipping and handling costs in cost of products sold.

Advertising

The Company expenses all advertising costs as incurred, which for the years ended December 31, 2007, 2006 and 2005 totaled $3,165,000, $3,022,000, and $3,553,000, respectively.

Product Warranties

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

(Thousands of dollars)	2007			2006
Balance at beginning of year	$	1,216		$	1,277
Warranty costs		3,033			1,895
Settlements		(2,567	)		(1,956	)
Balance at end of year	$	1,682		$	1,216

Foreign Currency Translation

Assets and liabilities of the Company’s operations outside the United States which are accounted for in a functional currency other than U.S. Dollars are translated into U.S. Dollars using year-end exchange rates. Revenues and expenses are translated at weighted-average exchange rates effective during the year. Foreign currency translation gains and losses are included as a component of accumulated other comprehensive income (loss) within shareholders’ equity.

Gains and losses resulting from foreign currency transactions, the amounts of which are not material, are included in net income.

Common Stock Split

On October 26, 2007 the Company announced a five-for-four stock split effective December 10, 2007 to shareholders of record as of November 15, 2007.

Reclassification

Certain amounts for 2006 have been reclassified to conform to the 2007 presentation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

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. A reconciliation of the beginning and ending amount of unrecognized tax benefits is presented in Note E in the Notes to Consolidated Financial Statements.

In September, 2006 the FASB issued FAS No. 158, Employers’Accounting for Defined Benefit Pension and Other Postretirement Plans (FAS 158). FAS 158 requires employers to fully recognize the obligations associated with single-employer defined benefit pension, retiree

25

Notes to Consolidated Financial Statements

healthcare and other postretirement plans in their consolidated financial statements. The provisions of FAS 158 were adopted for the fiscal year ending December 31, 2006. See Note F in the Notes to 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. It also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. 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. However, on December 14, 2007, the FASB issued FASB Staff Position FAS 157-b, which deferred the effective date of FAS 157 for one year as it relates to non-financial assets and liabilities. The Company does not expect the adoption of FAS 157 to have a material impact on its consolidated financial position or results of operations.

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 noncontrolling 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 is evaluating the impact the adoption of FAS 160 will have on its consolidated financial position and results of operations, but does not expect it to have a material impact on its consolidated financial position or results of operations.

Note B — Allowance for Doubtful Accounts

The allowance for doubtful accounts was $339,000 and $359,000 at December 31, 2007 and 2006, respectively.

Note C — Inventories

The excess of replacement cost over LIFO cost is approximately $45,182,000 and $41,904,000 at December 31, 2007 and 2006, respectively. Replacement cost approximates current cost. Reserves for excess and obsolete inventory totaled $2,100,000 and $2,408,000 at December 31, 2007 and 2006, respectively.

Note D — Financing Arrangements

Under an unsecured demand line of credit which matures in June, 2009, the Company may borrow up to $10.0 million with interest at LIBOR plus .75% or at alternative rates as selected by the Company. At December 31, 2007, there was $9,565,000 available for borrowing after deducting $435,000 for letters of credit.

The Company also has a $4.0 million unsecured revolving loan agreement which matures in May, 2009. At December 31, 2007 there was $1,676,000 available for borrowing after deducting $2,324,000 for letters of credit. Interest is payable quarterly at LIBOR plus .55% or at alternative rates as selected by the Company.

The $10.0 million demand line of credit and the $4.0 million revolving loan agreement contain restrictive covenants, including limits on additional borrowings and maintenance of certain operating and financial ratios. At December 31, 2007 the Company was in compliance with such requirements.

26

Interest expense, which approximates interest paid, was $49,000, $41,000 and $25,000 in 2007, 2006 and 2005, respectively.

The Company has operating leases for certain offices, manufacturing buildings, land, office equipment and automobiles. Rental expenses relating to operating leases were $691,000, $588,000 and $433,000 in 2007, 2006 and 2005, respectively.

The future minimum lease payments due under these operating leases are as follows:

(Thousands of dollars)	2008		2009		2010		2011		2012		Thereafter
Minimum lease payments	$	715	$	579	$	445	$	417	$	404	$	2,577

Note E — Income Taxes

The components of income before income taxes are:

(Thousands of dollars)	2007		2006		2005
United States	$	33,243	$	26,001	$	15,618
Foreign		2,140		1,725		1,520
	$	35,383	$	27,726	$	17,138

The components of income tax expense are as follows:

(Thousands of dollars)	2007			2006			2005
Current expense:
Federal	$	10,347		$	5,334		$	3,188
Foreign		713			706			535
State and local		1,153			1,004			46
		12,213			7,044			3,769
Deferred expense (credit):
Federal		225			1,549			1,684
Foreign		(15	)		(52	)		(44	)
State and local		101			113			826
		311			1,610			2,466
	$	12,524		$	8,654		$	6,235

The reconciliation between income tax expense and the amount computed by applying the statutory federal income tax rate of 35% to income before income taxes is as follows:

(Thousands of dollars)	2007			2006			2005
Income taxes at statutory rate	$	12,384		$	9,704		$	5,998
State and local income taxes, net of federal tax benefit		815			726			567
Tax credits		(350	)		(1,496	)		—
IRC Section 199		(508	)		(125	)		(121	)
Other		183			(155	)		(209	)
	$	12,524		$	8,654		$	6,235

Deferred tax assets and liabilities consist of the following:

(Thousands of dollars)	2007		2006		2005
Deferred tax assets
Inventories		—	$	235	$	1,327
Accrued liabilities	$	2,140		1,693		2,006
Postretirement health benefits obligation		9,663		10,083		8,132
Other		—		1,554		—
Other — Canada		273		—		—
Total deferred tax assets		12,076		13,565		11,465
Deferred tax liabilities
Inventories		244		—		—
Depreciation and amortization — The Netherlands		750		—		—
Depreciation and amortization		5,324		5,607		5,956
Other		290		—		3,109
Total deferred tax liabilities		6,608		5,607		9,065
Net deferred tax assets	$	5,468	$	7,958	$	2,400

The Company made income tax payments of $8,925,000, $11,982,000 and $3,710,000 in 2007, 2006 and 2005, respectively.

Annual Disclosures in Year of Adoption

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

27

Notes to Consolidated Financial Statements

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 approximately a $256,000 increase 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, 2007 was $1,159,000.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(Thousands of dollars)	2007
Balance at January 1, 2007	$	1,159
Additions based on tax positions related to the current year		242
Additions for tax positions of prior years		90
Reductions for tax positions of prior years		(245	)
Reductions as result of lapse of applicable statue of limitations		(6	)
Settlements		(243	)
Balance at December 31, 2007	$	997

The amount of unrecognized tax benefits at December 31, 2007 includes $794,000 of unrecognized tax benefits which, if ultimately recognized, will reduce the Company’s annual effective tax rate.

The Company is subject to income taxes in the U.S. federal jurisdiction, and various states, local and foreign jurisdictions. Income 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 has entered into Voluntary Disclosure programs with several state income taxing jurisdictions. The Company has recorded unrecognized tax benefits of approximately $114,000 related primarily to income tax filing issues with these states. The Company anticipates that the resolution of these unrecognized tax benefits will occur within the next 12 months. Additionally, the statute of limitations in several jurisdictions will expire in the next 12 months. The Company has unrecognized tax benefits of $61,000, which would be recognized if the statute of limitations expires without the relevant taxing authority examining the applicable returns.

The Company resolved a provincial tax audit in Canada that resulted in a $151,000 reduction in the settlement amount which includes taxes, interest and penalties. The Company recognizes interest accrued related to unrecognized tax benefits in income tax expense for all periods presented.

The Company had accrued approximately $172,000 and $154,000 for the payment of interest and penalties at January 1, 2007 and December 31, 2007, respectively.

Note F — Pensions and Other Postretirement Benefits

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. For substantially all United States employees hired after January 1, 2008, an enhanced 401(k) plan will be made available instead of the Company’s defined benefit pension plan. Benefits will be based on age and years of service. Current employees hired prior to January 1, 2008 will not be affected by the change. Total contributions for the defined contribution pension plan and the 401(k) plan in 2007, 2006 and 2005 were $821,000, $742,000 and $599,000, respectively.

The Company also sponsors a non-contributory defined

28

benefit health care plan that provides health benefits to substantially all retirees and their spouses. The Company funds the cost of these benefits as incurred. For measurement purposes, a 4.0% annual rate of increase in the per capita cost of covered health care benefits for retirees age 65 and over was assumed for 2007. The rate of increase is expected to remain constant going forward.

The Company has adopted FAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (FAS 158) 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 financial statements.

The following table presents the plans’ funded status as of the measurement date reconciled with amounts recognized in the Company’s balance sheets as required by FAS 158:

	Pension						Postretirement
	Benefits						Benefits
(Thousands of dollars)	2007			2006			2007			2006
Accumulated benefit obligation at end of year	$	41,660		$	40,349		$	28,248		$	29,435
Change in benefit obligation
Benefit obligation at beginning of year	$	48,774		$	45,264		$	29,435		$	30,980
Service cost		2,479			2,236			1,256			1,191
Interest cost		2,682			2,496			1,616			1,709
Benefits paid		(4,197	)		(3,984	)		(1,779	)		(1,470	)
Effect of foreign exchange		—			—			124			—
Actuarial loss (gain)		2,239			2,762			(2,280	)		(2,975	)
Benefit obligation at end of year	$	51,977		$	48,774		$	28,372		$	29,435
Change in plan assets
Fair value of plan assets at beginning of year	$	44,589		$	36,418			—			—
Actual return on plan assets		6,972			5,617			—			—
Employer contributions		6,824			6,538		$	1,779		$	1,470
Benefits paid		(4,197	)		(3,984	)		(1,779	)		(1,470	)
Fair value of plan assets at end of year	$	54,188		$	44,589		$	0		$	0
Funded status at measurement date	$	2,211		$	(4,185	)

	Pension					Postretirement
	Benefits					Benefits
(Thousands of dollars)	2007			2006		2007			2006
Amounts recognized in the statement of financial position consist of:
Noncurrent assets	$	2,211		—			—			—
Current liabilities		—		—		$	(1,711	)	$	(1,868	)
Noncurrent liabilities		—	$	(4,185	)		(26,661	)		(27,567	)
	$	2,211	$	(4,185	)	$	(28,372	)	$	(29,435	)

Amounts recognized in accumulated other
comprehensive income consist of:

Accumulated other comprehensive loss	$	14,439		$	16,674		$	239	$	2,507
Deferred tax (benefit)		(5,731	)		(6,236	)		220		(932	)
Provision after tax accumulated other comprehensive loss	$	8,708		$	10,438		$	459	$	1,575

	Pension						Postretirement
	Benefits						Benefits
(Thousands of dollars)	2007			2006			2007		2006
Components of net periodic benefit cost
Service cost	$	2,479		$	2,236		$	1,256	$	1,191
Interest cost		2,682			2,496			1,616		1,709
Expected return on plan assets		(3,418	)		(2,858	)		—		—
Recognized actuarial loss		921			1,024			—		262
Net periodic benefit cost		2,664			2,898			2,872		3,162

Other changes in plan assets and benefit obligations recognized in other comprehensive income are:

Net gain		(3,259	)		2		—		—
Total recognized in net periodic benefit cost and other comprehensive income	$	(595	)	$	2,900	$	2,872	$	3,162

The prior service cost is amortized on a straight line basis over the average remaining service period of active participants.

The gain or loss in excess of the greater of 10% of the benefit obligation or the market related value of assets

29

Notes to Consolidated Financial Statements

is amortized on a straight line basis over the average remaining service period of active participants.

	Pension						Postretirement
	Benefits						Benefits
(Thousands of dollars)	2007			2006			2007			2006
Weighted-average assumptions used to determine benefit obligations at October 31 are:
Discount rate		6.10	%		5.70	%		6.10	%		5.70	%
Rate of compensation increase		3.50	%		3.50	%		—			—
Weighted-average assumptions used to determine net periodic benefit cost for years ended October 31 are:
Discount rate		5.70	%		5.70	%		5.70	%		5.70	%
Expected long-term rate of return on plan assets		8.00	%		8.00	%		—			—
Rate of compensation increase		3.50	%		3.50	%		—			—

The investment return of the Account’s asset allocation will be measured against those of a target portfolio consisting of 60% equities, 35% fixed income securities, and 5% cash equivalents of domestic corporations. Equities (including all convertible securities) may comprise up to 70% of the accounts market value, with a minimum requirement of 20%. Fixed income/floating rate securities (including preferred stocks and cash equivalents) should not exceed 80% of the Account’s market value and may represent as little as 30%. Cash equivalents (including all senior debt securities with less than one year to maturity) may comprise up to 40% of the Fund’s market value. Non-U.S. corporate securities may comprise up to 35% of the account. The long-term objective growth rate of the Plan is the Consumer Price Index plus 3%.

	Pension Benefits
(Thousands of dollars)	2007			2006
Weighted-average asset allocations at October 31 are:
Asset Category
Equity Securities		62	%		56	%
Fixed Income		22	%		33	%
Cash and Cash Equivalents		16	%		11	%
Target Asset Allocations
Equity Securities		20-70	%		20-70	%
Fixed Income		30-80	%		30-80	%
Cash and Cash Equivalents		0-40	%		0-40	%

Contributions

The Company expects to contribute $4,200,000 to its pension plan in 2008.

Expected future benefit payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

(Thousands of dollars)	2008		2009		2010		2011		2012		Thereafter
Pension	$	3,620	$	3,206	$	3,904	$	4,077	$	5,528	$	29,343
Postretirement	$	1,763	$	1,770	$	1,863	$	1,994	$	2,146	$	12,536

Note G — Business Segment Information

The Company operates principally in one business segment, the design, manufacture and sale of pumps and related fluid control equipment for water, wastewater, construction, industrial, petroleum, original equipment, agriculture, fire protection, heating, ventilation and air conditioning (HVAC), military and other liquid-handling applications. The Company’s pumps are marketed in the United States and Canada through a network of approximately 1,000 distributors, through manufacturers’ representatives (for sales to many original equipment manufacturers), through third-party distributor catalogs, and by direct sales. Export sales are made primarily through foreign distributors and representatives. The Company exports to more than 100 countries around the world. The components of customer sales, determined based on the location of customers, are as follows:

(Thousands of dollars)	2007		%		2006		%		2005		%
United States	$	217,444		71	$	188,545		70	$	171,677		74
Foreign countries		88,118		29		82,365		30		59,572		26
Total	$	305,562		100	$	270,910		100	$	231,249		100

30

Note H — Other Assets

The major components of other assets are as follows:

	December 31,
(Thousands of dollars)	2007			2006
Goodwill	$	4,803		$	4,053
Intangibles:
Trade names		1,020			1,020
Drawings		1,400			1,400
Customer relationships		874			—
Non-compete agreements		713			195
Other intangibles		825			687
Prepaid pension cost		2,211			—
Other assets		1,276			2,601
		13,122			9,956
Less — accumulated amortization		(1,356	)		(862	)
Total	$	11,766		$	9,094

Included in intangibles for 2007 is $1,509,000 related to the Wavo Pompen B.V. acquisition (Gorman-Rupp Europe B.V.).

Note I — Acquisitions

In April, 2007 the Company’s wholly-owned subsidiary, The Gorman-Rupp International Company, purchased a 90% controlling equity interest in Wavo Pompen B.V. (subsequently renamed Gorman-Rupp Europe B.V.) for consideration (net of cash acquired) of approximately $4.1 million, of which $3.7 million has been paid as of December 31, 2007. The acquisition was financed with cash from the Company’s treasury. The preliminary allocation of the purchase price to the business acquired was recorded as of December 31, 2007 after an allocation of fair value to assets and liabilities acquired. The acquisition of Wavo Pompen B.V. offers the Company an expanded European presence and is a continuation of the implementation of its international growth strategy.

Note J — Flood Insurance Recoveries

In August, 2007 the Company’s Mansfield Division assembly facility was damaged by flooding as a result of a flash flood of an adjacent creek. As of December 31, 2007, the Company incurred costs and damages related to the flood of $3.8 million. These costs included the write-off of inventory and long-lived assets, repair of property damage and other cleanup costs. The Company maintains replacement value insurance coverage, including flood insurance, which provides for reimbursement of losses resulting from property damage, loss of product and business interruption. There was not a material effect on earnings as a result of the flood due to the replacement value coverage of the insurance. The Company’s insurance policy carries a $500,000 deductible. The Company expects to be fully covered for losses as a result of the flood as accounted for in accordance with FASB Statement No. 5, Accounting for Contingencies, and FASB Interpretation No. 30, Accounting for Involuntary Conversions of Nonmonetary Assets to Monetary Assets. As of December 31, 2007, the Company received a partial payment of $3.0 million and has recorded a receivable of $900,000 for insurance recoveries.

31

Management’s Discussion and Analysis of Financial Condition and Results of Operation

The Company operates principally in one business segment, the design, manufacture and sale of pumps and related equipment for use in water, wastewater, construction, industrial, petroleum, original equipment, agriculture, fire protection, heating, ventilating and air conditioning (HVAC), military and other liquid-handling applications.

Results of Operations 2007 Compared to 2006

The Company achieved record net sales of $305.6 million in 2007 compared to the previous record of $270.9 million set in 2006, an increase of $34.7 million or 12.8%. The record level of net sales reflected the continued organic growth in the Company’s core business of fluid-handling applications. Sales of dewatering and flood control equipment contributed to the strong 2007 results. The international, fire protection and construction markets all recorded substantial increases in sales revenue in 2007. At Patterson Pump Company, a $14.0 million order was shipped for flood control and levee protection in New Orleans, contributing to a $7.2 million increase in centrifugal pump sales, while fire protection pump sales increased $11.5 million from 2006 levels as a result of continued growth in international construction activity.

Commercial market sales increased $12.7 million due to strength in the construction and rental markets. Also included in 2007 results are $3.4 million in sales from the newly acquired Wavo Pompen B.V. (renamed Gorman-Rupp Europe B.V.) subsidiary. Continued emphasis on water and wastewater infrastructure improvements, both domestically and internationally, provided for growth in sales during 2007.

Total international sales increased $5.7 million, representing a 6.9% increase from 2006 levels. International sales amounted to $88.1 million in 2007 compared to $82.4 million in 2006. The increase in international sales is primarily the result of an increased focus on international growth by the Company and the strong global economies.

The backlog of orders at December 31, 2007 was $116.4 million compared to $109.5 million at December 31, 2006, an increase of $6.9 million or 6.3%. Over 97 percent of the total current backlog of orders is expected to ship during 2008, with the remainder in 2009. The original equipment market, fire protection market and municipal market represent 40%, 20% and 20%, respectively, of the total order backlog at December 31, 2007.

Cost of products sold in 2007 was $238.1 million compared to $212.2 million in 2006, an increase of $25.9 million or 12.2%. As a percent of net sales, cost of products sold was 77.9% in 2007 compared to 78.3% in 2006. The 0.4 percentage point reduction in cost of products sold as a percent of net sales was primarily related to efficiencies on increased volume at the Company’s production facilities. Material costs increased $20.9 million to support the increase in sales. Health care costs for current employees increased $2.2 million due to increased claims and higher medical costs. Salaries increased $736,000 due to the inclusion of Gorman-Rupp Europe B.V. and normal salary increases. Warranty costs increased $1.1 million due to estimates related to higher sales volume and claims experience. Depreciation expense increased $578,000 due to additions of machinery and equipment purchased in 2007. Profit sharing expense increased $181,000 directly related to the higher operating income levels achieved during the year. Partially offsetting the increases, retirement and postretirement benefit expenses decreased $694,000 primarily from lower postretirement costs related to decreased medical costs among retirees. As a percent of net sales, gross margins were 22.1% in 2007 and 21.7% in 2006.

Selling, general and administrative (SG&A) expenses in 2007 were $34.6 million compared to $32.4 million in 2006, an increase of $2.2 million. As a percent of net sales, SG&A expenses were 11.3% during 2007 and 12.0% in 2006, with the decrease of 0.7 percentage points related primarily to the higher sales volume. Salaries increased $714,000 as a result of the filling of vacant positions, normal salary increases and the inclusion of Gorman-Rupp Europe B.V. Profit sharing expense increased $692,000 related to the higher operating income levels that were achieved during the year. Health care costs increased $242,000 due to increased claims and higher medical costs among current employees. Amortization costs increased $241,000 due to the allocation of the purchase price to intangible assets related to the acquisition of Gorman-Rupp Europe B.V. in 2007.

32

Other income in 2007 was $2.6 million compared to $1.5 million in 2006, an increase of $1.1 million or 73.3%. Interest income increased $719,000 as the result of higher cash balances invested during the year. Foreign currency exchange gains increased $239,000 in 2007 reflecting increases in the value of the Euro and the Canadian Dollar compared to the U.S. Dollar throughout the year.

Other expense was $76,000 and $66,000 in 2007 and 2006, respectively.

The effective income tax rate was 35.4% in 2007 compared to 31.2% in 2006, an increase of 4.2 percentage points. Tax rates in 2006 were lower due to research and development tax credits for the years 2002 through 2006 amounting to $1.5 million, and changes in state and local tax liabilities totaling $570,000. Without the research and development tax credits, the effective tax rate would have been 36.6% in 2006.

Net income for 2007 was a record $22.9 million compared to $19.1 million in 2006, an increase of $3.8 million or 19.9%. As a percent of net sales, net income was 7.5% and 7.0% in 2007 and 2006, respectively.

Earnings per share was $1.37 in 2007 compared to $1.14 in 2006, an increase of $0.23 per share, restated to reflect the five-for-four stock split distributed December 10, 2007.

Cash dividends paid on common shares increased $0.023 per share during 2007 to $0.388 per share and marked the 35th consecutive year of increased cash dividends. The dividend yield at December 31, 2007 was 1.2%. Dividend amounts reflect the five-for-four stock split distributed December 10, 2007.

In September, 2006 the FASB issued FAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, which changed the accounting rules for reporting and disclosures related to pension and other post-retirement benefit plans for companies with year- ends after December 15, 2006. Effective in 2008, the Company will change the measurement date for pension and post-retirement benefit plans from October 31 to December 31 to comply with the requirements of FAS 158.

Results of Operations 2006 Compared to 2005

The Company achieved record net sales of $270.9 million in 2006 compared to $231.2 million in 2005, an increase of $39.7 million or 17.2%. The record level of net sales reflected the continued organic growth in the Company’s core business of fluid-handling applications. Sales of dewatering and flood control equipment contributed to the strong 2006 results. The international, fire protection, municipal and original equipment manufacturer (OEM) markets all recorded substantial increases in sales revenue in 2006. In the OEM market, sales of fabricated components increased $10.8 million from 2005 levels. At Patterson Pump Company, a $6.9 million order was shipped for flood control and levee protection, contributing to an $8.6 million increase in centrifugal pump sales. Fire protection sales increased $11.0 million from 2005 levels as a result of continued growth in international construction activity and the strong global economies. Additional price increases of three to five percent were implemented midyear to offset inflationary trends in the metals commodity markets and higher energy costs.

Total export shipments increased $22.8 million or 38.1% from 2005. Sales amounted to $82.3 million in 2006 compared to $59.6 million in 2005. Export shipments represented 30% of total net sales in 2006 compared to 26% in 2005, more than doubling in the past two years. The increase in export sales is primarily the result of an increased focus on international growth by the Company and strong global economies. Additionally, the decline in the value of the dollar against foreign currencies contributed to the strong growth.

The record backlog of orders at December 31, 2006 was $109.5 million compared to $94.1 million at December 31, 2005, an increase of $15.4 million or 16.4%. Patterson Pump Company’s backlog increased $6.1 million from December, 2005 levels and includes a $15 million order for pumping equipment for a New Orleans flood control project that is scheduled to ship in the first half of 2007. The Mansfield Division backlog increased $6.2 million due to strength in its core markets, including construction. Over 90 percent of the current backlog of orders is expected to ship during 2007, with the remainder in 2008.

33

Management’s Discussion and Analysis of Financial Condition and Results of Operation

Cost of products sold in 2006 was $212.2 million compared to $184.2 million in 2005, an increase of $28.0 million or 15.2%. As a percent of sales, cost of products sold was 78.3% in 2006 compared to 79.6% in 2005. The 1.3% reduction in cost of products sold as a percent of net sales was primarily related to efficiencies on increased volume at the Company’s production facilities. Material costs and hourly labor costs increased $21.1 million and $3.2 million, respectively, to support the growth in sales volumes and were proportionate to the increase in sales. Rising raw material costs were realized early in the year and stabilized toward the end of the year at the somewhat higher levels. Stainless steel, copper and aluminum all realized substantial price increases during the year. Profit sharing expense increased $1.3 million related to the higher operating income levels that were achieved during the year. Retirement and postretirement benefit expense increased $813,000 from higher service and interest costs. Health care costs increased $382,000 due to increased claims and higher medical costs. As a percent of net sales, gross margins were 21.7% in 2006 and 20.4% in 2005.

Selling, general and administrative (SG&A) expenses in 2006 were $32.4 million compared to $30.4 million in 2005, an increase of $2.0 million. As a percent of net sales, SG&A expenses were 12.0% during 2006 and 13.1% in 2005, with the decrease of 1.1 percentage points related primarily to the higher sales volume. Salaries increased $721,000 due to filling of vacancies in open positions and additional hiring to support the increased sales activity. Professional services increased $663,000 due to higher auditing and consulting fees. Profit sharing expense increased $517,000 related to the higher operating income levels that were achieved during the year. Retirement and postretirement benefit expense increased $236,000 from higher service and interest costs. Offsetting these increases was a $530,000 reduction in advertising expense in 2006 due partially to a trade show that was held in 2005 that is held every three years.

Other income in 2006 was $1.5 million compared to $892,000 in 2005, an increase of $608,000 or 68.2%. Increased interest income of $380,000 was the result of higher cash balances invested during the year at higher interest rates. Foreign currency exchange gains increased $313,000 in 2006, reflecting fluctuations primarily in the value of the Dollar vs. the Euro throughout the year.

Other expense was $66,000 and $457,000 in 2006 and 2005, respectively. Foreign currency exchange losses decreased $393,000 in 2006, reflecting fluctuations primarily in the value of the Dollar vs. the Euro throughout the year.

The effective income tax rate was 31.2% in 2006 compared to 36.4% in 2005, a decrease of 5.2 percentage points. The lower tax rate was primarily due to research and development tax credits for the years 2002 through 2006, and changes in state and local tax liabilities totaling $570,000. Without the research and development tax credits, the effective tax rate would have been 36.6%.

Net income for 2006 was a record $19.1 million compared to $10.9 million in 2005, an increase of $8.2 million or 75.2%. As a percent of net sales, net income was 7.0% and 4.7% in 2006 and 2005, respectively. The strong growth in net income was primarily a result of growth in sales and the much improved profitability at the Company’s Patterson Pump Company subsidiary.

Earnings per share was $1.14 in 2006 compared to $0.66 in 2005, an increase of $0.48 per share restated to reflect the five-for-four stock split distributed December 10, 2007.

Cash dividends paid on common shares increased to $0.365 per share in 2006 from $0.358 per share in 2005 and marked the 34th consecutive year of increased cash dividends. The dividend yield at December 31, 2006 was 1.2%. Dividends have been restated to reflect the five-for-four stock split distributed December 10, 2007.

In September, 2006 the FASB issued FAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, which changed the accounting rules for reporting and disclosures related to pension and other postretirement benefit plans for companies with year-end after December 15, 2006. Included in the pronouncement, companies are required to record pension and postretirement liabilities on their balance sheets. At December 31, 2006, the Company recorded a $19.2 million charge against other comprehensive income related to retirement and postretirement expenses. A deferred tax benefit of $7.2 million resulted in a net charge to other comprehensive income of $12.0 million. Effective by 2008, the Company will be required to change the measurement date for pension and postretirement benefit plans from October 31 to December 31.

34

Trends

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 with a letter of credit.

Numerous business entities in the pump and fluid-handling industries, as well as a multitude of companies in many other industries, continue to be targeted in a series of lawsuits in several jurisdictions by various individuals seeking redress to claimed injury as a result of the entities’ alleged use of asbestos in their products. The Company and three of its subsidiaries remain drawn into this mass-scaled litigation, typically as one of hundreds of co-defendants in a particular proceeding. (The vast majority of these cases are against Patterson Pump Company.) The allegations in the lawsuits involving the Company and/or its subsidiaries are vague, general and speculative, and most cases have not advanced beyond the early stage of discovery. In certain situations, the plaintiffs have voluntarily dismissed the Company and/ or its subsidiaries from some of the lawsuits after the plaintiffs have acknowledged that there is no basis for their claims. In other situations, the Company and/or its subsidiaries have been dismissed from some of the lawsuits as a result of court rulings in favor of motions to dismiss and/or motions for summary judgment. In eleven cases, the Company and/or its subsidiaries have entered into nominal economic settlements recommended and paid for by insurers, coupled with dismissal of the lawsuits. Insurers of the Company have engaged legal counsel to represent the Company and its subsidiaries and to protect their interests.

In addition, the Company and/or its subsidiaries are parties in a small number of legal proceedings arising out of the ordinary course of business. Management does not currently believe that these proceedings, or the industry-wide asbestos litigation, will materially impact the Company’s results of operations, liquidity or financial condition.

Liquidity and Sources of Capital

Cash equivalents and short-term investments totaled $30.2 million and there was no bank debt at December 31, 2007. In addition, the Company had $11,241,000 available in bank lines of credit after deducting $2,759,000 in outstanding letters of credit. The Company was in compliance with all restrictive covenants, including limits on additional borrowings and maintenance of certain operating and financial ratios at December 31, 2007.

Normal capital expenditures for 2008, consisting principally of machinery and equipment, are estimated to be $8.0 to $10.0 million and expected to be financed through internally generated funds. During 2007, 2006 and 2005, the Company financed its capital improvements and working capital requirements principally through internally generated funds, proceeds from short-term investments and line of credit arrangements with banks.

The Company has allocated $5,850,000 for site preparation and architectural and design engineering services regarding a future expansion of a manufacturing facility in Mansfield, Ohio. Capital expenditures of $2,359,000 have been incurred as of December 31, 2007. No date has been established to begin construction of the facility.

Cash provided by operating activities was $34.8 million, $18.7 million and $3.0 million in 2007, 2006 and 2005, respectively. In 2007, additional cash was generated principally due to increased net income and the reduction of prepaid income taxes applied to the Company’s current tax liability.

Insurance proceeds of $3.0 million were received in 2007 related to a flood that occurred in August of 2007 at one of the Company’s Mansfield, Ohio assembly and office facilities. Proceeds from the insurance company were used to replace inventory and equipment and to rebuild offices damaged in the flood.

Cash used for investing activities was $17.4 million, $6.7 million and $6.6 million for 2007, 2006 and 2005, respectively, and normally consists of investments in machinery and equipment. The Company’s 2007 net capital expenditures were $12.8 million compared to $7.3 million in 2006, an increase of $5.5 million. Additionally, $3.7 million in cash was used for the acquisition of Wavo Pompen B.V. (subsequently renamed Gorman-Rupp Europe B.V.) in 2007.

Cash used for financing activities was $6.5 million in 2007, $6.1 million in 2006 and $6.0 million in 2005. Cash dividends constituted the major portion of cash outflows.

35

Management’s Discussion and Analysis of Financial Condition and Results of Operation

The changes in foreign currency translation against the U.S. Dollar increased cash by $992,000 in 2007, decreased cash by $45,000 in 2006, and increased cash by $102,000 in 2005. The increase in 2007 is primarily due to the gain in the value of the Euro and the Canadian Dollar compared to the U.S. Dollar.

The ratio of current assets to current liabilities was 4.0 to 1 and 4.3 to 1 at December 31, 2007 and 2006, respectively. Management believes that the Company has adequate working capital and a healthy liquidity position.

Critical Accounting Policies

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. When more than one accounting principle, or the method of its application, is generally accepted, management selects the principle or method that is appropriate in Gorman-Rupp’s specific circumstances. Application of these accounting principles requires management to make estimates about the future resolution of existing uncertainties; as a result, actual results could differ from these estimates. In preparing these financial statements, management has made its best estimates and judgments of the amounts and disclosures included in the financial statements, giving due regard to materiality. The Company does not believe there is a great likelihood that materially different amounts would be reported under different conditions or using different assumptions pertaining to the accounting policies described below.

Revenue Recognition

Substantially all of Gorman-Rupp’s revenues are recognized when the risks and rewards of ownership and title passes, which generally occurs when products are shipped to unaffiliated customers. The Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition” provides guidance on the application of generally accepted accounting principles to selected revenue recognition issues. The Company has concluded that its revenue recognition policy is appropriate and in accordance with generally accepted accounting principles and SAB No. 104.

Allowance for Doubtful Accounts

The Company evaluates the collectibility of its accounts receivable based on a combination of factors. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations to Gorman-Rupp (e.g., bankruptcy filings, substantial down-grading of credit scores, etc.), the Company records a specific reserve for bad debts against amounts due to reduce the net recognized receivable to the amount the Company reasonably believes will be collected. For all other customers, the Company recognizes reserves for bad debts based on the length of time the receivables are past due. If circumstances change (e.g., an unexpected material adverse change in a major customer’s ability to meet its financial obligations), the Company’s estimates of the recoverability of amounts due could be reduced by a material amount. Historically, the Company’s collection history has been good.

Inventories and Related Allowance

Inventories are valued at the lower of cost or market value and have been reduced by an allowance for excess and obsolete inventories. The estimated allowance is based on a variety of factors, including historical inventory usage and management evaluations. Historically, the Company has not experienced large write-offs due to obsolescence. The Company uses the last-in, first-out (LIFO) method for primarily all of its inventories.

Pension Plans and Other Postretirement Benefit Plans

The Company adopted FAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (FAS 158) effective January 1, 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 financial statements.

The measurement of liabilities related to pension plans and other postretirement benefit plans is based on management’s assumptions related to future events including interest rates, return on pension plan assets, compensation increases and health care cost trend rates. The Company uses a measurement date of October 31 for benefit plan determinations. For fiscal year 2008 the measurement date will be changed to December 31 as

36

required by the Pension Protection Act of 2006. The discount rates used to determine the present value of future benefits are based on effective yields of investment grade fixed income investments. The discount rate used to value pension plan and postretirement obligations was 6.10% at October 31, 2007 and 5.70% at October 31, 2006. Annual expense amounts are determined based on the discount rate at October 31 of the prior year. 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 2007 and 2006 was 8.00%. During 2007, the fair market value of pension assets increased. Actual pension plan asset performance will either reduce or increase unamortized losses which will ultimately affect net income. The assumed rate of compensation increase was 3.50% in 2007 and 2006.

The assumption used for the rate of increase in medical costs over the next five years was essentially unchanged from 2006 to 2007. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, a one-percentage point change in the assumed health care cost trend rate would have the following effects:

	One-Percentage Point
(Thousands of dollars)	Increase		Decrease
Effect on total of service and interest cost components in 2007	$	259	$	(231	)
Effect on accumulated postretirement benefit obligation as of December 31, 2007	$	2,058	$	(1,863	)

The overall effect of changes noted in the above assumptions will increase pension and postretirement expenses.

Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standard No. 109, Accounting for Income Taxes, which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Realization of the Company’s deferred tax assets is principally dependent upon the Company’s achievement of projected future taxable income, which management believes is sufficient to fully utilize the deferred tax assets recorded.

Goodwill and Other Intangibles

The Company accounts for goodwill in a purchase business combination as the excess of the cost over the fair value of net assets acquired. Business combinations can also result in goodwill and other intangible assets being recognized. Amortization of intangible assets, if applicable, occurs over their estimated useful lives. FAS 142 establishes a two-step method for testing goodwill for impairment on an annual basis (or an interim basis if an event occurs that might reduce the fair value of a reporting unit below its carrying value). FAS 142 also requires that an identifiable intangible asset that is determined to have an indefinite useful economic life not be amortized, but separately tested for impairment using a one-step fair value based approach. The value of goodwill is tested for impairment as of October 1 of each year, or more frequently if events or circumstances change that would likely reduce the fair value below carrying value. The Company uses the fair market value approach to test for impairment. The fair market valuations used for the impairment tests can be affected by changes in the estimates of the revenue multiples and the discount rate used in the calculations. Losses, if any, resulting from impairment tests will be reflected in operating income in the Company’s income statement. No impairment resulted from the annual reviews performed in 2007 or 2006.

Amortization of other intangible assets is calculated on the straight-line basis using the following lives:

Sales contracts	18 years
Drawings	15 years
Program logic	10 years
Customer relationships	9 years
Non-compete agreements	2-3 years

Other Matters

Transactions with related parties are in the ordinary course of business and are not material to Gorman-Rupp’s financial position, net income or cash flows. Gorman-Rupp does not have any off-balance sheet arrangements, financings or other relationships with unconsolidated “special purpose entities.” Gorman-Rupp is also not a party to any long-term debt agreements, or any material capital leases, operating leases or purchase obligations.

37

Report of Management on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that receipts and expenditures of the Company are being made only in accordance with authorizations of Management and Directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, Management concluded the Company maintained effective internal control over financial reporting as of December 31, 2007.

Jeffrey S. Gorman

President and Chief Executive Officer

Robert E. Kirkendall

Senior Vice President and Chief Financial Officer

February 28, 2008

38

Report of Independent Registered Public Accounting
Firm on Internal Control over Financial Reporting

Board of Directors and Shareholders of The Gorman-Rupp Company

We have audited The Gorman-Rupp Company’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Gorman-Rupp Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, The Gorman-Rupp Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of The Gorman-Rupp Company as of December 31, 2007 and 2006, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007 of The Gorman-Rupp Company and our report dated February 28, 2008 expressed an unqualified opinion thereon.

Cleveland, Ohio
February 28, 2008

39

Eleven-Year Summary of Selected Financial Data

(Thousands of dollars, except per share amounts)

	2007		2006		2005		2004
Operating Results:
Net sales	$	305,562	$	270,910	$	231,249	$	203,554
Gross profit		67,452		58,676		47,071		42,425
Income taxes		12,524		8,654		6,235		5,075
Net income		22,859		19,072		10,903		9,277
Depreciation and amortization		7,597		6,688		6,808		7,179
Interest expense		49		41		25		40
Return on net sales (%)		7.5		7.0		4.7		4.6
Sales dollars per employee		286.9		258.3		233.3		211.4
Income dollars per employee		21.5		18.2		11.0		9.6
Financial Position:
Current assets	$	135,288	$	120,118	$	110,501	$	96,974
Current liabilities		33,481		27,646		28,219		21,112
Working capital		101,807		92,472		82,282		75,862
Current ratio		4.0		4.3		3.9		4.6
Property, plant and equipment — net		59,970		52,351		51,505		54,812
Capital additions — net		12,826		7,258		3,189		7,500
Total assets		211,534		187,540		179,541		165,673
Long-term debt		—		—		—		—
Shareholders’ equity		149,440		128,142		127,048		121,898
Dividends paid		6,503		6,126		5,983		5,907
Average number of employees		1,065		1,049		991		963
Shareholder Information: (1)
Basic and diluted earnings per share	$	1.37	$	1.14	$	0.66	$	0.55
Cash dividends per share		0.388		0.365		0.358		0.354
Shareholders’ equity per share at December 31		8.95		7.67		7.61		7.30
Average number of shares outstanding		16,701,175		16,696,962		16,692,273		16,686,997

(1) Shares outstanding and per share data reflect the 5 for 4 stock split effective December 10, 2007.

Summary of Quarterly Results of Operations

The following is a summary of unaudited quarterly results of operations for the years ended December 31, 2007 and 2006:

(Thousands of dollars, except per share amounts)

							Basic and Diluted
Quarter Ended 2007	Net Sales		Gross Profit		Net Income		Earnings per Share(1)
First Quarter	$	74,461	$	16,065	$	5,092	$	0.30
Second Quarter		79,647		18,099		6,538		0.39
Third Quarter		74,629		16,267		5,475		0.33
Fourth Quarter		76,825		17,021		5,754		0.35
Total	$	305,562	$	67,452	$	22,859	$	1.37

(1) Per share data reflect the 5 for 4 stock split effective December 10, 2007.

40

2003		2002		2001		2000		1999		1998		1997
$	195,826	$	195,081	$	203,169	$	190,384	$	182,239	$	174,162	$	167,723
	41,851		41,451		48,108		48,430		46,347		43,713		40,964
	4,613		5,267		8,450		8,400		8,460		7,400		6,340
	9,787		8,936		14,585		13,796		13,081		11,752		10,612
	7,274		7,035		7,128		6,863		6,489		6,330		5,959
	56		72		116		183		55		188		238
	5.0		4.6		7.2		7.2		7.2		6.7		6.3
	196.4		185.1		195.2		186.5		177.6		170.4		163.8
	9.8		8.5		14.0		13.5		12.7		11.5		10.4
$	95,718	$	85,315	$	90,575	$	83,745	$	79,641	$	80,012	$	83,151
	21,908		19,282		18,103		19,079		17,439		17,431		17,036
	73,810		66,033		72,472		64,666		62,202		62,581		66,115
	4.4		4.4		5.0		4.4		4.6		4.6		4.9
	54,338		57,757		53,895		57,885		53,609		43,916		40,919
	3,698		5,765		3,139		11,439		16,182		9,327		6,329
	162,395		154,302		149,569		147,337		138,331		128,933		129,321
	—		291		—		3,413		3,107		783		6,689
	117,918		112,912		109,366		101,455		93,751		85,162		79,516
	5,809		5,550		5,475		5,322		5,152		4,983		4,821
	997		1,054		1,041		1,021		1,026		1,022		1,024
$	0.58	$	0.54	$	0.87	$	0.82	$	0.78	$	0.70	$	0.63
	0.348		0.333		0.328		0.318		0.307		0.297		0.286
	7.07		6.77		6.55		6.05		5.59		5.07		4.73
	16,681,146		16,675,287		16,708,026		16,761,442		16,766,702		16,793,724		16,812,795

							Basic and Diluted
Quarter Ended 2006	Net Sales		Gross Profit		Net Income		Earnings per Share(1)
First Quarter	$	67,087	$	14,950	$	4,538	$	0.27
Second Quarter		67,905		15,587		5,499		0.33
Third Quarter		70,833		16,590		6,612		0.40
Fourth Quarter		65,085		11,549		2,423		0.14
Total	$	270,910	$	58,676	$	19,072	$	1.14

(1) Per share data refl ect the 5 for 4 stock split effective December 10, 2007.

41

Shareholder Information

SHAREHOLDER RETURN PERFORMANCE PRESENTATION

Set forth to the right is a line graph comparing the yearly percentage change in the cumulative total shareholder return on the Company’s Common Shares against the cumulative total return of the American Stock Exchange Market Value Index and a Peer Group Index for the period of five fiscal years commencing January 1, 2003 and ending December 31, 2007. The issuers in the Peer Group Index were selected on a line-of-business basis by reference to SIC Code 3561—Pumps and Pumping Equipment. The Peer Group Index is composed of the following issuers: Ampco-Pittsburgh Corp., Flowserve Corp., Graco Inc., Idex Corp., Pentair Inc., Robbins & Myers Inc. and Roper Industries Inc., in addition to the Company.

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG THE GORMAN-RUPP
COMPANY, AMEX MARKET INDEX AND PEER GROUP INDEX

ASSUMES $100 INVESTED ON JAN. 01, 2003. ASSUMES DIVIDEND REINVESTED. FISCAL YEAR ENDING DEC. 31, 2007.

Ranges of Stock Prices

The high and low sales price and dividends per share for common shares traded on the American Stock Exchange were:

	Sales Price of Common Shares								Dividends Per Share
	2007				2006				2007		2006
	High		Low		High		Low
First Quarter	$	34.02	$	21.61	$	15.67	$	13.62	$	.096	$	.090
Second Quarter		28.20		23.99		17.92		14.46		.096		.090
Third Quarter		28.32		22.44		22.08		15.13		.096		.090
Fourth Quarter		36.50		26.41		31.09		19.36		.100		.096

Per share data and sales price reflect the 5 for 4 stock split effective December 10, 2007.

Shareholder information reported by Transfer Agent and Registrar, National City Bank, February 4, 2008.

	Holders		Shares
Individuals		1,668		2,712,463
Nominees, brokers and others		53		13,990,572
Total		1,721		16,703,035

An additional 609,183 common shares are held in Treasury.
Shares reflect the 5 for 4 stock split effective December 10, 2007.

42

Safe Harbor Statement

This Annual Report contains various forward-looking statements and includes 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 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.

43

EX-14

EXHIBIT (14)

THE GORMAN-RUPP COMPANY

CODE OF ETHICS

Introduction

     This Code of Ethics describes the basic principles of conduct that apply to all employees, officers and Directors of The Gorman-Rupp Company (“Company”). This Code is intended to provide a broad overview of basic ethical principles that guide our conduct. Violation of this Code may result in disciplinary action as deemed appropriate by the Company’s Board of Directors, varying from reprimand to dismissal.

     The requirement that we adhere to each of the policies and principles contained in this Code may only be waived by the Board of Directors. The Company will promptly disclose to the Company’s shareholders and the investing public any waiver of this Code.

Compliance with Laws, Rules and Regulations

     We strive to comply with all laws, rules and regulations of the places where the Company conducts business.

Conflicts of Interest

     We conduct our business affairs in the best interests of the Company and shall therefore avoid situations where our private interests interfere with the Company’s interests. We shall be especially sensitive to situations that have the appearance of impropriety.

Record-Keeping

     We require honest and accurate recording and reporting of financial and other information.

     All of the Company’s records, accounts and financial statements are maintained in reasonable detail, appropriately reflect its transactions, and conform both to applicable legal and financial accounting requirements.

Public Reporting

     We endeavor to make full, fair, accurate, timely and understandable disclosure in reports and documents filed with, or submitted to, the Securities and Exchange Commission and the American Stock Exchange and in the Company’s news releases and other public communications.

     We require cooperation and open communication with our internal and external auditors. We consider any action to fraudulently influence, coerce, manipulate or mislead any auditor engaged in the performance of an audit of the Company’s financial statements to be an illegal activity.

44

Insider Trading

     Consistent with the federal securities laws, we confirm that the conduct of any person who buys or sells the Company’s securities on the basis of material, non-public information concerning the Company is illegal.

     We further confirm the illegal conduct of any person in possession of material, non-public information who provides another person with such information or recommends that he or she buy or sell the Company’s securities. These prohibitions also apply to material, non-public information obtained about any other company during the course of working for the Company.

Corporate Opportunities

     We do not personally take advantage of opportunities that are discovered because of our position without the prior consent of the Board of Directors. We shall not compete with the Company and shall fulfill our fiduciary duties to the Company to advance its legitimate interests whenever the opportunity to do so arises.

Competition and Fair Dealing

     We manage the Company so that it competes fairly and honestly. We do not engage in unethical or illegal business practices such as stealing proprietary information, possessing trade secret information that was obtained without the owner’s consent, or inducing disclosure of this type of information by past or present employees of other companies. We shall respect the confidentiality of our customers’, suppliers’ and competitors’ information.

Business Entertainment and Gifts

     We recognize that business entertainment and gifts are meant to create goodwill and sound working relationships, not to gain unfair advantage with customers or suppliers. We shall not offer, give or accept any gift or entertainment unless it: (i) is not a cash gift, (ii) is consistent with customary business practices, (iii) is not excessive in value, (iv) cannot be construed as a bribe or payoff, and (v) does not violate any laws or regulations.

Discrimination and Harassment

     We provide equal opportunity in employment and will not tolerate discrimination or harassment in the workplace. Derogatory comments based on racial or ethnic characteristics, unwelcome sexual advances and similar behavior are prohibited by the Company’s policies.

Health and Safety

     We strive to provide a safe and healthful work environment by following safety and health rules and practices.

     We do not permit violence or threatening behavior in the workplace.

45

Confidentiality

     We protect the Company’s confidential, proprietary and trade secret information. We also protect information that suppliers and customers have entrusted to the Company on a confidential basis. Our personal obligation to safeguard the Company’s confidential, proprietary and trade secret information continues even after our employment with the Company ends.

Protection and Proper Use of Company Assets

     We shall not engage in theft or careless use of the Company’s assets. We shall never use the Company’s assets for illegal purposes.

Activities Concerning Foreign Governments

     In compliance with the United States Foreign Corrupt Practices Act and The Organization for Economic Co-Operation and Development Anti-Bribery Convention, we do not give anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. We do not promise, offer or deliver to any foreign or domestic government employee or official any gift, favor or other gratuity that would be illegal.

     Our policy is to comply with the laws of other nations in which the Company conducts business.

Reporting Illegal or Unethical Behavior

     In order to encourage good faith reports of illegal or unethical behavior within the Company to the Company’s Corporate Manager Internal Audit (including violations of this Code), we keep all reports confidential and do not allow retaliation for reports of misconduct by others. We will cooperate in internal investigations of alleged misconduct.

     We shall not permit any form of retribution against any employee who, in good faith, reports violations or suspected violations of Company policy.

Conclusion

     Our business conduct on behalf of the Company shall be guided by the policies and principles set forth in this Code.

*      *      *      *      *      *      *      *      *      *      *      *

     This Code of Ethics was first authorized, approved and adopted by the Board of Directors of The Gorman-Rupp Company on October 23, 2003 for application to the Company’s Chief Executive Officer, Chief Financial Officer and Treasurer. The Board of Directors expanded the scope of this Code of Ethics by the authorization, approval and adoption of an appropriate resolution on April 22, 2004 so that it applies to all employees, officers and Directors of the Company.

46

EX-21

EXHIBIT (21)

SUBSIDIARIES OF THE COMPANY

The Company has four wholly owned subsidiaries: (i) Gorman-Rupp of Canada Limited, organized under the laws of the Province of Ontario; (ii) The Gorman-Rupp International Company, organized under the laws of the State of Ohio, (iii) Patterson Pump Company, organized under the laws of the State of Ohio; and (iv) American Machine and Tool Co., Inc. of Pennsylvania, organized under the laws of the State of Delaware. The Company has one indirect, wholly owned subsidiary: Patterson Pump Ireland Limited, a wholly owned subsidiary of Patterson Pump Company, and organized under the laws of the Republic of Ireland. The Company has one indirect, majority owned subsidiary: Gorman-Rupp Europe B.V., a 90% owned subsidiary of The Gorman-Rupp International Company, and organized under the laws of The Netherlands. The consolidated financial statements of the Company, filed as a part of this Form 10-K, include the accounts of each such subsidiary.

47

EX-23

EXHIBIT (23)

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in this Annual Report (Form 10-K) of The Gorman-Rupp Company of our reports dated February 28, 2008, with respect to the consolidated financial statements of The Gorman-Rupp Company, and the effectiveness of internal control over financial reporting of The Gorman-Rupp Company, included in the 2007 Annual Report to Shareholders of The Gorman-Rupp Company.

We also consent to the incorporation by reference in the Registration Statement and in the related Prospectus (Form S-8 No. 333-85982) pertaining to the Employee Stock Purchase Plan of The Gorman-Rupp Company, in the Registration Statement and in the related Prospectus (Form S-8 No. 333-105682) pertaining to the 401(k) Plan of The Gorman-Rupp Company, and in the Registration Statement and in the related Prospectus (Form S-8 No. 333-30159) pertaining to the Non-Employee Directors’ Compensation Plan of The Gorman-Rupp Company of our reports dated February 28, 2008, with respect to the consolidated financial statements of The Gorman-Rupp Company, and the effectiveness of internal control over financial reporting of The Gorman-Rupp Company, incorporated herein by reference in this Annual Report (Form 10-K) for the year ended December 31, 2007.

/s/ ERNST & YOUNG LLP

Cleveland, Ohio
March 10, 2008

48

EX-24

EXHIBIT (24)

THE GORMAN-RUPP COMPANY

CERTIFICATE OF THE SECRETARY

     The undersigned hereby certifies that he is the duly elected, qualified and acting Corporate Secretary of The Gorman-Rupp Company, an Ohio corporation (the “Company”), and that the following resolutions were duly adopted by the Company’s Board of Directors at a duly noticed and called meeting held on February 28, 2008 at which a quorum was present and acting throughout, which resolutions have not been amended, rescinded or modified and are in full force and effect on the date hereof.

     RESOLVED, that the executive officers of the Company, and each of them, hereby are authorized, for and on behalf of the Company, to prepare, sign and file, or cause to be prepared, signed and filed, with the Securities and Exchange Commission, under the Securities Exchange Act of 1934, as amended, the Company’s 2007 Annual Report on Form 10-K, and any and all amendments thereto, and to do or cause to be done all things necessary or advisable in connection therewith.

     FURTHER RESOLVED, that Jeffrey S. Gorman, David P. Emmens and Anthony R. Moore, and each of them, hereby are appointed attorneys for the Company, with full power of substitution and resubstitution, for and in the name, place and stead of the Company, to sign and file the Company’s 2007 Annual Report on Form 10-K and any and all amendments thereto, and any and all other documents in connection therewith, with full power and authority to do and perform any and all acts necessary or advisable.

     FURTHER RESOLVED, that the executive officers of the Company and each of them, hereby are authorized, for and on behalf of the Company, to execute a power of attorney evidencing the foregoing appointments.

     IN WITNESS WHEREOF, I have hereunto signed this Certificate this 10th day of March, 2008.

/s/ DAVID P. EMMENS  

David P. Emmens 

Corporate Secretary 

49

EXHIBIT (24)

POWER OF ATTORNEY

     The undersigned, The Gorman-Rupp Company (the “Company”), by the undersigned executive officer of the Company hereunto duly authorized, hereby appoints Jeffrey S. Gorman, David P. Emmens and Anthony R. Moore, and each of them, as attorneys for the Company, with full power of substitution and resubstitution, for and in its name, place and stead, to sign and file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, the Company’s 2007 Annual Report on Form 10-K and any and all amendments thereto, and any and all other documents to be filed with the Securities and Exchange Commission or otherwise in connection therewith, with full power and authority to do and perform any and all acts whatsoever necessary or advisable.

     Executed this 10th day of March 2008.

THE GORMAN-RUPP COMPANY
BY:	/s/ DAVID P. EMMENS
	David P. Emmens
	Corporate Secretary

50

EXHIBIT (24)

POWER OF ATTORNEY

The undersigned Directors and Officers of The Gorman-Rupp Company (the “Company”) hereby appoint Jeffrey S. Gorman, David P. Emmens, and Anthony R. Moore, and each of them, as attorneys for each of the undersigned, with full power of substitution and resubstitution, for and in the name, place and stead of each of the undersigned, to sign and file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, the Company’s 2007 Annual Report on Form 10-K and any and all amendments thereto, and any and all other documents to be filed with the Securities and Exchange Commission or otherwise in connection therewith, with full power and authority to do and perform any and all acts whatsoever necessary or advisable.

Executed as of the 28th day of February, 2008

/s/ JEFFREY S. GORMAN Jeffrey S. Gorman	President and Chief Executive Officer and Director  (Principal Executive Officer)
/s/ ROBERT E. KIRKENDALL Robert E. Kirkendall	Senior Vice President and Chief Financial Officer  (Principal Financial and Accounting Officer)
/s/ JAMES C. GORMAN James C. Gorman	Director
/s/ THOMAS E. HOAGLIN Thomas E. Hoaglin	Director
/s/ CHRISTOPHER H. LAKE Christopher H. Lake	Director
Peter B. Lake	Director
/s/ RICK R. TAYLOR_ Rick R. Taylor	Director
/s/ W. WAYNE WALSTON W. Wayne Walston	Director
/s/ JOHN A. WALTER John A. Walter	Director

51

EX-31.A

EXHIBIT (31)(a)

CERTIFICATIONS

I, Jeffrey S. Gorman, certify that:

1.	I have reviewed this annual report on Form 10-K of The Gorman-Rupp Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

52

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 10, 2008	/s/ JEFFREY S. GORMAN
	Jeffrey S. Gorman
	President and Chief Executive Officer The Gorman-Rupp Company (Principal Executive Officer)

53

EX-31.B

EXHIBIT (31)(b)

CERTIFICATIONS

I, Robert E. Kirkendall, certify that:

1.	I have reviewed this annual report on Form 10-K of The Gorman-Rupp Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

54

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 10, 2008	/s/ ROBERT E. KIRKENDALL
	Robert E. Kirkendall
	Senior Vice President and Chief Financial Officer The Gorman-Rupp Company (Principal Financial Officer)

55

EX-32

EXHIBIT (32)

Certification Pursuant to 18 U. S. C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of The Gorman-Rupp Company on Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U. S. C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

Date: March 10, 2008	/s/ JEFFREY S. GORMAN
	Jeffrey S. Gorman
	President and Chief Executive Officer (Principal Executive Officer)
	/s/ ROBERT E. KIRKENDALL
	Robert E. Kirkendall
	Senior Vice President and Chief Financial Officer (Principal Financial Officer)

The foregoing certification is being furnished solely pursuant to 18 U. S. C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

56