ITEM 1.   FINANCIAL STATEMENTS 

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATION 

The following is Management's discussion and analysis of the significant factors that have affected the Companies' earnings during the periods included in the accompanying Consolidated Condensed Statements of Income. 

The information discussed below in Management's Discussion and Analysis of Operating Results and Financial Condition contains statements regarding matters that are not historical facts, but rather are forward-looking statements.  These statements are based on current financial and economic conditions and current expectations and involve risk and uncertainties.  Actual future results may differ materially depending on a variety of factors. These factors, some of which are identified in the discussion accompanying such forward-looking statements, include, but are not limited to, milk prices paid to dairy farmers, feed prices, weather conditions, dairy farm consolidation and other factors affecting the profitability of dairy farmers, the price of stainless steel, actions of competitors, the Registrant's execution of internal performance plans, economic conditions in key export markets, the level of capital expenditures in the U.S. economy, and other changes to business conditions.& nbsp;

OPERATING RESULTS 

Net income for the third quarter of 2002 was $1,010,000 compared to net income of $502,000 for the third quarter of 2001.  The primary factor contributing to the improved performance was the increase in sales for the third quarter of 2002 versus the third quarter of 2001. 

Consolidated net sales for the quarter ended September 30, 2002, were $36,680,000 compared to $27,384,000 for the quarter ended September 30, 2001.  The increase in sales was solely attributable to the Industrial Equipment segment, as the Dairy Farm Equipment and Field Fabrication segments had slightly lower sales for the comparative quarters.  The increase in the Industrial segment sales of $7,394,000 was primarily the result of order entry that was about 90% higher for the first nine months of 2002 versus the first nine months of 2001, and the increase in order entry occurred predominantly in the BioPharm product line.  The level of sales for the third quarter of 2002 was favorably affected by revenues for modular systems for the pharmaceutical and biotechnology industries and included a small modular system that was completed and shipped during the third quarter of 2002 and revenue recognized under the percentage-of-completion method for two large projects scheduled to be completed during the second half of 2003.  Sales of virtually all products within the BioPharm product line were higher when comparing the third quarter of 2002 to the third quarter of 2001.  For the balance of the Industrial Equipment segment, sales for the third quarter of 2002 declined compared to sales for the same period of a year ago.  Declines were particularly significant in the Processing Equipment and Heat Transfer product lines, as the market remains depressed for capital expenditures.  The level of order entry was down 9% for Processing Equipment and Heat Transfer equipment when comparing the first nine months of 2002 versus the first nine months of 2001, and in addition to weak market conditions pricing was extremely competitive for projects available.  Dairy Farm Equipment segment sales for the three months ended September 30, 2002, declined by $99,000.  Although the average milk price paid to domestic farmers was 30% less during the third quarter of 2002 versus t he third quarter of 2001, a backlog of Dairy Farm Equipment that was 39% higher at June 30, 2002, versus June 30, 2001, helped to offset the effect of the milk price decline.  Field Fabrication segment sales were comparable for the third quarter of 2002 compared to the third quarter of 2001. 

Gross profit increased by $1,282,000 for the third quarter of 2002 versus the third quarter of 2001 due to the significantly higher sales volume, coupled with an improvement in the gross margin rate, which is a measure of the variable profit margin.  Although gross profit increased during the third quarter of 2002 versus the third quarter of 2001, the gross profit rate for the third quarter of 2002 was 18.2% versus 19.8% for the third quarter of 2001. The decline in the gross profit rate was primarily attributable to higher manufacturing burden expenses and the effect of LIFO.  Manufacturing burden expenses were higher for the third quarter of 2002 versus the third quarter of 2001 as a direct result of the higher production and sales volume.  Additionally, since the beginning of 2002, over 100 new production employees have been added to the Springfield facility to handle the workload level over the next several months due to the significant backlog of work.  Appro ximately 50 of the employees were added during the third quarter of 2002, and this increased the manufacturing burden expenses for the third quarter of 2002.  There was a significant investment made to obtain a sufficient number of employees and provide training.  Also, the gross profit rate was adversely affected during the third quarter of 2002 by an increase to the LIFO reserve that was due to the higher stainless steel prices experienced during 2002; while during the third quarter of 2001, the LIFO reserve was reduced due to lower prices for stainless steel.  The effect of LIFO was to increase cost of sales by $725,000 when comparing the results of the third quarter of 2002 to the third quarter of 2001. 

General and administrative expenses were higher for the third quarter of 2002 versus the third quarter of 2001 due to higher expenditures for salaries and benefits, travel, legal fees, and product development activities, and a higher provision for identified warranty claims. 

Other income for the three months ended September 30, 2002, was higher than the three months ended September 30, 2001, due to higher interest income and an increase in miscellaneous income. 

On a segment basis, the Dairy Farm Equipment segment recorded income before income tax of $1,012,000 for the third quarter of 2002 versus income before income tax of $476,000 for the third quarter of 2001.  The increase in profitability over the prior year was due to an increase in the gross margin rate and to lower manufacturing burden included in cost of sales, as the level of production activity for the quarter ended September 30, 2002, was significantly higher than the same period of a year ago and manufacturing burden was absorbed over a larger base of work.  The production increase was due to the backlog, which was 39% larger as of June 30, 2002, versus June 30, 2001. 

The Industrial Equipment segment incurred a loss before income tax of $436,000 for the third quarter of 2002 versus a loss before income tax of $779,000 for the third quarter of 2001.  A higher level of sales and an improvement in the gross margin were the factors contributing to the lower level of loss.  However, these factors were not sufficient to overcome the increase in manufacturing burden expense for the reasons mentioned above and the effect of LIFO on the loss for the segment. 

For the Field Fabrication segment, income before income tax for the third quarter of 2002 was $747,000 compared to income before income tax of $881,000 for the third quarter of 2001.  The decrease in profitability was due to a slightly lower gross margin rate, coupled with a slightly higher operating expense level. 

The effective tax rate for the three months ended September 30, 2002, was 38% versus 36% for the three months ended September 30, 2001.  The effective tax rate varied from the statutory rate (34%) for 2002 primarily as a result of permanent differences between book and tax income and state income taxes.  For 2001, the variance related to permanent differences between book and tax income, state income taxes, and tax credits. 

For the nine months ended September 30, 2002, the net loss was $328,000 compared to a net loss for the nine months ended September 30, 2001, of $707,000.  The primary factor contributing to the lower level of loss was the improvement in sales for 2002 versus 2001. 

Consolidated net sales for the nine months ended September 30, 2002, were $10,571,000 higher than sales during the nine months ended September 30, 2001.  The increase in sales occurred in the Industrial Equipment and Dairy Farm Equipment segments, as net sales were approximately $590,000 less in the Field Fabrication segment.  Within the Industrial Equipment segment, sales of BioPharm products increased by over 260%, while virtually all of the other product lines experienced a decrease in sales.  The higher sales level in BioPharm products was due to an increase in order entry of over 600% during the first nine months of 2002 versus the first nine months of 2001.  Additionally, the BioPharm product line backlog includes two major long-term contracts for which revenue has been recognized on the percentage-of-completion basis during the third quarter, and this contributed to the increase in sales.  The increase in Dairy Farm Equipment segment sales was due to a backl og that was 65% higher at December 31, 2001, versus December 31, 2000, and an increase in new orders of 7% for the first nine months of 2002 over the same period of a year ago.  These factors helped to offset an average milk price paid to dairy farmers that was 21% less during the first three quarters of 2002 compared to the first three quarters of 2001. 

Gross profit for the first nine months of 2002 was $14,327,000 compared to $12,552,000 for the first nine months of 2001 primarily as a result of the improved sales volume.  Although the gross profit amount increased during 2002 as compared to 2001, the gross profit rate declined from 18.7% for 2001 to 18.4% for 2002.  The primary reason for the decline in gross profit rate was increased manufacturing burden expenses for the reasons previously discussed.  Additionally, for the first nine months of 2002, a provision was made to increase the LIFO reserve due to the increased level of stainless steel prices; while in contrast, during the first nine months of 2001, the reserve for LIFO was reduced due to a lower level of stainless steel prices.  The effect of LIFO was to increase cost of sales by $1,350,000 when comparing the results for the first nine months of 2002 to the first nine months of 2001. 

Selling, general, and administrative expenses were higher for the nine months ended September 30, 2002, versus the nine months ended September 30, 2001, due to increased expenditures for salaries and benefits, travel, legal fees, insurance, and a provision for specific warranty claims. 

Other income for the nine months ended September 30, 2002, was higher than for the nine months ended September 30, 2001, principally due to higher miscellaneous income. 

On a segment basis, the Dairy Farm Equipment segment income before income tax was $2,719,000 for the first nine months of 2002 versus income before income tax of $1,114,000 for the same period of 2001.  The increase in profitability related primarily to the improvement in sales of $2,393,000, coupled with a higher gross margin rate during 2002 compared to 2001. 

The Industrial Equipment segment incurred a loss of $4,074,000 during the first nine months of 2002 compared to a loss of $3,540,000 during the first nine months of 2001.  Although sales were higher by $3,157,000, the loss was greater due to higher manufacturing burden expense and selling, general, and administrative expense and the effect of LIFO.  The higher manufacturing burden expense was due to the higher level of activity in the plant due to the increased backlog.  Additionally, over 100 new plant employees have been added since the beginning of 2002; and there was a significant investment in employment and training costs, which added to the manufacturing burden expense.  Selling, general, and administrative expenses were higher, consistent with the higher sales level. During 2002, a provision was made to increase the LIFO reserve due to higher stainless steel prices; whereas during 2001, the LIFO reserve was reduced due to lower stainless steel prices.  ; The effect of LIFO was to increase cost of sales for the Industrial Equipment segment by approximately $1,000,000 when comparing the results of the first nine months of 2002 to the first nine months of 2001. 

Field Fabrication income before tax was $329,000 for the first nine months of 2002 compared to $855,000 for the first nine months of 2001.  The difference in profitability for 2002 versus 2001 was the result of the lower sales volume, slightly lower gross margins, and an increased level of expenditures for burden and selling, general, and administrative expenses. 

The effective tax rate for the nine months ended September 30, 2002, was (22%) and it varied from the statutory tax rate (34%) due to permanent differences between the book and tax loss.  The effective rate for the nine months ended September 30, 2001, was (38%); and it varied from the statutory rate due to permanent differences between the book and tax loss and to tax credits. 

Market risks relating to the Registrant's operations result primarily from changes in interest rates, foreign exchange rates, and stainless steel prices.  The Registrant has a $3,250,000 bank borrowing facility that expires May 31, 2003, and a long-term note outstanding in the amount of $1,251,000 payable quarterly, with the final payment due August 2, 2005.  The interest rate for both facilities is the LIBOR Daily Floating Rate plus 1.75%. The Registrant periodically enters into foreign exchange forward or spot contracts to hedge the exposure to foreign-currency-denominated purchase transactions.  Forward contracts generally have durations of less than three months.  Foreign-currency-denominated purchases were $1,054,000 and $1,420,000 for the nine months ended September 30, 2002 and 2001, respectively.  There were no foreign exchange forward contracts outstanding at September 30, 2002 or 2001.  There was approximately $19,000 of foreign currencies held at September 30, 2002, and none held at September 30, 2001.  The risk of an increase in stainless steel prices, which can be significant to large Industrial Equipment and Field Fabrication segment projects that extend over several months, is managed by contracting for stainless steel at the time the project is obtained. 

Concentration of credit risk, with respect to receivables, is limited due to the large number of customers and their dispersion across a wide geographic area.  The Registrant performs credit evaluations on new customers and periodically reviews the financial condition of existing customers.  For Industrial Equipment orders and Field Fabrication segment projects, down payments and/or progress payments are generally required based on the dollar value of the order and customer creditworthiness.  Foreign receivables generally are secured by irrevocable letters of credit confirmed by major U.S. banks. 

Looking to the balance of 2002, there are factors that could affect the results of operations.  The average price of milk paid to dairy farmers in the domestic market through September 30, 2002, was approximately 21% less than the average price paid for milk during the same period of 2001.  The average milk price is expected to remain low for the balance of the year and, coupled with anticipated increases in feed costs, these factors could have an adverse effect on order entry, sales, and profitability of the Dairy Farm Equipment segment. 

The current economic conditions and the related depressed capital expenditure level are having an adverse effect on certain product lines within the Industrial Equipment segment.  Although order entry has significantly increased for the BioPharm product line when comparing the first nine months of 2002 to 2001, combined order entry for Processing Equipment and Heat Transfer equipment, key products within the Industrial Equipment segment, was 9% lower for 2002 versus 2001.  Also, pricing continues to be very competitive for the projects that are available within the Industrial Equipment segment. 

The price of stainless steel has increased since the beginning of 2002, and surcharges have been a significant contributor to the higher prices.  Surcharges, which are assessed at the time of shipment from the vendor, have been implemented due to the increase in and the volatility of the market price of nickel and molybdenum (materials used in the production of stainless steel).  The effect of higher stainless steel prices may delay projects or reduce the profitability if increases cannot be passed along in the form of higher prices.  The effect of higher stainless steel prices also may require additional increases to the LIFO reserve. 

In general, the Registrant's business is not subject to seasonal variation in demand for its products.  However, because orders for certain products within the Industrial Equipment and Field Fabrication segments can be large in terms of sales dollars, a small number of large orders can have a significant impact on the Registrant's sales in any one particular quarter.  As a result, a relatively small reduction or delay in the number of orders shipped or completed and accepted by the customer can have a material effect on the Registrant's sales for any particular quarter.  Gross margins may vary from quarter to quarter due to the variations in the profitability of large orders, as well as the mix of the various products manufactured or fabricated by the Registrant.  Accordingly, the results of operations for the Registrant for any one particular quarter are not necessarily indicative of the results that may be expected for any subsequent quarter of the calendar year.  

Consolidated new orders for the first nine months of 2002 were 89% higher than for the first nine months of 2001.  As a result of the order entry activity, the consolidated backlog totaled $71,074,000 at September 30, 2002 compared to $28,728,000 at September 30, 2001.  The backlog for the Industrial Equipment segment (exclusive of shop work for the Field Fabrication segment) was $58,368,000 and $19,705,000 at September 30, 2002 and 2001, respectively.  The backlog for the Dairy Farm Equipment segment at September 30, 2002 and 2001, was $2,919,000 and $3,275,000, respectively.  The Field Fabrication segment backlog was $9,787,000 at September 30, 2002, versus $5,748,000 at September 30, 2001.  The increase in the Industrial Equipment segment backlog was exclusively due to the BioPharm product line, which consists of pure-water/pure-steam generating equipment, pharmaceutical tanks and vessels, bioreactors, and modular systems for the pharmaceutical an d biotechnology industries.  Approximately 90% of the September 30, 2002, consolidated backlog will be recognized as sales over the next twelve months. 

The level of backlog at any particular point in time is not necessarily indicative of the future operating performance of the Registrant in the following quarter due to the long engineering and/or fabrication cycles for some projects.  Orders in backlog are subject to delays in fabrication and/or holds at the request of the customer, and this could have a significant impact on sales and results for a quarter. 

FINANCIAL CONDITION 

The consolidated financial condition and the liquidity of the Registrant as of September 30, 2002, have not changed significantly since December 31, 2001.  There were no significant commitments for capital expenditures as of September 30, 2002. 

Net cash provided by operating activities for the nine months ended September 30, 2002, was less than net cash provided by operating activities for the nine months ended September 30, 2001, due primarily to increases in accounts receivable and inventory, which were related to the significant increase in the backlog. 

The Registrant has a $3,250,000 bank borrowing facility that expires on May 31, 2003; and $1,000,000 was borrowed under the facility as of September 30, 2002.  Additionally, the Registrant has a facility of $2,750,000 to support standby letters of credit.  As of September 30, 2002, there was $2,464,984 of standby letters of credit issued and outstanding under the facility, with all but $62,800 set to expire within one year.  The Registrant also has a $1,251,000 note outstanding, repayable in quarterly payments over three years, secured by equipment. 

The Registrant has adopted SFAS No. 142, "Goodwill and Other Intangible Assets," issued in June 2001; and there was no impact on the Registrant's financial position or results of operations. 

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

Certain information concerning market risk is set forth in Item 2, pages 11 and 12, and is incorporated herein by reference.  Other disclosure requirements are not submitted because they are not applicable or they are not material. 

ITEM 4.   CONTROLS AND PROCEDURES 

Within 90 days prior to the date of this report, the Registrant carried out an evaluation, under the supervision and with the participation of the Registrant's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Registrant's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Registrant's disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Registrant files or submits under the Exchange Act is recorded, processed, summarized, and reported as required and within the time periods specified in the Securities and Exchange Commission's rules and forms. There have been no significant changes in the Registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation discu ssed in this Item 4. 

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K