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. 

Safe Harbor For Forward-Looking Statements  --  This Management's Discussion and Analysis of Operating Results and Financial Condition contains certain statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact.  All statements regarding future performance, growth, sales and earnings projections, conditions, or developments are forward-looking statements.  Words such as "anticipates," "believes," "intends," "expects," "may," "will," "should," "could," "plans," "forecasts," "estimates," "predicts," "projects," "potential," "continue," "outlook," and similar expressions may be intended to identify forward-looking statements. 

Actual future results may differ materially from those described in the forward-looking statements due to a variety of factors, including the fact that the economy generally, and the dairy farm equipment, industrial equipment and field-fabrication markets specifically, are all currently subject to uncertainty, making it difficult to determine if past experience is a good guide to the future.  A downturn in the Registrant's business segments could adversely affect the Registrant's revenues and results of operations.  Other factors affecting forward-looking statements, some of which are identified in the discussion relating to such forward-looking statements, include, but are not limited to, the following: specific economic conditions in the food, dairy, beverage, chemical, pharmaceutical, biotechnological, and other process industries, and the dairy farm equipment market and the impact of such conditions on the Registrant's customers in such markets; the cyclical nature of some of the Registrant's markets; milk prices, feed costs, weather conditions, dairy farm consolidation, and other factors affecting the profitability of dairy farmers; the price of stainless steel; the highly competitive nature of the markets for the Registrant's products, as well as pricing pressures that may result from such competitive conditions; business relationships with major customers and suppliers; the continued operation and viability of the Registrant's major customers; the Registrant's execution of internal performance plans; difficulties or delays in manufacturing; cost-reduction and productivity efforts; competing technologies and difficulties in entering new markets, both domestic and foreign; changes in product mix; future levels of indebtedness and capital spending; claims, including, without limitation, warranty claims, product liability claims, charges or dispute resolutions; ability of suppliers to provide materials as needed and the Registrant's ability to recover any price increases for mate rials and product pricing; the Registrant's ability to attract and retain key technical and other personnel; labor relations; the failure of customers to make timely payment; any inadequacy of the Registrant's intellectual property protection or the potential for third-party claims of infringement; global economic factors, including currency exchange rates; general economic conditions, including interest rates, the rate of inflation, and commercial and consumer confidence; energy prices; governmental laws and regulations affecting domestic and foreign operations, including tax obligations; changes in accounting standards; worldwide political stability; the effects of terrorist activities and resulting political or economic instability, including U.S. military action overseas; and the effect of acquisitions, divestitures, restructurings, product withdrawals, and other unusual events. 

The Registrant cautions the reader that these lists of cautionary statements and risk factors may not be exhaustive. The Registrant expressly disclaims any obligation or undertaking to release publicly any updates or changes to these forward-looking statements that may be made to reflect any future events or circumstances. 

Net income for the first quarter ended March 31, 2003, was $718,000 compared to a net loss of $1,113,000 for the first quarter of 2002.  The improved performance was primarily due to the increase in sales for the first quarter of 2003 versus the first quarter of 2002. 

Net sales were $8,982,000 greater for the three months ended March 31, 2003, compared to the three months ended March 31, 2002.  The increase was attributable to higher sales in the Industrial Equipment segment and the Field Fabrication segment for the first three months of 2003 versus 2002, as the Dairy Farm Equipment segment had lower sales for the first quarter of 2003 compared to the first quarter of 2002.  The improvement in sales for the Industrial Equipment segment for the first three months of 2003 compared to 2002 was due to significantly higher sales in the BioPharm product line, as the backlog was 259% higher at the beginning of 2003 versus the beginning of 2002.  Revenues from two large module projects, scheduled for completion during the second half of 2003 and for which revenues are recognized under the percentage-of-completion method, were the primary reasons for the increase in sales.  The Field Fabrication segment recorded higher sales fo r the three months ended March 31, 2003, versus the same period of a year ago as a result of an improved backlog level at December 31, 2002, compared to the backlog at December 31, 2001.  Dairy Farm Equipment, on the other hand, recorded a decline in sales of $1,424,000, when comparing the first quarter of 2003 to the first quarter of 2002, that was the result of a 67% lower beginning backlog for 2003 versus 2002 and a 33% lower order entry level for the first quarter of 2003 compared to the first quarter of 2002. The lower order entry for the first quarter of 2003 occurred primarily in the domestic market and was the result of significantly lower milk prices paid to dairy farmers during the first quarter of 2003 versus 2002.  Sales to foreign markets for the Dairy Farm Equipment segment were flat when comparing the quarterly results. 

The gross profit increased by $2,938,000 when comparing the first quarter of 2003 to the first quarter of 2002. The primary reasons for the increase were the significantly higher level of sales, coupled with an improvement in the gross margin rate, which is a measure of the variable profit margin. 

Selling, general, and administrative expenses were $138,000 greater for the first quarter ended March 31, 2003, versus the first quarter of 2002, as expenditures were higher for personnel and travel, and provisions were higher for depreciation and potential bad debts. 

Other income (expense) was $82,000 greater for the first quarter of 2003 versus the first quarter of 2002 due to royalty income and an increase in miscellaneous income items. 

On a segment basis, the Dairy Farm Equipment segment recorded a loss before tax of $2,000 for the quarter ended March 31, 2003, compared to income before tax of $382,000 for the first quarter of 2002.  The change in results between periods was due primarily to the $1,424,000 reduction in sales volume for the reasons mentioned above. The Industrial Equipment segment recorded income before tax of $763,000 for the first quarter of 2003 compared to a loss before tax of $1,925,000 for the same period of a year ago.  The improved performance was due to the $8,331,000 increase in sales and a higher gross margin rate for the first quarter of 2003 compared to 2002. The two large module projects mentioned above, for which fabrication began during the third quarter of 2002, contributed significantly to the results of the Industrial Equipment segment for the first quarter of 2003.  The Field Fabrication segment recorded sales of $3,065,000 for the first quarter of 2003 compared to sal es of only $424,000 for the first quarter of 2002.  The higher sales level was the sole reason for the improvement in results for the Field Fabrication segment, which included income before tax of $214,000 for the first quarter of 2003 compared to a loss before tax of $350,000 for the first quarter of 2002. 

The effective tax rate for the periods presented varied from the statutory tax rate (34%) primarily due to state income taxes and nondeductible meals and entertainment expenses. 

Market risks relating to the Registrant's operations result primarily from changes in foreign-exchange rates and stainless steel prices.  The Registrant periodically enters into foreign-exchange forward or spot contracts to hedge its exposure to foreign-currency-denominated purchase transactions.  Forward contracts generally have durations of less than three months.  Foreign-currency-denominated purchases were $76,700 and $131,300 for the three months ended March 31, 2003 and 2002, respectively.  There were no foreign-exchange forward contracts outstanding at March 31, 2003 or 2002.  There was approximately $19,000 of foreign currencies held at March 31, 2003, and none held at March 31, 2002.  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 projec t 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 2003, there are factors that could affect the results of operations.  The average price of milk paid to dairy farmers in the domestic market for the first three months of 2003 was approximately 16% lower than the average price paid for milk during the same period of 2002.  The average milk price is expected to remain low as long as milk production continues to increase.  Although feed costs are expected to remain favorable, continuation of low milk prices could have an adverse effect on order entry, sales, and profitability for the Dairy Farm Equipment segment. 

The current economic conditions and the related depressed capital expenditure level in the United States are having an adverse effect on certain product lines within the Industrial Equipment segment.  For 2002, the Processing Equipment and Heat Transfer product lines, which are part of the Industrial Equipment segment, suffered a combined 23% decline in order entry from the prior year.  For the first quarter of 2003, combined order entry for Processing Equipment and Heat Transfer products was down approximately 2% from the first quarter of 2002. 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 2003 due to increased surcharges.  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 prices of nickel, chromium, and molybdenum (materials used in the production of stainless steel).  The effect of surcharges on stainless steel prices may delay projects or reduce profitability if the 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 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 delivered, or the percentage of completion achieved 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 backlog totaled $58,695,000 at March 31, 2003, compared to $35,943,000 at March 31, 2002.  The backlog for the Industrial Equipment segment (exclusive of shop work for the Field Fabrication segment) was $53,307,000 and $30,819,000 at March 31, 2003 and 2002, respectively.  The backlog for the Dairy Farm Equipment segment was $1,805,000 and $4,110,000 at March 31, 2003 and 2002, respectively.  The Field Fabrication segment backlog was $3,583,000 at March 31, 2003, versus $1,014,000 at March 31, 2002.  The increase in the Industrial Equipment segment backlog was almost exclusively due to the BioPharm product line, which consists of pure-water/pure-steam generating equipment, tanks and vessels, and modular systems for the pharmaceutical and biotechnology industries.  Approximately 96% of the March 31, 2003, consolidated backlog will be recognized as sales over the next 12 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 manufacturing or fabrication cycles for some projects.  Orders in backlog are subject to delays in completion and/or holds at the request of the customer, and this could have a significant impact on sales and quarterly results. 

The consolidated financial condition and the liquidity of the Registrant as of March 31, 2003, have not changed significantly since December 31, 2002.  There were no significant commitments for capital expenditures as of March 31, 2003. 

Net cash provided by operating activities for the three months ended March 31, 2003, was higher than net cash provided by operating activities for the three months ended March 31, 2002, due to improved results (a net loss of $1,113,000 for the first quarter of 2002 compared to net income of $718,000 for the first quarter of 2003) and an increase in billings in excess of costs and estimated earnings. 

The Registrant has a $7,000,000 bank borrowing facility that expires on May 31, 2004; and there was $1,500,000 borrowed under the facility at March 31, 2003.  Additionally, the Registrant has a facility of $2,750,000 to support standby letters of credit.  As of March 31, 2003, there was $2,180,584 of standby letters of credit issued and outstanding under the facility, and all are set to expire within one year.  The Registrant also has a $1,042,500 note outstanding (repayable in quarterly installments of $104,250 through August 2, 2005) that is secured by equipment. 

NONAUDIT SERVICES OF INDEPENDENT AUDITORS -- Pursuant to Section 10A(i)(2) of the Securities Exchange Act of 1934, as added by Section 202 of the Sarbanes-Oxley Act of 2002, we are responsible for disclosing to investors the nonaudit services approved by our Audit Committee to be performed by KPMG LLP, our independent auditors. Nonaudit services are defined in the law as services other than those provided in connection with an audit or review of the financial statements of the Registrant. The Audit Committee approved (a) nonaudit tax compliance services in connection with the preparation of the Registrant's tax returns and (b) research and consultation on various federal, state, and local tax issues. 

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

Certain information concerning market risk is set forth in Item 2 on page 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 evalua tion discussed in this Item 4.