SECURITIES AND EXCHANGE COMMISSION

Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

DOVER CORPORATION

Registrant’s telephone number, including area code: (212) 922-1640

Indicate by checkmark 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 x No o

Indicate by checkmark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Securities Exchange Act). Yes x No o

The number of shares outstanding of the Registrant’s common stock as October 25, 2004 was 203,363,281.

Index
Form 10-Q

(All other schedules are not required and have been omitted)

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PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

DOVER CORPORATION

The computations of basic and diluted earnings per share from continuing operations were as follows:

See Notes to Condensed Consolidated Financial Statements

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DOVER CORPORATION

DOVER CORPORATION

Preferred Stock, $100 par value per share. 100,000 shares authorized; none issued.

Dividends paid per share were $.46 and $.42 for the period ending September 30, 2004 and 2003, respectively.

See Notes to Condensed Consolidated Financial Statements

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DOVER CORPORATION

See Notes to Condensed Consolidated Financial Statements

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DOVER CORPORATION

See Notes to Condensed Consolidated Financial Statements

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DOVER CORPORATION

NOTE A – Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and changes in financial position in conformity with accounting principles generally accepted in the United States of America. It is the opinion of the Company’s management that all adjustments necessary for a fair statement of the interim results presented have been reflected therein. The results of operations of any interim period are not necessarily indicative of the results of operations for the fiscal year. Certain amounts in prior years have been reclassified to conform to the current quarter’s presentation.

For a more complete understanding of the Company’s financial position, operating results, business properties and other matters, reference is made to the Company’s Annual Report on Form 10-K which was filed with the Securities and Exchange Commission on February 27, 2004.

NOTE B – Stock-Based Compensation

The Company has long-term incentive plans authorizing various types of market and performance based incentive awards that maybe granted to officers and employees. Statements of Financial Accounting Standards (“SFAS”) No. 123 and SFAS No. 148 “Accounting for Stock-Based Compensation,” allows companies to measure compensation cost in connection with employee share option plans using a fair value based method or to continue to use an intrinsic value based method as defined by APB No. 25 “Accounting for Stock Issued to Employees,” which generally does not result in a compensation cost at time of grant. The Company accounts for stock-based compensation under APB 25, and does not recognize stock-based compensation expense upon the grant of its stock options because the option terms are fixed and the exercise price equals the market price of the underlying stock on the grant date. All granted stock options have a term of ten years and cliff vest after three years.

The following table illustrates the effect on net earnings and basic diluted earnings per share if the Company had recognized compensation expense upon grant of the options, based on the Black-Scholes option pricing model:

The fair value of each option grant was estimated on the date of grant using a Black-Scholes option-pricing model with the following assumptions:

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NOTE C – Acquisitions

The Company completed six acquisitions during the first nine months of 2004 including two in the third quarter. During the first nine months of 2003, Dover completed three acquisitions, one of which closed during the third quarter of 2003. The acquisitions made during the first nine months of 2004 and 2003 have been accounted for appropriately under SFAS 141 “Business Combinations”. Accordingly, the accounts of the acquired companies, after adjustment to reflect fair market values assigned to assets and liabilities, have been included in the consolidated financial statements from their respective dates of acquisitions. All 2004 and 2003 acquisitions are wholly owned and had an aggregate cost of approximately $317.7 million and $32.1 million, respectively, including cash balance, at date of acquisition, respectively.

2004 Acquisitions

The following unaudited pro forma information presents the results of operations of the Company for the three and nine month periods ending September 30, 2004 and 2003 as if the 2004 and 2003 acquisitions had taken place on January 1, 2003.

These pro forma results of operations have been prepared for comparative purposes only and include certain adjustments, such as additional amortization and depreciation expense as a result of intangibles and fixed assets acquired. They do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred on the date indicated, or which may result in the future.

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NOTE D – Inventory

Summary by Components

NOTE E – Property, Plant and Equipment

Summary by Components

The Company changed its method of depreciation for assets acquired on or after January 1, 2004 from primarily an accelerated method to the straight-line method of depreciation. Management’s decision to change was based on the fact that straight-line depreciation has become a better method of matching revenue and expenses over the estimated useful life of capitalized assets given their characteristics and usage patterns. The Company has determined that the design and durability of these assets increasingly does not diminish to any significant degree over time and it is therefore preferable to recognize the related cost uniformly over their estimated useful lives. The effect of the change on earnings for the three and nine month period ended September 30, 2004, was an increase of approximately $2.4 million and $4.7 million pre-tax, respectively.

NOTE F – Goodwill and Other Intangible Assets

Dover is continuing to evaluate the initial purchase price allocations of acquisitions made during the nine months ended September 30, 2004 and will adjust the allocations as additional information relative to the fair values of the assets and liabilities of the businesses becomes known. The Company is also in the process of obtaining appraisals of tangible and intangible assets for significant acquisitions. The following table provides the changes in carrying value of goodwill by market segment through the nine months ended September 30, 2004:

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The following table provides the gross carrying value and accumulated amortization for each major class of intangible asset:

NOTE G – Discontinued Operations

During the third quarter of 2004, Dover sold two previously discontinued businesses, one from the Industries segment and one from the Resources segment for net cash proceeds of $45.6 million. For the first nine months of 2004, Dover sold five businesses for net cash proceeds of $67.9 million. Comparatively, during the third quarter of 2003, Dover sold one business from the Technologies segment for net cash proceeds of $4.4 million and for the first nine months of 2003 sold four businesses for net cash proceeds of $9.5 million.

Discontinued operations earnings for the third quarter and first nine months of 2004 and 2003 were primarily from the favorable resolution of certain outstanding tax matters and tax benefits related to losses on sales of discontinued businesses. These gains were partially offset by charges related to contingent liabilities from the entities sold.

NOTE H – Debt

Dover’s long-term notes with a book value of $1,000.1 million at September 30, 2004, had a fair value of approximately $1,097.0 million. The estimated fair value of the Company’s long-term notes is based on quoted market prices for similar issues.

During the third quarter of 2004, the Company renewed its $600 million of bank credit facilities. The new credit agreement provides access to a 5-Year $600 million syndicated bank credit facility (dated September 8, 2004) and replaced on substantially the same terms both prior credit agreements ($300 million 3-Year Credit Agreement dated October 2002, and $300 million 364-day credit agreement dated October 2003). The new credit agreement is intended to be used primarily as liquidity back-up for the Company’s commercial paper program. This new facility bears interest at LIBOR plus .23% and contains key financial covenants that require the company to maintain an interest coverage ratio of EBITDA to net interest expense of not less than 3.5 to 1. As of September 30, 2004, Dover is in compliance with all debt covenants. Dover has not borrowed under any of these facilities.

During the first quarter of 2004, Dover terminated an interest rate swap with a notional amount of $50.0 million for an immaterial gain, which is being amortized over the remaining term of the debt issuance. This interest rate swap was designated as a fair value hedge of the 6.25% Notes, due June 1, 2008.

During the second quarter of 2004, Dover entered into an interest rate swap with a notional amount of $50.0 million, at more favorable rates to replace the interest rate swap terminated during the first quarter. This interest rate swap is designated as a fair value hedge of the 6.25% Notes, due June 1, 2008. The swap is designated in a foreign currency and exchanges fixed-rate interest for variable-rate interest, which also hedges a portion of the Company’s net investment in foreign operations.

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There are presently three interest rate swaps outstanding for a total notional amount of $150.0 million, designated as fair value hedges of the $150.0 million 6.25% Notes due on June 1, 2008, to exchange fixed-rate interest for variable-rate interest.

There is no hedge ineffectiveness, and the fair value of the interest rate swaps outstanding as of September 30, 2004 was determined through market quotation.

NOTE I – Commitments and Contingent Liabilities

A few of the Company’s subsidiaries are involved in legal proceedings relating to the cleanup of waste disposal sites identified under federal and state statutes which provide for the allocation of such costs among “potentially responsible parties.” In each instance the extent of the Company’s liability appears to be very small in relation to the total projected expenditures and the number of other “potentially responsible parties” involved and is anticipated to be immaterial to the Company. In addition, a few of the Company’s subsidiaries are involved in ongoing remedial activities at certain plant sites, in cooperation with regulatory agencies, and appropriate reserves have been established.

The Company and certain of its subsidiaries are also parties to a number of other legal proceedings incidental to their businesses. Management and legal counsel periodically review the probable outcome of such proceedings, the costs and expenses reasonably expected to be incurred, the availability and extent of insurance coverage and established reserves. While it is not possible at this time to predict the outcome of these legal actions, in the opinion of management, based on these reviews, it is remote that the disposition of the lawsuits and the other matters mentioned above will have a material adverse effect on the financial position, results of operations or cash flows of the Company.

Estimated warranty program claims are provided for at the time of sale. Amounts provided for are based on historical costs and adjusted new claims. The changes in carrying amount of product warranties through September 30, 2004, is as follows:

NOTE J — Employee Benefit Plans

The following table sets forth the components of the Company’s net periodic expense for the three and nine months ended September 30, 2004 and 2003:

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The Company does not anticipate making any employer discretionary contributions to defined benefit plan assets during the year ending December 31, 2004.

NOTE K – New Accounting Standards

In May 2004, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. FAS 106-2 (FSP 106-2), “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003”, which supersedes FSP 106-1. FSP 106-2 provides guidance on the accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) for employers that sponsor postretirement health care plans that provide prescription drug benefits. It also requires certain disclosures regarding the effect of the federal subsidy provided by the Act. This FSP is effective for the first interim or annual period beginning after June 15, 2004. The effect is not material to the Company’s results of operations, cash flow or financial position.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Please refer to the section entitled “Special Notes Regarding Forward Looking Statements” for a discussion of factors that could cause actual results to differ from the forward looking statements contained below and throughout this quarterly report.

(1) MATERIAL CHANGES IN CONSOLIDATED FINANCIAL CONDITION:

Management assesses the Company’s liquidity in terms of its ability to generate cash to fund its operating, investing and financing activities. Significant factors affecting liquidity are: cash flows generated from operating activities, capital expenditures, acquisitions, dispositions, dividends, adequacy of available bank lines of credit and the ability to attract long-term capital with satisfactory terms. The Company continues to generate substantial cash from operations and remains in a strong financial position, with enough liquidity available for reinvestment in existing business, while managing the capital structure on a short- and long-term basis.

The Company’s cash and cash equivalents of $306.6 million at September 30, 2004 decreased from the December 31, 2003 balance of $370.4 million, as described below. Cash and cash equivalents were invested in highly liquid investment grade debt instruments with a maturity of 90 days or less.

The following table is derived from the Condensed Consolidated Statements of Cash Flows:

Cash flow provided from operating activities for the first nine months of 2004 increased $141.3 million. Increases in cash flows from operations were primarily driven by increased net earnings of $105.8 million, decreased discretionary contributions to defined benefit plans of $45.8 million and offset by increases in working capital. During the first nine months of 2004, Dover made tax payments of approximately $72.9. million and received tax refunds of approximately $45.8 million, compared to $40.5 million of payments made in the prior year.

The level of cash used in investing activities for the first nine months of 2004 increased $220.4 million, reflecting a significant increase in acquisition activity, offset by an increase in proceeds from the sale of discontinued businesses. Acquisition expenditures for the first nine months of 2004 increased $280.8 million to $312.0 million, compared to $31.2 million, in the prior year period. Capital expenditures in the first nine months of 2004 increased $4.3 million to $72.4 million, compared to $68.1 million, in the prior year period. Proceeds from the sale of discontinued businesses for the first nine months of 2004 was $67.9 million, compared to $9.5 million, in the prior year period. The Company currently anticipates that any additional acquisitions made during 2004 will be funded from available cash and internally generated funds and, if necessary, through established lines of credit or public debt markets.

Cash used in financing activities for the first nine months of 2004 increased $83.8 million to $140.3 million. Net cash used in financing activities during the first nine months of 2004 primarily reflected a net $52.7 million decrease of debt due primarily to the repayment of commercial paper that was outstanding as of December 31, 2003, and dividend payments of $93.5 million, compared with a prior year net increase in debt of $25.7 million and dividend payments of $85.1 million.

Operational working capital (calculated as accounts receivable, plus inventory, less accounts payable) increased from December 31, 2003, by $190.4 million or 17% to $1,318.4 million, primarily driven by increases in receivables of $184.4 million and increases in inventory of $117.3 million, offset by increases in payables of $111.2 million. Excluding the impact of changes in foreign currency of $7.3 million and acquisitions of $72.1 million, operational working capital would have increased $107.5 million or 9% from December 31, 2003. The increase in accounts receivable and inventory needed to support the Company’s increased sales was partially mitigated by an increase in accounts payable, as the Company continues to focus on working capital management.

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In addition to measuring its cash flow generation and usage based upon the operating, investing and financing classifications included in the Condensed Consolidated Statement of Cash Flow, the Company also measures free cash flow. Management believes that free cash flow is an important measure of operating performance because it provides both management and investors a measurement of cash generated from operations that is available to fund acquisitions and repay debt. Dover’s free cash flow for the nine months ended September 30, 2004, increased significantly by $128.6 million, driven primarily by the $141.3 million dollar increase in cash generated from operations, offset by increases in capital expenditures and dividends to stockholders.

The following table is a reconciliation of free cash flow with cash flows from operating activities:

The Company utilizes the total debt and net debt to total capitalization calculations to assess its overall financial leverage and capacity and believes the calculations are useful to its stakeholders for the same reason. The following table provides a reconciliation of total debt and net debt to total capitalization with the GAAP information:

The total debt level of $1,022.9 million as of September 30, 2004, decreased from December 31, 2003, as a result of a decrease of $40.0 million of short-term commercial paper. Net debt as of September 30, 2004, increased $19.8 million as a result of acquisition spending offset by a reduction in commercial paper, and the net debt to total capitalization ratio decreased to 19.5% during the period.

Dover’s long-term notes with a book value of $1,000.1 million at September 30, 2004, had a fair value of approximately $1,097.0 million. The estimated fair value of the Company’s long-term notes is based on quoted market prices for similar issues.

During the third quarter of 2004, the Company renewed its $600 million of bank credit facilities. The new credit agreement provides access to a 5-Year $600 million syndicated bank credit facility (dated September 8, 2004) and replaced on substantially the same terms both prior credit agreements ($300 million 3-Year Credit Agreement dated October 2002, and $300 million 364-day credit agreement dated October 2003). The new credit agreement is intended to be used primarily as liquidity back-up for the Company’s commercial paper program. This new facility bears interest at LIBOR plus .23% and contains key financial covenants that require the company to maintain an interest coverage ratio of EBITDA to net interest expense of not less than 3.5 to 1. As of September 30, 2004, Dover is in compliance with all debt covenants. Dover has not borrowed under any of these facilities.

During the first quarter of 2004, Dover terminated an interest rate swap with a notional amount of $50.0 million for an immaterial gain, which is being amortized over the remaining term of the debt issuance. This interest rate swap was designated as a fair value hedge of the 6.25% Notes, due June 1, 2008.

During the second quarter of 2004, Dover entered into an interest rate swap with a notional amount of $50.0 million, at more favorable rates to replace the interest rate swap terminated during the first quarter. This interest rate swap is designated as a fair value hedge of the 6.25% Notes, due June 1, 2008. The swap is designated in a foreign currency and exchanges fixed-rate interest for variable-rate interest, which also hedges a portion of the Company’s net investment in foreign operations.

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There are presently three interest rate swaps outstanding for a total notional amount of $150.0 million, designated as fair value hedges of the $150.0 million 6.25% Notes due on June 1, 2008, to exchange fixed-rate interest for variable-rate interest.

There is no hedge ineffectiveness, and the fair value of the interest rate swaps outstanding as of September 30, 2004 was determined through market quotation.

(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:

Three and Nine Months Ended September 30, 2004, Compared with Three and Nine Months Ended September 30, 2003

Gross Profit

Sales in the third quarter of 2004 increased 29% or $321.3 million from the comparable 2003 period, driven by increases of $114.8 million at Technologies, $106.2 million at Resources, $57.8 million at Diversified and $42.9 million at Industries. Sales would have increased 26% to $1,409.7 million if 2003 foreign currency translation rates were applied to 2004 results. The impact of acquisitions in the third quarter of 2004 was a contribution to consolidated sales of approximately $96.5 million, or a 9% increase from 2003. Organic sales growth from existing Dover businesses was 17% for the third quarter of 2004.

Sales for the nine month period ending September 30, 2004, increased 26% or $851.7 million from the comparable 2003 period, driven by increases of $336.6 million at Technologies, $281.5 million at Resources, $136.8 million at Industries and $97.5 million at Diversified. Sales would have increased 23% to $3,950.9 million if 2003 foreign currency translation rates were applied to 2004 results. The impact of acquisitions in the first nine months of 2004 was a contribution to consolidated sales of approximately $215.5 million, or a 7% increase from 2003. Organic sales growth from existing Dover businesses was 16% for the first nine months of 2004.

Operating Profit

Selling and administrative expenses for the third quarter of 2004 increased $56.8 million from the comparable 2003 period, primarily due to increased sales activity, while selling and administrative expenses as a percentage of sales decreased as a result of prior years’ restructuring programs which focused on cost reductions and business efficiencies.

Selling and administrative expenses for the first nine months of 2004 increased $151.1 million from the comparable 2003 period, primarily due to increased sales activity, while selling and administrative expenses as a percentage of sales decreased as a result of prior years’ restructuring programs which focused on cost reductions and business efficiencies.

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Interest and Other (Income) Expense

Net interest expense for the third quarter of 2004 increased $0.5 million, primarily as a result of lower interest income on lower average cash and equivalent balances. Other net income for the third quarter of 2004 was primarily due to gains on the sale of fixed assets offset by foreign exchange losses. Other net expense in 2003 primarily related to a legal settlement within the Resources segment.

Net interest expense for the first nine months of 2004 decreased $1.6 million, primarily as a result of lower effective interest rates on long term notes impacted by interest rate swaps entered into during the third quarter of 2003 and the second quarter of 2004. Other net income for the first nine months of 2004 was a result of an insurance settlement at the Resources segment, gains on the sale of fixed assets, offset by foreign exchange losses. Other net expense in 2003 primarily related to legal settlements within the Industries and Resources segments.

Income Taxes

The effective tax rate for continuing operations for the third quarter of 2004 was 26.4% compared to last year’s third quarter tax rate of 25.0%. For the first nine months of 2004, the effective tax rate for continuing operations was 28.2%, compared to 24.3% for the first nine months of 2003. The increase in the quarter and year-to-date 2004 rates is primarily attributable to a decrease in the amounts of anticipated tax benefits from tax credit programs such as those for R&D, an increase in sales not qualifying for tax incentives relating to U.S. export sales, and the recognition of certain non-recurring capital loss benefits in 2003.

Net Earnings

Net earnings from continuing operations for the third quarter of 2004 were $116.9 million or $.58 per diluted share compared to $75.2 million or $.37 per diluted share from continuing operations in the comparable 2003 period. For the third quarter of 2004, net earnings were $120.3 million or $.59 per diluted share, including $3.4 million or $.01 per diluted share in earnings from discontinued operations, compared to $84.4 million or $.42 per diluted share in the third quarter of 2003, which included $9.1 million or $.05 per diluted share in earnings from discontinued operations.

Net earnings from continuing operations for the first nine months of 2004 were $310.3 million or $1.52 per diluted share compared to $204.5 million or $1.01 per diluted share from continuing operations in the comparable 2003 period. For the first nine months of 2004, net earnings were $315.6 million or $1.54 per diluted share, including $5.3 million or $.02 per diluted share in income from discontinued operations, compared to $216.6 million or $1.07 per diluted share for the first nine months of 2003, which included $12.1 million or $.06 per diluted share in earnings from discontinued operations.

Discontinued Operations

Discontinued operations earnings for the third quarter and first nine months of 2004 and 2003 were primarily from the favorable resolution of certain outstanding tax matters and tax benefits related to losses on sales of discontinued businesses. These gains were partially offset by charges related to contingent liabilities from the entities sold.

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Diversified

Diversified’s earnings improved 40% over the prior year quarter and 14% over the second quarter, led by favorable year-over-year comparisons at Mark Andy, Crenlo and Graphics Microsystems. Favorable quarterly year-over-year earnings were posted by nine of the 12 operating companies and 11 of 12 operating companies reported increased bookings over prior year. Total Diversified bookings were up 7% compared to the second quarter of this year. Increased material commodity costs have reduced quarterly margins by approximately 150 basis points. Hill Phoenix achieved record shipments despite delays in customer construction projects in the Southeast due to the severe hurricane season. Earnings were flat, compared to a record quarter last year, as steel cost increases continued to impact margins. Mark Andy realized improved sales and bookings, primarily from strong growth in the label market in the U.S., Eastern Europe and South America. As a result of this increase in sales, earnings and margins improved significantly over the prior year. Due to the continued strengthening of the cab markets, sales at Crenlo increased by 49%. Crenlo’s book-to-bill was 1.16 for the quarter and its backlog is at a four-year high. Belvac had its best bookings, sales and earnings quarter of the year, beating its prior year earnings performance by 145% on a 37% sales increase. Bookings were up 30% over prior year, due primarily to robust large machine order activity in Europe. While quarterly results for Belvac were a significant improvement over the previous quarter, they remained below the prior year to date earnings. Graphics Microsystems had a strong quarter in bookings, sales and earnings as its color and ink control products continued to gain acceptance among their larger customers. Sargent reported improved sales, fueled by strong demand for helicopter components, business jet engine parts and increased spares to the commercial airline industry. Sargent’s earnings improved 11% year-over-year and its margins increased by two percentage points over the prior quarter. PMI’s earnings were up 4% on flat sales, as strong North American powersports and automotive markets were offset by a weak European OEM business. SWEP and Tranter PHE’s sales and bookings remained strong in the quarter, although their margins continued to be negatively impacted by higher raw material prices. Hydratight Sweeney’s earnings were up 61% on a 15% increase in sales as the robust oil and gas markets drove increased demand for equipment sales and service. Waukesha Bearing’s bookings increased 84% over the prior year on the strength of large orders for both fluid film and magnetic bearing products and a sizeable order for nuclear waste clean-up equipment.

Diversified reported significant growth in bookings, sales and earnings for the first nine months of 2004. Earnings improved 13%, as seven of the 12 operating companies posted favorable year-over-year earnings comparisons. Margins improved slightly despite higher steel costs. All 12 operating companies reported improved bookings, led by significant increases at Crenlo, Sargent, Waukesha Bearings and Mark Andy, and backlog is at a record $436.8 million.

Industries

Industries generated record third quarter revenues, reflecting improving market conditions and continued share gains, with favorable quarterly year-over-year earnings comparisons at seven of its 12 operating companies. Sales grew at 11 of the 12 companies, with 10 contributing double-digit gains, but earnings were negatively impacted by rising steel costs, which, net of price increases, reduced quarterly margins by approximately 240 basis points. Nine of the 12 operating companies reported increased bookings over the prior year’s quarter, while backlog increased by 68%, driven primarily by military orders at Heil Trailer.

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Despite escalating steel costs and a slight decline in the refuse market, Heil Environmental was the largest earnings contributor, as revenues rose 24%. Although Rotary’s sales increased for the seventh consecutive quarter, earnings declined on a year-over-year basis due to the aforementioned run-up in steel costs. Both companies have instituted price increases that have begun to offset the impact of these higher steel costs, although the full benefit isn’t expected to be realized until the fourth quarter of 2004. Chief’s sales also grew 24% on a 71% increase in unit sales of computerized measuring products, offsetting a 25% decline in pulling product sales. Strong sales in Eastern Europe drove a 13% increase at Tipper Tie’s international subsidiaries. Marathon’s new product offerings in its baler line, along with strong compactor sales, helped to generate record results, while PDQ’s strong performance was the result of strong customer acceptance of its reintroduced ‘G5’ touch-free product line. Kurz Kasch’s earnings increased due to better than expected performance at Wabash, a recent acquisition, and a more active truck market. Somero continues to benefit from strong market acceptance of its new product introductions. Triton generated record revenues for the quarter, driven primarily by increased sales of recently introduced high end ATM’s. Earnings were slightly down, however, as Triton continued to make investments in internal infrastructure and expand into new markets in Europe and the Far East. Strong military shipments continue to positively impact sales at Heil Trailer, although earnings were negatively affected by charges associated with Heil’s U.K. realignment. DI Foodservice had a disappointing quarter, as volume declines and a number of accrual adjustments, both of which were significant, resulted in a loss. The unfavorable sales performance was driven by institutional projects falling below expectations, as municipal customers continued to be severely hampered by lower tax receipts.

For the first nine months of 2004, favorable year-over-year earnings were posted by 10 of the 12 operating companies and bookings have increased by 20%. Earnings increases were driven by sales gains at 11 of the 12 companies and operational efficiencies resulting from recent plant consolidations, offset by rising steel costs. To date, steel costs within this segment have risen over $27 million, half of which have been offset by price increases.

Resources

Resources’ sales and earnings in the third quarter were sequentially stronger than the first two quarters of 2004. The increases were due primarily to continued improvement in the energy, material handling and fluid solution markets, as well as by positive leverage related to internal initiatives to improve productivity and offset material cost increases. For the quarter, 11 of 12 companies achieved favorable earnings compared to last year’s third quarter, in which nine companies experienced double-digit earnings growth. The continued strength in oil and gas exploration, production, refining, and retailing favorably impacted a number of businesses, although disciplined capital expenditures by customers has somewhat neutralized the impact of higher energy prices. Energy Products Group, which on September 1st acquired US Synthetic, a leading supplier of polycrystalline diamond cutters used in drill bits for oil and gas drilling, continues to generate positive year-over-year comparisons, as does C. Lee Cook, which supplies equipment to the natural gas processing and transmission markets. The material handling businesses, WARN, Tulsa Winch and Texas Hydraulics continue to experience strong demand from winch, automotive powertrain and construction equipment customers, and all have done an excellent job of ramping up production and managing the material availability issues associated with strong demand. The companies associated with fluid solutions, which include the OPW and pump companies, have benefited from increased chemical and petroleum processing as well as favorable changes in environmental regulations. In particular, the pump companies serving the process markets, Blackmer and Wilden, have achieved strong growth in the global markets they serve. Despite the fact that revenue at De-Sta-Co Industries and Hydro Systems was flat as compared to the prior year, earnings improvements were achieved through solid cost control initiatives.

For the first nine months of 2004, favorable year-over-year earnings were posted by 11 of the 12 operating companies. The improvements reflect strength in most served markets, improved operating efficiencies,

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and excellent management of material cost and pricing. Global positioning in selected markets and global sourcing of material has also been instrumental in the achievement of sustained improvement in results. Eleven of twelve companies have achieved double-digit earnings increases.

Technologies

Technologies reported an increase in sales and earnings over the prior year quarter in all three of its operating groups: Imaje, Circuit Board Assembly and Test (CBAT) and Specialty Electronic Components (SEC). There were favorable quarterly year-over-year earnings comparisons at 11 of the 13 operating companies and all but one of the operating companies were profitable during the third quarter. However, sequential quarterly comparisons at Technologies for bookings decreased by 17%, while earnings and sales were essentially flat.

Imaje’s quarterly sales increased by 11% over the same period last year while earnings were up 5%. Sales in Continuous Ink Jet (CIJ) products were up as Imaje continued to gain market share. Interest is strong, especially in Europe, for the new non-CIJ products, including the new Thermal Transfer on Line, Print & Apply system and Drop on Demand Printers. Imaje’s U.S. production platform, which has begun to manufacture printers, and its newly established facility in China, which came on-line late in the quarter, are expected to provide improvements in global customer delivery capabilities.

For the first nine months of 2004, Technologies reported growth in bookings, sales and earnings at all three of its operating groups, Imaje, CBAT and SEC. Favorable year-over-year earnings were posted by nine of the 13 operating companies. All but one of the Technologies companies were profitable during the first nine months of 2004 and seven companies generated double-digit operating margins. Imaje’s sales increased 16% over the same period last year with earnings up 8%.

Circuit Board Assembly and Test (CBAT)

The CBAT businesses recorded an increase in earnings of $23.4 million over the comparable quarter in 2003 on a sales increase of $95.7 million. This strong increase in earnings was reported at all but one of the CBAT companies, with overall margins at 14.3%. Sequential quarterly earnings increased $3.1 million or 8% on a sales increase of $15.6 million or 5% while bookings decreased 24% over the second quarter of 2004. The book-to-bill ratio for the quarter was .79 and ending backlog was $121.0 million, a decrease of 33% from the second quarter. The decrease in the book-to-bill ratio was attributable to two primary factors. First, the recent warnings of softness in the semiconductor sector had a negative impact on the back-end semiconductor equipment companies, resulting in a book-to-bill ratio that was lower than that of CBAT as a whole. It now appears that bookings may have peaked in the second quarter as the near term semiconductor market continues to weaken. Additionally, in the pure Circuit Board Assembly sector, the Asian market (particularly China) is showing signs of moderation in booking patterns as it absorbs the recent increase in buying from earlier in the year. Mitigating this trend to some extent were bookings at Vitronics Soltec and OK International, both of which have introduced technical product offerings that address the soon-to-be mandated migration to lead-free solder. Also, Alphasem recorded a large booking in the quarter for an application specific project. Universal Instruments’ bookings also declined from the previous quarter, reflecting overall softness in the market. Sales of new products introduced this year by

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Universal have been adversely impacted by the current volatile market conditions as well as ongoing product sourcing and production challenges. Everett Charles Technologies, DEK, OK, Hover Davis and Vitronics Soltec all recorded solid double-digit margins for the quarter.

For the first nine months of 2004, the CBAT businesses recorded an earnings increase of $71.7 million or 229% on sales increases of $275.5 million or 52%, while bookings increased 46%. The growth in the CBAT business was experienced by all operating companies with the strongest growth attributable to the increased demand in the backend semiconductor products at Everett Charles Technologies and Alphasem. Core circuit board assembly and repair companies DEK, Vitronics Soltec, Hover-Davis and OK International finished the first nine months of 2004 with solid double-digit margins.

Specialty Electronic Components (SEC)