SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2005		Commission File No. 1-4018

DOVER CORPORATION

(Exact name of registrant as specified in its charter)

Delaware (State of Incorporation)		53-0257888 (I.R.S. Employer Identification No.)
280 Park Avenue, New York, NY (Address of principal executive offices)		10017 (Zip Code)

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 þ    No o

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

The number of shares outstanding of the Registrant’s common stock as of July 21, 2005 was 202,493,696.

 

 

Dover Corporation
Index
Form 10-Q

Item		Page
Part I — Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Earnings for the three and six months ended June 30, 2005 and 2004			1
Condensed Consolidated Balance Sheets at June 30, 2005 and December 31, 2004			2
Condensed Consolidated Statement of Stockholder’s Equity for the six months ended June 30, 2005			2
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004			3
Notes to Condensed Consolidated Financial Statements			4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			11
Item 3. Quantitative and Qualitative Disclosures About Market Risk			19
Item 4. Controls and Procedures			20
Part II — Other Information
Item 1. Legal Proceedings			21
Item 2. Unregistered Sales of Equity Securities and of Use Proceeds			21
Item 3. Defaults Upon Senior Securities			21
Item 4. Submission of Matters to a Vote of Security Holders			21
Item 5. Other Information			21
Item 6. Exhibits			21
Signatures			22
Exhibit Index			23
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATION

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

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

DOVER CORPORATION

		Three Months Ended June 30,								Six Months Ended June 30,
		2005				2004				2005				2004
Net sales		$	1,584,485			$	1,365,719			$	3,022,104			$	2,595,878
Cost of sales			1,041,320				889,226				1,987,305				1,689,757
Gross profit			543,165				476,493				1,034,799				906,121
Selling and administrative expenses			361,402				307,978				708,217				606,461
Operating profit			181,763				168,515				326,582				299,660
Interest expense, net			15,202				15,324				31,348				30,004
All other income, net			(7,281	)			(189	)			(11,739	)			(198	)
Total			7,921				15,135				19,609				29,806
Earnings from continuing operations, before taxes on income			173,842				153,380				306,973				269,854
Federal and other taxes on income			50,324				45,332				84,093				78,849
Net earnings from continuing operations			123,518				108,048				222,880				191,005
Net earnings from discontinued operations			49,683				4,216				48,455				4,371
Net earnings		$	173,201			$	112,264			$	271,335			$	195,376
Basic earnings per common share:
- Continuing operations		$	0.61			$	0.53			$	1.10			$	0.94
- Discontinued operations			0.24				0.02				0.23				0.02
- Net earnings		$	0.85			$	0.55			$	1.33			$	0.96
Diluted earnings per common share:
- Continuing operations		$	0.61			$	0.53			$	1.09			$	0.93
- Discontinued operations			0.24				0.02				0.24				0.02
- Net earnings		$	0.85			$	0.55			$	1.33			$	0.95
Weighted average number of common shares outstanding during the period:
Basic			202,959				203,263				203,303				203,176
Diluted			203,984				204,787				204,417				204,774

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

		Three Months Ended June 30,								Six Months Ended June 30,
		2005				2004				2005				2004
Numerator:
Net earnings from continuing operations available to common stockholders		$	123,518			$	108,048			$	222,880			$	191,005
Denominator:
Basic weighted average shares			202,959				203,263				203,303				203,176
Dilutive effect of assumed exercise of employee stock options			1,025				1,524				1,114				1,598
Denominator:
Diluted weighted average shares			203,984				204,787				204,417				204,774
Basic earnings per share from continuing operations		$	0.61			$	0.53			$	1.10			$	0.94
Diluted earnings per share from continuing operations		$	0.61			$	0.53			$	1.09			$	0.93
Shares excluded from dilutive effect due to exercise price exceeding average market price of common stock			8,906				3,909				8,357				3,387

See Notes to Condensed Consolidated Financial Statements

DOVER CORPORATION

		June 30, 2005				December 31, 2004
Assets:
Current assets:
Cash and equivalents		$	399,671			$	356,932
Receivables, net			970,425				903,554
Inventories, net			795,032				771,811
Deferred tax and other current assets			126,680				103,430
Total current assets			2,291,808				2,135,727
Property, plant and equipment, net			741,552				749,646
Goodwill			2,148,355				2,124,905
Intangible assets, net			536,884				528,639
Other assets and deferred charges			202,680				195,616
Assets of discontinued operations			11,244				54,845
Total assets		$	5,932,523			$	5,789,378
Liabilities:
Current liabilities:
Short-term debt and commercial paper		$	380,710			$	339,265
Accounts payable			411,808				360,370
Accrued expenses			444,046				468,055
Federal and other taxes on income			189,806				177,702
Total current liabilities			1,426,370				1,345,392
Long-term debt			751,651				753,063
Deferred income taxes			317,758				296,854
Other deferrals (principally compensation)			245,972				246,330
Liabilities of discontinued operations			23,176				32,248
Stockholders’ equity:
Total stockholders’ equity			3,167,596				3,115,491
Total liabilities and stockholders’ equity		$	5,932,523			$	5,789,378

DOVER CORPORATION

										Accumulated
		Common				Additional				Other												Total
		Stock				Paid-In				Comprehensive				Retained				Treasury				Stockholders’
		$1 Par Value				Capital				Earnings (Loss)				Earnings				Stock				Equity
Balance as of December 31, 2004		$	239,015			$	98,979			$	192,029			$	3,628,715			$	(1,043,247	)		$	3,115,491
Net earnings			—				—				—				271,335				—				271,335
Dividends paid			—				—				—				(64,987	)			—				(64,987	)
Common stock issued for options exercised			384				10,519				—				—				—				10,903
Stock acquired			—				—				—				—				(51,063	)			(51,063	)
Translation of foreign financial statements			—				—				(113,391	)			—				—				(113,391	)
Unrealized holding losses, net of tax			—				—				(692	)			—				—				(692	)
Balance as of June 30, 2005		$	239,399			$	109,498			$	77,946			$	3,835,063			$	(1,094,310	)		$	3,167,596

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

Dividends paid per share for the three and six months ended June 30, 2005 and 2004 were $0.16 and $0.32, and $0.15 and $0.30, respectively.

See Notes to Condensed Consolidated Financial Statements

DOVER CORPORATION

		Six Months Ended June 30,
		2005				2004
Operating Activities:
Net earnings		$	271,335			$	195,376
Adjustments to reconcile net earnings to net cash from operating activities:
Net earnings from discontinued operations			(48,455	)			(4,371	)
Depreciation and amortization			84,377				75,016
Changes in current assets and liabilities (excluding effects of acquisitions, dispositions and foreign exchange):
Increase in accounts receivable			(97,072	)			(139,341	)
Increase in inventories			(29,922	)			(75,230	)
Increase in prepaid expenses & other assets			(5,045	)			(5,520	)
Increase in accounts payable			65,317				73,208
Increase (decrease) in accrued expenses			(14,226	)			43,767
Increase in accrued federal and other taxes payable			15,882				30,836
Net increase in current assets and liabilities			(65,066	)			(72,280	)
Net (increase) decrease in non-current assets & liabilities			(10,295	)			17,278
Total adjustments			(39,439	)			15,643
Net cash provided by operating activities			231,896				211,019
Investing Activities:
Proceeds from the sale of property and equipment			4,846				6,937
Additions to property, plant and equipment			(68,324	)			(47,462	)
Proceeds from sale of discontinued businesses			95,943				22,313
Acquisitions (net of cash and cash equivalents acquired)			(117,858	)			(83,563	)
Net cash used in investing activities			(85,393	)			(101,775	)
Financing Activities:
Increase (decrease) in debt, net			38,878				(52,043	)
Purchase of treasury stock			(51,063	)			(4,639	)
Proceeds from exercise of stock options			8,380				10,128
Dividends to stockholders			(64,987	)			(60,972	)
Net cash used in financing activities			(68,792	)			(107,526	)
Effect of exchange rate changes on cash			(28,366	)			(7,228	)
Cash provided by (used in) discontinued operations			(6,606	)			5,781
Net increase in cash and cash equivalents			42,739				271
Cash and cash equivalents at beginning of period			356,932				370,177
Cash and cash equivalents at end of period		$	399,671			$	370,448

See Notes to Condensed Consolidated Financial Statements

DOVER CORPORATION

NOTE A — Basis of Presentation

The accompanying unaudited condensed consolidated financial statements, in accordance with Securities and Exchange Commission (“SEC”) rules, do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements included in the Annual Report on our Form 10-K for the year ended December 31, 2004, filed with the SEC. It is the opinion of the Company’s management that all adjustments necessary for a fair presentation of the interim results 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 presentation.

As previously disclosed, the Company expanded its subsidiary structure from four to six reporting market segments effective January 1, 2005 and is reporting financial information on this basis effective January 1, 2005.

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 March 14, 2005.

NOTE B — Stock-Based Compensation

The Company has long-term incentive plans authorizing various types of market and performance based incentive awards that may be granted to officers and employees. Statement of Financial Accounting Standards (“SFAS”) No. 123 and SFAS No. 148 “Accounting for Stock-Based Compensation,” allow companies to measure compensation costs 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.” 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 and diluted earnings per share if the Company had recognized compensation expense upon grant of the options, based on the Black-Scholes option pricing model:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands, except per share figures)		2005				2004				2005				2004
Net earnings, as reported		$	173,201			$	112,264			$	271,335			$	195,376
Deduct:
Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax effects			(4,735	)			(4,519	)			(9,398	)			(9,168	)
Pro forma net earnings		$	168,466			$	107,745			$	261,937			$	186,208
Earnings per share:
Basic-as reported		$	0.85			$	0.55			$	1.33			$	0.96
Basic-pro forma			0.83				0.53				1.29				0.92
Diluted-as reported		$	0.85			$	0.55			$	1.33			$	0.95
Diluted-pro forma			0.83				0.53				1.28				0.91

NOTE C — Acquisitions

The Company completed five acquisitions during the first six months of 2005 one of which was during the second quarter. During the first six months of 2004, the Company completed four acquisitions, all in the second quarter. The acquisitions have been appropriately accounted for under SFAS 141 “Business Combinations.” Accordingly, the accounts of the acquired companies, after adjustments to reflect fair market values assigned to assets and liabilities, have been included in the consolidated financial statements from their respective dates of acquisitions. The 2005 acquisitions are wholly owned and had an aggregate cost of approximately $119 million, including cash, at the date of acquisition.

2005 Acquisitions

Date		Type		Acquired Companies		Location (Near)		Segment		Operating Company
7-Jun		Stock		C-Tech Energy Services Inc.		Edmonton, Alberta		Resources		Energy Products Group
Manufacturer of continuous rod technology for oil and gas production.
2-Mar		Asset		APG		Longmont, Colorado		Technologies		ECT
Manufacturer of test fixtures for loaded circuit board testing.
23-Feb		Stock		Fas-Co Coders, Inc.		Phoenix, Arizona		Technologies		Imaje
Integrator of high resolution carton printers.
21-Feb		Asset		Rostone (Reunion Industries)		Lafayette, Indiana		Electronics		Kurz-Kasch
Manufacturer of thermo set specialty plastics.
18-Jan		Asset		Avborne Accessory Group, Inc.		Miami, Florida		Diversified		Sargent
Maintenance, repair, and overhaul of commercial, military and business aircraft.

The following unaudited pro forma information presents the results of operations of the Company for the three- and six-month periods ending June 30, 2005 and 2004 as if the 2005 and 2004 acquisitions had taken place on January 1, 2004.

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands, except per share figures)		2005				2004				2005				2004
Net sales from continuing operations:
As reported		$	1,584,485			$	1,365,719			$	3,022,104			$	2,595,878
Pro forma			1,586,340				1,467,155				3,032,680				2,810,597
Net earnings from continuing operations:
As reported		$	123,518			$	108,048			$	222,880			$	191,005
Pro forma			123,458				114,851				223,511				206,908
Basic earnings per share from continuing operations:
As reported		$	0.61			$	0.53			$	1.10			$	0.94
Pro forma			0.61				0.57				1.10				1.02
Diluted earnings per share from continuing operations:
As reported		$	0.61			$	0.53			$	1.09			$	0.93
Pro forma			0.61				0.56				1.09				1.01

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.

NOTE D — Inventory

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

		June 30, 2005								December 31, 2004
		Gross Carrying				Accumulated				Gross Carrying				Accumulated
(in thousands)		Amount				Amortization				Amount				Amortization
Trademarks		$	30,110			$	11,777			$	30,084			$	11,084
Patents			99,668				56,422				96,073				60,231
Customer Intangibles			190,468				22,640				176,984				15,219
Unpatented Technologies			102,719				31,139				101,228				28,521
Non-Compete Agreements			7,901				6,753				9,395				7,853
Drawings & Manuals			5,942				3,371				5,989				2,722
Distributor Relationships			38,300				2,681				38,300				1,915
Other (primarily minimum pension liability)*			59,489				11,788				55,269				5,978
Total Amortizable Intangible Assets			534,597				146,571				513,322				133,523
Total Indefinite-Lived Trademarks			148,858				—				148,840				—
Total		$	683,455			$	146,571			$	662,162			$	133,523

NOTE G — Discontinued Operations

During the second quarter of 2005, Dover discontinued Hydratight Sweeney, a business in the Diversified segment, which was sold on May 17, 2005. The net gain on the sale of Hydratight Sweeney of $46.9 million or $0.23 per diluted share along with the income from operations, were partially offset by losses related to businesses discontinued in previous periods and resulted in net earnings from discontinued operations of $49.7 million.

During the first quarter of 2005, Dover discontinued one business from the Industries segment which was subsequently sold on April 1, 2005. The write-down of the carrying value of the entity to fair market value was partially offset by a small gain for a business discontinued in a previous period and resulted in a net loss on discontinued operations of $1.2 million.

During the second quarter of 2004, Dover sold two previously discontinued businesses from the Diversified segment. Earnings from discontinued operations during the second quarter and first six months of 2004 primarily relate to the disposition of discontinued operations. Discontinued operations did not have a material financial impact on any period presented.

Cash proceeds from the sale of discontinued operations during the first six months of 2005 and 2004 were $95.9 million and $22.3 million, respectively.

NOTE H — Debt

Dover’s long-term notes with a book value of $1,002.9 million, of which $251.2 million matures in the current year, had a fair value of approximately $1,096.0 million at June 30, 2005. The estimated fair value of the Company’s long-term notes is based on quoted market prices for similar issues.

During the second quarter of 2005 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 Company’s 6.25% Notes, due June 1, 2008.

There are presently two interest rate swap agreements outstanding for a total notional amount of $100.0 million, designated as fair value hedges of part of the Company’s $150.0 million 6.25% Notes due on June 1, 2008, to exchange fixed-rate interest for variable-rate. The swap agreements have reduced the effective interest rate on the notes to 4.69%.

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 under federal and state statutes that 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 June 30, 2005 and 2004 are as follows:

(in thousands)		2005				2004
Beginning Balance January 1,		$	46,761			$	36,598
Provision for warranties			12,093				13,325
Settlements made			(12,568	)			(10,850	)
Other adjustments			(702	)			(236	)
Ending Balance June 30,		$	45,584				38,837

NOTE J — Employee Benefit Plans

The following table sets forth the components of the Company’s net periodic expense for the three and six months ended June 30, 2005 and 2004:

		Retirement Plan Benefits								Post Retirement Benefits
		Three Months Ended June 30,								Three Months Ended June 30,
(in thousands)		2005				2004				2005				2004
Expected return on plan assets		$	6,408			$	6,877			$	—			$	—
Benefits earned during period			(3,897	)			(3,358	)			(98	)			(229	)
Interest accrued on benefit obligation			(5,866	)			(5,654	)			(341	)			(559	)
Amortization
Prior service cost			(1,769	)			(1,223	)			21				(228	)
Unrecognized actuarial losses			(1,334	)			(936	)			(25	)			(39	)
Transition			260				268				—				—
Net periodic expense		$	(6,198	)		$	(4,026	)		$	(443	)		$	(1,055	)

		Retirement Plan Benefits								Post Retirement Benefits
		Six Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2005				2004				2005				2004
Expected return on plan assets		$	12,816			$	13,754			$	—			$	—
Benefits earned during period			(7,794	)			(6,716	)			(196	)			(458	)
Interest accrued on benefit obligation			(11,732	)			(11,308	)			(682	)			(1,118	)
Amortization
Prior service cost			(3,538	)			(2,446	)			42				(456	)
Unrecognized actuarial losses			(2,668	)			(1,872	)			(50	)			(78	)
Transition			520				536				—				—
Net periodic expense		$	(12,396	)		$	(8,052	)		$	(886	)		$	(2,110	)

The Company does not anticipate making any employer discretionary contributions to defined benefit plan assets during the year ending December 31, 2005.

NOTE K — New Accounting Standards

In May 2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”), which replaces Accounting Principles Board Opinion (“APB”) No. 20 “Accounting Changes,” and SFAS No. 3 “Reporting Accounting Changes in Interim Financial Statements.” SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle, and applies to all voluntary changes in accounting principles, as well as changes required by an accounting pronouncement in the unusual instance that it does not include specific transition provisions. Specifically, SFAS 154 requires retrospective application to prior periods’ financial statements, unless it is impracticable to determine the period-specific effects or the cumulative effect of the change. SFAS 154 does not change the transition provisions of any existing pronouncement. SFAS 154 is effective for the Company for all accounting changes and corrections of errors made beginning January 1, 2006.

In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (“FIN 47”). FIN 47 clarifies that a conditional asset retirement obligation, as used in SFAS No. 143, “Accounting for Asset Retirement Obligations,” refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN 47 is effective for the Company no later than the end of the 2005. The effect of FIN 47 will be immaterial to the Company’s consolidated results of operations, cash flows or financial position.

In December of 2004, the FASB issued SFAS No. 123R, “Share-Based Payment” (“SFAS 123R”). SFAS No. 123R revises previously issued SFAS 123 “Accounting for Stock-Based Compensation,” supersedes APB No.25 “Accounting for Stock Issued to Employees,” and amends SFAS Statement No. 95 “Statement of Cash Flows.” SFAS 123R requires the Company to expense the fair value of employee stock options and other forms of stock-based compensation for the annual periods beginning after June 15, 2005. The cost will be recognized over the period during which an employee is required to provide services in exchange for the award. The share-based award must be classified as equity or as a liability and the compensation cost is measured based on the fair value of the award at the date of the grant. In addition, liability awards will be re-measured at fair value each reporting period. Based on current guidance the Company will begin to expense the fair value of employee stock options and other forms of stock-based compensation in the first quarter of 2006. The effect of the adoption of SFAS 123R will not be materially different from the pro-forma results included in Note B — Stock-Based Compensation.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary assets, an amendment of APB No. 29, Accounting for Nonmonetary Transactions” (“SFAS 153”). The amendments made by SFAS 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. The statement is effective for the Company beginning July 1, 2005 and shall be applied prospectively. The effect of the adoption of SFAS 153 will be immaterial to the Company’s consolidated results of operations, cash flows or financial position.

In November of 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of Accounting Research Bulletin No. 43, Chapter 4” (“SFAS 151”). SFAS 151 requires that abnormal amounts of idle capacity and spoilage costs should be excluded from the cost of inventory and expensed when incurred. The provisions of SFAS 151 are applicable to inventory costs incurred by the Company beginning January 1, 2006. The effect of the adoption of SFAS 151 will be immaterial to the Company’s consolidated results of operations, cash flow or financial position.

NOTE L — Comprehensive Income

10 of 23

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

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.

Dover Corporation (the “Company”) is a multinational, diversified manufacturing corporation comprised of 48 stand-alone operating companies which manufacture a broad range of specialized industrial products and sophisticated manufacturing equipment. The Company also provides some engineering and testing services, which are not significant in relation to consolidated revenue. The Company’s operating companies are based primarily in the United States of America and Europe. The Company reports its results in six segments and discusses its operations in 13 groups.

(1) 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’s cash and cash equivalents of $399.7 million at June 30, 2005 increased from the December 31, 2004 balance of $356.9 million. Cash and cash equivalents were invested in highly liquid investment grade money market instruments with a maturity of 90 days or less.

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

		Six Months Ended June 30,
Cash Flows from Continuing Operations (in thousands, unaudited)		2005				2004
Cash flows provided by operating activities		$	231,896			$	211,019
Cash flows used in investing activities			(85,393	)			(101,775	)
Cash flows used in financing activities			(68,792	)			(107,526	)

Cash flow provided by operating activities for the first six months of 2005 increased $20.9 million from $211.0 million in the prior year period. Increases in cash flows provided by operations were primarily due to increased net earnings which were partially offset by changes in net tax payments of $34.3 million over the same period last year and higher benefits and compensation payouts in 2005.

The level of cash used in investing activities for the first six months of 2005 decreased $16.4 million compared to the prior year period, largely reflecting an increase in proceeds from dispositions, partially offset by higher than prior year acquisition and capital expenditure activity. Acquisition expenditures for the first six months of 2005 increased $34.3 million to $117.9 million from $83.6 million in the prior year period. Capital expenditures in the first six months of 2005 increased $20.9 million to $68.3 million as compared to $47.5 million in the prior year period due to investments in plant expansions, plant machinery and information systems. Proceeds from sales of discontinued businesses in the first six months of 2005 increased $73.6 million from $22.3 million of proceeds in the prior year period. The Company currently anticipates that any additional acquisitions made during 2005 will be funded from available cash and internally generated funds and, if necessary, through the issuance of commercial paper, established lines of credit or public debt markets.

Cash used in financing activities for the first six months of 2005 decreased $38.7 million to $68.8 million. Net cash used in financing activities during the first six months of 2005 primarily reflected an increase in borrowings which was used to fund the majority of our $46.0 million open market treasury stock buyback.

Operational working capital (calculated as accounts receivable, plus inventory, less accounts payable) increased from the prior year period by $38.7 million or 3% to $1,353.6 million, primarily driven by increases in receivables of $66.9 million and increases in inventory of $23.2 million, offset by increases in

payables of $51.4 million. Excluding the impact of changes in foreign currency of $44.0 million and acquisitions of $26.5 million, operational working capital increased approximately 4% when compared to the prior year period. The Company continues to focus on working capital management.

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, pay dividends, repay debt and repurchase the Company’s common stock. Dover’s free cash flow for the six months ended June 30, 2005, was essentially flat compared to the prior year period, driven primarily by the increase of net tax funding of $34.3 million and higher benefits and compensation payouts in 2005 which were offset by higher earnings for the six months ended June 2005.

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

		Six Months Ended June 30,
Free Cash Flow (in thousands, unaudited)		2005				2004
Cash flow provided by operating activities		$	231,896			$	211,019
Less: Capital expenditures			(68,324	)			(47,462	)
Free cash flow		$	163,572			$	163,557

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 to the most directly comparable GAAP measures:

		June 30,				December 31,
Net Debt to Total Capitalization Ratio (in thousands, unaudited)		2005				2004
Current maturities of long-term debt		$	251,215			$	252,677
Commercial paper and other short-term debt			129,495				86,588
Long-term debt			751,651				753,063
Total debt			1,132,361				1,092,328
Less: Cash and cash equivalents			399,671				356,932
Net debt			732,690				735,396
Add: Stockholders’ equity			3,167,596				3,115,491
Total capitalization		$	3,900,286			$	3,850,887
Net debt to total capitalization			18.8	%			19.1	%

The total debt level of $1,132.4 million as of June 30, 2005 increased from December 31, 2004 as a result of an increase of $42.9 million in borrowings of short-term commercial paper. Net debt as of June 30, 2005, decreased $2.7 million primarily as a result of increased cash from operations offset by higher capital expenditures. The net debt-to-total capitalization ratio decreased to 18.8% during the period.

Dover’s long-term notes with a book value of $1,002.9 million, of which $251.2 million matures in the current year, had a fair value of approximately $1,096.0 million at June 30, 2005. The estimated fair value of the Company’s long-term notes is based on quoted market prices for similar issues.

During the first quarter of 2005 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 Company’s 6.25% Notes due June 1, 2008.

There are presently two interest rate swap agreements outstanding for a total notional amount of $100.0 million, designated as fair value hedges of part of the Company’s $150.0 million 6.25% Notes due on June 1, 2008, to exchange fixed-rate interest for variable-rate. The swap agreements have reduced the effective interest rate on the notes to 4.69%.

There is no hedge ineffectiveness, and the fair value of the interest rate swaps outstanding as of June 30, 2005 was determined through market quotation.

(2) RESULTS OF OPERATIONS:

Three and Six Months Ended June 30, 2005, Compared with Three and Six Months Ended June 30, 2004

Gross Profit

		Three Months Ended June 30,												Six Months Ended June 30,
(in thousands, unaudited)		2005				2004				% Change				2005				2004				% Change
Net sales		$	1,584,485			$	1,365,719				16	%		$	3,022,104			$	2,595,878				16	%
Cost of sales			1,041,320				889,226				17	%			1,987,305				1,689,757				18	%
Gross profit			543,165				476,493				14	%			1,034,799				906,121				14	%
Gross profit margin			34.3	%			34.9	%							34.2	%			34.9	%

Sales in the second quarter of 2005 increased 16% or $218.8 million from the comparable 2004 period, driven by increases of $78.6 million at Resources, $45.3 million at Diversified, $29.6 at Systems, $28.2 million at Electronics, $25.4 million at Industries, and $12.0 million at Technologies. Sales would have increased 14% to $1,558.8 million if 2004 foreign currency translation rates were applied to 2005 results. Acquisitions completed subsequent to the second quarter of 2004 contributed $93.6 million to consolidated sales during the quarter ended June 30, 2005. Gross profit margin decreased slightly from the comparable 2004 period.

Sales for the six months of 2005 increased 16% or $426.2 million from the comparable 2004 period, driven by increases of $159.5 million at Resources, $84.2 million at Diversified, $53.5 at Electronics, $49.4 million at Industries, $47.6 million at Systems, and $32.8 million at Technologies. Sales would have increased 15% to $2,978.1 million if 2004 foreign currency translation rates were applied to 2005 results. Acquisitions completed subsequent to the second quarter of 2004 contributed $179.3 million to consolidated sales during the six months ended June 30, 2005. Gross profit margin decreased slightly from the comparable 2004 period.

Selling and Administrative Expenses

Selling and administrative expenses for the second quarter of 2005 increased $53.4 million from the comparable 2004 period, primarily due to increased sales activity, while selling and administrative expenses as a percentage of sales remained essentially flat.

Selling and administrative expenses for the first six months of 2005 increased $101.8 million from the comparable 2004 period, primarily due to increased sales activity, while selling and administrative expenses as a percentage of sales remained essentially flat.

Interest and Other (Income) Expense

		Three Months Ended June 30,												Six Months Ended June 30,
(in thousands, unaudited)		2005				2004				% Change				2005				2004				% Change
Interest expense, net		$	15,202			$	15,324				-1	%		$	31,348			$	30,004				4	%
All other income, net			(7,281	)			(189	)							(11,739	)			(198	)

Net interest expense for the second quarter of 2005 remained essentially flat when compared to the prior year. Net interest expense for the first six months of 2005 increased $1.3 million, primarily due to an increase in commercial paper borrowings. Other Income of $7.3 million and $11.7 million for the three and six months ended June 30, 2005, respectively, primarily results from the effects of foreign exchange fluctuations on assets and liabilities denominated in currencies other than the functional currency.

Income Taxes

The effective tax rate for continuing operations for the second quarter and first six months of 2005 were 28.9% and 27.4%, respectively, compared to last year’s second quarter tax rate of 29.6% and first six months tax rate of 29.2%. A $5.5 million tax benefit, or a 4.1% tax rate reduction, was recognized during the first quarter of 2005 as a result of a favorable United States Tax Court decision related to a 1997 income tax return position. The tax reserve related to this transaction was no longer required since the Tax Court decision became final during the first quarter and can no longer be appealed. The benefit of this discrete item did not affect the second quarter effective tax rate which saw a slight increase due to the 20% reduction in tax benefits relating to U.S. export sales caused by the American Jobs Creation Act of 2004.

Net Earnings

Net earnings from continuing operations for the second quarter of 2005 were $123.5 million or $0.61 per diluted share compared to $108.0 million or $0.53 per diluted share from continuing operations in the comparable 2004 period.

Net earnings from continuing operations for the first six months of 2005 were $222.9 million or $1.09 per diluted share compared to $191.0 million or $0.93 per diluted share from continuing operations in the comparable 2004 period.

Discontinued Operations

During the second quarter of 2005, Dover discontinued Hydratight Sweeney a business in the Diversified segment which was sold on May 17, 2005. The gain on the carrying value of Hydratight Sweeney of $46.9 million or $0.23 per diluted share along with the income from operations, were partially offset by losses related to businesses discontinued in previous periods and resulted in net earnings from discontinued operations of $49.7 million.

During the first quarter of 2005, Dover discontinued one business from the Industries segment which was subsequently sold on April 1, 2005. The write-down of the carrying value of the entity to fair market value was partially offset by a small gain for a business discontinued in a previous period and resulted in a net loss on discontinued operations of $1.2 million.

During the second quarter of 2004, Dover sold two previously discontinued businesses from the Diversified segment. Earnings from discontinued operations during the second quarter and first six months of 2004 primarily relate to the disposition of discontinued operations. Discontinued operations did not have a material financial impact on any period presented.

Cash proceeds from the sale of discontinued operations during the first six months of 2005 and 2004 were $95.9 million and $22.3 million, respectively.

MARKET SEGEMENT RESULTS OF OPERATIONS

15 of 23

For the six months ended June 30, 2005, Electronics sales, bookings and earnings increases reflected improvements at both Components and Commercial Equipment. Components had sales and earnings increases of 30% and 2%, respectively. Bookings increased 23% and the book-to-bill ratio was 1.04. Commercial Equipment had sales and earnings increases of 12% and 9%, respectively. Bookings increased 8% and the book-to-bill ratio was 0.97.

Industries

		Three Months Ended June 30,												Six Months Ended June 30,
(in thousands, unaudited)		2005				2004				% Change				2005				2004				% Change
Net sales		$	235,568			$	210,201				12	%		$	455,247			$	405,804				12	%
Earnings			28,190				26,222				8	%			53,410				47,254				13	%
Operating margins			12.0	%			12.5	%							11.7	%			11.6	%
Bookings			234,087				216,374				8	%			457,245				444,933				3	%
Book-to-Bill			0.99				1.03								1.00				1.10
Backlog															204,741				208,935				-2	%

Industries sales have increased for the ninth consecutive quarter, driven by market strength, share gains and pricing. Industries second quarter 12% sales increase was driven primarily by Mobil Equipment.

During the second quarter, Mobile Equipment sales increased 17% compared to the prior year, resulting from strength in the dry bulk and petroleum transportation markets and a rebounding refuse collection vehicle market. A 22% earnings increase was driven by increased volume, pricing and productivity gains. Bookings were up 15%, backlog was essentially flat, and the book-to-bill ratio was 0.98.

Service Equipment sales increased 5%, and earnings declined 3% compared to the prior year quarter as commodity and new product introduction costs, along with product mix impacted margins. Revenue softness in the automotive service industry continued, but was more than offset by pricing and continued share gains. Bookings were essentially flat, backlog decreased 14% and the book-to-bill ratio was 1.02.

For the six months ended June 30, 2005, Industries sales, bookings and earnings increases reflected improvement primarily at Mobile Equipment, which had sales and earnings increases of 16% and 26%, respectively. Mobile Equipment bookings increased 5% and the book-to-bill ratio was 1.00. Service Equipment earnings were flat on increased sales of 7% with a bookings decrease of 2% and a book-to-bill ratio of 1.02.

Resources

		Three Months Ended June 30,												Six Months Ended June 30,
(in thousands, unaudited)		2005				2004				% Change				2005				2004				% Change
Net sales		$	394,248			$	315,610				25	%		$	765,904			$	606,403				26	%
Earnings			66,710				55,081				21	%			130,478				102,661				27	%
Operating margins			16.9	%			17.5	%							17.0	%			16.9	%
Bookings			388,117				339,620				14	%			793,205				675,726				17	%
Book-to-Bill			0.98				1.08								1.04				1.11
Backlog															186,415				170,915				9	%

All three Resources groups contributed to record quarterly sales and earnings.

During the quarter, the Oil and Gas Equipment group was the strongest performer in the segment with sales and earnings increases of 55% and 67%, respectively, aided by the acquisition of US Synthetic in the third quarter of 2004, as well as positive market conditions. Bookings increased 70%, the book-to-bill ratio was 1.02, and backlog increased 112%.

For the quarter, Fluid Solutions sales and earnings both increased 17% due to strength in the rail car, chemical processing and environmental markets and from the Almatec acquisition, partially offset by softness in the petroleum transport and industrial markets. Bookings increased 3%, the book-to-bill ratio was 0.97, and backlog was essentially flat.

Material Handling earnings increased 5% on a 16% sales increase compared to the prior year quarter. The negative sales to earnings leverage reflects continued investment in, and cost of analysis of, the businesses, as well as some operational inefficiencies, and managing significant increases in volume. The book-to-bill ratio was 0.97, backlog increased 6% and bookings were essentially flat.

For the six months ended June 30, 2005, Resources sales, bookings and earnings increases reflected improvements at all three Resources groups. Oil and Gas Equipment had sales and earnings increases of 56% and 76%, respectively. Bookings increased 53% and the book-to-bill ratio was 1.02. Fluid Solutions had sales and earnings increases of 19% and 22%, respectively. Bookings increased 11% and the book-to-bill ratio was 1.02. Material Handling had sales and earnings increases of 17% and 4%, respectively. Bookings increased 6% and the book-to-bill ratio was 1.07.

Systems

		Three Months Ended June 30,												Six Months Ended June 30,
(in thousands, unaudited)		2005				2004				% Change				2005				2004				% Change
Net sales		$	188,617			$	159,031				19	%		$	354,219			$	306,662				16	%
Earnings			23,424				15,913				47	%			44,648				31,492				42	%
Operating margins			12.4	%			10.0	%							12.6	%			10.3	%
Bookings			233,795				178,092				31	%			402,491				339,305				19	%
Book-to-Bill			1.24				1.12								1.14				1.11
Backlog															185,525				133,549				39	%

Incremental margin improvement in both the Food Equipment and Packaging groups contributed to Systems’ increase in quarterly sales and earnings. Compared to the first quarter, sales and earnings were up 14% and 10%, respectively.

Food Equipment sales and earnings improved 14% and 30%, respectively, over the prior year quarter primarily due to increased supermarket equipment sales. Bookings increased 27%, backlog increased 42% and the book-to-bill ratio was 1.23.

For the quarter, Packaging Equipment sales were up 30% and earnings more than doubled due to increased can necking and trimming equipment and closure systems sales, partially offset by a decrease in automated packaging equipment sales. The book-to-bill ratio was 1.25, bookings increased 41% and backlog increased 33%.

For the six months ended June 30, 2005, Systems sales, bookings and earnings increases reflected improvements at both Food Equipment and Packaging. Food Equipment had sales and earnings increases of 14% and 30%, respectively. Bookings increased 17% and the book-to-bill ratio was 1.15. Packaging had sales and earnings increases of 19% and 53%, respectively. Bookings increased 21% and the book-to-bill ratio was 1.12.

Technologies

		Three Months Ended June 30,												Six Months Ended June 30,
(in thousands, unaudited)		2005				2004				% Change				2005				2004				% Change
Net sales		$	399,977			$	387,971				3	%		$	736,013			$	703,215				5	%
Earnings			45,707				53,120				-14	%			66,648				79,398				-16	%
Operating margins			11.4	%			13.7	%							9.1	%			11.3	%
Bookings			419,741				413,027				2	%			798,189				776,764				3	%
Book-to-Bill			1.05				1.06								1.08				1.10
Backlog															218,277				235,459				-7	%

Technologies second quarter sales, earnings and margins were the best since the third quarter of 2004. The second quarter earnings decline reflects lower demand in the Circuit Assembly and Test (“CAT”) markets and competitive conditions in the Product Identification and Printing (“PIP”) markets, and also includes the results of Datamax, a fourth quarter 2004 acquisition.

CAT experienced a 12% sales decline and a 41% earnings decline when compared to the same quarter in 2004. This reflects very strong first half 2004 conditions in the backend semiconductor equipment market, which subsequently moderated in 2004 and through the first quarter of 2005. Beginning late in the second quarter of 2005 conditions improved in the backend semiconductor equipment market. As a result, on a sequential basis, CAT companies leveraged a 21% sales increase into a 184% earnings increase. The book-to-bill ratio grew to 1.08 during the quarter with a sequential bookings increase of 13%. CAT also continues to see growth resulting from the replacement of equipment required for compliance with the new lead free regulations in Europe.

For the quarter, PIP reported a 14% increase in earnings on a 44% increase in sales. The acquisition of Datamax Corporation accounted for a significant portion of sales growth and substantially all of the earnings growth. The product identification market is seeing increased price and margin pressure along with continuing weakness in European sales. However, new product releases continue to be accepted by the market and orders trended positively through the second quarter. The book-to-bill ratio was 0.99, bookings increased 40% and backlog increased 11%.

For the six months ended June 30, 2005, Technologies sales increased 5%, bookings were up 3% and earnings decreased 16%. CAT had a 10% decrease in sales and bookings, and a 53% decrease in earnings with a book-to-bill ratio of 1.11. PIP earnings increased 26% on a 43% increase in sales with a 37% increase in bookings and a book-to-bill ratio of 1.03. The six month results for Technologies and its two groups reflect the conditions described for the second quarter.

Outlook

The Company expects to see the benefits of its renewed focus on operational excellence which includes improving margins and working capital. Most market indicators are cautiously positive, and each subsidiary enters the third quarter with a strong backlog after two quarters of record or near record bookings. This gives the Company some confidence that the third quarter should continue to show positive trends.

The acquisition market is active and the Company expects to complete additional purchases through the remainder of the year.

New Accounting Standards

of which were changed in 2004); unforeseen developments in contingencies such as litigation; protection and validity of patent and other intellectual property rights; the success of the Company’s acquisition program; and the cyclical nature of some of the Company’s businesses. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions including interest rate and currency exchange rate fluctuations. In light of these risks and uncertainties, actual events and results may vary significantly from those included in or contemplated or implied by such statements. Readers are cautioned not to place undue reliance on such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

The Company may, from time to time, post financial or other information on its Internet website, www.dovercorporation.com. Such information will be found in the “What’s New” section of the website’s home page. It will be accessible from the home page for approximately one month after release, after which time it will be archived on the website for a period of time. The Internet address is for informational purposes only and is not intended for use as a hyperlink. The Company is not incorporating any material on its website into this report.

Non-GAAP Information

In an effort to provide investors with additional information regarding the Company’s results as determined by generally accepted accounting principles (GAAP), the Company also discloses non-GAAP information which management believes provides useful information to investors. Free cash flow, net debt, total capitalization, operational working capital, revenues excluding the impact of changes in foreign currency exchange rates and organic sales growth are not financial measures under GAAP and should not be considered as a substitute for cash flows from operating activities, debt or equity, sales and working capital as determined in accordance with GAAP, and they may not be comparable to similarly titled measures reported by other companies. Management believes the (1) net debt to total capitalization ratio and (2) free cash flow are important measures of operating performance and liquidity. Net debt to total capitalization is helpful in evaluating the Company’s capital structure and the amount of leverage it employs. Free cash flow provides both management and investors a measurement of cash generated from operations that is available to fund acquisitions, pay dividends, repay debt and repurchase the Company’s common stock. Reconciliations of free cash flow, total debt and net debt can be found in Part (1) of Item 2-Management’s Discussion and Analysis. Management believes that reporting operational working capital (also sometimes called “working capital”), which is calculated as accounts receivable, plus inventory, less accounts payable, provides a meaningful measure of the Company’s operational results by showing the changes caused solely by sales. Management believes that reporting operational working capital and revenues at constant currency, which excludes the positive or negative impact of fluctuations in foreign currency exchange rates, provides a meaningful measure of the Company’s operational changes, given the global nature of Dover’s businesses. Management believes that reporting organic sales growth, which excludes the impact of foreign currency exchange rates and the impact of acquisitions, provides a better comparison of the Company’s revenue performance and trends between periods.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no significant change in the Company’s exposure to market risk during the first six months of 2005. For discussion of the Company’s exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

Item 4. CONTROLS AND PROCEDURES

At the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective. During the second quarter of 2005, there were no changes in the Company’s internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. In making its assessment of changes in internal control over financial reporting as of June 30, 2005, management has excluded SSE GmbH, Flexbar, Rasco, Voltronics, US Synthetics, Corning Frequency Control, Almatec, Datamax, Avborne Accessory Group, Rostone, Fas-Co Coders, APG and C-Tech because these companies were acquired in purchase business combinations during the twelve months ended June 30, 2005. The Company is currently assessing the control environments of these acquisitions. These companies are wholly-owned by the Company and their total sales for both the three- and six-month periods ended June 30, 2005 and assets at June 30, 2005, represent approximately 5.9% and 10.4% of the Company’s consolidated total sales and assets, respectively.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

See Part I, Notes to Condensed Consolidated Financial Statements, Note I.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

	(a)		Not applicable.
	(b)		Not applicable.
	(c)		The shares listed below represent shares of the Company’s stock which were acquired by the Company during the second quarter. The following table depicts the purchase of these shares:

(d) Maximum Number

(c) Total Number of

(or Approximate Dollar

Shares Purchased as

Value) of Shares that

(a) Total Number

Part of Publicly

May Yet Be Purchased

of Shares

(b) Average Price

Announced Plans or

under the Plans or

Period

Purchased

Paid per Share

Programs

Programs

April 1 to April 30, 2005

525,000

35.36

Not applicable

Not applicable

May 1 to May 31, 2005

747,500

36.68

Not applicable

Not applicable

June 1 to June 30, 2005

—

—

Not applicable

Not applicable

For Second Quarter 2005

1,272,500

36.14

Not applicable

Not applicable