UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT
PURSUANT TO SECTION 13 or 15(d) OF
THE SECURTIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

Commission File Number: 1-4018

Dover Corporation

(Exact name of registrant as specified in its charter)

Delaware		53-0257888
(State of Incorporation)		(I.R.S. Employer Identification No.)

280 Park Avenue, New York, NY		10017
(Address of principal executive offices)		(Zip Code)

(212) 922-1640
(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definitions of “accelerated filer” and “large accelerated filer” in Rule 12-b-2 of the Securities and Exchange Act.

Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Securities Exchange Act).
Yes o No þ

The number of shares outstanding of the Registrant’s common stock as of July 20, 2007 was 204,576,291.

 

 

Dover Corporation
Form 10-Q
Table of Contents

PART I – FINANCIAL INFORMATION

Page		Item
		Item 1. Financial Statements (unaudited)
1		Condensed Consolidated Statements of Operations
		(For the three and six months ended June 30, 2007 and 2006)
2		Condensed Consolidated Balance Sheets
		(At June 30, 2007 and December 31, 2006)
2		Condensed Consolidated Statement of Stockholders’ Equity
		(For the six months ended June 30, 2007)
3		Condensed Consolidated Statements of Cash Flows
		(For the six months ended June 30, 2007 and 2006)
4		Notes to Condensed Consolidated Financial Statements
13		Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
22		Item 3. Quantitative and Qualitative Disclosures About Market Risk
22		Item 4. Controls and Procedures
EX-31.1: CERTIFICATE
EX-31.2: CERTIFICATE
EX-32: CERTIFICATE

PART II – OTHER INFORMATION

Page		Item
23		Item 1. Legal Proceedings
23		Item 1A. Risk Factors
23		Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
23		Item 3. Defaults Upon Senior Securities
24		Item 4. Submission of Matters to a Vote of Security Holders
24		Item 5. Other Information
24		Item 6. Exhibits
25		Signatures
26		Exhibit Index

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

DOVER CORPORATION

		Three Months Ended June 30,								Six Months Ended June 30,
		2007				2006				2007				2006
Revenue		$	1,858,965			$	1,660,341			$	3,639,152			$	3,170,554
Cost of goods and services			1,191,792				1,045,397				2,336,068				2,007,701
Gross profit			667,173				614,944				1,303,084				1,162,853
Selling and administrative expenses			404,765				366,126				825,196				701,626
Operating earnings			262,408				248,818				477,888				461,227
Interest expense, net			22,444				19,247				44,284				40,732
Other expense (income), net			147				4,113				(137	)			6,935
Total interest/other expense, net			22,591				23,360				44,147				47,667
Earnings before provision for income taxes and discontinued operations			239,817				225,458				433,741				413,560
Provision for income taxes			64,690				66,699				119,770				123,510
Earnings from continuing operations			175,127				158,759				313,971				290,050
Loss from discontinued operations, net			(2,933	)			(86,848	)			(12,846	)			(14,313	)
Net earnings		$	172,194			$	71,911			$	301,125			$	275,737
Basic earnings (loss) per common share:
Earnings from continuing operations		$	0.86			$	0.78			$	1.54			$	1.42
Loss from discontinued operations, net			(0.01	)			(0.43	)			(0.06	)			(0.07	)
Net earnings			0.84				0.35				1.47				1.35
Weighted average shares outstanding			204,431				203,897				204,446				203,602
Diluted earnings (loss) per common share:
Earnings from continuing operations		$	0.85			$	0.77			$	1.52			$	1.41
Loss from discontinued operations, net			(0.01	)			(0.42	)			(0.06	)			(0.07	)
Net earnings			0.84				0.35				1.46				1.34
Weighted average shares outstanding			206,145				205,615				206,155				205,234
Dividends paid per common share		$	0.185			$	0.170			$	0.370			$	0.340
The following table is a reconciliation of the share amounts used in computing earnings per share:
		Three Months Ended June 30,								Six Months Ended June 30,
		2007				2006				2007				2006
Weighted average shares outstanding - Basic			204,431				203,897				204,446				203,602
Dilutive effect of assumed exercise of employee stock options			1,714				1,718				1,709				1,632
Weighted average shares outstanding - Diluted			206,145				205,615				206,155				205,234
Anti-dilutive shares excluded from diluted EPS computation			3,403				1,875				3,403				6,141

See Notes to Condensed Consolidated Financial Statements

DOVER CORPORATION

		At June 30,				At December 31,
		2007				2006
Current assets:
Cash and equivalents		$	409,863			$	373,616
Receivables, net of allowances of $29,549 and $28,632			1,119,522				1,056,828
Inventories, net			740,728				709,647
Prepaid and other current assets			85,407				65,646
Deferred tax asset			76,993				65,769
Total current assets			2,432,513				2,271,506
Property, plant and equipment, net			887,849				856,799
Goodwill			3,277,806				3,201,983
Intangible assets, net			1,043,521				1,065,382
Other assets and deferred charges			133,018				123,045
Assets of discontinued operations			33,110				107,943
Total assets		$	7,807,817			$	7,626,658
Current liabilities:
Notes payable and current maturities of long-term debt		$	290,789			$	290,549
Accounts payable			436,837				410,001
Accrued compensation and employee benefits			242,465				280,580
Accrued insurance			122,842				122,488
Other accrued expenses			184,351				183,642
Federal and other taxes on income			85,244				146,720
Total current liabilities			1,362,528				1,433,980
Long-term debt			1,465,674				1,480,491
Deferred income taxes			357,023				364,034
Other deferrals			535,227				405,845
Liabilities of discontinued operations			89,766				131,286
Commitments and contingent liabilities
Stockholders’ Equity:
Total stockholders’ equity			3,997,599				3,811,022
Total liabilities and stockholders’ equity		$	7,807,817			$	7,626,658

DOVER CORPORATION

										Accumulated
		Common				Additional				Other												Total
		Stock				Paid-In				Comprehensive				Retained				Treasury				Stockholders’
		$1 Par Value				Capital				Earnings				Earnings				Stock				Equity
Balance at December 31, 2006		$	242,293			$	241,455			$	48,852			$	4,421,927			$	(1,143,505	)		$	3,811,022
FIN 48 Adjustment (See Note 2)			—				—				—				(58,157	)			—				(58,157	)
Net earnings			—				—				—				301,125				—				301,125
Dividends paid			—				—				—				(75,753	)			—				(75,753	)
Common stock issued for options exercised			1,311				44,112				—				—				—				45,423
Stock-based compensation expense			—				14,596				—				—				—				14,596
Tax benefit from exercises of stock options			—				5,550				—				—				—				5,550
Common stock acquired			—				—				—				—				(76,772	)			(76,772	)
Translation of foreign financial statements			—				—				25,479				—				—				25,479
SFAS No. 158 amortization, net of tax			—				—				6,388				—				—				6,388
Other, net of tax			—				—				(1,302	)			—				—				(1,302	)
Balance at June 30, 2007		$	243,604			$	305,713			$	79,417			$	4,589,142			$	(1,220,277	)		$	3,997,599

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

See Notes to Condensed Consolidated Financial Statements

DOVER CORPORATION

		Six Months Ended June 30,
		2007				2006
Operating Activities of Continuing Operations
Net earnings		$	301,125			$	275,737
Adjustments to reconcile net earnings to net cash from operating activities:
Loss (earnings) from discontinued operations			12,846				14,313
Depreciation and amortization			121,499				94,526
Stock-based compensation			14,685				13,931
Changes in current assets and liabilities (excluding effects of acquisitions, dispositions and foreign exchange):
Increase in accounts receivable			(46,172	)			(112,433	)
Increase in inventories			(13,415	)			(39,654	)
Increase in prepaid expenses and other assets			(17,927	)			(6,621	)
Increase in accounts payable			18,675				35,082
Decrease in accrued expenses			(48,580	)			(11,355	)
Increase in accrued and deferred taxes			4,985				10,745
Other non-current, net			(17,524	)			23,991
Net cash provided by operating activities of continuing operations			330,197				298,262
Proceeds from the sale of property and equipment			15,573				6,660
Additions to property, plant and equipment			(95,133	)			(86,592	)
Proceeds from sales of discontinued businesses			30,437				153,429
Acquisitions (net of cash and cash equivalents acquired)			(117,976	)			(104,598	)
Net cash used in investing activities of continuing operations			(167,099	)			(31,101	)
Financing Activities of Continuing Operations
Decrease in debt, net			(15,912	)			(157,596	)
Purchase of treasury stock			(76,772	)			(43,175	)
Proceeds from exercise of stock options, including tax benefits			50,973				61,240
Dividends to stockholders			(75,753	)			(69,264	)
Net cash used in financing activities of continuing operations			(117,464	)			(208,795	)
Cash Flows From Discontinued Operations
Net cash provided by (used in) operating activities of discontinued operations			(14,259	)			23,611
Net cash used in investing activities of discontinued operations			(422	)			(5,154	)
Net cash provided by (used in) discontinued operations			(14,681	)			18,457
Effect of exchange rate changes on cash			5,294				9,133
Net increase in cash and cash equivalents			36,247				85,956
Cash and cash equivalents at beginning of period			373,616				185,832
Cash and cash equivalents at end of period		$	409,863			$	271,788

See Notes to Condensed Consolidated Financial Statements

DOVER CORPORATION

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements, in accordance with Securities and Exchange Commission (“SEC”) rules for interim periods, 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 Dover Corporation (“Dover” or the “Company”) Annual Report on Form 10-K for the year ended December 31, 2006, which provides a more complete understanding of Dover’s accounting policies, financial position, operating results, business properties and other matters. It is the opinion of management that these financial statements reflect all adjustments necessary for a fair presentation of the interim results. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year.

Certain prior period amounts have been reclassified to conform to the current period presentation.

2. New Accounting Pronouncement

Effective January 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 specifies the way companies are to account for uncertainty in income tax reporting, and prescribes a methodology for recognizing, reversing, and measuring the tax benefits of a tax position taken, or expected to be taken, in a tax return. As a result of adopting the new standard, the Company recorded a $58.2 million increase to reserves as a “cumulative effect” decrease to opening retained earnings as of January 1, 2007, of which $53.4 million is included in continuing operations. Including this “cumulative effect” adjustment, the Company had unrecognized tax benefits (reserves) of $190.5 million at January 1, 2007, of which $35.4 million related to accrued interest and penalties. The portion of the unrecognized tax benefits included in continuing operations totaled $147.6 million, of which $28.0 million related to accrued interest and penalties. At January 1, 2007, the majority of these unrecognized tax benefits in continuing operations were classified as Other Deferrals in the condensed consolidated balance sheet and, if recognized, the entire amount of $147.6 million would impact the Company’s effective tax rate. The Company accrues interest and penalties related to its uncertain tax positions for continuing operations as a component of provision for income taxes.

At December 31, 2006, the continuing unrecognized tax benefit of $94.2 million was included in Federal and Other Taxes on Income in the condensed consolidated balance sheet.

During the second quarter of 2007, the Company reduced its unrecognized tax benefits through Net Earnings by $13.6 million, $7.1 million in continuing operations, as a result of settling certain tax positions.

Dover files Federal income tax returns, as well as multiple state, local and foreign jurisdiction tax returns. The Company is no longer subject to examinations of its federal income tax returns by the Internal Revenue Service (“IRS”) for years through 2002. The IRS is currently examining years 2003 and 2004. All significant state and local, and foreign matters have been concluded for years through 1994 and 1999, respectively. With the exception of matters in litigation, for which an estimate cannot be made due to uncertainties, the Company does not believe it is reasonably possible that its unrecognized tax benefits will significantly change within the next twelve months.

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

3. Acquisitions

The 2007 acquisitions are wholly-owned and had an aggregate cost of $118.0 million, net of cash acquired, at the date of acquisition. The following table details acquisitions made during 2007:

Operating

Date

Type

Acquired Companies

Location (Near)

Segment

Group

Company

31-Jan

Stock

Biode

Westbrook, ME

Electronics

Components

Vectron

Designer and manufacturer of fluid viscosity sensors and viscometer readers.

28-Feb

Asset

Pole/Zero Corporation

West Chester, OH

Electronics

Components

MPG

Designer and manufacturer of radio frequency filters that resolve interference issues.

31-Mar

Asset

Theta Oilfield Services

Brea, CA

Resources

Oil & Gas

EPG

Provider of oilwell optimization software.

For certain acquisitions, the Company is in the process of obtaining or finalizing appraisals of tangible and intangible assets and continuing to evaluate the initial purchase price allocations as of the acquisition date, which will be adjusted as additional information relative to the fair values of the assets and liabilities of the businesses becomes known. Accordingly, management has used its best estimate in the initial purchase price allocation as of the date of these financial statements.

The following table summarizes the estimated fair values of the assets and liabilities that were assumed as of the dates of the 2007 acquisitions and the amounts assigned to goodwill and intangible asset classifications:

(in thousands)		At June 30, 2007
Current assets, net of cash acquired		$	15,113
PP&E			2,045
Goodwill			65,853
Intangibles			44,039
Total assets acquired			127,050
Total liabilities assumed			(9,074	)
Net assets acquired		$	117,976

The following unaudited pro forma information illustrates the effect on Dover’s revenue and net earnings for the three and six month periods ended June 30, 2007 and 2006, assuming that the 2007 and 2006 acquisitions had all taken place on January 1, 2006:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands, except per share figures)		2007				2006				2007				2006
Revenue from continuing operations:
As reported		$	1,858,965			$	1,660,341			$	3,639,152			$	3,170,554
Pro forma			1,858,965				1,838,988				3,646,622				3,533,885
Net earnings from continuing operations:
As reported		$	175,127			$	158,759			$	313,971			$	290,050
Pro forma			175,127				165,817				314,818				301,313
Basic earnings per share from continuing operations:
As reported		$	0.86			$	0.78			$	1.54			$	1.42
Pro forma			0.86				0.81				1.54				1.48
Diluted earnings per share from continuing operations:
As reported		$	0.85			$	0.77			$	1.52			$	1.41
Pro forma			0.85				0.81				1.53				1.47

These pro forma results of operations have been prepared for comparative purposes only and include certain adjustments to actual financial results for the relevant periods, such as imputed financing costs, and estimated additional amortization and depreciation expense as a result of intangibles and fixed assets acquired. They do not

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

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.

In connection with certain 2006 acquisitions, the Company recorded $14.7 million of severance and facility closing costs at the date of acquisition in accordance with Emerging Issues Task Force Issue No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination.” Through the end of the second quarter of 2007, the reserve was reduced by $2.9 million.

4. Inventory

The following table displays the components of inventory:

		At June 30,				At December 31,
(in thousands)		2007				2006
Raw materials		$	346,970			$	330,016
Work in progress			184,916				173,194
Finished goods			258,672				254,684
Subtotal			790,558				757,894
Less LIFO reserve			49,830				48,247
Total		$	740,728			$	709,647

5. Property, Plant and Equipment

The following table displays the components of property, plant and equipment:

		At June 30,				At December 31,
(in thousands)		2007				2006
Land		$	52,074			$	52,227
Buildings and improvements			515,948				503,464
Machinery, equipment and other			1,723,451				1,641,151
			2,291,473				2,196,842
Accumulated depreciation			(1,403,624	)			(1,340,043	)
Total		$	887,849			$	856,799

6. Goodwill and Other Intangible Assets

The following table provides the changes in carrying value of goodwill by market segment through the six months ended June 30, 2007 (see Note 3 for discussion of purchase price allocations):

										Other
										adjustments
						Goodwill from				including
		At December 31,				2007				currency
(in thousands)		2006				acquisitions				translations				At June 30, 2007
Diversified		$	261,821			$	—			$	289			$	262,110
Electronics			749,157				61,526				(1,529	)			809,154
Industries			234,683				—				(1,589	)			233,094
Resources			788,988				4,327				2,393				795,708
Systems			108,877				—				401				109,278
Technologies			1,058,457				—				10,005				1,068,462
Total		$	3,201,983			$	65,853			$	9,970			$	3,277,806

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

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

		At June 30, 2007												At December 31, 2006
		Gross Carrying				Accumulated				Average				Gross Carrying				Accumulated
(in thousands)		Amount				Amortization				Life				Amount				Amortization
Amortized Intangible Assets:
Trademarks		$	31,026			$	12,832				29			$	29,865			$	11,848
Patents			129,151				69,021				13				116,128				64,833
Customer Intangibles			648,052				111,015				9				648,283				80,794
Unpatented Technologies			147,134				47,452				9				135,449				40,196
Non-Compete Agreements			6,864				5,395				5				6,746				5,021
Drawings & Manuals			15,843				5,159				5				15,765				4,479
Distributor Relationships			72,387				11,247				20				72,374				9,235
Other			19,829				8,769				14				29,217				8,038
Total			1,070,286				270,890				11				1,053,827				224,444
Unamortized Intangible Assets:
Trademarks			244,125												235,999
Total Intangible Assets		$	1,314,411			$	270,890							$	1,289,826			$	224,444

7. Discontinued Operations

2007

During the second quarter of 2007, the Company completed the sale of a previously discontinued business in the Resources segment and recorded other adjustments for businesses still held for sale, resulting in a net loss of approximately $5.0 million ($8.3 million after-tax).

During the first quarter of 2007, the Company completed the sales of Kurz Kasch, discontinued in 2006 from the Electronics segment, and SWF, discontinued in 2005 from the Systems segment and recorded other adjustments for businesses still held for sale and to reserves related to completed sales, resulting in a net loss of approximately $9.6 million ($7.5 million after-tax).

2006

During the second quarter of 2006, the Company discontinued five businesses in the Technologies segment, one business in the Industries segment and one business in the Electronics segment. As a result, the Company recorded write-down and other adjustments totaling $101.2 million ($84.9 million after-tax) of the carrying value of these businesses to their estimated fair market value.

During the first quarter of 2006, Dover completed the sale of Tranter PHE, a business discontinued from the Diversified segment in the fourth quarter of 2005, resulting in a pre-tax gain of approximately $109.0 million ($85.5 million after-tax). In addition, during the first quarter of 2006, the Company discontinued and sold a business in the Electronics segment for a loss of $2.5 million ($2.2 million after-tax). Also, during the first quarter of 2006, the Company discontinued an operating company, comprised of two businesses in the Resources segment, resulting in an impairment of approximately $15.4 million ($14.4 million after-tax).

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

     Summarized results of the Company’s discontinued operations are as follows:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2007				2006				2007				2006
Revenue		$	12,977			$	199,949			$	38,941			$	419,973
Loss on sale, net of taxes (1)		$	(8,335	)		$	(84,911	)		$	(15,833	)		$	(15,962	)
Earnings (loss) from operations before taxes			(1,166	)			(711	)			(3,969	)			4,670
Benefit (provision) for income taxes related to operations			6,568				(1,226	)			6,956				(3,021	)
Earnings (loss) from discontinued operations, net of tax		$	(2,933	)		$	(86,848	)		$	(12,846	)		$	(14,313	)

At June 30, 2007, the assets and liabilities of discontinued operations primarily relate to the three businesses discontinued in 2006 in the Diversified segment which have not been sold. Additional detail related to the assets and liabilities of the Company’s discontinued operations is as follows:

		At June 30,				At December 31,
(in thousands)		2007				2006
Assets of Discontinued Operations
Current assets		$	17,641			$	69,769
Non-current assets			15,469				38,174
		$	33,110			$	107,943
Liabilities of Discontinued Operations
Current liabilities		$	70,524			$	107,239
Long-term liabilities			19,242				24,047
		$	89,766			$	131,286

In addition to the assets and liabilities of the entities currently held for sale in discontinued operations, the assets and liabilities of discontinued operations include residual amounts related to businesses previously sold. These residual amounts include property, plant and equipment, deferred tax assets, short and long-term reserves, and contingencies.

8. Debt

Dover’s long-term debt with a book value of $1,497.8 million, of which $32.1 million matures in the current year, had a fair value of approximately $1,447.1 million at June 30, 2007. The estimated fair value of the long-term notes is based on quoted market prices for similar issues.

There are presently two interest rate swap agreements outstanding for a total notional amount of $100.0 million, designated as fair value hedges on part of the Company’s $150.0 million 6.25% Notes due on June 1, 2008. One $50.0 million interest rate swap exchanges fixed-rate interest for variable-rate interest. The other $50.0 million swap is designated in foreign currency and exchanges fixed-rate interest for variable-rate interest, and also hedges a portion of the Company’s net investment in foreign operations. The swap agreements have reduced the effective interest rate on the notes to 6.05%. There is no hedge ineffectiveness. The fair value of the interest rate swaps outstanding as of June 30, 2007 was determined through market quotation.

9. 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

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

ongoing remedial activities at certain current and former 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. These proceedings primarily involve claims by private parties alleging injury arising out of use of the Company’s products, exposure to hazardous substances, patent infringement, employment matters and commercial disputes. 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 or any need for additional reserves, in the opinion of management, based on these reviews, it is very unlikely 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, cash flows or competitive position 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 the carrying amount of product warranties through June 30, 2007 and 2006 are as follows:

(in thousands)		2007				2006
Beginning Balance January 1		$	48,976			$	37,749
Provision for warranties			18,342				16,582
Increase from acquisitions			143				260
Settlements made			(15,881	)			(13,111	)
Other adjustments			210				745
Ending Balance June 30		$	51,790			$	42,225

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

10. Employee Benefit Plans

The following table sets forth the components of net periodic expense.

		Retirement Plan Benefits								Post Retirement Benefits
		Three Months Ended June 30,								Three Months Ended June 30,
(in thousands)		2007				2006				2007				2006
Expected return on plan assets		$	(7,807	)		$	(7,900	)		$	—			$	—
Benefits earned during period			5,810				5,599				93				61
Interest accrued on benefit obligation			8,673				8,318				283				227
Amortization:
Prior service cost (gain) loss			2,128				1,972				(43	)			(43	)
Recognized actuarial loss			2,717				2,604				18				15
Transition obligation			(39	)			(274	)			—				—
Net periodic expense		$	11,482			$	10,319			$	351			$	260

		Retirement Plan Benefits								Post Retirement Benefits
		Six Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2007				2006				2007				2006
Expected return on plan assets		$	(15,614	)		$	(15,800	)		$	—			$	—
Benefits earned during period			11,620				11,198				180				144
Interest accrued on benefit obligation			17,346				16,636				558				502
Amortization (A):
Prior service cost			4,256				3,944				(86	)			(113	)
Recognized actuarial (gain) loss			5,434				5,208				(38	)			38
Transition obligation			(78	)			(548	)			—				—
Settlement gain (Tranter PHE sale) (B)			—				—				—				(4,699	)
Net periodic expense (benefit)		$	22,964			$	20,638			$	614			$	(4,128	)

11. Comprehensive Earnings

Comprehensive earnings were as follows:

		Three months Ended June 30,								Six Months Ended June 30,
(in thousands)		2007				2006				2007				2006
Net Earnings		$	172,194			$	71,911			$	301,125			$	275,737
Foreign currency translation adjustment			18,159				52,384				25,479				62,491
Unrealized holding losses, net of tax			(1,813	)			(113	)			(1,208	)			(258	)
Derivative cash flow hedges			(47	)			75				(94	)			100
SFAS No. 158 amortization, net of tax			3,194				—				6,388				—
Comprehensive Earnings		$	191,687			$	124,257			$	331,690			$	338,070

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

12. Segment Information

Dover has six reportable segments which are based on the management reporting structure used to evaluate performance. Segment financial information and a reconciliation of segment results to consolidated results follows:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2007				2006				2007				2006
REVENUE
Diversified		$	218,945			$	202,358			$	433,949			$	396,035
Electronics			234,724				222,751				457,142				422,246
Industries			239,595				226,072				470,056				444,814
Resources			561,946				435,341				1,113,925				860,503
Systems			220,997				234,124				426,580				415,409
Technologies			386,642				343,367				745,180				638,308
Intramarket eliminations			(3,884	)			(3,672	)			(7,680	)			(6,761	)
Total consolidated revenue		$	1,858,965			$	1,660,341			$	3,639,152			$	3,170,554
EARNINGS FROM CONTINUING OPERATIONS
Segment Earnings:
Diversified		$	28,739			$	23,384			$	55,707			$	45,968
Electronics			27,792				29,862				51,630				50,616
Industries			38,428				30,208				69,265				57,536
Resources			97,137				80,919				190,949				163,716
Systems			34,129				38,341				60,705				65,313
Technologies			53,119				60,684				83,043				108,396
Total segments			279,344				263,398				511,299				491,545
Corporate expense / other			(17,083	)			(18,693	)			(33,274	)			(37,253	)
Net interest expense			(22,444	)			(19,247	)			(44,284	)			(40,732	)
Earnings before provision for income taxes and discontinued operations			239,817				225,458				433,741				413,560
Provision for income taxes			64,690				66,699				119,770				123,510
Earnings from continuing operations — total consolidated		$	175,127			$	158,759			$	313,971			$	290,050

13. Recent Accounting Standards

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This statement is effective for fiscal periods beginning after November 15, 2007 and does not require any new fair value measurements. The Company is currently evaluating the impact of SFAS No. 157 on its overall results of operations and financial position.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” This Statement allows entities to choose to measure financial instruments and certain other items at fair value. This statement is effective for fiscal periods beginning after November 15, 2007. The Company is currently evaluating the impact of SFAS No. 159 on its overall results of operations and financial position.

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

14. Equity and Performance Incentive Program

In the first quarter of 2007 and 2006, the Company issued stock-settled stock appreciation rights (“SSARs”) totaling 1,736,383 and 1,886,989, respectively. For the quarters ended June 30, 2007 and 2006, after-tax stock-based compensation expense totaled $4.3 million and $4.4 million, respectively. For the six months ended June 30, 2007 and 2006, after-tax stock-based compensation expense totaled $9.5 million and $9.1 million, respectively. The fair value of each grant was estimated on the dates of grant using the Black-Scholes option-pricing model with the following assumptions:

		2007 Grant				2006 Grant
		SSARs				Options
Risk-free interest rate			4.84	%			4.63	%
Dividend yield			1.43	%			1.52	%
Expected life (years)			6.5				8
Volatility			28.25	%			30.73	%
Option grant price		$	50.60			$	46.00
Fair value of options granted		$	16.65			$	17.01

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Refer to the section below 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.

OVERVIEW

Dover Corporation (“Dover” or the “Company”) is a diversified multinational manufacturing corporation comprised of operating companies that manufacture a broad range of specialized industrial products and components, as well as sophisticated manufacturing equipment, and seek to expand their range of related services, consumables and wear parts sales. Dover’s operating companies are based primarily in the United States of America, Europe and the Far East with manufacturing and other operations throughout the world. Dover reports its operating companies’ results in six reportable segments and discusses its operations in 13 groups.

(1) FINANCIAL CONDITION:

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

Cash and cash equivalents of $409.9 million at June 30, 2007 increased from the December 31, 2006 balance of $373.6 million. Cash and cash equivalents were primarily 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)		2007				2006
Net Cash Flows Provided By (Used In):
Operating activities		$	330,197			$	298,262
Investing activities			(167,099	)			(31,101	)
Financing activities			(117,464	)			(208,795	)

Cash flows provided by operating activities for the first six months of 2007 increased $31.9 million over the prior year period, primarily reflecting higher earnings from the Company’s operations.

The cash used in investing activities in the first six months of 2007 was $167.1 million compared to $31.1 million in the prior year period, largely reflecting higher proceeds received from sales of discontinued businesses in the 2006 period. Capital expenditures in the six months of 2007 increased to $95.1 million as compared to $86.6 million in the prior year period primarily due to investments in plant expansions, plant machinery and information technology systems to support revenue growth and market demand. Acquisition spending was $118.0 million during the first six months of 2007 compared to $104.6 million in the prior year period. Proceeds from the sales of discontinued businesses in the first six months of 2007 were $30.4 million compared to $153.4 million in the 2006 period. The Company currently anticipates that any additional acquisitions made during 2007 will be funded from available cash and internally generated funds and, if necessary, through the issuance of commercial paper, use of established lines of credit or public debt markets.

Cash used in financing activities for the first six months of 2007 totaled $117.5 million as compared to cash used of $208.8 million during the comparable period last year, as reduced debt repayments in 2007 was partially offset by increased stock repurchase activity. In 2007, the Company purchased 1,500,000 shares of the Company’s

common stock in the open market at an average market price of $49.47, of which 1,000,000 shares were purchased in the second quarter at an average price of $50.23.

“Adjusted Working Capital” (calculated as accounts receivable, plus inventory, less accounts payable) increased from the prior year end by $66.9 million or 4.9% to $1,423.4 million, which reflected increases in receivables of $62.7 million and increases in inventory of $31.1 million, partially offset by an increase in payables of $26.8 million. Excluding the impact of acquisitions and foreign currency, working capital would have increased by $40.9 million or 3.0%. Average Annual Adjusted Working Capital as a percentage of revenue (a non-GAAP measure; calculated as the five quarter average balance of accounts receivable, plus inventory, less accounts payable divided by the trailing twelve months of revenue) was 19.3% at June 30, 2007 compared to 18.9% at December 31, 2006 and inventory turns were 6.4 at June 30, 2007 compared to 6.5 at December 31, 2006 and 6.3 at June 30, 2006.

In addition to measuring its cash flow generation and usage based upon the operating, investing and financing classifications included in the Condensed Consolidated Statements of Cash Flows, the Company also measures free cash flow (a non-GAAP measure). 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 Dover’s common stock. Dover’s free cash flow for the six months ended June 30, 2007 increased $23.4 million compared to the prior year period. The increase reflected higher earnings from the Company’s operations, partially offset by an increase in capital expenditures.

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)		2007				2006
Cash flow provided by operating activities		$	330,197			$	298,262
Less: Capital expenditures			(95,133	)			(86,592	)
Free cash flow		$	235,064			$	211,670
Free cash flow as a percentage of revenue			6.5	%			6.7	%

The Company utilizes total debt and net debt-to-total-capitalization calculations to assess its overall financial leverage and capacity and believes the calculations are useful to investors 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:

		At June 30,				At December 31,
Net Debt to Total Capitalization Ratio (in thousands)		2007				2006
Current maturities of long-term debt		$	32,122			$	32,267
Commercial paper and other short-term debt			258,667				258,282
Long-term debt			1,465,674				1,480,491
Total debt			1,756,463				1,771,040
Less: Cash and cash equivalents			409,863				373,616
Net debt			1,346,600				1,397,424
Add: Stockholders’ equity			3,997,599				3,811,022
Total capitalization		$	5,344,199			$	5,208,446
Net debt to total capitalization			25.2	%			26.8	%

Total debt of $1,756.5 million and net debt of $1,346.6 million at June 30, 2007 decreased from December 31, 2006 due to a repayment of $15.0 million of long-term debt and a higher cash balance. The net debt decrease was substantially due to the increase in cash generated from operations during the six months ended June 30, 2007 when compared to December 31, 2006.

Dover’s long-term debt with a book value of $1,497.8 million, of which $32.1 million matures in less than one year, had a fair value of approximately $1,447.1 million at June 30, 2007. The estimated fair value of the long-term notes is based on quoted market prices for similar issues.

There are presently two interest rate swap agreements outstanding for a total notional amount of $100.0 million, designated as fair value hedges on part of the Company’s $150.0 million 6.25% Notes due on June 1, 2008. One $50 million interest rate swap exchanges fixed-rate interest for variable-rate interest. The other $50 million swap is designated in foreign currency and exchanges fixed-rate interest for variable-rate interest, and also hedges a portion of the Company’s net investment in foreign operations. The swap agreements have reduced the effective interest rate on the notes to 6.05%. There is no hedge ineffectiveness, and the fair value of the interest rate swaps outstanding as of June 30, 2007 was determined through market quotation.

(2) RESULTS OF OPERATIONS:

CONSOLIDATED RESULTS OF OPERATIONS

Revenue for the second quarter of 2007 increased 12% to $1,859.0 million from the comparable 2006 period, principally from acquisitions at Resources and Technologies, as the modest reduction in core business revenue was offset by the impact of foreign exchange. Gross profit increased 8% to $667.2 million from the prior year quarter while the gross profit margin decreased 110 basis points (“bps”) to 35.9%. Overall, segment operating margin totaled 15.0% for the quarter ended June 30, 2007 compared to 15.9% in the prior year quarter and 13.0% in the first quarter of 2007.

Revenue for the first six months of 2007 increased 15% to $3,639.2 million from the comparable 2006 period, primarily due to acquisitions at Resources and Technologies, along with increases at all other segments. Gross profit increased 12% to $1,303.1 million from the prior year period while the gross profit margin decreased 90 bps to 35.8%. Overall, segment operating margin totaled 14.0% for the year to date period ended June 30, 2007 compared to 15.5% at June 30, 2006 and 14.9% for the year ended December 31, 2006.

Selling and administrative expenses of $404.8 million for the second quarter of 2007 increased by $38.6 million over the comparable 2006 period, primarily due to increased revenue activity. The 2007 period includes a $5.3 million net gain on a facility sale. Selling and administrative expenses as a percentage of revenue decreased to 21.8% from 22.1% in the comparable 2006 period.

Selling and administrative expenses of $825.2 million for the first six months of 2007 increased $123.6 million over the comparable 2006 period, mainly due to increased revenue activity. Selling and administrative expenses as a percentage of revenue increased to 22.7% from 22.1% in the comparable 2006 period.

Interest expense, net, for the second quarter and first six months of 2007 remained essentially the same as the prior year. Other expense (income), net, for the three and six months ended June 30, 2007 and 2006, respectively, primarily related to the effects of foreign exchange fluctuations on assets and liabilities denominated in currencies other than the company’s functional currency and other miscellaneous non-operational items.

The effective tax rates for continuing operations for the three months ended June 30, 2007 and 2006 were 27.0% and 29.6%, respectively. The effective tax rates for continuing operations for the six months ended June 30, 2007 and 2006 were 27.6% and 29.9%, respectively. The rates for the three and six month periods ended June 30, 2007 both decreased due to benefits recognized for tax positions that are effectively settled.

Effective January 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 specifies the way companies are to account for uncertainty in income tax reporting, and prescribes a methodology for recognizing, reversing, and measuring the tax benefits of a tax position taken, or expected to be taken, in a tax return. As a result of adopting the new standard, the Company recorded a $58.2 million increase to reserves as a “cumulative effect” decrease to opening retained earnings as of January 1, 2007, of which $53.4 million is included in continuing operations. Including this “cumulative effect” adjustment, the Company had unrecognized tax benefits (reserves) of $190.5 million at January 1, 2007, of which $35.4 million related to accrued interest and penalties. The portion of the unrecognized tax benefits included in continuing operations totaled $147.6 million, of which $28.0 million related to accrued interest and penalties. At January 1, 2007, the majority of these unrecognized tax benefits in continuing operations

were classified as Other Deferrals in the condensed consolidated balance sheet and, if recognized, the entire amount of $147.6 million would impact the Company’s effective tax rate. During the second quarter of 2007, the Company reduced its unrecognized tax benefits through Net Earnings by $13.6 million, $7.1 million in continuing operations, as a result of settling certain tax positions.

Earnings from continuing operations for the quarter increased 10% to $175.1 million or $0.85 EPS compared to $158.8 million or $0.77 EPS in the prior year second quarter. The increase was primarily a result of acquisitions at Resources and Technologies.

Earnings from continuing operations for the six months ended June 30, 2007 increased 8.2% to $314.0 million or $1.52 EPS compared to $290.1 million or $1.41 EPS in the prior year period.

Loss from discontinued operations for the second quarter 2007 was $2.9 million or $0.01 EPS compared to a loss of $86.8 million or $0.42 EPS in the comparable 2006 quarter. The 2007 loss included a $8.3 million loss, net of tax, related to the sale of a previously discontinued business in the Resources segment and adjustments related to businesses still held for sale. The 2006 loss included an impairment of $67.5 million ($59.8 million after-tax) related to five businesses that were discontinued in the Technologies segment and an impairment of $39 million ($28.1 million after-tax) related to a discontinued business in the Electronics segment.

Loss from discontinued operations for the six months ended June 30, 2007 was $12.8 million or $0.06 EPS compared to a loss of $14.3 million or $0.07 EPS in the comparable 2006 period. The 2007 loss includes the second quarter events mentioned above as well as first quarter losses from the sales of two previously discontinued businesses, Kurz-Kasch in the Electronics segment and SWF in the Systems segment, and other adjustments for businesses still held for sale and to reserves related to completed sales. The 2006 year to date loss included the impairments recorded for discontinued businesses in the first and second quarters of 2006, partially offset by a gain on the sale of Tranter PHE.

SEGMENT RESULTS OF OPERATIONS

Diversified

		Three Months Ended June 30,												Six Months Ended June 30,
(in thousands)		2007				2006				% Change				2007				2006				% Change
Revenue		$	218,945			$	202,358				8	%		$	433,949			$	396,035				10	%
Segment earnings			28,739				23,384				23	%			55,707				45,968				21	%
Operating margin			13.1	%			11.6	%							12.8	%			11.6	%
Bookings			222,307				210,061				6	%			441,713				418,306				6	%
Book-to-Bill			1.02				1.04								1.02				1.06
Backlog															371,818				323,567				15	%

Diversified’s revenue and earnings increases over the prior year second quarter were primarily due to strength in the markets served by the Process Equipment group, partially offset by declines in the Industrial Equipment group. Overall, the segment had 5% organic revenue growth, with the remainder from the impact of foreign exchange. Operating margin increased 150 basis points over the prior year second quarter and 60 basis points sequentially.

The Process Equipment group had revenue and earnings increases of 44% and 72%, respectively, over the prior year second quarter due to continued strength in the heat exchanger and energy markets. Earnings benefited from increased volume, favorable pricing and productivity improvements. Bookings and backlog increased 31% and 58%, respectively.

The Industrial Equipment group was negatively impacted by softness in the housing construction and aerospace service results in the second quarter of 2007, as revenue and earnings decreased 9% and 12%, respectively, over the prior year second quarter. Earnings were up 8% sequentially due to strength in the commercial aerospace OEM market. Bookings and backlog decreased 10% and 2%, respectively.

For the six months ended June 30, 2007, the increase in Diversified revenue and earnings reflected improvements at Process Equipment, partially offset by declines at Industrial Equipment. Process Equipment had revenue and earnings increases of 41% and 63%, respectively, and bookings increased 34%. Industrial Equipment had revenue and earnings decreases of 6% and 12%, respectively, and bookings decreased 10%.

Electronics

		Three Months Ended June 30,												Six Months Ended June 30,
(in thousands)		2007				2006				% Change				2007				2006				% Change
Revenue		$	234,724			$	222,751				5	%		$	457,142			$	422,246				8	%
Segment earnings			27,792				29,862				-7	%			51,630				50,616				2	%
Operating margin			11.8	%			13.4	%							11.3	%			12.0	%
Bookings			240,850				219,784				10	%			459,803				443,343				4	%
Book-to-Bill			1.03				0.99								1.01				1.05
Backlog															190,318				163,182				17	%

Electronics’ revenue increase over the prior year second quarter reflects an increase in the Components group, partially offset by a decrease in the Commercial Equipment group. The segment’s increase in revenue was attributed to acquisitions, as the net core business revenue decline of 3% was offset by the impact of foreign exchange. Earnings were negatively impacted by competitive conditions in the Commercial Equipment group and initial purchase accounting expenses related to the February 2007 acquisition of Pole/Zero by Microwave Products Group.

Components’ revenue increased 8% while the group’s earnings increased 11% compared to the prior year second quarter, largely due to demand for micro acoustic products as well as strength in military markets. The majority of the revenue growth reflected the February 2007 acquisition of Pole/Zero. Bookings increased 8% and backlog increased 16%.

Commercial Equipment revenue and earnings decreases over the prior year second quarter of 7% and 62%, respectively, were a result of competitive conditions and unfavorable product mix in the ATM business. Bookings increased 18%, while backlog increased 23%.

For the six months ended June 30, 2007, the increase in Electronics’ revenue and earnings primarily reflects increases at Components partially offset by decreases in Commercial Equipment. When compared to the prior year period, Components revenue increased 11%, while earnings increased 15% and bookings increased 4%. Commercial Equipment revenue was flat, earnings decreased 54% and bookings increased 3%.

Industries

		Three Months Ended June 30,												Six Months Ended June 30,
(in thousands)		2007				2006				% Change				2007				2006				% Change
Revenue		$	239,595			$	226,072				6	%		$	470,056			$	444,814				6	%
Segment earnings			38,428				30,208				27	%			69,265				57,536				20	%
Operating margin			16.0	%			13.4	%							14.7	%			12.9	%
Bookings			277,057				232,185				19	%			573,583				451,608				27	%
Book-to-Bill			1.16				1.03								1.22				1.02
Backlog															398,682				251,301				59	%

Industries’ revenue and earnings increases over the prior year second quarter were a result of improvement in the Mobile Equipment group, which included a net gain on the sale of a facility, partially offset by declines in the Service Equipment group. The segment achieved organic revenue growth in the quarter of 5%, with the remainder due to the impact of foreign exchange.

Mobile Equipment revenue increased 11% over the prior year second quarter, due to strength in the petroleum, crude oil and military markets. Earnings increased 44% driven by improved volume and a $5.3 million net pre-tax gain recognized on the sale of a facility. Without the gain from this sale, earnings would have been up 20%. Bookings and backlog increased 23% and 65%, respectively.

The Service Equipment group was negatively impacted by weakness in the North American automotive service industry. Revenue and earnings decreased 4% and 13%, respectively, compared to the prior year second quarter. Bookings and backlog increased 11% and 27%, respectively.

For the six months ended June 30, 2007, the increases in Industries’ revenue and earnings were driven by Mobile Equipment, which had increases of 11% and 33%, respectively, and bookings increased 39%. Service Equipment revenue and earnings declined 5% and 9%, respectively, and bookings increased 4%.

Resources

		Three Months Ended June 30,												Six Months Ended June 30,
(in thousands)		2007				2006				% Change				2007				2006				% Change
Revenue		$	561,946			$	435,341				29	%		$	1,113,925			$	860,503				29	%
Segment earnings			97,137				80,919				20	%			190,949				163,716				17	%
Operating margin			17.3	%			18.6	%							17.1	%			19.0	%
Bookings			555,588				441,761				26	%			1,133,122				896,430				26	%
Book-to-Bill			0.99				1.01								1.02				1.04
Backlog															258,095				203,757				27	%