dover Q305_Transcript

FINAL TRANSCRIPT

Conference Call Transcript
DOV - Q3 2005 Dover Corporation Earnings Conference Call

Event Date/Time: Oct. 21. 2005 / 9:00AM ET
Event Duration: N/A

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Oct. 21. 2005 / 9:00AM, DOV - Q3 2005 Dover Corporation Earnings Conference Call

CORPORATE PARTICIPANTS
Ron Hoffman
Dover Corporation - President, CEO
Rob Kuhbach
Dover Corporation - VP-Finance, CFO

CONFERENCE CALL PARTICIPANTS
Wendy Caplan
Wachovia Securities - Analyst
Ned Armstrong
FBR - Analyst
Robert McCarthy
Robert W. Baird - Analyst
Steven Tusa
JPMorgan - Analyst
Dan Whang
Lehman Brothers - Analyst
Don MacDougall
Bank of America Securities - Analyst
Jack Kelly
Goldman Sachs - Analyst
Nigel Coe
Deutsche Bank - Analyst
Alex Blanton
Ingalls & Snyder - Analyst
Walt Liptak
Key Bank Capital Markets - Analyst
[Christian Wong]
Foresight Research - Analyst

PRESENTATION

Operator

Good morning. And welcome to the third quarter 2005 Dover Corporation earnings conference call. With us today are Ron Hoffman, President
and Chief Executive Officer of Dover Corporation and Rob Kuhbach, Vice President of Finance and Chief Financial Officer of Dover
Corporation. After the speakers' opening remarks, there will be a question-and-answer period. [OPERATOR INSTRUCTIONS]. As a reminder,
ladies and gentlemen, this conference call is being recorded, and your participation implies consent to our recording of this call. If you do not
agree with these terms, please disconnect at this time. Thank you. I would now like to turn the call over to Mr. Ron Hoffman. Mr. Hoffman,
please go ahead, sir.

Ron Hoffman - Dover Corporation - President, CEO

Thank you. Good morning, ladies and gentlemen. Thank you for joining our conference call and Webcast this morning. Rob Kuhbach and I are
very pleased to share Dover Corporation's 2005 third quarter results. During the quarter our operating companies continue to display performance
improvements that generated record revenues and the best quarterly income since the third quarter of 2000. Before we make our overview
comments and open the call for questions, I want to remind everyone that our comments may contain certain forward-looking statements that are

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inherently subject to uncertainties. We caution everyone to be guided in their analysis of Dover Corporation by referring to our Form 10-K for a
list of factors that could cause our results to differ from those anticipated in any such forward-looking statements. I would also direct your
attention to our internet site, www.dovercorporation.com where considerably more information can be found.

Last evening, Dover reported third quarter earnings per share from continuing operations of $0.65, up from $0.55 in the comparable period of
2004, an increase of 18%. Year-to-date, earnings per share from continuing operations were $1.72, up 18% from last year. For the quarter,
income from continuing operations before-tax was $178.9 million, up 17% from the prior-year period and up 4% sequentially. Dover Resources
continues to be the earnings leader, but double-digit gains were also posted at Diversified, Industries, and Systems. Technologies, though down
6% from last year, posted its strongest performance of the year and was up 19% sequentially and improved margins by 140 basis points. Overall,
operating margins have improved every quarter this year, reflecting our strong focus on productivity improvements, pricing initiatives, and a
decreased impact from steel price increases.

Third quarter sales were $1.56 billion, up 13% from the prior year and up 2% sequentially. Sales were up at all six subsidiaries with four
subsidiaries posting double-digit gains compared to last year. Record sales were posted at Resources and Systems while Technologies posted
their highest sales since 2000. Our 13% sales growth consisted of 7% organic growth and 6% from acquisitions. Quarterly bookings were 1.55
billion, up 17% from last year, but down 2% sequentially with a book-to-bill of 0.99. All subsidiaries posted double-digit booking gains against
last year. Record quarterly bookings at Resources were offset by slight sequential declines at Technologies, Systems, and Diversified.

Higher energy prices, hurricanes disruption, and summer shut-downs impacted a number of our companies and customers. During the third
quarter, we announced three acquisitions, totaling a record $960 million that will fuel our future growth and deliver long-term value for our
shareholders. Knowles Electronics and Colder Products were both stand-alone additions to the Components group of Dover Electronics. Both of
these companies are global in scope, are market share leaders, and have highly differentiated products and processes. Knowles, which was the
largest acquisition in Dover's history at $750 million, is the world's largest manufacturer of advanced hearing aid components, MEMS
microphones, and other speciality micro-acoustic components. Knowles, with headquarters in Chicago, has about 3,000 employees in China and
Asia, and will significantly expand Dover's footprint in that region.

Colder Products is the leading manufacturer of low pressure, specialty quick disconnect couplers with major applications in medical, biotech and
specialized industrial applications. The third company, Harbor Electronics, is an add-on to Everett Charles Technologies, bringing expanded
technology to its semiconductor test products. These acquisitions will negatively impact our 2005 fourth quarter results by $0.03 to $0.05 EPS,
but will be accretive to 2006 income by $0.08 to $0.12 EPS. Rob will comment later on the financing used to fund these acquisitions.

The sale of two businesses was announced during the quarter: Somero from Dover Industries was sold to a financial buyer and we signed a
contract to sell Tranter PHE from Dover Diversified, which is awaiting regulatory approval. These divestitures will generate approximately $135
million of after-tax proceeds. We are seeing positive signs that the strong focus on Dover metrics and operational excellence are producing
tangible results. Margins have been improving across a number of Dover companies and 20 companies representing 56% of our revenue had
margins in excess of 15% for the quarter. Inventory turns improved to 5.4 with 22% of revenue generated from companies that exceed the Dover
metric of eight turns. These results are driving improvements in working capital as a percentage of revenue and a return on invested capital.
Organic growth continues to be robust with revenues up 7% and income up 11% for the quarter.

I am very proud of our employees worldwide and want to thank them for their strong support and tireless efforts to drive world-class performance
throughout Dover. I must also share that the recent Gulf Coast hurricanes impacted a number of Dover companies, but Triton, our ATM machine
company located in Long Beach, Mississippi, took a direct hit. We are pleased to report that our employees are safe, and despite the fact that
roughly 120 employees lost their homes, Triton is back in production. I sincerely applaud the many Dover companies, suppliers, and customers
that responded to provide support for Triton. It was very heart-warming to see the perseverance and dedication of these employees at such a
difficult time.

As we look to the fourth quarter, we are cautiously optimistic about the economic climate but convinced that our improvements in operating
performance will continue, and with the addition of our recent acquisitions, we are building a strong foundation for future growth for Dover. With
that, I'll turn it over to Rob Kuhbach to overview our subsidiary performance and financial highlights before we open the call for your questions.
Rob?

Rob Kuhbach - Dover Corporation - VP-Finance, CFO

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Thanks, Ron. Good morning, ladies and gentlemen. Since Ron has already summarized Dover's overall performance, let me review briefly the
individual segment results for the third quarter of 2005. Dover Diversified experienced a 25% revenue growth, leveraging 39% income gains and
positive margin increases, driven by market strength and operational efficiencies. Diversified's Industrial Equipment group revenue increased
26% and income rose 25% due to strong commercial aerospace and construction markets. The automotive and powersports markets had mixed
performance, resulting in lower income. Diversified's Process Equipment group had nice leverage with income up 57% on a 23% higher revenue
as demand from the oil and gas and HVAC markets was strong. This positive leverage was driven by pricing adjustments, productivity gains and
higher volume.

Dover Electronics increased revenue 12% driven by acquisitions, but income was down 32% due to the effects of Hurricane Katrina. The
Components group saw revenue growth of 25%, primarily from the Colder and Corning Frequency Control acquisitions. Margin improvements
offset by realignment costs contributed to half of the 133% income increase with acquisitions accounting for most of the balance. The
Commercial Equipment group had decreased revenue and income of 15% and 92% respectively, reflecting the disruption of the ATM business by
Hurricane Katrina, which had a negative earnings impact estimated at $5 to $6 million. ATM production is expected to return to normal in the
fourth quarter. The Dover Industry's 9% revenue increase was primarily driven by military shipments and pricing moves initiated earlier in the
year to cover material cost increases contributed to record income, up 23%. The Mobile Equipment group revenue increased 19% behind strong
military shipments and robust energy markets. Income increased 52% driven by volume and cost control initiatives, along with a $1.4 million
gain on the sale of a facility. Service Equipment Group revenue decreased 5%, but income rose 3%, reflecting weakness in the Automotive
Service industry, creating a volume shortfall that was offset by continued improvements in operating efficiencies and pricing increases.

Dover Resources had record sales and near record earnings with moderating margins which resulted largely from market development activities,
new IT Systems costs and one-time charges. Leading Resources' performance was the Oil and Gas Equipment group, which had increased
revenue and income of 56% and 50% respectively. This reflects continued global energy demand, the acquisition of C-Tech and new product
development, somewhat offset by the hurricane impact. The Fluids Solutions groups' revenue increased 4%, reflecting strong rail, tank car,
chemical and industrial markets, offset by soft European markets. Income was flat as service station markets slowed due to market trends, some
hurricane effect and a slowdown in regulatory-driven demand. Material Handling group revenue grew 16% with income increasing 12%. The
petroleum, crane and utility markets were strong, more than offsetting the moderating automotive market. On the margins side, price increases
partially offset material cost increases.

Dover Systems 17% growth drove income up 53% with significant margin gains substantially all from volume leverage and productivity
programs. Systems Food Equipment group revenue increased 23% with income up 122%, driven by double-digit increases in both supermarket
and Food Service Equipment revenue. The comparative improvement income was also aided by a prior-year food service loss. Systems
Packaging Group had a 2% decrease in revenue and a 31% decline in income due to timing of beverage equipment shipments and weak demand
in Western Europe. Technologies' revenue increased 3% and income decreased 6%, reflecting lower demand in the Circuit Assembly and Test or
CAT group, compared to a robust prior-year period and competitive pricing in the Product Identification and Printing group, which also
experienced some weakness in the European market.

Overall CAT end markets have shown positive improvements during 2005, but appear to be moderating somewhat. Although, CAT year-over-
year revenue and income declined 5% and 17% , respectively. On a sequential basis, revenue increased 13%, and income was up 69%, driven
primarily by sales of automated screen printers and soldering equipment, particularly in the Far East. The CAT companies did absorb some
rationalization costs in the quarter and anticipate further similar fourth quarter expenses in the range of $4 to $5 million. The Product
Identification and Printing group revenue rose 26% and income was up 23%, primarily the result of the Datamax acquisition in the fourth quarter
of 2004. The product identification market continues to be sensitive to price pressures and some softness in Europe, such that sequentially, sales
eased 5% but earnings were up 12%. This positive leverage reflects an overall trend of market share gains and cost improvements, contributing to
better margins, which have been increasing sequentially all year. Having covered segment operations, let me now review briefly some other
corporate information.

During the third quarter, as Ron noted, Dover had record acquisition spending. Dover Electronics acquired Colder Products and Knowles
Electronics and Everett Charles Technologies and the Technologies segment bought Harbor Electronics, an add-on to expand its semiconductor
test group. For the quarter, Dover spent about $960 million on new businesses. Year-to-date, Dover's overall acquisition spending came to about
$1.1 billion for eight companies with annualized revenue of about $400 million. Of Dover's 13% growth in quarterly revenue, 7% was organic
and 6% came from acquisitions with a nominal foreign exchange impact. Free cash flow, defined as cash from operations less capital
expenditures, for the quarter was 6.9% of revenue and year-to-date was 6% of revenue. The quarter and year-to-date free cash flow includes an
$18 million pension contribution to the Knowles Electronics pension plan. For the full-year 2005, we still expect to generate free cash flow in the
range of 7 to 9% of revenue.

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Year-to-date capital expenditures were up $35.7 million or 52% over prior year, driven largely by manufacturing efficiency improvements,
globalization initiatives and improved IT systems. That spend rate is expected to moderate in the fourth quarter. The net debt-to-capital ratio
increased to 32.3%, up from 19.1%, largely reflecting the acquisition spending. In the third quarter, we increased our commercial paper capability
to $1 billion, again to provide increased acquisition spending flexibility. After the quarter closed in early October, Dover issued $300 million of
10-year notes with a coupon of 4.875% and 300 million of 30-year debentures with a coupon of 5.375%. These proceeds reduced commercial
paper borrowings used to finance the third quarter acquisitions and are appropriately reflected on the third quarter balance sheet.

Dover's third quarter effective tax rate was just under 26%, about the same as the prior-year quarter rate of 26.3%. Reflecting the benefits from
the resolution of various tax issues and a $9.7 million tax provision applicable to a $290 million dividend repatriation. The 9-month rate was
26.8%, down from last year's comparable period rate of 28.1%. For the full year, we still anticipate an overall tax rate of 30% before non-
recurring discreate items. With that overview, let me turn this call back to Ron for questions.


Thanks, Rob. With that, we'll open the call for questions and hope that everyone can hold their follow-up questions so that everyone will have a
chance to participate this morning.

QUESTION AND ANSWER
Operator

Thank you. [OPERATOR INSTRUCTIONS]. Our first question is coming from Wendy Caplan of Wachovia Securities.


Good morning, Wendy.

Wendy Caplan - Wachovia Securities - Analyst

Good morning, Ron, Rob.


Good morning.


You gave us some detail on the recent acquisitions that you've announced. I've been talking to people about them, and although they seem to be
high-quality acquisitions, there's some concern that the multiples paid for these are a little steep. Can you address that for us and talk about some
of your-- the discipline in your acquisition program?


Happy to, Wendy. Quite candidly, the price of acquisitions has gone up this year over past years, as we've said quarter-to-quarter. However, I
think as we look at these acquisitions, specifically to Colder and to Knowles, these are both very high-growth, very unique acquisitions in that
they play in a different market than Dover has presence in currently, and these are higher-growth markets. There were also were properties that
had long-term performance of high-margin, high-growth, and those type of properties you have to pay up forward in order to get.

In our particular case, we looked at these and said, as we balance those up against Dover's disciplined acquisition criteria, they met all the factors
that we traditionally look for; proven performance, leaders that want to stay with the Company, great growth prospects for the future. So in this

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particular case, we don't feel that we overpaid really, compared to what we've learned about the future prospects of these companies. And in both
cases, we're also thrilled to get into the medical components market and the biotech market, as we think that has a different dynamic than many of
the other Dover businesses.


Okay, thanks. And I'll respect your wish for one question and hop back on. Thanks.


That's kind of you, Wendy. Thank you.

Operator

Thank you. Our next question is coming from Ned Armstrong of FBR.

Ned Armstrong - FBR - Analyst

Good morning.


Good morning, Ned.


In your release, your outlook was somewhat cautious, and you mentioned that you were seeing some softening in some markets. How broad is
that softening? And specifically, what markets are you seeing the softening that concerns you?


Well, I think the signals that were most difficult to read were probably in the Technologies sector. Quite candidly, as we announced, there was an
awful lot to celebrate in CAT's performance in the third quarter-- sales up 13%, earnings up 69%, margin improvement of a lot of basis points. So
we were quite pleased in that sector. However, a lot of conflicting signals. I think if many of you follow different trends and different indicators,
but I think if you look at the semi-data, which has been rising for the last few quarters, finally plateaued with the September results that were put
out. And some of the growth, we don't have full detail, but we wondered if maybe the rate of growth might have been influenced by a big order.
This is a three-month rolling average, which, [inaudible] in North America.

If you look at that in Japan, which is basically the same sized market as North America, roughly a billion dollars a month, their semiconductor
equipment association really identified that the book-to-bill for Japanese chip-makers was about 0.9. You also calibrate that against the [pro-tech]
data, and the pro-tech data which basically relates more to the bookings trend of the assembly equipment machines showed a declining trend
since June. July and August both showed downturns, specifically in China and Asia. So I think those are things that we look to to kind of say
what's the barometer of the business in the arena that would affect our CAT businesses? Now to counter that a little bit, I would have to say that
we continue to be very pleased and very encouraged with the business levels of Everett Charles, of DEK, of Vitronics. These companies continue
to gain market share. They continue to operate at levels that are at the 2000 peaks. So it's kind of spotty. I think more in the assembly equipment
right now is where we've seen the other -- excuse me, the latest decline.

If you look at the rest of Dover's market segments, quite candidly, we continue to be bullish on our oil patch companies, on our petroleum
equipment companies. They continue to not only perform very well, but they continue to post quarter-to-quarter gains, and we would anticipate
that that would continue going forward. We've had some impact from automotive companies. If you recall, many of our businesses that do supply
to the automotive industry, there's kind of a change of product mix going on, as we all know. Large trucks, that activity is slowing a little bit,

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SUV-type activity. So that impacts the market a little bit for those people. As we look at our printing businesses, again, they have shown growth
with the exception of Europe being somewhat slow. So, I guess I would have to say that our caution is more related to CAT, but the rest of our
businesses we feel are probably going to perform at the levels they did in the third quarter with some potential upside.


Great. Thank you.

Operator

Thank you. Our next question is coming from Robert McCarthy of Robert W. Baird.


Good morning, Bob.

Robert McCarthy - Robert W. Baird - Analyst

Good morning, guys.


Good morning.


I wanted to follow-up Wendy's question on the acquisitions and get a couple clarifications, if I can. The $0.08 to $0.12 accretion estimate for
next year is for all of the acquisitions. It's also accounted for by Knowles, I think. So do I understand that correctly that you're anticipating zero
contribution from the balance of the businesses that were required?


I would say that -- Bob this is Rob Kuhbach -- I would say that Knowles clearly is the significant driver of the $0.08 to $0.12. The Colder
contribution in the short-run will be minimal only because it's a much smaller acquisition in terms of revenue generation. And, frankly, given the
increase in AD &A that is applicable, it's not going to add more than a penny or two during -- in any given quarter. So it's really Knowles
primarily that's going to do the driving. And as you know, we assumed a sort of an offsetting interest cost, so when we talk about $0.08 to $0.12
net that, includes the imputed cost of carrying the investment.


Right, but what I'm just trying to clarify is that when you announced Knowles originally it was 8 to 12, and so that's why -- I think because you
could maybe just being a little more conservative --.


Well, I would say any time we get into an area of projection like this, I think we're comfortable with 8 to 12 on Knowles. Again, Colder's
contribution will not that be that significant, so we haven't tried to meticulously quantify that.


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Okay, that's fine. I don't detect any significant level of special purchase accounting adjustments for Colder in the quarter. Is that right?


No, there's nothing for Colder.


And your assumption for interest expense or interest rate? Is that about 5%, I guess, based on the refinancing you just did?


Right. We, I think, assumed a 5% rate, and we have the normal write-offs. So we only owned Colder about a month; month and a half. So they
didn't have a lot of -- I mean, mostly what would have happened for Colder in the quarter would have been negative because of the accelerated
early write-offs of inventory.


Yes, okay. All right. Thanks for your patience.


Sure.


Thank you.

Operator

Thank you. Our next question is coming from Steven Tusa of JPMorgan.

Steven Tusa - JPMorgan - Analyst

Good morning.


Good morning, Steve.


Just looking at Resources and the margin there. You called out some of the hurricane impacts for Triton. Wondering, what we should think about
as a longer-term sustainable margin at Resources and if there's anything going on as far as put's and take's in that business this quarter? I know
you mentioned a couple of one-time items, but wondering if we could get a little more color on that?


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Well, I think if we look at Resources, certainly we're happy that Resources should continue to perform and at 16 to 17% range that they
displayed for quite a number of quarters. They were impacted a little bit in the last quarter by the hurricane even though Houston did not take a
direct hit. We still had companies that had to shut down; move their employees out; they lost production days; they had to come back up to speed.
We had customers that were impacted in their ability to take product during that period. We also had the Port of Houston, which a lot of our
product that we make shipped to international customers would go out of was disrupted. So shipments were slowed as far as actually getting out
of ports, which means they were slow getting out of plants. Most of this is fully recoverable, so we really think that there isn't any concern there.
There was a comparable, I guess, as we look back to last year, at Cook we had a little bit of pickup on a fire loss at a plant that folded into last
year's comp. But in general, again, we feel Resources will continue to operate in the 16 to 17% margin category going forward.


Was it hit as much as Triton was?


No, not as much as Triton. Triton actually lost about 14 production days because the disruption of not only to the plant, but to the employees. So
there was not that much disruption in Houston and the recovery will happen much quicker. The question there is just, issues at offshore rigs,
getting distributors back in touch with their customers, getting product properly placed, and unfortunately, we've got another hurricane out there
rolling around. Let's hope it doesn't impact the Gulf Coast region again.


Great, thank you.

Operator

Thank you. Our next question is coming from Dan Whang of Lehman Brothers.


Good morning, Dan.

Dan Whang - Lehman Brothers - Analyst

Yes, good morning. My question was regarding CAT. You mentioned that some of these businesses there, Everett Charles, DEK, Vitronics
doing well, but it's more on the assembly side. Could you provide an update on what's going on at Universal with regard to some of the new
product initiatives? And you talked about the plateauing going on in this CAT business, do you think it's kind of a pause before resuming up or
maybe shifting down? Any sense for that would be great.


Well, I don't think we are going to be able to be fully directional there because we're trying to read the signals ourselves. But I guess responding
to Universal, I would share that we have a new president that we've put into Universal, and this president is Jeroen Schmits who comes from our
Vitronics Soltec operation. Jeroen worked at Universal early in his career before being promoted to President of Vitronics Soltec, where he did a
great job of not only performing the overall performance and gaining market share of that company, but also was very important in leading that
company into China. We feel that Jeroen has displayed the kind of leadership that will really be effective at Universal. We've placed him on the
job, roughly during the latter part of August.

We're taking a look at all the manufacturing efficiencies, the cost of redundancies that we may have between the U.S. and China and addressing
the cost issues that we think might be opportunities for improvement. I think we would also say that our product acceptance for the most part is

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improving. We're seeing customers repeat their buys of some of the Genesis and AdVantis platforms, increased I guess customer activity in terms
of evaluating those machines. But quite candidly, continue to have challenges in getting the supply chains where we want them to be. The
slowdown in China that I happened to mention on some of the Pro-tech data, certainly that is concerning to us because China is the dominant
market for that equipment.

Dan Whang - Lehman Brothers - Analyst

Okay, thank you.

Operator

Thank you. Our next question is coming from Don MacDougall of Bank of America Securities.


Good morning, Don.


Good morning, Don.

Don MacDougall - Bank of America Securities - Analyst

Good morning, Ron and Rob. Hey, congratulations in getting those margins in Industries and Diversified up. I think that's the real story from our
standpoint. How sustainable is that? You mentioned steel. I know you've been pushing price in a lot of your businesses. Are we going to finally
start to see the leverage from your Industrials side that, quite frankly has been a little bit lacking for the past year or so?


Well, Don, I think as we've mentioned through the past quarters, we've had significant restructuring costs in many of those businesses to improve
them and right-size them. I think as we shared at our Dover Day Investor conference, we have closed a number of facilities in our Heil Trailer
plant, had to right-size those companies. All those costs impact us in the past, which impacted our margins. Those are behind us now. We're
starting to see those companies gain performance improvements because of those actions. So I think it's sustainable. We're comfortable with the
business levels that are coming into those companies. We're comfortable at the improvements they've made in their cost structures, are producing
results. We also feel that we've done a nice job of rationalizing what are the products, what are the developments that we want to build those
companies with.

So I would have to say that we do believe it's sustainable. We think the steel price challenges that we identified in the past had great impact on
our quarter-to-quarter performance. Those challenges, even though we still see some I guess inconsistency in steel prices from company to
company or subsidiary to subsidiary, for the most part, the comparables there are much softer now. We still see some steel price increases in
various alloys, various commodities, but we also have been much more disciplined in our pricing so that we don't eat so much of that price
increase.


So general sense then is it that we've been restructuring, retooling these businesses to get margins up and that that restructuring spend level from
here looks to tail off a little bit?


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I think that would be the right observation. I think at this point, we think that the majority of that is behind us. We think those companies have
also really embraced the new Dover metrics that we've put in front of them. They're taking that seriously and they're doing a lot of work to
improve their performance, and it's all starting to reflect.


Now, I assume there's also some impact on those margins from your announced divestitures? I mean, you mentioned Somero and there's a couple
of others. Is that a driver behind the higher margins? Is that significant?


That is not [inaudible] certainly that is not the primary driver. We think of Hydratight Sweeney and we think of even Somero. These businesses
were operating probably at the full performance level of that subsidiary, so when those businesses went out, they did not have a significant
negative impact.


But I think it's fair to say that the discontinued operations in Systems did have a modest improvement on the margin level because the Company
in that segment that's been discontinued and will be sold was not performing at Dover-like levels for a while. So there was some favorable pick
up in the Systems margin improvement from that discontinued operation.


Got it. Thanks for your help, guys.


Thanks.

Operator

Thank you. Our next question is coming from Jack Kelly of Goldman Sachs.


Good morning, Jack.

Jack Kelly - Goldman Sachs - Analyst

Good morning. A couple of things. You had mentioned $0.03 to $0.05 dilution in the fourth quarter, as well as purchase accounting adjustments.
Rob, can you give us a sense of how big the purchase accounting adjustments might be? Just to get a sense of what the total drag might be from
those two add-ins.


Those are one in the same, Jack. The $0.03 to $0.05 is really a reflection of the fact that in the case obviously primarily with Knowles, that we
have the rapid write-off of inventory that will impact the quarter, and we expect that to be fully behind us by the end of the year. And then the
counter to that is the incremental improvement next year of the $0.08 to $0.12 is the reflection of the ability to realize the benefit of the Knowles

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acquisition next year. So there's no difference between the $0.03 to $0.05 and any other comments we've made about short-term acquisition
write-offs. That's one in the same.


Okay, good. And then Ron, going back to Resources in terms of margins, you had mentioned 16 to 17 should be sustainable. But just kind of
looking through the various components of oil, gas, fluid and material handling, it looks like there's pretty significant room on the upside. In fact,
if you look at oil and gas, while the numbers are great, you could in one sense argue a little bit disappointing in terms of incremental leverage
because the revenue for oil and gas is up 56% in the quarter, income up 50. Absolute, it's a good number, but it doesn't look like there's a lot of
operating leverage there. So, I guess the question is, as you look through oil and gas, fluid and material over the next couple of quarters, couldn't
they go materially higher than 16 or 17?


As I mentioned earlier, Jack, there was a one-time issue that would have impacted that group that would have made the comps off as we look,
see -- excuse me, year-to-year. Quite candidly, we are very pleased with the performance of the oil and gas sector. We think that there will be
some upside there. There were some IT expenses in there that would not be repeatable go-forward. If we look at, let's say the rest of Resources in
general, Fluid Solutions, which has performed well for us also and is up in those basically same type of margins, is always impacted by some of
the mix of projects. Ronningen-Petter, RPA is a company that kind of, let's say lives and dies based on what type of projects they have in their
pipeline. This quarter they had weak performance from projects, some of their orders looked better on a go-forward basis.

DE-STA-CO was impacted somewhat by the automotive business as was Warn due to summer shutdowns and also due to product mix changes
away from some of the larger vehicle platforms. But in general, all of these businesses -- it's not that it would be a wrong categorization to think
that only petroleum products is driving the performances of Resources. All three of these product segments are performing well in excess of our
Dover metric target and are all in that same range of 16 to 17%.


I guess your comment question -- or your question, Jack, is whether it could be higher? The answer is, it could be higher, but that would not be --
the long-term range perspective was over the next three to five years is 16 to 17% in our minds, something in a reasonably sustainable level, and I
think that was Ron's answer.


Okay. And just finally, on IMAJE. It looks like revenues there were flat. One of your competitors, Videojet was talking maybe high single-digit
kind of increases. Just -- and I know they're not exactly comparable companies, but just kind of -- maybe your comments on IMAJE?


Well, our core growth at IMAJE was roughly 13%, so we think there was improvement in IMAJE. Looking at sales, certainly Datamax is a new
add there. But just looking down inside, we saw growth at IMAJE in the core business. And if you parallel that to that fact -- actually, they had
record earnings in our coding and marking business through that period. Strong customer response to the new CIJ printers that IMAJE has been
coming out with. We think also IMAJE is broadening their business with their thermal transfer on-line, their laser product offerings, their drop-
on-demand offerings. So we think IMAJE is well-postured to take advantage of the market, of gaining market share and performing well on a go-
forward basis.


Okay, Ron, maybe I misread this, but it said in terms of product imaging, the acquisition of Datamax contributed substantially to the revenue
increase. So it's not like Datamax contributed the revenue increase. So if you backed out IMAJE, the old IMAJE, it would be flat, is that -- ?

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FINAL TRANSCRIPT


No, I'm just telling you the core growth of IMAJE was up 13% year-to-year.


Excluding Datamax?


No.


Including it?


I'm saying if you include Datamax, the growth is year-to-year would be higher. What we're showing is if we look at our sales year-to-year --.


Yes, that's sales.


If we look at our sales year-to-year, our growth was more like 45%; 13% from core, 32% from acquisition growth on our comparison. So I think
it would be incorrect to say that all the sales growth came from Datamax. That's not what our numbers are reflecting.


Okay. Thank you.

Operator

Thank you. Our next question is coming from Nigel Coe of Deutsche Bank.

Nigel Coe - Deutsche Bank - Analyst

Good morning.


Good morning, Nigel.


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FINAL TRANSCRIPT

Good morning. You talked about some weakness in, I think, in the service station markets and also in the [packaging] equipment market in
Europe. Can you talk about -- a little bit about that and whether that's a market problem or whether you might be losing some market share in
those markets?


Nigel, I do apologize. I didn't understand the first market question you asked there.


Yes, it was about -- I think it was the service station.


Yes. Well, again, we're talking about service station equipment. This ranges from anything from our gas nozzle business to our automotive lift to
our core straightening equipment. I guess I would say that we feel that business has softened slightly. How much of that might be hurricane
impact, we don't know. There's an awful lot of stores that were knocked out of operation in the Gulf Coast. Those stores have to be built back.
They will generate demand for equipment long-term. I think also we've mentioned in the past that our OPW Fueling Components group has
benefited from vapor recovery actions, certainly on the West Coast. A lot of that vapor recovery activity in terms of product improvements and
buildout has certainly been for the majority completed. There will be some ongoing, but the majority of that has now been completed, so we've
seen some drop-off in that level of activity.


Okay. And on the Packaging Equipment in Europe?


What? I'm sorry, Nigel.


So you mentioned I think in the -- on the slides, you mentioned -- [multiple speakers.]


Oh, Packaging Equipment. Yes. I think the answer in the Packaging Equipment area is that we have had some softness in the Western European
markets. These are companies that sell equipment primarily into the meat processing area.


Okay.


That area I think has had some softness, you know.


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FINAL TRANSCRIPT

Again, we would comment that our can necking and trimming business in that area again is very much a project-driven business and it depends
on whether those projects happen to hit in a specific quarter. Actually, that group booked quite well, but the shipments of the quarter were down.


I'm sorry. I'm referring to product I.D., rather than Packaging Equipment. Sorry.


Okay, all right. [Laughter].


Yes.


Let's try this over again. All right.


Right, why not.


Product, I.D.


Sorry, Nigel. Again, as we related in Jack's question, our product I.D. group actually, Datamax being new certainly is new numbers to add in
there. We've mentioned the performance improvements in the growth and the new product developments at IMAJE that we think have been
positive in setting a foundation for future growth and actually, they had a nice quarter on balance. We have the printing press company in that
group that, again, is kind of a lumpy business, big project-oriented. Their bookings were off in the quarter as well as their sales. So I think that's
probably the area that softened the overall performance.


Okay. And can you remind me, how much of your business in that area is in Europe versus North America?


Well, it would dominantly be in Europe, predominantly because the IMAJE -- the majority of IMAJE's business is in Europe and an awful lot of
the major printing press companies are also in that region.


Okay.

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FINAL TRANSCRIPT


The second biggest market is probably evenly divided -- it's probably a balance between Asia and North America would be kind of even as to the
rest of the business. But more than half of IMAJE's business is in the European sphere.


Okay, thanks a lot.

Operator

Thank you. Our next question is coming from Alex Blanton of Ingalls & Snyder.


Good morning, Alex.


Good morning, Alex.

Alex Blanton - Ingalls & Snyder - Analyst

Good morning. The Katrina impact on Triton, $5 to $6 million translates into $0.036 a share, but you had impacts on other businesses too. Do
you have any forecast of what the total impact was?


I don't think we have a total number. We've kind of identified the Triton number. And I would also kind of say that the Triton number was truly
our worse case number, meaning that it wasn't offset by any anticipated insurance recovery that may happen in that business. So it was truly the
impact of not only the direct hit, but an awful lot of our employees have been diverted into hurricane-relief activities, which means that they're
not necessarily involved in the ATM business on a day-to-day basis also. We've had to provide housing for people. We've had to bring a number
of trailers in. Provide gasoline. Provide drinking water. A number of things that add to the cost side that really aren't related to the earnings
performance of what this group might be. So we've tried to quantify that. I think in the other oil patch-related companies, even though we talk
about the disruptions of the companies in Houston, those that may serve the oil patch or those that might be impacted in other markets relative to
the hurricane, we feel those are really impacts that just deferred sales but didn't really take those sales away.


Was this negative impact offset by any positive impact whatsoever?


Well, I think in the quarter the answer would be no. But I think if we look at long-term, we think there will be quite a bit of infrastructure
rebuilding in that area that will generate business in a number of our companies.


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FINAL TRANSCRIPT

Well, I guess my point is this: If it hadn't been for the hurricane, it looks as if you might have recorded something like $0.70 or better in the
quarter against the consensus expectation of $0.64. It seems to me that has implications for the fourth quarter when you're going to make up some
of the losses of the third from the hurricane.


I think the question -- I'd like to say yes, you're correct, but I think it's a question of how fast will the infrastructure rebuild really happen in that
region? I don't think --.


I'm not talking about the infrastructure rebuild. I'm just saying that the absence of these negative impacts plus a little bit of recovery from what
might have been shipped in the third that gets shipped in the fourth, I mean, it looks to me like there's a positive implication here for the fourth
quarter?


Well, certainly our numbers would have been [inaudible] the impact of maybe -- go ahead, Rob.


Alex, the $5 to $6 million really converts to more like $0.02 a share. In other words, you have to tax-effect it, so realistically --.


Well, I did.


Well, but $5 to $6 million --.


Maybe I did the math wrong. It was $0.02 a share?


It's more like $0.02 a share.


And the rest [multiple speakers] relates to Triton, so we didn't really try to put any evaluation on the other companies, so it may have been
impacted.


Okay. The second question is, you said something about the tax rate before special effects in the fourth quarter, but what will it be on the bottom
line?

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FINAL TRANSCRIPT


Well, there are always issues that come up in our world almost every quarter where we resolve matters with regulatory agencies that can have
these one-time impacts. Usually in the past they've been positive and we can't predict exactly when some of those resolutions will occur. I guess
the other factor is that we think the sort of long-term rate for the time being is in the 30% range. But as we've had in the past, when we sell a
business, sometimes there are other gains and tax rate benefits that are triggered that tend to drive that rate down by sometimes as much as a
percentage or two. But it really is specifically driven off of transactional activity, and it's not something that is always easily quantified in
advance.

I guess the other comment I'd give you, Alex, is that as we grow in our overall earnings increase, some of the tax credit benefits that we are
getting and we have been getting, marginally have less and less positive impact because our top line and our earnings go up. So that's why we're -
- it's a complex area and that's why we're trying to give you sort of a generalized rate at the point that we are now, because every quarter we have
to take a look at this.


Okay. Finally, did I hear right in the beginning or earlier, you said that the reason for the decreased impact of steel price increase is better
pricing?


Well, it is better pricing in some regards. Some of it was surcharges, some of it was true price increases. So that impacted. And then also we've
seen the rate of increases decline.


Right. But suppose the steel prices continue to rise as raw material prices continue to rise. We've got quite an inflation going on here and it
doesn't look like there's going to be much of an easing of it. Will you continue to be aggressive in your pricing? Do you have room to do that?


Well, I think certainly we have the same room to do that that other companies have, that if we get a reaction on steel price, we'll react to it. I
think -- I don't know whether the steel price increases that we saw in the last year would be sustainable. I think if automotive weakens or softens
at all, that will drive capacity. That will impact steel prices.


Well, that's -- [multiple speakers].


Certainly infrastructure involvement in China, the pace of that, if it slows at all would certainly drive steel capacity. So there's a number of world
events that play into that.


Well, the automotive is sheet steel, and it's not going to affect structural steel or plate steel.


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FINAL TRANSCRIPT

I think, Alex, let me just add this thought to your question. I think the operating companies over the last two years have developed a better sense
of what I'll call their ability to impact pricing because of steel cost increases to them. And I think they have become more comfortable that prior
to that time period when you had a relatively weaker economy and there was some defensiveness, I think that situation is considerably moderated.
So I think the individual operating companies' perspective on pricing, whether, frankly, its steel or other costs, I think has improved over the last
year. So I think in the long run, I think we feel more comfortable that as these things happen over time that we're going to be able to address
those.


Okay, thank you.

Operator

Thank you. Our next question is coming from Walt Liptak of Key Bank Capital Markets.


Good morning, Walt.


Good morning, Walt.

Walt Liptak - Key Bank Capital Markets - Analyst

Good morning. Thank you. My question is with regard to the CAT companies. And I thought, Rob in your remarks you mentioned that the
expenses that you absorbed were similar to what you're going to see in the fourth; is that right? In the $4 to $5 million range?


No. The expenses that we had in the -- there was a specific situation having to do with, frankly, a rationalization of one of the businesses in CAT
that involves, frankly, terminating a lease -- surrendering a lease facility. So the $4 to $5 million we identified is large enough that we wanted to
make people aware of the fact that that was coming up in the fourth quarter, which is anticipated at this point in time to be something that we
know about. So we wanted to advise people who followed over that fact. I would say in the third quarter, we're talking about incrementally small
numbers in the million to a million and a half range, and candidly, that sort of thing happens with some regularities. So we don't usually try to put
a metric on it, because it's sort of the cost of doing business.


Okay, good. Thanks for clarifying that. And if I may with just a second question. Somero and Tranter, what is the revenue run rate annually for
those?


We gave you the aggregate for all those businesses, which I think was around $150 million year-to-date for the three companies. I would say that
the aggregate of Tranter and Somero is in the range of $100 to $150 million roughly. It's just those two.


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FINAL TRANSCRIPT

Okay, that's fine. That helps. Thank you.

Operator

Thank you. We have time for one final question. Our next question is coming from Brian Langenberg of Foresight Research.


Good morning, Brian.


Good morning.

Christian Wong - Foresight Research - Analyst

Good morning. This is Christian Wong for Brian. Question about the discontinued businesses. They had a $9.9 million operating loss this
quarter, but if you look at the history of these businesses, they have been great businesses. So, could you give us some color here as to what
happened? Is the $9.9 million really the losses, or is it impairment charges?


The loss that we recorded for the quarter is substantially goodwill impairment of one of the companies. The two companies that have been
specifically identified, Tranter and Somero, as I think Ron often mentioned earlier, have had good performance. But as we characterize it in our
release they were companies that we felt had better long-term strategic owners elsewhere, but we had an opportunity to exit. So what you see in
the third quarter is essentially the net gain, the net of the gain on Somero, offset by the goodwill impairment in a business that we're not going to
identify at this point.

Christian Wong - Foresight Research - Analyst

Okay, great. Thanks.

Operator

Thank you. At this time I would like to turn the floor back over to management for any closing remarks.


Thank you. Well, again, I'd like to comment that we feel we had nice leverage in the third quarter. We're pleased with the results that we've
posted, which were the best that we've posted probably since back in 2000. I would also say the acquisitions that we announced we're very
excited about what they're going to bring to the long-term growth of Dover. Once we get pass the acquisition accounting, we think that you will
see those reflected very favorably in our numbers. So with that again, we thank everyone for their questions and look forward to talking with you
next quarter.

Operator

Thank you. This concludes today's Dover Corporation conference call. You may now disconnect.

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FINAL TRANSCRIPT

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