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

Commission File Number: 1-4018

Dover Corporation

(Exact name of registrant as specified in its charter)

Delaware (State of Incorporation)		53-0257888 (I.R.S. Employer Identification No.)
3005 Highland Parkway, Suite 200 Downers Grove, Illinois (Address of principal executive offices)		60515 (Zip Code)

(630) 541-1540
(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 (or for such shorter period that the registrant was required to file such reports), 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ No o

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

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

The number of shares outstanding of the Registrant’s common stock as of October 15, 2010 was 186,790,017.

 

 

Dover Corporation
Form 10-Q
Table of Contents

		Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2010 and 2009			1
Condensed Consolidated Balance Sheet at September 30, 2010 and December 31, 2009			2
Condensed Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2010			3
Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2010 and 2009			4
Notes to Condensed Consolidated Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 3. Quantitative and Qualitative Disclosures About Market Risk			25
Item 4. Controls and Procedures			25
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			25
Item 1A. Risk Factors			25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			25
Item 3. Defaults Upon Senior Securities			26
Item 4. [Removed and Reserved]			26
Item 5. Other Information			26
Item 6. Exhibits			26
SIGNATURES			27
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

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

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

DOVER CORPORATION

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Revenue		$	1,887,141			$	1,499,611			$	5,257,107			$	4,269,028
Cost of goods and services			1,175,456				941,345				3,244,567				2,735,308
Gross profit			711,685				558,266				2,012,540				1,533,720
Selling and administrative expenses			414,022				378,125				1,247,000				1,110,476
Operating earnings			297,663				180,141				765,540				423,244
Interest expense, net			26,335				26,299				80,446				73,537
Other expense (income), net			9,837				(903	)			3,888				(1,124	)
Earnings before provision for income taxes and discontinued operations			261,491				154,745				681,206				350,831
Provision for income taxes			38,732				47,261				165,069				81,378
Earnings from continuing operations			222,759				107,484				516,137				269,453
Gain (loss) from discontinued operations, net			1,000				(600	)			(14,381	)			(12,063	)
Net earnings		$	223,759			$	106,884			$	501,756			$	257,390
Basic earnings (loss) per common share:
Earnings from continuing operations		$	1.19			$	0.58			$	2.76			$	1.45
Gain (loss) from discontinued operations, net			0.01				—				(0.08	)			(0.06	)
Net earnings			1.20				0.57				2.68				1.38
Weighted average shares outstanding			186,721				186,148				186,917				186,077
Diluted earnings (loss) per common share:
Earnings from continuing operations		$	1.18			$	0.58			$	2.73			$	1.45
Gain (loss) from discontinued operations, net			0.01				—				(0.08	)			(0.06	)
Net earnings			1.19				0.57				2.66				1.38
Weighted average shares outstanding			188,565				186,358				188,898				186,321
Dividends paid per common share		$	0.28			$	0.26			$	0.80			$	0.76

The following table is a reconciliation of the share amounts used in computing earnings per share:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Weighted average shares outstanding — Basic			186,721				186,148				186,917				186,077
Dilutive effect of assumed exercise of employee stock options, SAR’s and performance shares			1,844				210				1,981				244
Weighted average shares outstanding — Diluted			188,565				186,358				188,898				186,321
Anti-dilutive options/SAR’s excluded from diluted EPS computation			3,709				12,404				1,432				9,721

See Notes to Condensed Consolidated Financial Statements

DOVER CORPORATION

		September 30, 2010				December 31, 2009
Current assets:
Cash and equivalents		$	866,090			$	714,365
Short-term investments			214,742				223,809
Receivables, net of allowances of $38,652 and $41,832			1,181,599				878,754
Inventories, net			725,312				570,858
Prepaid and other current assets			58,092				64,922
Deferred tax asset			57,006				69,999
Total current assets			3,102,841				2,522,707
Property, plant and equipment, net			840,374				828,922
Goodwill			3,338,517				3,350,217
Intangible assets, net			902,123				950,748
Other assets and deferred charges			105,896				113,108
Assets of discontinued operations			63,824				116,701
Total assets		$	8,353,575			$	7,882,403
Current liabilities:
Notes payable and current maturities of long-term debt		$	50,180			$	35,624
Accounts payable			490,572				357,004
Accrued compensation and employee benefits			260,189				210,804
Accrued insurance			108,870				107,455
Other accrued expenses			235,581				219,295
Federal and other taxes on income			53,593				38,994
Total current liabilities			1,198,985				969,176
Long-term debt			1,789,660				1,825,260
Deferred income taxes			348,854				292,344
Other deferrals			529,446				573,137
Liabilities of discontinued operations			111,366				138,878
Commitments and contingent liabilities
Stockholders’ Equity:
Total stockholders’ equity			4,375,264				4,083,608
Total liabilities and stockholders’ equity		$	8,353,575			$	7,882,403

See Notes to Condensed Consolidated Financial Statements

DOVER CORPORATION

										Accumulated
		Common				Additional				Other												Total
		Stock				Paid-In				Comprehensive				Retained				Treasury				Stockholders’
		$1 Par Value				Capital				Earnings (Loss)				Earnings				Stock				Equity
Balance at December 31, 2009		$	247,342			$	497,291			$	84,842			$	5,453,022			$	(2,198,889	)		$	4,083,608
Net earnings			—				—				—				501,756				—				501,756
Dividends paid			—				—				—				(148,636	)			—				(148,636	)
Common stock issued for options exercised			1,354				47,060				—				—				—				48,414
Tax benefit from the exercise of stock options			—				3,807				—				—				—				3,807
Stock-based compensation expense			—				16,576				—				—				—				16,576
Common stock acquired			—				—				—				—				(70,198	)			(70,198	)
Translation of foreign financial statements			—				—				(61,167	)			—				—				(61,167	)
Unrealized holding gains, net of tax			—				—				272				—				—				272
Defined benefit pension plans, net of tax			—				—				832				—				—				832
Balance at September 30, 2010		$	248,696			$	564,734			$	24,779			$	5,806,142			$	(2,269,087	)		$	4,375,264

Preferred Stock; $100 par value per share; 100,000 shares authorized; no shares issued.

See Notes to Condensed Consolidated Financial Statements

DOVER CORPORATION

		Nine Months Ended September 30,
		2010				2009
Operating Activities of Continuing Operations
Net earnings		$	501,756			$	257,390
Adjustments to reconcile net earnings to net cash from operating activities:
Loss from discontinued operations			14,381				12,063
Depreciation and amortization			199,146				191,900
Stock-based compensation			17,068				14,926
Loss on extinguishment of long-term debt			4,343				—
Gain on sale of assets			(5,108	)			—
Cash effect of changes in current assets and liabilities (excluding effects of acquisitions, dispositions and foreign exchange):
Accounts receivable			(302,368	)			108,526
Inventories			(148,719	)			92,799
Prepaid expenses and other assets			7,310				3,156
Accounts payable			131,175				(23,327	)
Accrued expenses			71,665				(102,124	)
Contributions to employee benefit plans			(30,000	)			(15,000	)
Accrued and deferred taxes, net			66,451				10,135
Other non-current, net			(7,988	)			3,669
Net cash provided by operating activities of continuing operations			519,112				554,113
Investing Activities of Continuing Operations
Proceeds from sale of short-term investments			457,063				304,103
Purchase of short-term investments			(463,575	)			(348,439	)
Proceeds from the sale of property, plant and equipment			12,266				12,995
Additions to property, plant and equipment			(129,837	)			(83,250	)
Proceeds from the sales of businesses			4,500				1,375
Acquisitions (net of cash and cash equivalents acquired)			(45,198	)			(43,264	)
Net cash used in investing activities of continuing operations			(164,781	)			(156,480	)
Financing Activities of Continuing Operations
Change in notes payable, net			48,000				(192,557	)
Reduction of long-term debt			(75,814	)			(34,135	)
Purchase of common stock			(70,198	)			—
Proceeds from exercise of stock options, including tax benefits			52,221				5,297
Dividends to stockholders			(148,636	)			(141,431	)
Net cash used in financing activities of continuing operations			(194,427	)			(362,826	)
Cash Flows from Discontinued Operations
Net cash used in operating activities of discontinued operations			(1,244	)			(15,863	)
Net cash used in investing activities of discontinued operations			(140	)			(586	)
Net cash used in discontinued operations			(1,384	)			(16,449	)
Effect of exchange rate changes on cash and cash equivalents			(6,795	)			31,737
Net increase in cash and cash equivalents			151,725				50,095
Cash and cash equivalents at beginning of period			714,365				547,409
Cash and cash equivalents at end of period		$	866,090			$	597,504

See Notes to Condensed Consolidated Financial Statements

DOVER CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)
(in thousands, unless otherwise indicated)

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, 2009, which provides a more complete understanding of the Company’s accounting policies, financial position, operating results, business properties and other matters. The year-end condensed consolidated balance sheet was derived from audited financial statements. It is the opinion of management that these financial statements reflect all adjustments necessary for a fair statement 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.

2. Acquisitions

The following table details the acquisitions made during the nine months ended September 30, 2010.

2010 Acquisitions

Date

Type

Company Acquired

Location (Near)

Segment

Platform

Company

4-May

Stock

BSC Filters

York, UK

Electronic Technologies

N/A

Ceramic & Microwave

Designer and manufacturer of microwave filters, diplexers, waveguide and coaxial passive components.

Products Group

1-Jun

Asset

Chemilizer

Largo, FL

Fluid Management

Fluid Solutions

HydroSystems

Manufacturer of non-electric, volumetric dosing equipment used in commercial animal raising, agriculture, horticulture and irrigation markets.

17-Aug

Asset

Intek Manufacturing

Fort Wayne, IN

Engineered Systems

Engineered Products

Unified Brands

Manufacturer of electric and gas steam equipment (steamers, kettles, braising pans).

30-Sep

Asset/Stock

Diagnostic Product Line - Dynalco Controls

Ft. Lauderdale, FL

Fluid Management

Energy

Cook Compression

Manufacturer and servicer of portable analyzers targeting the gas gathering and gas transmission markets.

30-Sep

Stock

Gear Products

Tulsa, OK

Industrial Products

Material Handling

Tulsa Winch Group

Manufacturer of worm gear and planetary hoists, rotation drives, rotation bearings and hydraulic pump drives.

The 2010 acquisitions are wholly-owned and had an aggregate cost of $45,198, net of cash and cash equivalents acquired, at the dates of acquisition. The Company is in the process of finalizing appraisals of tangible and intangible assets and continuing to evaluate the initial purchase price allocations for the 2010 acquisitions. Accordingly, management has used its best estimates in the preliminary purchase price allocations as of the date of these financial statements.

The following presents the allocation of the acquisition cost to the assets acquired and liabilities assumed, based on their estimated fair values:

		2010
Current assets, net of cash acquired		$	8,944
Property, plant and equipment			9,807
Goodwill			13,903
Intangible assets			17,098
Total assets acquired			49,752
Total liabilities assumed			(4,554	)
Net assets acquired		$	45,198

Acquired intangible assets consist primarily of customer-related intangibles and trademarks, which are being amortized over weighted average lives of 10 years. The 2010 acquisitions resulted in the recognition of goodwill totaling $13,903, of which $8,706 is expected to be deductible for tax purposes. The goodwill identified by the acquisitions is attributed primarily to the benefits derived from product line expansion and operational synergies.

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)

The following unaudited pro forma information illustrates the effect on the Company’s revenue and net earnings for the three and nine months ended September 30, 2010 and 2009, assuming that the 2010 acquisitions had taken place at the beginning of the periods presented.

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Revenue from continuing operations:
As reported		$	1,887,141			$	1,499,611			$	5,257,107			$	4,269,028
Pro forma			1,892,979				1,508,658				5,279,011				4,295,875
Net earnings from continuing operations:
As reported		$	222,759			$	107,484			$	516,137			$	269,453
Pro forma			223,069				107,905				516,943				270,240
Basic earnings per share from continuing operations:
As reported		$	1.19			$	0.58			$	2.76			$	1.45
Pro forma			1.19				0.58				2.77				1.45
Diluted earnings per share from continuing operations:
As reported		$	1.18			$	0.58			$	2.73			$	1.45
Pro forma			1.18				0.58				2.74				1.45

These pro forma results of operations have been prepared for comparative purposes only and include certain adjustments to actual financial results for the periods presented, such as estimated additional amortization and depreciation expense as a result of intangibles and fixed assets acquired, measured at fair value. They do not purport to be indicative of the results of operations that actually would have resulted had the acquisitions occurred on the dates indicated or that may result in the future.

3. Inventories, net

The following table reflects the components of inventory:

		September 30, 2010				December 31, 2009
Raw materials		$	353,218			$	291,340
Work in progress			173,207				136,726
Finished goods			250,454				191,853
Subtotal			776,879				619,919
Less LIFO reserve			51,567				49,061
Total		$	725,312			$	570,858

4. Property, Plant and Equipment, net

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

		September 30, 2010				December 31, 2009
Land		$	50,783			$	48,010
Buildings and improvements			571,090				555,262
Machinery, equipment and other			1,919,423				1,840,638
			2,541,296				2,443,910
Accumulated depreciation			(1,700,922	)			(1,614,988	)
Total		$	840,374			$	828,922

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)

5. Financial Instruments

Derivatives

The Company periodically uses derivative financial instruments to hedge its exposures to various risks, including, but not limited to, interest rate and foreign exchange risk. The Company does not use derivative instruments for trading or speculative purposes and does not have a material portfolio of derivative financial instruments. The Company is exposed to credit loss in the event of nonperformance by counterparties to its derivative instruments. The Company enters into derivative and other financial instruments with major investment grade financial institutions and has policies to monitor the credit risk of its counterparties. The Company does not anticipate nonperformance by any of its counterparties.

In accordance with the provisions of Accounting Standards Codifications (“ASC”) 815, Derivatives and Hedging, the Company recognizes all derivatives as either assets or liabilities on the balance sheet and measures those instruments at fair value. For derivative instruments that are designated and qualifying cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. For derivative instruments that are designated and qualifying as fair value hedges, the gain or loss on the derivatives as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings.

The Company currently has an outstanding floating-to-floating cross currency swap agreement for a total notional amount of $50,000 in exchange for CHF 65,100. This transaction hedges a portion of the Company’s net investment in non-U.S. operations. The agreement qualifies as a net investment hedge and changes in the fair value are reported within the cumulative translation adjustment section of other comprehensive income, with any hedge ineffectiveness being recognized in current earnings. At September 30, 2010, the fair value of the swap was a net liability of $16,604, which is recorded in other accrued expenses, with the offset reflected in cumulative translation adjustment in the unaudited Condensed Consolidated Balance Sheet.

The Company’s other hedging activity is not significant; therefore, tabular disclosures are not presented. There are no credit-risk-related contingent features in the Company’s derivative instruments. The amount of gains or losses from hedging activity recorded in current earnings and the amount of unrealized gains or losses from cash flow hedges which are expected to be reclassified to earnings in the next twelve months are not significant to the Company.

Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy that requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value.

•		Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
•		Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.
•		Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2010 and December 31, 2009:

		September 30, 2010												December 31, 2009
		Level 1				Level 2				Level 3				Level 1				Level 2				Level 3
Assets:
Short-term investments		$	214,742			$	—			$	—			$	223,809			$	—			$	—
Liabilities:
Net investment hedge derivative			—				16,604				—				—				13,278				—

Short-term investments generally consist of investment grade time deposits with original maturities between three months and one year and are included in current assets in the Unaudited Condensed Consolidated Balance Sheet. Short-term investments are measured at fair value using quoted market prices. The derivative liability is measured at fair value using models based on observable market inputs such as foreign currency exchange rates and interest rates; therefore, it is classified within Level 2 of the valuation hierarchy.

In addition to fair value disclosure requirements related to financial instruments carried at fair value, accounting standards require interim disclosures regarding the fair value of all of the Company’s financial instruments.

The estimated fair value of long-term debt at September 30, 2010 and December 31, 2009 was $2,089,106 and $1,954,569, respectively, compared to the carrying value of $1,791,205 and $1,860,884. The carrying value includes the portion that is due and payable in less than one year of $1,545 and $35,624 at September 30, 2010 and December 31, 2009, respectively. The estimated fair value of the long-term debt is based on quoted market prices for similar instruments.

The carrying values of cash and cash equivalents, trade receivables, accounts payable, notes payable, and accrued expenses are reasonable estimates of their fair values as of September 30, 2010 and December 31, 2009 due to the short-term nature of these instruments.

6. Goodwill and Other Intangible Assets

The following table provides the changes in carrying value of goodwill by segment for the nine months ended September 30, 2010:

																										Balance at
		Balance at December 31, 2009																								September 30,
		Gross Carrying				Accumulated								2010				Purchase Price								2010
		Amount				Impairment				Net Goodwill				Acquisitions				Adjustments				Other (A)				Net Goodwill
Electronic Technologies		$	979,506			$	—			$	979,506			$	5,197			$	—			$	(6,521	)		$	978,182
Industrial Products			1,020,202				(99,751	)			920,451				1,031				2,525				(192	)			923,815
Fluid Management			677,903				(59,971	)			617,932				1,863				(1,583	)			(1,644	)			616,568
Engineered Systems			832,328				—				832,328				5,812				(14,184	)			(4,004	)			819,952
Total		$	3,509,939			$	(159,722	)		$	3,350,217			$	13,903			$	(13,242	)		$	(12,361	)		$	3,338,517

Purchase price adjustments arose primarily from allocation to customer-related intangibles and property, plant and equipment resulting from revised valuations relating to prior year business acquisitions.

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)

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

		September 30, 2010								December 31, 2009
		Gross Carrying				Accumulated				Gross Carrying				Accumulated
		Amount				Amortization				Amount				Amortization
Amortized Intangible Assets:
Trademarks		$	75,842			$	20,050			$	72,790			$	16,492
Patents			130,370				92,445				128,041				84,092
Customer Intangibles			777,546				316,540				764,865				267,558
Unpatented Technologies			133,107				83,171				134,822				75,244
Non-Compete Agreements			3,398				3,341				3,396				3,310
Drawings & Manuals			15,142				7,330				11,922				6,523
Distributor Relationships			73,180				23,772				73,230				20,974
Other			27,250				14,248				20,344				12,722
Total			1,235,835				560,897				1,209,410				486,915
Unamortized Intangible Assets:
Trademarks			227,185								228,253
Total Intangible Assets		$	1,463,020			$	560,897			$	1,437,663			$	486,915

Amortization expense totaled $25,795 and $24,632 for the three months ended September 30, 2010 and 2009, respectively. For the nine months ended September 30, 2010 and 2009, amortization expense was $77,450 and $73,576, respectively.

7. Debt

During the quarter ended September 30, 2010, a lender of a structured five-year, non-interest bearing amortizing loan originally due July 2011 called the loan, as permitted per the terms of the agreement. As a result, the Company repaid the outstanding $51,214 balance and recognized a net loss on extinguishment of $4,343, recorded in other income.

As of September 30, 2010, the Company has debt outstanding with a carrying value of approximately $400,000 maturing within a twelve-month period which is classified as long-term within the Unaudited Condensed Consolidated Balance Sheet, as the Company has the ability and intends to refinance this debt on a long-term basis.

The Company’s provision for income taxes for continuing operations in interim periods is computed by applying its estimated annual effective tax rate against earnings before income tax expense for the period. In addition, non-recurring or discrete items are recorded during the period in which they occur. The comparable three and nine month periods in both years presented were impacted by discrete items. During the third quarter of 2010, discrete items totaling $28,081, arising from settlements with U.S. taxing authorities and resolution of a foreign tax matter, favorably impacted the Company’s tax rates for the three and nine months ended September 30, 2010. A $28,363 tax settlement in the second quarter of 2009 favorably impacted the nine month period ended September 30, 2009. Excluding these items, the effective tax rates for the three and nine months ended September 30, 2010 were 25.5% and 28.3% compared to the prior year rates of 30.5% and 31.3%, respectively.

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)

9. Discontinued Operations

During the first quarter of 2010, the Company sold a business for net consideration of $7,498, resulting in a net after-tax loss on sale of approximately $13,100. During the second and third quarters of 2010, the loss was increased by approximately $900, net of tax, upon settlement of a $1,500 working capital adjustment related to the sale. The gain from discontinued operations during the third quarter includes expenses and accrual adjustments of $3,502 which were more than offset by $4,502 of tax benefits driven primarily by discrete tax items settled or resolved during the quarter. During the nine months ended September 30, 2009, the Company recorded adjustments to the carrying value of a business held for sale and other adjustments resulting in a net after-tax loss of approximately $7,656.

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

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Revenue		$	—			$	14,046			$	9,380			$	40,379
Loss on sale, net of taxes (1)		$	—			$	(203	)		$	(14,203	)		$	(7,656	)
Loss from operations before taxes			(3,502	)			1,199				(3,400	)			(1,685	)
Benefit (provision) for income taxes			4,502				(1,596	)			3,222				(2,722	)
Gain (loss) from discontinued operations, net of tax		$	1,000			$	(600	)		$	(14,381	)		$	(12,063	)

The Company currently has no businesses held for sale in discontinued operations. At September 30, 2010, the assets and liabilities of discontinued operations primarily represent residual amounts for deferred tax assets, short and long-term reserves, and contingencies related to businesses previously sold. Additional detail related to the assets and liabilities of the Company’s discontinued operations is as follows:

		September 30, 2010				December 31, 2009
Assets of Discontinued Operations
Current assets		$	39,048			$	73,284
Non-current assets			24,776				43,417
		$	63,824			$	116,701
Liabilities of Discontinued Operations
Current liabilities		$	14,899			$	25,919
Non-current liabilities			96,467				112,959
		$	111,366			$	138,878

10. Commitments and Contingent Liabilities

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

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)

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, at least quarterly, 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 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, or cash flows of the Company.

Estimated warranty program claims are provided for at the time of sale. Amounts provided for are based on historical costs and adjusted new claims. The changes in the carrying amount of product warranties through September 30, 2010 and 2009 are as follows:

		2010				2009
Beginning Balance, January 1		$	59,714			$	56,137
Provision for warranties			29,952				23,715
Increase from acquisitions/dispositions			106				3,081
Settlements made			(29,814	)			(25,774	)
Other adjustments, including currency translation			(999	)			383
Ending Balance, September 30		$	58,959			$	57,542

From time to time, the Company will initiate various restructuring programs at its operating companies and incur severance and other restructuring costs. For the three months ended September 30, 2010, restructuring charges of $1,993 and $1,361 were recorded in cost of goods and services and selling and administrative expenses, respectively. For the nine months ended September 30, 2010, $2,103 and $3,499 of restructuring charges were recorded in cost of goods and services and selling and administrative expenses, respectively.

The following table details the Company’s severance and other restructuring reserve activity:

		Severance				Exit				Total
At December 31, 2009		$	8,152			$	8,619			$	16,771
Provision			2,403				3,199				5,602
Payments			(9,000	)			(4,814	)			(13,814	)
Other, including impairments			(231	)			55				(176	)
At September 30, 2010		$	1,324			$	7,059			$	8,383

The following table details restructuring charges incurred by segment for the periods presented:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Industrial Products		$	309			$	3,190			$	1,105			$	15,287
Engineered Systems			2,034				3,210				2,460				14,846
Fluid Management			719				3,545				1,487				7,849
Electronic Technologies			292				(1,341	)			550				24,249
Total		$	3,354			$	8,604			$	5,602			$	62,231

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)

11. Employee Benefit Plans

The following tables set forth the components of the Company’s net periodic expense relating to retirement and post-retirement benefit plans:

		Retirement Plan Benefits
		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Expected return on plan assets		$	(9,621	)		$	(8,547	)		$	(28,863	)		$	(25,641	)
Benefits earned during period			4,850				5,003				14,550				15,009
Interest accrued on benefit obligation			9,632				9,268				28,896				27,804
Curtailment gain			—				—				—				(337	)
Amortization:											—
Prior service cost			2,158				2,249				6,474				6,747
Recognized actuarial loss			1,367				1,298				4,101				3,894
Transition obligation			(11	)			(10	)			(33	)			(30	)
Other			20				—				60				—
Net periodic expense		$	8,395			$	9,261			$	25,185			$	27,446

		Post-Retirement Benefits
		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Expected return on plan assets		$	—			$	—			$	—			$	—
Benefits earned during period			70				79				209				237
Interest accrued on benefit obligation			209				240				629				720
Amortization:
Prior service cost			(102	)			(43	)			(302	)			(129	)
Recognized actuarial gain			(100	)			(107	)			(303	)			(321	)
Net periodic expense		$	77			$	169			$	233			$	507

12. Comprehensive Earnings

Comprehensive earnings were as follows:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Net Earnings		$	223,759			$	106,884			$	501,756			$	257,390
Foreign currency translation adjustment			110,298				70,511				(61,167	)			104,028
Unrealized holding gains (losses), net of tax			105				19				138				118
Derivative cash flow hedges, net of tax			(294	)			(112	)			134				913
Defined benefit pension plans, net of tax			(656	)			2,673				832				7,289
Comprehensive Earnings		$	333,212			$	179,975			$	441,693			$	369,738

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)

13. Segment Information

For management reporting and performance evaluation purposes, the Company categorizes its operating companies into four distinct reportable segments. Segment financial information and a reconciliation of segment results to consolidated results follows:

		Three Months Ended September 30								Nine Months Ended September 30,
		2010				2009				2010				2009
REVENUE
Industrial Products		$	471,208			$	396,040			$	1,362,392			$	1,213,779
Engineered Systems			620,362				520,693				1,681,756				1,388,894
Fluid Management			416,428				309,247				1,200,902				935,289
Electronic Technologies			381,386				275,266				1,017,982				735,254
Intra-segment eliminations			(2,243	)			(1,635	)			(5,925	)			(4,188	)
Total consolidated revenue		$	1,887,141			$	1,499,611			$	5,257,107			$	4,269,028
EARNINGS FROM CONTINUING OPERATIONS
Segment Earnings:
Industrial Products		$	59,473			$	38,119			$	172,147			$	98,084
Engineered Systems			91,442				78,194				230,940				178,961
Fluid Management			101,847				60,677				284,782				191,692
Electronic Technologies			69,617				38,160				174,104				44,043
Total segments			322,379				215,150				861,973				512,780
Corporate expense / other			(34,553	)			(34,106	)			(100,321	)			(88,412	)
Net interest expense			(26,335	)			(26,299	)			(80,446	)			(73,537	)
Earnings from continuing operations before provision for income taxes and discontinued operations			261,491				154,745				681,206				350,831
Provision for taxes			38,732				47,261				165,069				81,378
Earnings from continuing operations — total consolidated		$	222,759			$	107,484			$	516,137			$	269,453

14. Recent Accounting Standards

In January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06 which is intended to improve disclosures about fair value measurements. The guidance requires entities to disclose significant transfers in and out of fair value hierarchy levels, the reasons for the transfers and to present information about purchases, sales, issuances and settlements separately in the reconciliation of fair value measurements using significant unobservable inputs (Level 3). Additionally, the guidance clarifies that a reporting entity should provide fair value measurements for each class of assets and liabilities and disclose the inputs and valuation techniques used for fair value measurements using significant other observable inputs (Level 2) and significant unobservable inputs (Level 3). The Company has applied the new disclosure requirements as of January 1, 2010, except for the disclosures about purchases, sales, issuances and settlements in the Level 3 reconciliation, which will be effective for interim and annual periods beginning after December 15, 2010. The adoption of this guidance has not had and is not expected to have a material impact on the Company’s consolidated financial statements.

In October 2009, the FASB issued ASU 2009-13 which amends existing guidance for identifying separate deliverables in a revenue-generating transaction where multiple deliverables exist, and provides guidance for allocating and recognizing revenue based on those separate deliverables. The guidance is expected to result in more multiple-deliverable arrangements being separable than under current guidance. This guidance is effective for the Company beginning on January 1, 2011 and is required to be applied prospectively to new or significantly modified revenue arrangements. The Company is currently assessing the impact this guidance may have on its consolidated financial statements.

In October 2009, the FASB issued ASU 2009-14 which eliminates tangible products containing both software and non-software components that operate together to deliver a product’s functionality from the scope of current generally accepted accounting principles for software. This guidance is effective for the Company beginning on January 1, 2011 and is required to be applied prospectively to new or significantly modified revenue arrangements. The Company is currently assessing the impact this guidance may have on its consolidated financial statements.

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)

15. Equity Incentive Program

During the nine months ended September 30, 2010, the Company issued stock appreciation rights (“SARs”) covering 2,306,440 shares and 68,446 performance shares. During the nine months ended September 30, 2009, the Company issued SARs covering 2,796,124 shares and 75,892 performance shares.

The fair value of each SAR grant was estimated on the date of grant using the Black-Scholes option pricing model. The performance share awards are market condition awards and have been assessed at fair value on the date of grant using the Monte Carlo simulation model. The following assumptions were used in determining the fair value of the SARs and performance shares awarded during the respective periods:

		SARs								Performance Shares
		Nine Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Risk-free interest rate			2.77	%			2.06	%			1.37	%			1.23	%
Dividend yield			2.33	%			3.23	%			2.38	%			3.23	%
Expected life (years)			6.0				6.5				2.9				2.9
Volatility			31.93	%			30.47	%			39.98	%			30.24	%
Grant price		$	42.88			$	29.45				n/a				n/a
Fair value at date of grant		$	11.66			$	6.58			$	57.49			$	32.80

For the three months ended September 30, 2010 and 2009, after-tax stock-based compensation expense totaled $2,668 and $2,527, respectively. For the nine months ended September 30, 2010 and 2009, after-tax stock-based compensation expense totaled $11,094 and $9,702, respectively. Stock-based compensation is reported within selling and administrative expenses in the accompanying Unaudited Condensed Consolidated Statement of Operations.

16. Share Repurchases

In May 2007, the Board of Directors authorized the repurchase of up to 10,000,000 shares through May 2012. During the nine months ended September 30, 2010, the Company repurchased 1,450,000 shares of its common stock in the open market and 38,797 shares from the holders of its employee stock options/SARs when they tendered shares as full or partial payment of the exercise price of such options/SARs. A total of 1,488,797 shares were repurchased at an average price of $47.15 per share. Treasury shares increased to 61,956,190 at September 30, 2010 from a balance of 60,467,393 at December 31, 2009.

17. Subsequent Events

The Company assessed events occurring subsequent to September 30, 2010 for potential recognition and disclosure in the Unaudited Condensed Consolidated Financial Statements. No events have occurred that would require adjustment to or disclosure in the Unaudited Condensed Consolidated Financial Statements.

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”) owns a global portfolio of manufacturing companies providing innovative components and equipment, specialty systems and support services for a variety of applications in the industrial products, engineered systems, fluid management and electronic technologies markets. Dover discusses its operations at the platform level within the Industrial Products, Engineered Systems and Fluid Management segments, which contain two platforms each. Electronic Technologies’ results are discussed at the segment level.

(1) FINANCIAL CONDITION:

Liquidity and Capital Resources

Management assesses Dover’s liquidity in terms of its ability to generate cash and access 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, repurchase of outstanding shares, 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 $866.1 million at September 30, 2010 increased $151.7 million from the December 31, 2009 balance of $714.4 million. Short-term investments of $214.7 million at September 30, 2010 decreased $9.1 million from the December 31, 2009 balance of $223.8 million. Cash equivalents are invested in highly liquid investment grade money market instruments with a maturity of less than three months. Short-term investments consist of investment grade time deposits with original maturity dates between three months and one year.

At September 30, 2010, the Company’s balance of cash, cash equivalents and short-term investments totaled $1,080.8 million, substantially all of which was held outside of the United States.

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

		Nine Months Ended September 30,
Cash Flows from Continuing Operations (in thousands)		2010				2009
Net Cash Flows Provided By (Used In):
Operating activities		$	519,112			$	554,113
Investing activities			(164,781	)			(156,480	)
Financing activities			(194,427	)			(362,826	)

Cash flows provided by operating activities for the nine months ended September 30, 2010 decreased $35.0 million from the prior year period. While net earnings increased $244.4 million in the 2010 period, this was more than offset by higher working capital investment necessary to fund the increase in 2010 order and revenue levels. Revenues increased across all of the Company’s segments through the first nine months of 2010, and this period of improved activity compares to a period of reduced activity in the first nine months of 2009 due to the global economic slowdown. The Company generated cash from working capital as activity declined in the 2009 period.

Cash used in investing activities for the nine months ended September 30, 2010 increased by $8.3 million, largely due to higher capital expenditures offset in part by reduced net purchases of short-term investments. Capital expenditures during the nine months ended September 30, 2010 were $46.6 million higher than expenditures made in the prior year period. The 2010 year-to-date capital spending relates primarily to capacity expansion requirements of the Company’s high-growth businesses. The Company expects full year 2010 capital expenditures to approximate $185.0 million. The Company currently anticipates that any additional acquisitions made during the remainder of the year 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 nine months ended September 30, 2010 declined by $168.4 million from the amount used in the 2009 period. The reduced use of cash in the 2010 period is attributed primarily to $150.0 million less in debt repayments, the issuance of $48.0 million of commercial paper for general corporate purposes, and $46.9 million of higher proceeds from the exercise of employee stock options, offset by treasury stock purchases of $70.2 million.

Adjusted Working Capital (a non-GAAP measure calculated as accounts receivable, plus inventory, less accounts payable) increased from December 31, 2009 by $323.7 million, or 29.6%, to $1,416.3 million which reflected an increase in receivables of $302.8 million, an increase in inventory of $154.5 million and an increase in accounts payable of $133.6 million generally due to higher order and sales volume. Excluding acquisitions and the effects of foreign exchange translation, Adjusted Working Capital would have increased by $322.1 million, or 29.5%. “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) decreased to 18.0% at September 30, 2010 from 19.9% at December 31, 2009 and inventory turns were 6.6 at September 30, 2010 compared to 6.2 at December 31, 2009.

In addition to measuring its cash flow generation and usage based upon the operating, investing and financing classifications included in the Unaudited Condensed Consolidated Statement 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. The Company’s free cash flow for the nine months ended September 30, 2010 decreased $81.6 million compared to the prior year period, primarily due to the significant investment in working capital and increase in capital expenditures, partially offset by greater earnings on increased sales volume from continuing operations.

The following table is a reconciliation of free cash flow to cash flow provided by operating activities:

		Nine Months Ended September 30,
Free Cash Flow (in thousands)		2010				2009
Cash flow provided by operating activities		$	519,112			$	554,113
Less: Capital expenditures			129,837				83,250
Free cash flow		$	389,275			$	470,863
Free cash flow as a percentage of revenue			7.4	%			11.0	%

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:

Net Debt to Total Capitalization Ratio (in thousands)		September 30, 2010				December 31, 2009
Current maturities of long-term debt		$	1,545			$	35,624
Commercial paper and other short-term debt			48,635				—
Long-term debt			1,789,660				1,825,260
Total debt			1,839,840				1,860,884
Less: Cash, cash equivalents and short-term investments			1,080,832				938,174
Net debt			759,008				922,710
Add: Stockholders’ equity			4,375,264				4,083,608
Total capitalization		$	5,134,272			$	5,006,318
Net debt to total capitalization			14.8	%			18.4	%

The total debt level of $1,839.8 million at September 30, 2010 decreased $21.0 million from December 31, 2009, primarily due to repayment of $75.8 million of long-term debt, offset by the issuance of commercial paper. The net debt decrease was due to a larger cash balance generated from operations in the first nine months of 2010 as compared to the prior year period coupled with the lower total debt level.

The Company’s long-term debt with a book value of $1,791.2 million, of which $1.5 million is current and payable within one year, had a fair value of approximately $2,089.1 million at September 30, 2010. The estimated fair value of the long-term debt is based on quoted market prices for similar issues.

As of September 30, 2010, the Company has debt with a carrying value of approximately $400.0 million that will be maturing within a twelve-month period. The Company classified this debt as long-term within the Unaudited Condensed Consolidated Balance Sheet as it has the ability and intends to refinance this debt on a long-term basis.

The Company currently has an outstanding floating-to-floating cross currency swap agreement for a total notional amount of $50.0 million in exchange for CHF 65.1 million. This transaction hedges a portion of the Company’s net investment in non-U.S. operations. The agreement qualifies as a net investment hedge and changes in the fair value are reported within the cumulative translation adjustment section of other comprehensive income, with any hedge ineffectiveness being recognized in current earnings. At September 30, 2010, the fair value of the swap, which was based on quoted market prices for similar instruments (using Level 2 inputs under the provisions of ASC 820), was a net liability of $16.6 million, which is recorded in other accrued expenses, with the offset reflected in cumulative translation adjustment in the Unaudited Condensed Consolidated Balance Sheet.

(2) RESULTS OF OPERATIONS:

CONSOLIDATED RESULTS OF OPERATIONS

Revenue for the third quarter of 2010 increased 25.8% to $1,887.1 million from the comparable 2009 period, with increases at all of the Company’s segments. The Company’s revenue increase was attributed to organic revenue growth of 24.7% and revenue growth of 2.7% related to acquisitions completed in 2010 and 2009, offset by a 1.6% unfavorable impact from foreign exchange. Gross profit increased 27.5% to $711.7 million from the prior year quarter while gross profit margin increased 50 basis points to 37.7%. The increase in gross profit reflects the higher sales volumes, coupled with the impacts of lower restructuring charges on a comparative basis and the benefits realized in the current period from restructuring initiatives executed in the prior year.

Revenue for the first nine months of 2010 increased 23.1% to $5,257.1 million from the comparable 2009 period, with increases at all of the Company’s segments. The Company’s revenue increase was attributed to organic revenue growth of 18.7%, revenue growth of 4.2% related to acquisitions completed in 2010 and 2009, and a 0.2% favorable impact from foreign exchange. Gross profit increased 31.2% to $2,012.5 million from the prior year period while gross profit margin increased 240 basis points to 38.3%, reflecting the higher sales volumes, coupled with the impacts of lower restructuring charges on a comparative basis and the benefits realized in the current period from restructuring initiatives executed in the prior year.

Selling and administrative expenses totaled $414.0 million for the third quarter of 2010, representing an increase of 9.5% or $35.9 million over the comparable 2009 period. As a percentage of revenue, these costs decreased to 21.9% from 25.2% in the comparable 2009 period, reflecting increased revenue levels, the benefit of cost containment efforts and productivity savings, and the absence of significant restructuring charges in the current period, which more than offset increased incentive compensation costs.

Selling and administrative expenses totaled $1,247.0 million for the first nine months of 2010, representing an increase of 12.3% or $136.5 million over the comparable 2009 period. As a percentage of revenue, these costs decreased to 23.7% from 26.0% in the comparable 2009 period, reflecting increased revenue levels, the absence of significant restructuring charges in the current period as compared to the prior period, and the benefit of cost containment efforts and productivity savings in the current period, which more than offset increased incentive compensation costs.

Interest expense, net, for the third quarter of 2010 was approximately the same as interest expense, net for the same quarter of last year, while interest expense, net, for the first nine months of 2010 increased by $6.9 million compared to the respective 2009 period. In the nine month period, the increase was primarily due to reduced interest income resulting from lower interest rates on short term investment balances. Interest income declined by $7.2 million in the nine months ended September 30, 2010 compared to the same period of 2009.

Other expense (income), net for the quarter and year to date periods ending September 30, 2010 primarily reflects the impact of net losses from foreign exchange fluctuations on assets and liabilities denominated in currencies other than the Company’s functional currency, coupled with a $4.3 million loss on extinguishment of debt, offset in part by other miscellaneous non-operating gains. Other expense (income), net for the quarter and year to date periods ending September 30, 2009 also reflects the impact of net losses from foreign exchange fluctuations on assets and liabilities denominated in currencies other than the Company’s functional currency, while the nine month period includes a favorable insurance settlement realized in the first quarter of 2009.

The effective tax rates (“ETR”)for continuing operations for the three and nine months ended September 30, 2010 were 14.8% and 24.2%, compared to the prior period rates of 30.5% and 23.2%, respectively. The comparable three and nine month periods in both years were impacted by discrete items. During the third quarter of 2010, discrete items totaling $28.1 million, arising from settlements with U.S. taxing authorities and resolution of a foreign tax matter, favorably impacted the Company’s tax rates for the three and nine months ended September 30, 2010. A $28.4 million tax settlement in the second quarter of 2009 favorably impacted the ETR for the nine month year to date period ended September 30, 2009. Excluding these items, the effective tax rates for the three and nine months ended September 30, 2010 were 25.5% and 28.3% compared to the prior year rates of 30.5% and 31.3%, respectively, the variance of which is primarily attributed to the mix of non-U.S. earnings in low-tax jurisdictions. With the exception of contested matters, for which an estimate cannot be made due to uncertainties, the Company believes it is possible that additional uncertain tax positions will be settled in the fourth quarter of 2010.

Earnings from continuing operations for the third quarter increased 107.2% to $222.8 million, or $1.18 diluted EPS (“EPS”), compared to $107.5 million, or $0.58 diluted EPS, in the prior year third quarter. The increase was primarily a result of end-market improvements across all of the Company’s segments driving increased sales volume, coupled with the third quarter tax benefit noted above, the absence of significant restructuring charges in the current period and the benefits of restructuring initiatives from the prior year. Earnings from continuing operations for the first nine months of 2010 increased 91.5% to $516.1 million, or $2.73 diluted EPS, compared to $269.5 million, or $1.45 diluted EPS, in the prior year period primarily driven by the same factors.

Discontinued operations for the third quarter of 2010 generated a gain of $1.0 million, or $0.01 EPS, compared to a third quarter 2009 loss of $0.6 million. The 2010 gain related primarily to the benefit from a favorable tax settlement during the quarter, offset in part by other expense and accrual adjustments relating to previously sold businesses. The 2009 loss related primarily to a loss from operations of $0.4 million, net of tax, related to a business held for sale at the time.

Loss from discontinued operations for the first nine months of 2010 was $14.4 million, or $0.08 EPS, compared to a loss of $12.1 million, or $0.06 EPS, in the comparable 2009 period. The 2010 loss related primarily to the loss generated by the sale of a business that had been previously reflected as a discontinued operation. The 2009 loss related primarily to adjustments to the fair value of a business held for sale at that time.

Severance and Other Restructuring Reserves

From time to time, the Company will initiate various restructuring programs at its operating companies. During 2009, the Company substantially increased the amount of its restructuring efforts in response to the significant decline in global economic activity. The Company does not expect to incur significant restructuring costs during the remainder of 2010 and expects the restructuring activities taken during the prior year to yield incremental savings of approximately $30 to $40 million in 2010.

At September 30, 2010 and December 31, 2009 the Company had reserves related to severance and other restructuring activities of $8.4 million and $16.8 million, respectively. During the third quarter of 2010, the Company recorded $3.4 million in additional charges, primarily related to a facility closure in the Engineered Systems segment, and made $2.6 million in payments and other adjustments related to these reserves. For the quarter, $2.0 million and $1.4 million of the restructuring charges were recorded in cost of goods and services and selling and administrative expenses, respectively, in the Unaudited Condensed Consolidated Statement of Operations.

During the first nine months of 2010, the Company recorded $5.6 million in additional charges and made $14.0 million in payments and other adjustments related to these reserves. For the first nine months, $2.1 million and $3.5 million of

restructuring charges were recorded in cost of goods and services and selling and administrative expenses, respectively, in the Unaudited Condensed Consolidated Statement of Operations.

The following table details the restructuring charges incurred by segment:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Industrial Products		$	309			$	3,190			$	1,105			$	15,287
Engineered Systems			2,034				3,210				2,460				14,846
Fluid Management			719				3,545				1,487				7,849
Electronic Technologies			292				(1,341	)			550				24,249
Total		$	3,354			$	8,604			$	5,602			$	62,231

Current Economic Environment

The indications of a global economic recovery were first seen in third quarter 2009 bookings. This trend continued through the fourth quarter and the first nine months of 2010 has continued to show improvements in bookings and backlog. The structural changes made over the last few years, including becoming less dependent on capital goods markets and having greater recurring revenue, together with improved working capital management, strong pricing discipline and general improvements across most end-markets, are expected to result in 2010 revenue, earnings and margin improvements as compared to 2009. As discussed in the Liquidity and Capital Resources section, the Company believes that existing sources of liquidity are adequate to meet anticipated funding needs.

2010 Outlook

Dover anticipates that 2010 revenue will increase 20% to 21% above 2009 levels. The Company anticipates full year organic growth to be in the range of 16.5% to 17.5% (inclusive of foreign currency impact) and acquisition related growth to be approximately 3.5% for transactions completed in 2009 and 2010. Based on these assumptions, Dover has projected that its continuing diluted earnings per share for 2010 will be in the range of $3.50 to $3.55, inclusive of the third quarter tax benefit. If the global or domestic economic conditions accelerate or deteriorate, Dover’s operating results for 2010 could be materially different than currently projected.

SEGMENT RESULTS OF OPERATIONS

Industrial Products

		Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands)		2010				2009				% Change				2010				2009				% Change
Revenue
Material Handling		$	220,997			$	154,238				43	%		$	624,344			$	494,463				26	%
Mobile Equipment			250,664				242,011				4	%			739,326				719,824				3	%
Eliminations			(453	)			(209	)							(1,278	)			(508	)
		$	471,208			$	396,040				19	%		$	1,362,392			$	1,213,779				12	%
Segment earnings		$	59,473			$	38,119				56	%		$	172,147			$	98,084				76	%
Operating margin			12.6	%			9.6	%							12.6	%			8.1	%
Acquisition related depreciation and amortization expense*		$	7,774			$	7,770				0	%		$	22,969			$	23,866				-4	%
Bookings
Material Handling		$	222,961			$	162,759				37	%		$	650,846			$	407,326				60	%
Mobile Equipment			233,731				191,539				22	%			753,746				648,034				16	%
Eliminations			(444	)			(337	)							(1,154	)			(561	)
		$	456,248			$	353,961				29	%		$	1,403,438			$	1,054,799				33	%
Backlog
Material Handling														$	142,959			$	102,146				40	%
Mobile Equipment															344,160				318,496				8	%
Eliminations															(248	)			(170	)
														$	486,871			$	420,472				16	%