Dover Corporation - 10-Q quarterly report FY

 

(Exact name of registrant as specified in its charter)

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

Large accelerated filerþ      Accelerated filer o      Non-accelerated filer o

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

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

See Notes to Condensed Consolidated Financial Statements

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

See Notes to Condensed Consolidated Financial Statements

See Notes to Condensed Consolidated Financial Statements

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

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

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

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

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

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

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

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

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

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

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

purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred on the date indicated, or which may result in the future.

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

The following table displays the components of inventory:

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

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

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

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

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

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

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

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

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

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

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

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

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.

The Company and certain of its subsidiaries are also parties to a number of other legal proceedings incidental to their businesses. These proceedings primarily involve claims by private parties alleging injury arising out of use of the Company’s products, exposure to hazardous substances, patent infringement, employment matters and commercial disputes. Management and legal counsel periodically review the probable outcome of such proceedings, the costs and expenses reasonably expected to be incurred, the availability and extent of insurance coverage, and established reserves. While it is not possible at this time to predict the outcome of these legal actions or any need for additional reserves, in the opinion of management, based on these reviews, it is very unlikely that the disposition of the lawsuits and the other matters mentioned above will have a material adverse effect on the financial position, results of operations, cash flows or competitive position of the Company.

Estimated warranty program claims are provided for at the time of sale. Amounts provided for are based on historical costs and adjusted new claims. The changes in the carrying amount of product warranties through June 30, 2007 and 2006 are as follows:

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

Comprehensive earnings were as follows:

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

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

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

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

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.

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

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

Cash and cash equivalents of $409.9 million at June 30, 2007 increased from the December 31, 2006 balance of $373.6 million. Cash and cash equivalents were primarily invested in highly liquid investment grade money market instruments with a maturity of 90 days or less.

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

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

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

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

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

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

In addition to measuring its cash flow generation and usage based upon the operating, investing and financing classifications included in the Condensed Consolidated Statements of Cash Flows, the Company also measures free cash flow (a non-GAAP measure). Management believes that free cash flow is an important measure of operating performance because it provides both management and investors a measurement of cash generated from operations that is available to fund acquisitions, pay dividends, repay debt and repurchase Dover’s common stock. Dover’s free cash flow for the six months ended June 30, 2007 increased $23.4 million compared to the prior year period. The increase reflected higher earnings from the Company’s operations, partially offset by an increase in capital expenditures.

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

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:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Resources’ revenue and earnings increases were due to the continued strong performance of the Oil and Gas Equipment group and the August 2006 acquisition of Paladin. The operating margin declined due to the Paladin acquisition and decreased demand in construction and automotive markets. The segment had organic revenue growth of 6% during the quarter, with the remainder primarily from acquisitions.

Oil and Gas Equipment continued to lead the group’s core business growth with revenue and earnings increases of 13% and 9%, respectively, over the prior year second quarter. As in the first quarter of 2007, Domestic drilling activities continued at a strong pace with Canadian drilling moderating. Bookings increased by 11% and backlog increased 43%.

Material Handling revenue and earnings increased 61% and 51%, respectively, when compared to the prior year second quarter. Substantially all of the revenue and earnings increase was due to the August 2006 acquisition of Paladin. Strength in the heavy winch business was offset by the continued slowdown in the construction and automotive markets. Bookings increased 58% while the backlog grew 26%.

Fluid Solutions revenue and earnings increased 10% and 6%, respectively, compared to the prior year second quarter with strong demand in chemical and rail markets. Although margins were modestly lower, the group experienced general strength in all markets that it serves. Bookings increased 6% and backlog increased 16%.

For the six months ended June 30, 2007, the increase in Resources’ revenue and earnings was driven by Oil and Gas Equipment, which had increases of 17% and 12%, respectively, and bookings increased 14%. Material Handling revenue increased 59% while earnings grew 41% and bookings increased 53%. Fluid Solutions revenue increased 9% while earnings grew 4% and bookings increased 8%.