dover DOV-Transcript-2007-01-31T13-00

FINAL TRANSCRIPT

DOV - Q4 2006 Dover Corporation Earnings Conference Call
Event Date/Time: Jan. 31. 2007 / 8:00AM ET

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Jan. 31. 2007 / 8:00AM, DOV - Q4 2006 Dover Corporation Earnings Conference Call

CORPORATE PARTICIPANTS
Paul Goldberg
Dover Corp. - Treasurer, IR Director
Ron Hoffman
Dover Corp. - President, CEO
Rob Kuhbach
Dover Corp. - VP Finance, CFO

CONFERENCE CALL PARTICIPANTS
Shannon O'Callaghan
Lehman Brothers - Analyst
Steve Tusa
JPMorgan - Analyst
Ned Armstrong
Friedman Billings Ramsey & Co - Analyst
Jack Kelly
Goldman Sachs - Analyst
John Inch
Merrill Lynch - Analyst
Robert McCarthy
Robert W. Baird & Co. - Analyst

PRESENTATION
Operator
Good morning and welcome to the fourth-quarter and full fiscal year 2006 Dover Corporation earnings conference call. With
us today are Ron Hoffman, President and Chief Executive Officer of Dover Corporation, and Rob Kuhbach, Vice President of
Finance and Chief Financial Officer of Dover Corporation, and Paul Goldberg, Treasurer and Director of Investor Relations of
Dover Corporation.

After the speakers' opening remarks, there will be a question-and-answer period. (OPERATOR INSTRUCTIONS). As a reminder,
ladies and gentlemen, this conference call is being recorded and your participation implies consent to our recording of this call.
If you do not agree with these terms, please disconnect at this time. Thank you.

I would now like to turn the call over to Mr. Paul Goldberg. Mr. Goldberg, please go ahead, sir.

Paul Goldberg - Dover Corp. - Treasurer, IR Director
Thank you, Jackie. Good morning and welcome to Dover's fourth-quarter earnings call. With me today are Ron Hoffman, Dover's
President and Chief Executive Officer, and Rob Kuhbach, Dover's VP of Finance and CFO. Today's call will begin with some
comments from Ron and Rob on Dover's operating and financial performance. We will then open the call up to questions. In
the interest of time, we kindly ask that you limit your questions to one or two, with a follow-up.

Please note that our current earnings release and associated presentation can be found on our Web site,
www.DoverCorporation.com. This call will be available for playback through 5 PM February 7, and the audio portion of this call

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will be archived on our Web site for three months. The replay telephone number is 877-519-4471. When accessing the playback,
you will need to supply the following reservation code--8293040.

Before we get started, I'd like to remind everyone that our comments today, which are intended to supplement your understanding
of Dover, may contain certain forward-looking statements that are inherently subject to uncertainties. We caution everyone to
be guided in their analysis of Dover Corporation by referring to our Form 10-Q for a list of factors that could cause our results
to differ from those anticipated in any such forward-looking statements. Also, we undertake no obligation to publicly update
or revise any forward-looking statements, except as required by law. We would also direct your attention to our Web site, where
considerably more information can be found.

With that, I'd like to turn this call over to Ron.

Ron Hoffman - Dover Corp. - President, CEO
Thanks, Paul. Good morning, everyone. Thank you for joining today's conference call. We apologize for a little bit of technical
glitches. We started the call early. Hopefully everyone can hear us with great clarity.

I'm pleased to report that Dover posted the best fourth-quarter results in its history and for the year set new records for earnings
per share, sales, operating earnings, bookings and backlog. We also made significant progress towards meeting each of our
Dover metric goals.

As shown on slides 3 and 4, 2006 was a great year for Dover with record revenue of over $6.5 billion, up 22%, and earnings from
continuing operations of $603.3 million, up 35%. Earnings per share from continuing operations were a record $2.94, up 34%
over the prior year, easily surpassing Dover's all-time record achieved in 2000. Five of the six subsidiaries posted double-digit
earnings growth for the year. In addition to posting a 34% improvement in earnings per share, Dover also increased its quarterly
dividend by 8.8%, maintaining its 51-year record of continuous dividend improvement, the fourth-longest streak on the New
York Stock Exchange.

As announced this morning and shown on Slide 5, Dover recorded its strongest fourth quarter, posting record revenue of $1.7
billion, up 20% and generating earnings from continuing operations of $156.1 million, up 28%, resulting in a $0.76 earnings
per share, up 27% relative to last year. Rob will give you greater detail on the operational accomplishments later in the call.

These successful results were driven by a number of strategic initiatives that we set for ourselves at the beginning of 2006. The
five key areas of strategic focus which are highlighted on Slide 6 were, first, to complete the portfolio rationalization process
begun in 2005; second, to drive operational improvements through our emphasis on quot;PerformanceCOUNTSquot; and the five Dover
metrics; third, to key in on operating strategies that would drive organic growth; fourth, to add new value-creating acquisitions;
and last but highly important, to continue developing the pool of talented employees to fuel Dover's long-term success. We
believe that we have significantly delivered on each of these strategic initiatives.

Our subsidiary leader successfully completed the evaluation of our many businesses and made huge strides in revitalizing
Dover's portfolio of operating companies. During 2006, 12 businesses were discontinued and 8 were sold. Five of the discontinued
companies were highly volatile businesses in the technology segment. These companies were predominantly capital goods
businesses serving lower-growth, narrow niche markets with limited recurring revenue opportunities and in many cases were
not capable of sustaining Dover-like performance. These 12 companies represented annualized sales of $780 million at 4%
margins. Dover's portfolio is now more focused on growth platforms that can deliver a higher and more sustainable level of
performance during the inevitable swings in economic cycles. Even though we consider this portfolio evaluation as significantly
accomplished, the process will remain an aspect of each subsidiary leader's responsibility.


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Over the past two years, as shown on Slide 7, the portfolio review process discontinued 20 companies with annualized revenue
of $1.1 billion and margins of about 5%. 14 of those companies have been sold, and the remaining 6 are expected to be sold
in 2007. Those sales netted $605 million of cash that was used to support the capital needs of our companies and to fuel our
acquisition growth. We are confident that this process has significantly improved the quality of our portfolio and has focused
our energies on the future growth platforms of Dover.

Our quot;PerformanceCOUNTSquot; initiatives, driven by the five Dover Metrics, have produced substantial and sustainable improvements
in Dover's operating companies. As highlighted on Slide 8, Dover registered improvements in all five metrics. For the year, our
operating margins improved 110 basis points, annual earnings growth was 35%, inventory turns improved to 6.5, and working
capital as a percent of sales declined by 180 basis points to 18.9%, and the ROI of our operating companies rose to 27.5%.
Currently, 62% of Dover's revenue is at or above our 15% margin metric and 36% of our revenue is generated in companies at
or above the eight inventory turn target. These improvements are moving Dover to true world-class performance. The margin
improvement and working capital focus helped generate the cash flow in 2006 of $690 million or 11% of sales.

While strength in many of our served markets was helpful, we are confident that the focus on internal excellence through our
quot;PerformanceCOUNTSquot; program has permeated our operating companies and will continue to drive improvements going
forward.

2006 was a very active and successful year in adding new value-creating acquisitions. Dover invested a record $1.1 billion on
seven new acquisitions that reinforced our commitment to building key growth platforms. In particular, Markem, which closed
the fourth quarter, and Paladin, our two largest acquisitions, will enhance our product identification and material-handling
platforms. Both of these companies bring significant product development capabilities, market leadership, recurring revenue
opportunities, and the scale to expand globally, all of which should significantly enhance Dover's future.

We also added new companies with expanded products and technology to our electronic test, ATM, screenprinting, and
fluid-handling businesses. For the year, acquisitions added 8% of our revenue growth and after acquisition accounting, 6% of
earnings growth. Even with the record level of acquisition spending, Dover's return on invested capital rose 110 basis points
to 14.2%.

As highlighted on Slide 9, Dover has invested $2.2 billion in 17 acquisitions over the past two years that add approximately $1.2
billion of sales at Dover-like margins. We have been focusing our efforts on larger companies with expanded product portfolios
and unique technologies that serve a diverse base of customers and end markets.

Looking forward, the acquisition pipeline remains strong with considerable opportunities for additional growth. Acquisition
spending is targeted at roughly 10% of revenue, but with our strong cash flow and available debt capacity, we are prepared to
step up our spending if a significant value-creating opportunity to complement our growth platforms arises.

As shown on Slide 10, Dover recorded its fifth consecutive quarter with double-digit organic growth. Fourth-quarter organic
growth continued strong at 10% of revenues. For the full year, our organic growth rate was 14%, significantly above our industrial
peers and a testament to the strategic initiatives of our operating companies and their continual focus on new product
development, end-market expansion and customer-service initiatives.

In support of our organic growth initiative, a number of our companies expanded their operations in Asia, Mexico and Eastern
Europe to serve new customers while seeking venues for competitive cost advantage. We are very proud of our double digit
organic growth results and will continue to strategically focus on this key growth vector.

Succession planning and upgrading our talent pool at all levels of the organization is another key focus. We believe the
autonomous Dover culture is very unique and attracting and developing talent to sustain these traits is vitally important. Many
of our business leaders have developed focused programs to prepare upcoming talent for future growth opportunities. I am


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pleased to see the positive results of these development efforts, as well as the increased level of talent that joined the Company
over the past year.

Looking ahead, we anticipate building upon the record performance of 2006. The foundation of excellence set by our
quot;PerformanceCOUNTSquot; program, the revitalized portfolio of operating companies, as well as the contributions from our new
acquisition should deliver another record-setting year. As always, we will face challenges as we try to achieve these ambitious
goals.

Entering the year, our backlog is up 21% over the prior year, and many of our groups, such as Product Identification, Process
Equipment, and Oil and Gas Equipment, continue to exhibit strength and participate in healthy end markets. We expect some
early moderation in the end markets related to construction, food services, and our electronics businesses. As the year progresses,
we anticipate an economic climate which will enable Dover to deliver another year of strong results and increased shareholder
value. In 2007, we will continue to refine our focus on growth platforms. Our strategic emphasis on world-class performance
standards, internal growth initiatives, and focusing on larger acquisitions is driving a new era of growth and improved results
at Dover.

In closing, I want to thank our 33,000 employees around the world whose tireless efforts drove these group results. Their
dedication to attainment of the five Dover metrics and commitment to quot;PerformanceCOUNTSquot; is strongly recognized and is
driving increased value for our shareholders. I am very proud of the 2006 accomplishments, and I am confident that our employees
are ready to meet the challenges of 2007.

With that, I will turn it over to Rob Kuhbach for an overview of our subsidiary performance and financial highlights, before we
open up the call to your questions. Rob?

Rob Kuhbach - Dover Corp. - VP Finance, CFO
Thanks, Ron.

Overall, Dover's aggregate segment operating results for the year were excellent. Relative to last year, five of the six subsidiaries
posted double-digit earnings gains and all had double-digit margins for the first time in several years. Operating margins
improved 110 basis points to 14.9%, the highest level since 1996, which drove operating leverage for the year to 20%.

Resources was the overall earnings leader with Electronics posting the largest earnings gain, generating the biggest improvement
in segment margins of 500 basis points. Electronics and Industries posted sequential quarterly improvements in sales, earnings
and margin all year.

Technologies' newly focused portfolio of businesses posted a 260 basis point improvement in margins. While the majority of
the year-over-year earnings growth came from the Electronic Components, Automation and Measurement, Oil and Gas Equipment
and Product Identification groups, the earnings improvement was very broad-based with gains in 11 of our 13 market groups.

Turning to each segment, on Slide 11, we show the results for Dover Resources, where sales, earnings and margins were all-time
leaders at Dover. In fact, Resources set records in revenue, earnings, margins, bookings, backlog, capital investment and cash
flow. Driving these results for the quarter and the year was the Oil and Gas group, whose business has been and continues to
remain strong. We believe that, despite near-term moderation in energy prices, the long-term prospects for this market are
very positive.

Two other groups in Resources, Fluid Solutions and Material Handling, had good years and quarters, although softness in retail
fueling, automotive and light construction, some operational efficiency issues, as well as the short-term impact of the Paladin
acquisition, hurt margins, earnings trend and operating leverage later in the year. In 2007, the oil and gas market should continue


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to be robust, and 2006 capital investment should drive further earnings growth and leverage in this market. The automotive
and light construction markets are expected to be flat and with full-year improved performance from Paladin, the rest of
Resources should show improvement over 2006.

Slide 12 shows Dover Technologies, which was our second-most profitable segment in 2006, showing great leverage, strong
year-over-year sales, earnings and margin growth. Within Technologies, Automation and Measurement had a superb year.
Although its results moderated downward through the quarter, margins held up very well. Fourth-quarter booking levels and
year-end backlog ended up flat with the prior year, reflecting conditions in the semiconductor industry and seasonal electronics
industry trends. Second half 2006 back-end semiconductor bookings suggest a moderating first quarter of 2007 compared to
2006.

The Product Identification group had a great year with sequential improvements all year in sales, earnings and margins, including
the late-year Markem acquisition which had a negligible impact on 2006 results. Overall, markets remain strong and the prospects
for 2007 are good, given the strong organic growth in 2006. That said, significant Markem integration efforts will likely affect
earnings and margin levels during the year.

Slide 13 shows the results of Dover Electronics, which had a great year with sequential improvements in sales, earnings and
margins all year, largely reflecting strong growth at all of the components companies, particularly those serving the frequency
controls and micro acoustics markets. Given their relative size, the commercial equipment companies made little contribution
to year-over-year improvement, as they had a mixed year with modest revenue growth being more than offset by earnings
weakness in the ATM markets. For 2007, components companies are expected to continue to show further growth in their
markets and improvements in the commercial equipment companies should be additive.

Slide 14 shows the Industries' results, which was the fourth highest quarterly earnings contributor for 2006, reflecting steady
improvement sequentially all year in sales, earnings and margins. For both the quarter and the year, strong energy, military and
transport markets were the major factors. These same three end markets are also expected to drive Industries' growth in 2007,
despite some anticipated short-term slowdown in the refuse market.

Slide 15 shows Dover Systems, which had a solid year, driven by the Foodservice Equipment companies which dominate this
segment's results. Overall, both Food Equipment and Packaging Equipment groups had good years, subject to the customary
seasonality of demand and delivery which can affect this segment on a quarterly basis, as happened again in this year's fourth
quarter. While commodity prices and short-term capacity constraints had some impact on this segment during the latter half
of the year, corrective actions, together with continued strength in key served markets, suggest that 2007 should be another
year of growth and improved performance.

Slide 16 highlights Dover's Diversified results which had modest improvements for the year and lack of leverage for the fourth
quarter, which overall reflects very strong sales and earnings growth in the process equipment companies serving the broad
heat exchanger and energy markets, offset by challenges in the industrial equipment companies, particularly those connected
to the Aerospace, MRO and construction agricultural markets. With a record backlog, 2007 is expected to show meaningful
improvement as 2006 internal initiatives bear fruit, Industrial Equipment companies recover, and Process Equipment companies
continue to expand.

Here's some additional other key corporate data as covered on Slide 17. For the fourth quarter, the impact of Paladin and Markem
acquisitions, including short-term acquisition accounting, increased AD&A and [imputed] interest on purchase price was about
$0.03 negative to overall earnings. For the first quarter of 2007, we expect that impact to be about $0.02 negative and for the
full year, the impact is expected to be neutral.

2006 capital expenditures were $195 million, up 49% or $64 million from the prior year, reflecting significant investment in Oil
and Gas and Electronic Components groups.


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Turning to our capitalization, Dover ended the year at a net debt-to-total capitalization of 26.8%, down from last year's level of
28.9%. This largely reflects strong cash flow and divestiture cash proceeds resulting in a modest increase in total debt.

Our full-year tax rate was 26.7%, consistent with the last two years and reflecting some late-year adjustments for federal tax
credit programs just enacted, as well as favorable mix of foreign and domestic income. The fourth-quarter rate was 22.6% versus
last year's fourth-quarter rate of 25.6%. We expect our 2007 rate to be in the range of 28%.

With this overview, let me turn the call back to Paul for questions.

Paul Goldberg - Dover Corp. - Treasurer, IR Director
Thank you very much, Ron. With that, we'd like to turn to Jackie who can queue up the questions.

QUESTIONS AND ANSWERS
Operator
Thank you. (OPERATOR INSTRUCTIONS). Steve Tusa, JPMorgan.

Steve Tusa - JPMorgan - Analyst
Good morning. Just first a quick question on Resources--you know, I noticed kind of a sequential revenue increase was about
in line with the contribution from Paladin, but earnings were flat. I'm just wondering if you could maybe discuss in more detail
what the impact from these acquisition step-up costs was in the quarter.

Well, I think, in Resources, we anticipate that there were probably at least a couple hundred basis points of rate--of margin
impact, almost 300 basis points of margin impact because of the Paladin acquisition. So you would have to look at their overall
margins as actually being improved in the fourth quarter, absent the Paladin acquisition.

Okay. Are these one-time in nature or is that just a mix from the Paladin acquisition?

I think there are a couple things. One, I think some of it is AD&A, short-term, because we bought them late in August, so most
of the impact from that was in the fourth quarter. Some of it was acquisition write-offs, which were short-term. Then the fact is
their market tended to soften as the quarter wore on because of the light construction market slowdown. So it was really a
combination of acquisition accounting and to some degree their market condition.

I think, yes, Steve, I think the slowdown in the light equipment, which is one of t heir nice mix areas, was impacting. Also, they're
moving some of their production to Mexico and they are taking this cost on right at the front of the acquisition. It's a part of


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the integration we anticipated in buying the company, and we will see that probably continue through the first quarter of next
year. Certainly, the acquisition accounting issues are now behind us.

I know you guys are longer-term investors but you know, was this slowdown expected when you bought this business? You
know, how does this look throughout '07?

Well, we certainly were aware that there were signs on the horizon of a slowdown in housing starts that would affect light
construction. At point in time, we certainly considered that in our valuation as well as our implementation plans, so I don't think
it was a surprise, Steve. You know, how deep this is is still I think open for discussion, but I think, historically, what we've proven
with Paladin or what Paladin has proven in their history, I should say, is that typically they don't see the swings to the full extent
that the construction market might soften. They tend to be a recurring revenue spend, where you are buying either buckets or
blades or mower decks or all of the various specialty devices they make.

I think, if you look at Paladin in general, certainly light construction was down. Some of that is filtering into heavy construction
and some of the OEMs tend to back off in that area at this point in time. But their demolition business is staying very strong.
The utility business is strong. In fact, I think their utility business was at record levels in terms of bookings which will flow into
the first quarter, so again, a very broad-based company. Yes, we bought it right as the light construction was down the again,
looking at it long-term, we are very comfortable with this business where it's going. We think there's great integration
opportunities, and we think you'll see that reflected in their performance throughout 2007.

Okay, so using the fourth-quarter margin as kind of a baseline as-reported is probably the wrong way to think about it; it's
probably a little bit higher when we think about the 2007 outlook in margin?

Absolutely.

Okay. Lastly just as a follow-up, you know, you talked about moderation in the first quarter. Does that mean--I don't quite
understand. Does that mean--obviously a moderation in growth, but does that mean an absolute moderation relative to the
fourth quarter? How should we think about you talking about a first-quarter moderation?

Well, I think, Steve, as we end the year, we always have some seasonality issues. We normally see the Electronics business tend
to peak in the latter part of the year; it rolls into the first quarter. I think it seeks what its new level is going to be for '07, and in
most cases, you have to get past the Chinese New Year to get a good read on what's going to happen in your Asian market,
which is the driver of those businesses. So, I think that's still a little bit unknown. There's spots that tell us, from some of the
bookings in the A&M group, that there's a little bit of strength left in the market, but I would say, overall, we're waiting on the
semiconductor side to weigh in and we just don't have a solid read on that yet.


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I think also, you look at seasonality as it affects the telecom sector and also the food services sector--very traditional what Dover
has seen these last few years, and typically those are followed by pretty strong order periods in the first quarter. We're just
waiting to see all that kick in.

Okay, so it's basically seasonality plus maybe a little bit of incremental softening in your end markets, so we can go back and
look at first-quarter over fourth-quarter performance in the last few years and kind of figure out what you mean by that?

Yes, I think the related construction-related businesses which impact, again, the material handling sector of Resources is certainly
a bit on a decline, and I think that has been the impact. I think, ironically, you know, a question might beg about the performance
of the oil patch when you consider that we've seen oil prices slow, but our activity levels in that arena stay very strong, robust,
a little bit of slowdown perhaps in Canada but not really affecting our businesses yet, just seeing the pace of activity slow there
a little.

So still up nicely over last year but just down sequentially?

Absolutely. I think the pattern that you saw at the end of '04 to '05, where the first quarter was below fourth quarter of the prior
year, is what we're more likely to see than what happened from '05 to '06 where the first quarter exceeded the end of '05.

Okay. Okay, great. That's very helpful. That should be your toughest comparison of the year I would think.

We are hopeful that's the case.

Looks pretty good to me. Thanks a lot.

Operator
Ned Armstrong, FBR & Co.


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Ned Armstrong - Friedman Billings Ramsey & Co - Analyst
Thank you, good morning. You alluded to the growth platforms that you [attacked] the acquisition over '05 and '06, and it was
Oil and Gas, Electronic Test, Product ID, Material Handling, Electronic Components. Are those platforms continuing to be your
main targets? Is there any shift of emphasis within those platforms as far as what you're targeting?

Certainly, Ned, we've exhibited, through the last two years, that's where we've been spending the lion's share of our acquisition
dollars, building those. Some of that is not only our focus on the sectors but just the properties that happen to come available.
We were able to acquire Markem certainly at the end of the fourth quarter, which I think was an area of focus for us to exhibit
strength in the product ID market that we feel has better-than-normal growth rates. What we think now that has established
us with probably the broadest portfolio of product ID equipment in the marketplace.

We would also say that certainly oil and gas--there's been some technology opportunities come available there that we think
strengthen our posture in that way. I think, as we look at Dover in total, we spend a lot of time now evaluating our portfolio to
define where are the businesses that we distinguish ourselves from a performance, from a market-coverage standpoint,
sustainability of earnings. So I think we are becoming a little bit more focused company. We're not just looking at everything
that comes over the transom; we're looking at those things that we think we can identify value and in areas that we truly
understand the market well.

You know, I think you'll see, over the next quarter or two, that we're going to continue to be focused in the areas that Ron
identified in his Slide 9 because I think those are areas where, as he said, we think we've developed some expertise and some
in-depth understanding of those end markets and customers to where we can continue to get some leverage out of expanding
our presence in those spaces.

So I can interpret your acquisition strategy as being really capitalizing on where you believe you're strong, so maybe more
focused than it has been in the past?

Well, I think yes, Ned, that is the right way to summarize it. However, we always hold the caveat that if there's a new opportunity
that comes about that takes us into a new market that we think will create shareholder value and give us another growth vector,
we will certainly evaluate that also. But we are trying to become much more focused in our acquisition spending. Again, because
we're doing larger deals. We have to understand those deals much better and we need to know the end-market impact and be
able to kind of track what we think the trends are, long-term.

Okay, good. Thank you.

Operator
Jack Kelly, Goldman Sachs.


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Jack Kelly - Goldman Sachs - Analyst
Good morning, Ron. Just one broad question, Ron, in terms of the acquisitions that were completed in '06 and the dilutive
impact they might have had. Can you just give us a feel for what the dilution was in aggregate for '06, for the '06 deals and what
the swing factor might be in '07? So, they diluted--making up numbers, they diluted by $0.06 in '06 and they're going to contribute
$0.15 in '07.

I think, if you're talking about the acquisitions completed in '05 and their impact on '06, we can talk about that. I think if you're
talking about the ones we completed in '06, you know, I commented on those, Jack. We basically feel that the ones, really Paladin
and Markem, are going to be relatively neutral in '07. I think we obviously benefited from Knowles and Kohler in '06 to the extent
of about I think roughly $0.08 to $0.10 is what we indicated and we probably achieved that all in for '06. I think we're going to
continue to see contribution from the '05 transactions in '07, and I think the '06 transactions basically will be neutral to '07.

After being diluted by $0.06 in '06?

Well, I think we estimated the dilution in '06 at about $0.04 for the quarter. For the year, actually, for the whole year, I think the
dilution impact was about--most of that was in the fourth quarter but I would say that the whole-year impact was $0.04 in the
third quarter, the fourth quarter was $0.03 of the $0.04.

Is that clear?

Yes, so we are going from -4 to a push in ]07?

Right.

I think the contributions that we saw so fast coming from Knowles as we look to integrate Markem and Paladin, certainly with
Paladin, we acquired a company that really was kind of a roll-up of a number of acquisitions and the integration work really
hadn't been completed, so we will absorb some costs to finish that integration move during the course of the year to optimize
their performance. And really the same applies with Markem. Again, we bought a wonderful company there, but we have a
significant play in Product ID with Imaje and the other companies we own. We have to look for, let's say, the Best Practices or
best ideas in the group. That will take some time to ferret through that. That is in-process currently but there will be some costs
and some transition expenses in that sector until we get that optimized.


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Just on Foodservice, in the fourth quarter, revenues were up 18%. I assume that reflects kind of a rebound for Hill Phoenix,
which was I think down in the third quarter. But then in your comments, Ron, in the press release talking about the first quarter,
you talked about softness in end markets and Foodservice was cited. So is this another--going to be another--the first quarter
is going to be another lumpy quarter for Hill Phoenix after recovering in the fourth quarter?

Well, I think, Jack, we normally see a change of seasonality that impacts Hill Phoenix as to new store constructions, rebuilds of
existing stores, so I think the impact of that always takes some time to be defined. I know that Hill Phoenix is talking with a
number of their customers about their '07 requirements. They're getting greater clarity on that I think weekly in those dialogues.
I think also some of their new technology of sustainability is really catching a lot attention. Some of their new CO2 capabilities
as well as their second-nature coolant. In some cases, I think some of the customers are deciding if they want to invest in the
new technology versus traditional technology, and that's a bit of a valuation process. We're pretty excited about those new
technologies and what they're going to do for Hill Phoenix's performance in the marketplace.

I think it's safe to say, Jack, that our fourth quarter this year in that space, food equipment, was higher than last year's fourth
quarter. We ended up the year not only on a revenue basis but on an earnings basis, we got some leverage in that sector. We
continue to think that's going to play out, but the first quarter in that business generally is always softer than the second and
the third, which are traditionally very strong. So in fact the normal pattern is that there is a pickup. We ended the year, I think,
with a higher backlog than we did a year ago. So we think that portends to a decent quarter. But you're going to see most of
the improvement, most of the normal gains in that whole space really show up strongly in the second and third quarters. So
this is nothing unusual as far as we are concerned.

That's what I was trying to pick up on. And so the comment in the press release is a seasonal one, but you mean year-over-year--

Correct.

--we're dealing with same seasonality, so year-over-year Hill Phoenix should be up but just don't expect the kind of performance
that we maybe saw in the fourth quarter, which is probably a rebound-kind of quarter.

Right, and I think there are some other initiatives that we were taking late last year that we're going to see some additional
benefit of, probably more again seasonally in the second and third, having to do with commodity prices and frankly gaining
some traction in our markets where we think appropriate to recover that kind of issue.


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Actually, Jack, we never welcome a pullback in business but I think it has allowed Hill Phoenix also to complete some construction
and rearrange them in their plant to get ready for the next business upturn. They had been delaying that most of the year
because they were so busy they couldn't finish their rearrangement of the new plant expansion in Virginia. So I think it's kind
of good that they are able to absorb some of that now so they can get ready for the next layer of capacity.

I mean, keep in mind, they had a huge increase in revenue, well over 20% year-over-year, from '05 to '06. That inherently led to
some challenges in terms of the capacity and meeting those customer demands. I think it has given them an opportunity to
kind of catch their breath and be ready to roll on a bigger scale for '07.

Just final question, Ron, in terms of your metrics with regard to O/I margin, you're basically right there, meaning 14.9 versus the
15. You know, as you think about continuing to raise the bar, you know, we expect some time during the first half of '07 for you
to increase that metric from the 15% level?

Thanks, Jack, for acknowledging the 14.9 is right near 15. That box should have been colored green but sometimes we are very
succinct.

Anyhow, I guess, as I look at that, Jack, you know, all of our companies don't see 15% as a stopping point. Our companies will
always optimize their performance. I think that we still have companies that the 15% is a target they're working towards. Those
that are at 15% are not stopping there; they are continuing to redouble their efforts and I think we've seen that across the board.

Will we look at raising that target? Perhaps there will be a time, Jack, that we will visit that. At this point, we think that's still very
much in line with what you'd call world-class performance companies, so it's not something that we are in the process of moving
currently but it is something we are discussing at the executive level.

Because basically, given your comments about this year, you know, it's pretty clear you're going to exceed that, based on, you
know, the backlogs, the margin improvement, etc. So it would seem, at some point here, it just makes sense to raise it, but
anyway, we will pass the baton onto the next person.

It does take lots of work, Jack. It's not that easy but nonetheless, I appreciate the confidence that we will exceed it. I agree with
you.

Operator
John Inch, Merrill Lynch.


FINAL TRANSCRIPT

John Inch - Merrill Lynch - Analyst
Good morning. I'm wondering if we can get a little more direct on some of these questions. Hill Phoenix, if I go back to last
quarter, my understanding was that a certain large customer that begins with 'W' had pushed out some orders. Has that come
back? It sort of sounds like not necessarily if you're suggesting first quarter, although seasonally sort of softer but you're kind
of looking for improvement in second and third quarters. Could you talk a little bit about that and what's going on there?

I can't speak to the inner workings of Wal-Mart's demand, but I can't say that they have reshuffled some orders around. Some
of this push-out did shift in the fourth quarter, but other orders were moved to different periods, so they've kind of shuffle their
whole order base. Some of this is, I think, a reaction to some of their comments about pulling back on their growth vector of
store announcements. But again, John, I don't think you can over-read too much into the fourth quarter. We still see that market
as coming back, probably in the second quarter pretty strong, and we like the inroads we're making with some of the technology.
But quite candidly, there has been some removement of orders but nothing that we are concerned about at the moment.

(technical difficulty) then is basically kind of tracking--let's put it this way. Is the trajectory for '06 with that customer kind of
coming out where you would have thought prior to the third quarter's push-out?

Yes. In fact, I guess we are a little bit encouraged by some of the wins and the technology (indiscernible) that we're getting from
some of those customers also, so we're feeling comfortable there.

Okay. I wanted to flush out Resources a little bit. It's something about mislabeled segment. If you look at your oil and gas business,
you know, there's kind of a rig count abatement trend and softening; there's certainly gas questions in North America. I know
this business is kind of majority North America. Could you talk a little bit about sort of what kind of a growth rate trajectory you
see? I mean what sort of a scenario is baked into that and why should we not--considering how strong this business has been--not
be concerned, particularly given the trend of energy prices, gas prices, kind of rig counts, that sort of thing?

Well, I think, again, gas prices, or let's say commodity prices, we could debate that all day long as to how much of that had
premium versus real cost. I think what we see is certainly we've seen a change in the relationship of gas prices to oil prices. I
think that also as we started the winter with a much warmer winter, I think we were concerned about the use natural gas, what
impact that might have on drilling going forward.

The only sector right now that we're reading a lot about in terms of potential downturn is Canada. We are seeing a change in--or
let's say a pullback in the issuance of new permits in Canada, mainly related to gas wells. We also are heading into what we call
the breakup season in Canada, so we expect that sector to probably be off a little bit in the first quarter. When I say off, again,
we were running at an extremely high rate last year, so I'm talking rate of rate of growth more than physical pullback of actual
numbers.


FINAL TRANSCRIPT

I think, if you look at our thinking as we roll into 2007 and looking at the optimism of the business leaders and kind of how they
reported, they still are showing significant growth forecasts there. I think some of our companies, again like our companies that
make diamond inserts, continue to be gaining market share in that technology versus the traditional technology of roller cones.
I think some of our technologies on sensors, hide high-pressure, high-temperature sensors is getting a global perspective, an
additional business pretty much from the standpoint that some of the stuff is going deeper and offshore and that kind of plays
into both of these companies' technologies going forward.

We also kind of look at rig movement, which affects some of our other companies like Tulsa Winch and people like that. Their
order rates continue to stay very strong. They had a great year. Their rates are strong which means there's still a demand for
equipment in the Permian Basin as well as Canada in that particular regard.

So the signals we get are still pretty strong. We're reading the same signals you are of looking at commodity prices and some
of the permit requests and we're looking at a very cautious side. But incoming order rates, the diversity of the businesses we
have still (indiscernible) very strongly in that sector. We're still encouraged by the growth opportunities in '07 in that sector.

So Ron, do you think, even with Canada, this business can be up kind of high double digits, the way it was, perhaps a little bit
of moderation?

Well, I think you have to keep in mind, you know, last year was a huge gain and to be able to support that kind of a gain
year-over-year, just the numbers get awfully large on us. But I think we will see it certainly. At this point, we see strong double-digit
growth.

Okay. My other question is just on leverage, Ron. It sort of follows Jack Kelly's question. If you kind of flip through the presentation
and some of these businesses, if you look at the change in revenues versus earnings, you know, oil and gas kind of matched;
fluid seemed to see deleveraging; you had strong automation leverage; components had strong leverage, some negative
leverage. I mean, it kind of is a mixed bag in terms of sort of the impact on earnings in terms of the revenue deltas. How should
we think about, based on that, what you think the potential is for Dover in terms of margin runway from present levels? I'm not
holding you to an '07 number. I'm just more thinking, how much more juice out there--is there in these margins and how should
we maybe be thinking about realizing some of that benefit in '07? Are we talking about a couple of points more before peak
or how would you like us to think about it?

John, I kind of heard you start your question relative to Resources and then you broadened it to Dover in total through the
question, so are you speaking really to Resources or Dover in total?

I'm sorry, Ron, I was just talking Dover in total but trying to--you know, if you just flip through the segments, it's a little bit mixed
in terms of the sort of realized leverage that you saw in the fourth quarter. Sometimes the revenues and earnings match in
terms of the growth rate; sometimes you get more bottom-line leverage, sometimes less. How would you like us to think about
kind of how much juice you think there are in margins overall and then maybe what we can look forward to in '07?


FINAL TRANSCRIPT

John, this is Rob. I think a couple of things to keep in mind. I think ,in some cases, these businesses have had significant growth
in demand and to some degree, their lack of leverage in the near-term reflects the need for them to frankly expand capacity
and be able to meet some of the customer requirements. If you think about Resources, I think they probably consumed almost
a third of our huge CapEx budget this year. So, I think the relative lack of leverage, although their margins and their growth
rates are at high absolute levels, reflects the fact that they've had to make investments that includes US Synthetics, Quartz
(indiscernible) a number of companies in their resource base in particular, but Hill Phoenix has put capacity in. I mean, a number
of companies are now in effect recognizing that they are operating at a higher absolute sales revenue level, so they've been
making investments, which has tended to moderate the leverage that you would normally expect to see. So I guess, in my mind,
you're going to see sort of a resumption of I think some leveraging. I think most of the markets they are in are very strong right
now. There still is opportunity, but I think they are operating at a relatively higher level than you would have seen a year or two
ago.

So I think there is still room for improvement on margin, particularly at some of the companies that have been a disappointment
as some of these areas that you identified as pockets of relatively lower performance. So, I would say, overall, we think there's
still margin opportunity, and to some degree, we are going to get that from the fact that we put a lot of capital into some of
these businesses that's going to pay off.

John, let me give you a little bit additional clarity maybe without trying to be overly directive here, but certainly think there's
opportunities to improve the margins in Diversified. We think there's some unique issues in Diversified that are being responded
to. I think the pullback in the construction market that impacts our (technical difficulty) businesses is something we would like
to see turn. But I think some of the Aerospace business, some of the improvements we are seeing in our heat exchanger business
lead me to believe that diversified certainly can perform better in '07 than it did in '06.

If I look at Electronics, which had some nice growth certainly relative to the impact of the business at Knowles, I think we will
see continued growth at Knowles that will continue to impact that sector. I think we had some tough, a tough year in the ATM
business and we will see how that rolls out into '07. Hopefully, we will continue to see some improvement and gain there.

I was very pleased with Dover Industries, who posted quarter-to-quarter improvement in margins and performance across the
year. I think that's a nice-headed momentum in that group that hopefully can be maintained.

If we look at Resources, again we can talk about knits and knats and Resources and mix, but if you look at that, that whole
subsidiary, which is our largest earnings group, is running in a very narrow band of margin. It's almost in 1% if you look at the
whole quarterly spread, so again, very good, solid performance there, again with the only change being that with Paladin
coming in, that will have some negative pullback on the Material Handling margins until we will get all the integration moves
completed.

If you look at Systems, again, I think we will see a good strong year there, very similar to what you've seen in the past year. With
Electronics, you always have the A&M market that is a little harder for us to predict and call because it's going to depend on the
level of the capital demand as it impacts our handler business in the group.

So I think the recurring revenue side of that, which is a high POGO replacement, pin, fixture-replacement side, should hold well.
I really see our product identification business being--continuing to gain strength. With the integration moves we will make
with the Markem acquisition over time, I feel that's going to be a very nice long-term play for us.


FINAL TRANSCRIPT

Yes, that was very helpful color. Thank you, Ron. Lastly, do you guys ever think about maybe changing out some of these
segment names? You know, Industries, Diversified, Systems--it's sort of--even Resources, it's kind of a little bit non-intuitive
when you think about the businesses inside of it. I don't know, just to perhaps improve upon the clarity that you've already
improved upon since becoming CEO!

You don't have a speaker on the wall at our executive meetings, do you, John?

(LAUGHTER)

Certainly, we challenge ourselves with that on all occasions. I think one of the challenges we have is we've turned around the
portfolio. We think we are more focused; we think we will continue to look at, you know, are we portraying Dover in the best
light with the greatest clarity? We will see what develops in '07 in that regard.

Okay, well, I won't file away my eyechart just yet. Thanks very much.

Operator
Robert McCarthy, Robert W. Baird.

Robert McCarthy - Robert W. Baird & Co. - Analyst
Good morning, guys. I really just need to follow up on a couple of things that have already got a fair amount of attention. In
your comments, Ron, about Resources just as you were just talking about the expectation for somewhat slower growth in '07
but still solid, double-digit, it wasn't clear to me whether you were speaking about Resources in its entirety or just the Oil and
Gas Equipment group specifically.

I think the dialogue was more related to oil and gas as we were having that and talking double-digit growth. I think Resources
certainly is forecasting growth. They've posted double-digit growth the last few years. I'd like to think that they will have that
opportunity but I don't think I want to go out and say that yet.

Okay, fine. (multiple speakers)


FINAL TRANSCRIPT

Subject only to the fact that you've got Paladin coming in, so you're going to see some inherent growth because Paladin
eventually will become organic. You're going to see that, what I will call natural shift, so you may still see double-digit growth
in Material Handling revenue just because of the addition of Paladin.

Yes, I think that is a good clarification because it isn't impacting acquisition.

Absolutely. If I'm reading between the lines correctly, do I understand that Material Handling group had a down quarter without
the impact of the acquisition?

Well, certainly, again, light construction did impact a number of businesses in that group, plus automotive. Keep in mind that,
in that group, what little bit of automotive content we have in Dover pretty much shows up in that group. That sector has been
down and stayed down. I think we've seen the slide of light construction impact some companies in there but it's been offset,
again, by some nice business games at Tulsa Winch. So in general, I think you are right; we have seen just a flat to slow market
overall in that sector. However, I guess I would also say, though, that the sector down there, absent Paladin, really wasn't too
bad in terms of order rates and overall earnings--excuse me, overall revenue.

Okay, thank you. That's helpful. I would assume, as you look towards 2007, you are thinking in terms of the Material Handling
group, given likely auto production schedules, some ongoing pressure on light construction, that the first half of the year is
probably significantly weaker on a year-to-year basis than the second half will be.

Right now, I think, because of the light construction, it might filter into heavy construction if we don't see that turnaround come
in the spring when you'd expect the building season to improve. That could be the case. But again, most of this is pretty short
leadtime business, Rob, so you don't get the long backlogs in that sector that we might in some of our other businesses. So the
change will come about probably pretty quick and be reflected for a large amount in the same quarter as we receive it.

Okay, very good. To follow up on your comments about Technologies, particularly Automation and Measurement, I guess. We
are--moderating first quarter means down compared with prior year, right?

Well, in the prior year, we actually starting with a better backlog at off of a better base of orders. In fact, we had a few of our
companies that--again, I'm going to use a technical term here--the manufacture flying prober which is a test device that had
booked some all-time highs actually in the fourth quarter, so you get a lot of diverse signals.


FINAL TRANSCRIPT

But I would say, sequentially, we should see that business show the same pattern as it has in the past that we would expect to
see pickup after Chinese New Year to impact the second and third quarter with some drifting probably in the fourth quarter,
again absent some major consumer electronic device. That puts a whole level of demand out there in the marketplace.

Okay. I certainly understand the picture you're painting for the entire year, but I'm still a little bit confused about the first-quarter
outlook down sequentially but I hear you saying not necessarily down compared with prior year.

That would be a reasonable assumption.

Okay. Lastly if I may, could you comment on the issues in the ATM market in the quarter and to what extent you see those as
temporary, and whether they are related at all to--through the, you know, bank initiative or not?

Well, I think, Rob, our comment there would be we saw let's say slower growth or a slower market in the U.S. ATM retail market,
which is where we have exhibited the most strength.

Yes, the core market.

Yes. The growth that we are seeking in the banking market, we are continuing to see strides in improvement in that market,
but again, that's slower in coming because these are in bigger blocks and you have to prove your ability to perform in that area,
so you put out trial ATMs and they have to go through their tenure of being accepted by those major banking institutions. I
think are we encouraged? Yes. Is it slower than we would hope? Yes. But I think we're still pretty optimistic about what's going
to happen to that sector over time.

So to what do we attribute the slowing in the core business in the quarter? Is this slower construction activity in some of their
key markets like [C] store and gas station?

I think that is the case. I think we're trying to kind of get a feel of what is the saturation point of ATMs in these retail outlets. I
think we're seeing that industry has built out an awful lot over the last few years, and now it's a question of what's the magnitude
of the replacement market?


FINAL TRANSCRIPT

Okay, thanks. Very helpful.

Operator
Shannon O'Callaghan, Lehman Brothers.

Shannon O'Callaghan - Lehman Brothers - Analyst
Good morning, guys. Just a higher-level question I guess on organic growth, still very strong in the quarter, sort of a natural
moderation over the course of this year. How are you thinking about '07 for organic growth?

Well, I think certainly, mathematically, the number is down in the fourth quarter from what it was. If you look at our average
(technical difficulty) but I think, Shannon, anybody that can post double-digit growth five consecutive quarters, that's really a
testament to what's going on inside those companies. So I think I would hope everybody would interpret that that we're not
just buying growth; we are actually developing growth internally into our companies.

I think looking forward, I think we will continue to see organic growth. We've historically said that organic growth target was 5
to 7%. We would think that it would probably be at the high end if not exceeding that through the course of the year. Whether
it will maintain double digits all year I think is a little early to call, but we're pretty comfortable with our organic growth initiatives
going forward.

Okay. You know, you mentioned, on Paladin and I thought you said it on semi, too, some moderation over the course of the
fourth quarter. I mean, how are you guys, given your sort of broad exposure, how are you feeling about the economy?

Actually, the economy, again, we think is still holding in pretty robust with just the exceptions that we noted in our dialogue.
But in general, we are not seeing order rates or business trends that are scary to us. We anticipate some of the pullback you saw
in the second half of the year is going to come back in its normal, seasonal fashion. So we're really still pretty optimistic. I think,
if you look the broad base of companies we have and the markets we touch, we are getting a pretty solid read and it's not a
negative read. In fact, I would say, on-balance, it's more positive than negative.

Okay. You know, just I guess the last one, you made the comment on acquisition spending of 10% of revenue but you're willing
to go higher. You know, what drives that comment? Are you seeing things out there that are bigger that you are thinking of
going after, or I mean why would you sort of start to think higher than that now?


FINAL TRANSCRIPT

Well, I think, again, when you think of 10% of revenue of Dover and, let's say, just roughly $7 billion of (indiscernible) or something,
700 million in spending after two years at 2.2--or excuse me, 1.1 billion in each year, I think it says our appetite is out there to
look at bigger deals as they come across as opportunities.

So we're just saying that we have plenty of debt capacity. Our earnings are generating a lot of cash for us, in terms of balance
sheet are generating cash. We are going to deploy that into our acquisition program. I think now that we're more focused, we're
going to be able to kind of identify where those true value-building opportunities are going to be for us. If there is one that we
have to reach for, we're willing to reach.

How about on the divestiture side? I mean, could some of that be funded through the sale of something else?

Well, again, we feel like most of the divestiture activity is behind us. We have a few smaller ones to finish cleaning up yet, but I
think the gain of cash off of those will not equal what we posted in the past so we won't get as much cash back from that activity.
But again, you know, our debt equity has peaked up into the low 30s as we've done major acquisitions, but with the cash
generation, we've been able to pull not only from the acquisitions but just the portfolio of our companies now that we've
optimized it. You know, we get that back down into the mid-20s pretty fast. So I think we are very comfortable with our capacity
going forward.

Okay, well, thanks a lot, guys.

Operator
Thank you. I would like to turn the call over to Ron Hoffman for closing remarks.

Again, I would like to thank everyone for being on the call and the questions they asked today. Hopefully, we've provided some
clarity to help you think of Dover on a go-forward basis.

Again, I would like to just draw attention to the fact that I think this portfolio work that we essentially completed over the last
two years has significantly changed the outlook for Dover, the growth potential for Dover. We think it has allowed us to focus
our energies and has certainly been reflected in our results. It also reduces the volatility of Dover that we've exhibited historically.
We are very comfortable that we are poised to continue to deliver shareholder improved results over the coming year.

With that, we will close our call.

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


FINAL TRANSCRIPT

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