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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

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

As of May 1,October 29, 2007, there were 57,050,49957,139,380 shares of the issuer’s common stock outstanding.

The accompanying condensed consolidated balance sheet as of March 31,September 30, 2007, and the related condensed consolidated statements of income and comprehensive income for the three and nine months ended March 31,September 30, 2007 and 2006, and the condensed consolidated statements of cash flows for the threenine months ended March 31,September 30, 2007 and 2006, are unaudited. In management’s opinion, all adjustments comprising normal recurring adjustments necessary for a fair presentation of such condensed consolidated financial statements have been made.

The accompanying condensed consolidated financial statements and notes in this Quarterly Report on Form 10-Q for the quarterly period ended March 31,September 30, 2007 (“Quarterly Report”) are presented as permitted by Regulation S-X and do not contain certain information included in our annual financial statements and notes thereto. Accordingly, the accompanying condensed consolidated financial information should be read in conjunction with the consolidated financial statements for the year ended December 31, 2006 presented in our Annual Report on Form 10-K for the year ended December 31, 2006 (“2006 Annual Report”).

Certain reclassifications have been made to prior period amounts to conform withto the current period presentation.

As of January 1, 2007, we adopted Financial Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109.” FIN No. 48 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN No. 48, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information.

Other significant accounting policies, for which no significant changes have occurred in the three months ended March 31,September 30, 2007, are detailed in Note 1 of our 2006 Annual Report.

In February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 155, “Accounting for Certain Hybrid Financial Instruments,” which amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” SFAS No. 155 improves the financial reporting of certain hybrid financial instruments and simplifies the accounting for these instruments. In particular, SFAS No. 155:

SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s fiscal year that begins after September 15, 2006. Our adoption of SFAS No. 155 in the first three months ofeffective January 1, 2007 had no impact on our consolidated financial condition or results of operations.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets – an amendment of Statement No. 140.” SFAS No. 156 clarifies when an obligation to service financial assets should be separately recognized as a servicing asset or a servicing liability, requires that a separately recognized servicing asset or servicing liability be initially measured at fair value and permits an entity with a separately recognized servicing asset or servicing liability to choose either the amortization method or fair value method for subsequent measurement. SFAS No. 156 is effective for all separately recognized servicing assets and liabilities acquired or issued after the beginning of an entity’s fiscal year that begins after September 15, 2006. Our adoption of SFAS No. 156 in the first three months ofeffective January 1, 2007 had no impact on our consolidated financial condition or results of operations.

In March 2006, the Emerging Issues Task Force (“EITF”) issued EITF Issue No. 06-03, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation).” EITF No. 06-03 requires that the presentation of taxes assessed by a governmental authority that are directly imposed on a revenue-producing transaction between a seller and a customer on either a gross (included in revenues and costs) or a net (excluded from revenues) basis is an accounting policy decision that should be disclosed pursuant to APBAccounting Principles Board Opinion (“APB”) No. 22, “Disclosure of Accounting Policies.” In addition, if any of such taxes are reported on a gross basis, a company should disclose, on an aggregated basis, the amounts of those taxes in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. EITF Issue No. 06-03 is effective for interim and annual reporting periods beginning after December 31, 2006. As we have historically presented such taxes on a net basis within our results of operations, our adoption of EITF Issue No. 06-03 in the first three months ofeffective January 1, 2007 did not have a material impact on our consolidated financial position or results of operations.

In July 2006, the FASB issued Financial Interpretation (“FIN”)FIN No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109.” FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN No. 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The evaluation of a tax position in accordance with FIN No. 48 is a two-step process. The first step is a recognition process whereby the enterprise determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step is a measurement process whereby a tax position that meets the more-likely-than-not recognition threshold is calculated to determine the amount of benefit to recognize in the financial statements. The provisions of FIN No. 48 are effective for fiscal years beginning after December 15, 2006. The impact on our consolidated financial condition and results of operations of adopting FIN No. 48 in the first three months ofeffective January 1, 2007 is presented in Note 11.12.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 establishes a single definition of fair value and a framework for measuring fair value under accounting principles generally accepted in the United States (“GAAP”), and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements; however, it does not require any new fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are still evaluating the impact of SFAS No. 157 on our consolidated financial condition and results of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115.” SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. It provides entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are still evaluating the impact of SFAS No. 159 on our consolidated financial condition and results of operations.

Although there are no other final pronouncements recently issued that we have not adopted and that we expect to impact reported financial information or disclosures, accounting promulgating bodies have a number of pending projects that may directly impact us. We continue to evaluate the status of these projects and as these projects become final, we will provide disclosures regarding the likelihood and magnitude of their impact, if any.

Our stock-based compensation relates toincludes stock options, restricted stock and other equity-based awards, and is accounted for under SFAS No. 123(R), “Share-Based Payment”.Payment.” Under this method, we recorded stock-based compensation expense of $3.6 million ($5.3 million pre-tax) and $2.8 million ($3.9 million pre-tax) for the three months ended March 31, 2007 and 2006, respectively.as follows:

Stock Options —Information related to stock options issued to officers, other employees and directors under all plans described in Note 7 to our consolidated financial statements included in our 2006 Annual Report is presented in the following table:

No options were granted during the threenine months ended March 31,September 30, 2007. The weighted average fair value per share of options granted was $24.23$26.71 and $24.90 for the three and nine months ended March 31, 2006.September 30, 2006, respectively. The total fair value of stock options vested during the three months ended March 31,September 30, 2007 and 2006 was $2.6 million and $2.3 million, respectively. The total fair value of stock options vested during the nine months ended September 30, 2007 and $0.52006 was $5.4 million and $3.0 million, respectively. The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model.

As of March 31,September 30, 2007, we have $4.4had $2.5 million of unrecognized compensation cost related to outstanding unvested stock option awards, which is expected to be recognized over a weighted-average period of approximately 1.4 years.1 year. The total intrinsic value of stock options exercised during the three and nine months ended March 31,September 30, 2007 was $8.8 million.$5.6 million and $21.5 million, respectively. No options were exercised during the threenine months ended March 31,September 30, 2006 as we were in a black-out period due to our then non-current status of filings with the United States (“U.S.”) Securities and Exchange Commission (“SEC”).

The following table summarizes information regarding restricted stock activity:

We enter into forward exchange contracts to hedgemanage our risks associated with transactions denominated in currencies other than the local currency of the operation engaging in the transaction. Our risk management and derivatives policy specifies the conditions under which we may enter into derivative contracts. At March 31,September 30, 2007 and December 31, 2006, we had $337.6$380.9 million and $433.7 million, respectively, of notional amount in outstanding forward exchange contracts with third parties. At March 31,September 30, 2007, the length of forward exchange contracts currently in place was two daysranged from 1 day to 2019 months.

The fair market value adjustments of our forward exchange contracts are recognized directly in our results of operations.current period earnings. The fair value of these outstanding forward contracts at March 31,September 30, 2007 and December 31, 2006 was a net asset of $4.3$7.7 million and $3.4 million, respectively. Unrealized netNet gains (loss) from the changes in the fair value of these forward contracts of $0.3$3.5 million and $0.2$(3.5) million for the three months ended March 31,September 30, 2007 and 2006, respectively, and $5.1 million and $2.9 million, for the nine months ended September 30, 2007 and 2006, respectively, are included in other income (expense) income,, net in theour condensed consolidated statements of income.

Also as part of our risk management program, we enter into interest rate swap agreements to hedge exposure to floating interest rates on certain portions of our debt. At both March 31,September 30, 2007 and December 31, 2006, we had $415.0 million and $435.0 million, respectively, of notional amount in outstanding interest rate swaps with third parties. At March 31,September 30, 2007, the maximum remaining length of any interest rate contract in place was approximately 3336 months. The fair value of the interest rate swap agreements was a net liability of $1.0 million and a net asset of $0.8 million and $1.9 million at March 31,September 30, 2007 and December 31, 2006, respectively. Unrealized net (losses) gains (loss) from the changes in fair value of our interest rate swap agreements, net of reclassifications, of $(0.7)$2.0 million and $1.4$(1.8) million, net of tax, for the three months ended March 31,September 30, 2007 and 2006, respectively, and $1.9 million and $0.4 million, net of tax, for the nine months ended September 30, 2007 and 2006, respectively, are included in other comprehensive income.income (loss).

During 2004, we entered into a compound derivative contract to hedge exposure to both currency translation and interest rate risks associated with our European Investment Bank credit facility. The notional amount of the derivative was $85.0 million, and it served to convert floating rate interest rate risk to a fixed rate, as well as United States (“U.S.”) dollar currency risk to Euros. As described more fully in our 2006 Annual Report, we repaid all amounts outstanding under this facility on December 15, 2006 and settled the derivative. The unrealized gain (loss) on the derivative and the foreign transaction gain on the underlying loan aggregated to $2.2$(0.8) million and $2.8 million for the three and nine months, respectively, ended March 31,September 30, 2006, and is included in other income (expense) income,, net in theour condensed consolidated statementstatements of income.

We are exposed to risk from credit-related losses resulting from nonperformance by counterparties to our financial instruments. We perform credit evaluations of our counterparties under forward exchange contracts and interest rate swap agreements and expect all counterparties to meet their obligations. We have not experienced credit losses from our counterparties.

Debt, including capital lease obligations, consisted of:

On August 12, 2005, we entered into credit facilities comprised of a $600.0 million term loan expiring on August 10, 2012 and a $400.0 million revolving line of credit, which can be utilized to provide up to $300.0 million in letters of credit, expiring on August 12, 2010. We hereinafter refer to these credit facilities collectively as our Credit Facilities. At March 31,September 30, 2007 and December 31, 2006, we had $85.0$58.0 million and $0, respectively, outstanding under the revolving line of credit, respectively.credit. We had outstanding letters of credit of $90.5$110.9 million and $83.9 million at March 31,September 30, 2007 and December 31, 2006, respectively, which reduced borrowing capacity to $224.5$231.1 million and $316.1 million, respectively.

Borrowings under our Credit Facilities bear interest at a rate equal to, at our option, either (1) the base rate (which is based on the greater of the prime rate most recently announced by the administrative agent under our Credit Facilities or the Federal Funds rate plus 0.50%) or (2) LIBORLondon Interbank Offered Rate (“LIBOR”) plus an applicable margin determined by reference to the ratio of our total debt to consolidated Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), which as of March 31,September 30, 2007 was 1.5%1.00% and 1.50% for LIBOR borrowings.

Inventories are stated at lower of cost or market. Cost is determined by the first-in, first-out method. Inventories, net consisted of the following:

Summarized below is combined income statement information, based on the most recent financial information, for investments in entities we account for using the equity method:

Options outstanding with an exercise price greater than the average market price of the common stock were not included in the computation of diluted earnings per share. For the three and nine months ended both March 31,September 30, 2007 and 2006, we had an immaterial number ofno options to purchase common stock that were excluded from the computations of potentially dilutive securities.

We are a defendant in a large number of pending lawsuits (which include, in many cases, multiple claimants) that seek to recover damages for personal injury allegedly caused by exposure to asbestos-containing products manufactured and/or distributed by us in the past. While the aggregate number of asbestos-related claims against us has declined in recent years, there can be no assurance that this trend will continue. Any such products were encapsulated and used only as components of process equipment, and we do not believe that any significant emission of respirable asbestos fibers occurred during the use of this equipment. We believe that a high percentage of the applicable claims are covered by applicable insurance or indemnities from other companies.

In 2003, related lawsuits were filed in federal court in the Northern District of Texas (the “Court”), alleging that we violated federal securities laws. Since the filing of these cases, which have been consolidated, the lead plaintiff has amended its complaint several times. The lead plaintiff’s current pleading is the fifth consolidated amended complaint (the “Complaint”). The Complaint alleges that federal securities violations occurred between February 6, 2001 and September 27, 2002 and names as defendants our company, C. Scott Greer, our former Chairman, President and Chief Executive Officer, Renee J. Hornbaker, our former Vice President and Chief Financial Officer, PricewaterhouseCoopers LLP, our independent registered public accounting firm, and Banc of America Securities LLC and Credit Suisse First Boston LLC, which served as underwriters for our two public stock offerings during the relevant period. The Complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and Sections 11 and 15 of the Securities Act of 1933. The lead plaintiff seeks unspecified compensatory damages, forfeiture by Mr. Greer and Ms. Hornbaker of unspecified incentive-based or equity-based compensation and profits from any stock sales, and recovery of costs. On November 22, 2005, the Court entered an order denying the defendants’ motions to dismiss the Complaint. We have subsequently filed other contested motions for the purpose of dismissing this case which are currently pending before the Court. The case is currentlyhad been set for trial on October 1, 2007.2007, but on August 22, 2007, the Court stayed the trial and all pretrial proceedings pending its ruling on whether the case may be certified as a class action. We continue to believe that the lawsuit is without merit and are vigorously defending the case.

In 2005, a shareholder derivative lawsuit was filed purportedly on our behalf in the 193rd Judicial District of Dallas County, Texas. The lawsuit namesoriginally named as defendants Mr. Greer, Ms. Hornbaker, and former and current board members Hugh K. Coble, George T. Haymaker, Jr., William C. Rusnack, Michael F. Johnston, Charles M. Rampacek, Kevin E. Sheehan, Diane C. Harris, James O. Rollans and Christopher A. Bartlett. We arehave been named as a nominal defendant. Based primarily on the purported misstatements alleged in the above-described federal securities case, the plaintiff assertsoriginal lawsuit asserted claims against the defendants for breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment. The plaintiff allegesalleged that these purported violations of state law occurred between April 2000 and the date of suit. The plaintiff seeks on our behalf an unspecified amount of damages, injunctive relief and/or the imposition of a constructive trust on defendants’ assets, disgorgement of compensation, profits or other benefits received by the defendants from us and recovery of attorneys’ fees and costs. We strongly believe that the suit was improperly filed and have filed a motion seeking dismissal of the case. The Court has sincethereafter ordered the plaintiffs to replead. The trial is currently setOn October 11, 2007, the plaintiffs filed an amended petition adding new claims against the following additional defendants: Kathy Giddings, our former Vice-President and Corporate Controller; Bernard G. Rethore, our former Chairman and Chief Executive Officer; Banc of America Securities, LLC and Credit Suisse First Boston, LLC, which served as underwriters for December 2007.our public stock offerings in November 2001 and April 2002, and PricewaterhouseCoopers, LLP, our independent registered public accounting firm.  None of the defendants have yet responded to the amended petition.

On March 14, 2006, a shareholder derivative lawsuit was filed purportedly on our behalf in federal court in the Northern District of Texas. The lawsuit named as defendants Mr. Greer, Ms. Hornbaker, and the following former and current board members Mr. Coble, Mr. Haymaker, Mr. Lewis M. Kling, Mr. Rusnack, Mr. Johnston, Mr. Rampacek, Mr. Sheehan, Ms. Harris, Mr. Rollans and Mr. Bartlett. We were named as a nominal defendant. Based primarily on certain of the purported misstatements alleged in the above-described federal securities case, the plaintiff asserted claims against the defendants for breaches of fiduciary duty. The plaintiff alleged that the purported breaches of

We have engaged in and made substantial progress in discussions with the SEC and DOJ in an effort to resolve their outstanding investigations on a negotiated basis. We also believe that the Dutch investigation has effectively concluded. We believe this investigation will be taken as ourresolved with the Dutch subsidiary paying a penalty of approximately€265,000. We understand the remaining French investigation continues.

In March 2006, we initiated a voluntary process to determine our compliance posture with respect to U.S. export control laws and regulations. Upon initial investigation, it appeared that some product transactions and technology transfers were not re-exportedhandled in full compliance with U.S. export control laws and regulations. As a result, in conjunction with outside counsel, we are currently involved in a voluntary systematic process to conduct further review, validation and voluntary disclosure of apparent export violations discovered as part of this review process. We have completed approximately two-thirds of the site visits scheduled as part of this voluntary disclosure process, but currently believe this process will not be substantially complete and the results of site visits will not be fully analyzed until the end of 2008, given the complexity of the export laws and the current scope of the investigation. Any apparent violations of U.S. export control laws and regulations that are identified, confirmed and disclosed to the U.S. government may result in civil or criminal penalties, including fines and/or other penalties. Although companies making voluntary export disclosures have historically received reduced penalties and certain mitigating credits, legislation enacted on October 16, 2007 increased the maximum penalty for certain export control violations (assessed on a per-shipment basis) to the greater of $250,000 or twice the value of the transaction. Because our review into this issue is ongoing, we are currently unable to definitively determine the full extent of any confirmedapparent violations or determine the nature or total amount of potential penalties to which we might be subject to in the future. Given that the resolution of this matter is uncertain at this time, we are not able to reasonably estimate the maximum amount of liability that could result from final resolution of this matter. We cannot currently predict whether the ultimate resolution of this matter will have a material adverse effect on our business, including our ability to do business outside the U.S. or on, our financial condition.condition or our results of operations.

See additional discussion of our retirement and postretirement benefits in Note 12 to our consolidated financial statements included in our 2006 Annual ReportReport.

On September 29, 2006, the Board of Directors authorized a program to repurchase up to two2.0 million shares of our outstanding common stock.stock by the end of the second quarter of 2007. Shares may bewere repurchased to offset potentially dilutive effects of stock options issued under our equity-based compensation programs. We repurchased 0.5 million shares for $25.3 million during the three months ended March 31, 2007. To date, we have repurchased a total of 1.82.0 million shares. We expectshares and have concluded the program.

On both April 11, 2007 and July 11, 2007, we paid quarterly cash dividends of $0.15 per share to conclude the program by the endshareholders of the second quarterrecord as of 2007.

For the three months ended September 30, 2006, we earned $45.3 million before taxes and provided for income taxes of $16.8 million, resulting in an effective tax rate of 37.1%. For the nine months ended September 30, 2006, we earned $135.5 million before taxes and provided for income taxes of $54.8 million, resulting in an effective tax rate of 40.5%. The effective tax rate varied from the U.S. federal statutory rate for the three months ended March 31, 2007 primarily due to the net impact of foreign operations.

In July 2006, the FASB issued FIN No. 48, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN No. 48, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information.

The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. We adopted the provisions of FIN No. 48 on January 1, 2007.

The cumulative effect of adopting FIN No. 48 was an increase in tax reserves and a decrease of $29.8 million to opening retained earnings at January 1, 2007. Upon adoption, the amount of gross unrecognized tax benefits at January 1, 2007 was approximately $129 million. There are offsetting tax benefits of approximately $43 million associated with the correlative effects of transfer pricing adjustments, net operating losses and timing adjustments. The net liability for uncertain tax positions is $86.0 million. Of this amount $84.9 million, if recognized, would favorably impact our effective tax rate.

Interest and penalties related to income tax liabilities are included in income tax expense. The balance of accrued interest and penalties recorded on the balance sheet at January 1, 2007 was approximately $14 million.

     TheAs of September 30, 2007, the amount of unrecognized tax benefits did not materially change ashas increased by $14.5 million from January 1, 2007 due primarily to interest accrual on existing uncertain tax benefits, currency translation adjustments, and anticipated results of March 31, 2007.various tax audits. With limited exception, we are no longer subject to U.S. federal, state and local income tax audits for years through 2001 or non-U.S. income tax audits for years through 2000. Our U.S. income tax returns for 2002 through 2004 are currently under examination by the Internal Revenue Service (“IRS”). It is reasonably possible that within the next 12 months we and the IRS will resolve some or all of the matters presently under examination; however, an estimate of the range of possible changes that may result from the examination cannot be made at this time. Additionally, we are currently under examination for various years in Germany, Italy, Canada, the NetherlandsVenezuela and Argentina. We do

It is reasonably possible that within the next 12 months we and various taxing authorities will resolve some or all of the matters presently under audit, including a favorable resolution associated with the one-time repatriation of foreign profits in 2004, which was not expect any changespreviously recorded as a benefit. It is also reasonably possible that we will have the statute of limitations close in various taxing jurisdictions within the next 12 months. As such, we estimate we could record a reduction in our tax expense from these examinations$8 million to have a significant impact on our financial condition or results of operations.$16 million within the next 12 months.

We are principally engaged in the worldwide design, manufacture, distribution and service of industrial flow management equipment. We provide pumps, valves and mechanical seals primarily for the petroleum industry, chemical-processing industry, power-generation industry, water industry, general industry and other industries requiring flow management products.

We have the following three divisions, each of which constitutes a business segment:

Each division manufactures different products and is defined by the type of products and services provided. Each division has a President, who reports directly to our Chief Executive Officer, and a Division Vice President —– Finance, who reports directly to our Chief Accounting Officer. For decision-making purposes, our Chief Executive Officer and other members of senior executive management use financial information generated and reported at the division level. Our corporate headquarters does not constitute a separate division or business segment.

The following is a summary of the financial information of the reportable segments reconciled to the amounts reported in the condensed consolidated financial statements.

The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements, and notes thereto, and the other financial data included elsewhere in this Quarterly Report. The following discussion should also be read in conjunction with our audited consolidated financial statements, and notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2006 Annual Report.

We are an established leader in the fluid motion and control business, with a strong portfolio of pumping systems, valves, sealing solutions, automation and services in support of the oil and gas, chemical, power generation, water treatment and general industrial markets. These products are integral to the movement, control and protection of fluids in customers’ critical processes, whether it is a refinery, a power generation facility or a transportation pipeline. Our business model is heavily influenced by the capital spending of these industries for the placement of new products into service and for maintenance on existing facilities. The worldwide installed base of our products is another important source of revenue, where products are expected to ensure the maximum operating time of many key industrial processes. The aftermarket business includes parts, service solutions, product life cycle solutions and other value added services, and is generally a higher margin business and a key component to our profitable growth.

We experienced favorable conditions in 2006 in several of our core markets, specifically oil and gas, which has continued through the first threenine months of 2007. The sustained increase in the price of crude oil and natural gas, in particular, has spurred capital investment by oil and gas companies, resulting in many new projects and expansion opportunities for us. Favorable market conditions have resulted in corresponding growth, much of which is in non-traditional areas of the world where new oil and gas reserves have been discovered. We believe the outlook for our business remains favorable; however, we believe that oil and gas prices will fluctuate in the future and such volatility could have a negative impact on our business in some or all of the geographical areas in which we conduct business. We and our customers are seeing rapid growth in the Middle East and Asia, with China providing a significant source of project growth as that country continues to develop. We continue to execute on our strategy to increase our presence in these regions to capture aftermarket business through our current installed base, as well as new projects and process plant expansions. The opportunity to increase our installed base of new products and drive recurring aftermarket business in future years is a critical by-product of these favorable market conditions. Although we have experienced strong demand for our products and services in recent periods, we face challenges affecting many companies in our industry and/or with significant international operations.

We currently employ approximately 14,000 employees in more than 55 countries who are focused on six key strategies that reach across the business. See “Our Strategies” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2006 Annual Report for a discussion of our six key strategies. We continue to build on our geographic breadth with the implementation of additional Quick Response Centers (“QRCs”) with the goal to be positioned as near to our customers as practicable for service and support in order to capture this important aftermarket business. Along with ensuring that we have the local capability to sell, install and service our equipment in remote regions, it becomes equally imperative to continuously improve our global operations. Our global supply chain capability is being expanded to meet global customer demands and ensure the quality and timely delivery of our products. Significant efforts are underway to reduce the supply base and drive processes across the divisions to find areas of synergy and cost reduction. In addition, we are improving our supply chain management capability to ensure it can meet global customer demands. We continue to focus on improving on-time delivery and quality, while reducing warranty costs across our global operations through a focused Continuous Improvement Process (“CIP”) initiative. The goal of the CIP initiative is to maximize service fulfillment to customers such as on-time delivery, reduced cycle time and quality at the highest internal productivity. This program is a key factor in our margin expansion plans.

We define a booking as the receipt of a customer order that contractually engages us to perform activities on behalf of our customer with regard to manufacture, service or support. Bookings for the three months ended March 31,September 30, 2007 increased by $210.2$169.0 million, or 23.9%18.9%, as compared with the same period in 2006. The increase includes currency benefits of approximately $47 million. The increase is primarily attributable toled by strength in chemical and water markets in Europe, the strongMiddle East and Africa (“EMA”) for FPD and strength across all key valve markets for FCD. Strength in oil and gas industry, which has positively impacted all divisions.and general industries markets continues to drive improved bookings in FSD. Original