<PAGE>   1


===============================================================================


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(MARK ONE)

   [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000,

                                       OR

   [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                        FOR THE TRANSITION PERIOD FROM TO

                         COMMISSION FILE NUMBER 1-15603

                                NATCO GROUP INC.
             (Exact name of registrant as specified in its charter)

                  DELAWARE                                       22-2906892
(State or other jurisdiction of incorporation                 (I.R.S. Employer
              or organization)                               Identification No.)

       2950 NORTH LOOP WEST,
            7TH FLOOR,
          HOUSTON, TEXAS                                             77092
(Address of principal executive offices)                           (Zip Code)

                                  713-683-9292
              (Registrant's telephone number, including area code)

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

    Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:

     As of October 31, 2000 Class A, $0.01 par value per share 15,011,624 shares
                    Class B, $0.01 par value per share 699,874 shares

===============================================================================



<PAGE>   2



                                NATCO GROUP INC.

                                    FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2000

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                  PAGE
                                                                                                   NO.
                                                                                                  ----
<S>                                                                                               <C>
                  PART I -- FINANCIAL INFORMATION

                  Item 1.       Financial Statements..........................................     3
                                Unaudited Condensed Consolidated Balance Sheets--
                                September 30, 2000 and December 31, 1999......................     3
                                Unaudited Condensed Consolidated Statements of Operations--
                                Three Months and Nine Months Ended June 30, 2000 and 1999.....     4
                                Unaudited Condensed Consolidated Statements of Cash
                                Flows -- Nine Months Ended September 30, 2000 and 1999........     5
                                Notes to Unaudited Condensed Consolidated Financial
                                Statements....................................................     6

                  Item 2.       Management's Discussion and Analysis of Financial Condition
                                and Results of Operations.....................................    12

                  Item 3.       Quantitative and Qualitative Disclosures About Market Risk....    20

                  PART II -- OTHER INFORMATION

                  Item 1.       Legal Proceedings.............................................    21

                  Item 2.       Changes in Securities and Use of Proceeds.....................    21

                  Item 3.       Defaults Upon Senior Securities...............................    21

                  Item 4.       Submission of Matters to a Vote of Security Holders...........    21

                  Item 5.       Other Information.............................................    22

                  Item 6.       Exhibits and Reports on Form 8-K..............................    21

                  Signatures    ..............................................................    24
</TABLE>



                                       2
<PAGE>   3




                                     PART I

ITEM 1. FINANCIAL STATEMENTS

                        NATCO GROUP INC. AND SUBSIDIARIES

                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>

                                                                     SEPTEMBER 30,      DECEMBER 31,
                                                                         2000              1999
                                                                    --------------      ------------
<S>                                                                  <C>                <C>
                                     ASSETS

Current assets:
  Cash and cash equivalents ...................................      $        863       $      1,747
  Trade accounts receivable, net ..............................            49,882             33,720
  Inventories .................................................            30,197             20,414
  Notes receivable from director ..............................                --              1,890
  Prepaid expenses and other current assets ...................             3,412              3,459
                                                                     ------------       ------------
        Total current assets ..................................            84,354             61,230
Property, plant and equipment, net ............................            22,306             17,806
Goodwill, net .................................................            36,781             19,083
Deferred income tax assets, net ...............................             6,047              6,517
Other assets, net .............................................             1,260              2,194
                                                                     ------------       ------------
        Total assets ..........................................      $    150,748       $    106,830
                                                                     ============       ============

                           LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current installments of long-term debt ......................      $         --       $      4,643
  Notes payable ...............................................             1,002                 --
  Accounts payable ............................................            21,513             15,127
  Accrued expenses and other ..................................            13,654             10,900
  Customer advances ...........................................             5,478              5,256
                                                                     ------------       ------------
        Total current liabilities .............................            41,647             35,926
Long-term debt, excluding current installments ................            11,209             26,537
Postretirement benefit liability ..............................            14,697             15,853
                                                                     ------------       ------------
        Total liabilities .....................................            67,553             78,316
                                                                     ------------       ------------
Stockholders' equity:
  Preferred stock $.01 par value. Authorized 5,000,000
    shares; no shares issued and outstanding ..................                --                 --
  Class A Common stock, $.01 par value. Authorized
    45,000,000 shares; issued and outstanding 14,445,883 and
    8,787,520 shares as of September 30, 2000, and December 31,
    1999, respectively ........................................               144                 88
  Class B Common stock, $.01 par value. Authorized 5,000,000
    shares; issued and outstanding 699,874 and 825,836
    shares as of September 30, 2000, and December 31, 1999,
    respectively ..............................................                 7                  8
  Additional paid-in capital ..................................            94,494             43,273
  Accumulated deficit .........................................            (2,875)            (8,177)
  Treasury stock, 643,238 and 470,188 shares at cost as of
    September 30, 2000 and December 31, 1999, respectively ....            (6,075)            (4,550)
  Accumulated other comprehensive loss ........................            (1,893)              (886)
  Note receivable from officer and stockholder ................              (607)            (1,242)
                                                                     ------------       ------------
        Total stockholders' equity ............................            83,195             28,514
                                                                     ------------       ------------
Commitments and contingencies
        Total liabilities and stockholders' equity ............      $    150,748       $    106,830
                                                                     ============       ============
</TABLE>

                  See accompanying notes to unaudited condensed
                       consolidated financial statements.



                                       3
<PAGE>   4




                        NATCO GROUP INC. AND SUBSIDIARIES

            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                    THREE MONTHS ENDED                   NINE MONTHS ENDED
                                                                       SEPTEMBER 30,                      SEPTEMBER 30,
                                                                -----------------------------     -----------------------------
                                                                    2000            1999               2000             1999
                                                                ------------     ------------     ------------     ------------
<S>                                                             <C>              <C>              <C>              <C>
Revenues ...................................................    $     60,244     $     39,733     $    168,034     $    125,894
Cost of goods sold .........................................          43,979           29,063          122,473           94,902
                                                                ------------     ------------     ------------     ------------
          Gross profit .....................................          16,265           10,670           45,561           30,992
Selling, general and administrative expense ................           9,690            8,047           28,979           23,638
Depreciation and amortization expense ......................           1,307            1,180            3,850            3,568
Unusual charges ............................................              --               --            1,528               --
Interest expense ...........................................             355              835            1,129            2,546
Interest cost on postretirement benefit liability ..........             322              262              965              786
Revaluation gain on postretirement benefit liability .......              --               --               --             (848)
Interest income ............................................             (19)             (76)            (159)            (175)
                                                                ------------     ------------     ------------     ------------
          Income before income taxes .......................           4,610              422            9,269            1,477
Income tax provision .......................................           1,973              310            3,967            1,075
                                                                ------------     ------------     ------------     ------------
          Net income .......................................    $      2,637     $        112     $      5,302     $        402
                                                                ============     ============     ============     ============
EARNINGS PER SHARE:
  Basic ....................................................    $       0.17     $       0.01     $       0.37     $       0.04
  Diluted ..................................................    $       0.17     $       0.01     $       0.35     $       0.04
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:
  Basic ....................................................          15,144            9,288           14,358            9,197
  Diluted ..................................................          15,688            9,936           14,959            9,857
</TABLE>

           See accompanying notes to unaudited condensed consolidated
                             financial statements.


                                       4
<PAGE>   5




                        NATCO GROUP INC. AND SUBSIDIARIES

            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                  NINE MONTHS ENDED
                                                                                    SEPTEMBER 30,
                                                                            -----------------------------
                                                                               2000              1999
                                                                            ------------     ------------
<S>                                                                         <C>              <C>
Cash flows from operating activities:
  Net income ...........................................................    $      5,302     $        402
  Adjustments to reconcile net income to net cash provided by
     (used in) operating activities:
     Deferred income tax provision .....................................            (403)             735
     Depreciation and amortization expense .............................           3,850            3,568
     Non-cash interest income ..........................................             (67)            (143)
     Interest cost on postretirement benefit liability .................             965              786
     Gain on the sale of property, plant and equipment .................             (75)            (560)
     Gain on revaluation of postretirement benefit liability............              --             (848)
     Non-cash compensation expense .....................................              --             (237)
     Change in assets and liabilities, net of acquisitions:
       Decrease in restricted cash .....................................              --              883
       (Increase) decrease in trade accounts receivable ................         (10,483)          12,214
       (Increase) decrease in inventories ..............................          (8,219)           2,438
       Decrease in long-term assets ....................................             716               --
       Increase (decrease) in accounts payable .........................           3,596           (3,717)
       Decrease in accrued expenses and other ..........................           1,090           (1,530)
       Decrease in customer advances ...................................            (134)          (1,172)
       Other, net ......................................................            (326)            (405)
                                                                            ------------     ------------
          Net cash provided by (used in) operating activities ..........          (4,188)          12,414
                                                                            ------------     ------------
Cash flows from investing activities:
  Capital expenditures for property, plant and equipment ...............          (6,138)          (2,532)
  Proceeds from the sale of property, plant and equipment ..............             276              977
  Acquisitions, net of cash acquired ...................................         (17,239)              --
  Proceeds of note receivable ..........................................           1,067               --
                                                                            ------------     ------------
          Net cash used in investing activities ........................         (22,034)          (1,555)
                                                                            ------------     ------------
Cash flows from financing activities:
  Change in bank overdrafts ............................................           1,831           (2,473)
  Net borrowings (repayments) under long-term revolving credit
     facilities ........................................................           5,231           (4,775)
  Repayments of long-term debt .........................................         (27,858)          (4,197)
  Issuance of common stock, net ........................................          47,199               --
  Receipt from affiliate of remainder of net present value of
     postretirement benefit liability ..................................             600               --
  Payments on postretirement benefit liability .........................          (1,414)            (399)
  Other, net ...........................................................             220              213
                                                                            ------------     ------------
          Net cash provided by (used in) financing activities ..........          25,809          (11,631)
                                                                            ------------     ------------
Effect of exchange rate changes on cash and cash equivalents ...........            (471)              67
                                                                            ------------     ------------
Decrease in cash and cash equivalents ..................................            (884)            (705)
Cash and cash equivalents at beginning of period .......................           1,747            2,380
                                                                            ------------     ------------
Cash and cash equivalents at end of period .............................    $        863     $      1,675
                                                                            ============     ============
Cash payments for:
  Interest .............................................................    $        788     $      2,411
  Income taxes .........................................................    $      1,801     $        630
Significant non-cash investing and financing activities:
  Promissory notes issued for business acquisition .....................    $      1,026     $         --
  Partial settlement of a note arrangement with treasury shares ........    $      1,525     $         --
  Debt assumed in acquisition ..........................................    $      2,862     $         --
  Issuance of common stock for acquisition .............................    $      4,077     $         --
</TABLE>

           See accompanying notes to unaudited condensed consolidated
                             financial statements.


                                       5

<PAGE>   6




                        NATCO GROUP INC. AND SUBSIDIARIES

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

    The accompanying condensed consolidated interim financial statements and
related disclosures are unaudited and have been prepared by NATCO Group Inc.,
("the Company") pursuant to generally accepted accounting principles for interim
financial statements and the rules and regulations of the Securities and
Exchange Commission. As permitted by these regulations, certain information and
footnote disclosures that would typically be required in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. However, the Company's management believes that these
statements reflect all the normal recurring adjustments necessary for a fair
presentation, in all material respects, of the results of operations for the
periods presented, so that these interim financial statements are not
misleading. These condensed consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-K filing for the year ended December 31, 1999.

    To prepare financial statements in accordance with generally accepted
accounting principles, the Company's management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements, and reported amounts of revenues and expenses incurred during the
reporting period. Actual results could differ from those estimates. Furthermore,
certain reclassifications have been made to fiscal year 1999 amounts in order to
present these results on a comparable basis with amounts for fiscal year 2000.

    References to "NATCO" and "the Company" are used throughout this document
and relate collectively to NATCO Group Inc. and its consolidated subsidiaries.

(2) CAPITAL STOCK

    On January 27, 2000, the Company completed an initial public offering of
7,500,000 shares of Class A common stock at a price of $10.00 per share
(4,053,807 shares issued by the Company and 3,446,193 shares issued by selling
stockholders). The proceeds to the Company, less underwriting fees, were $37.7
million. These funds were used to retire debt of $27.9 million under the term
loan facility, to repay borrowings of $3.0 million under the revolving credit
facility used to acquire Porta-Test International, Inc. ("Porta-Test"), to
retire $2.2 million of Porta-Test debt acquired, to pay offering costs of $1.5
million and to fund other working capital needs. On February 3, 2000, the
underwriter exercised its over-allotment option, which resulted in the issuance
of 1,125,000 additional shares of Class A common stock and proceeds of $10.5
million, net of underwriter's fees. Proceeds from the over-allotment were used
to complete the acquisition of Modular Production Equipment, Inc., including the
repayment of $685,000 of debt acquired, and for other working capital needs.

    During 1997, the Company provided a loan of $1.5 million (at an interest
rate of 10% per annum) to a director of the Company who is also an affiliate of
Capricorn Holdings, Inc. ("Capricorn"). In March 1998, the related promissory
note was amended to change the interest rate to 11% per annum. The principal was
to be due on the date on which Capricorn distributed its holdings of NATCO's
common stock to its partners. During 1998, the Company acquired an option at a
cost of approximately $200,000 to purchase 173,050 shares of NATCO's common
stock from the director at a price of $8.81 per share. At the Company's option,
the note provided that the obligation could be repaid with shares of the common
stock of NATCO. The cost to acquire this option was recorded as treasury stock
in the accompanying condensed consolidated balance sheet. During February 2000,
the Company exercised its option to acquire 173,050 shares of NATCO's Class A
common stock from the director for $1.5 million, which reduced the note due from
the director by this amount. The shares were recorded as treasury stock at cost
in the accompanying condensed consolidated balance sheet. The balance of the
note due from the director was repaid in June 2000.

    On June 1, 2000, NATCO issued 418,145 shares of Class B Common Stock to the
former shareholders of The Cynara Company ("Cynara"), in connection with the
achievement of certain performance criteria defined in the November 1998
purchase agreement. Goodwill was increased $4.1 million as a result of this
transaction. See related discussion at "Commitments and Contingencies" (Note
12).


                                       6
<PAGE>   7

(3) EARNINGS PER SHARE

    Basic earnings per share is computed by dividing net income by the weighted
average number of shares outstanding for the period. Diluted earnings per common
and common equivalent share is computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding for the
period. For purposes of this calculation, outstanding employee stock options are
considered common stock equivalents. Included in diluted shares are common stock
equivalents related to employee stock options of 543,829 shares for the quarter
ended September 30, 2000, and 601,038 for the nine-month period ended September
30, 2000. Common stock equivalents related to employee stock options totaled
648,128 shares and 659,727 shares for the respective periods in 1999.
Anti-dilutive stock options were excluded from the calculation of common stock
equivalents. The impact of these anti-dilutive shares would have been a
reduction of 13,834 shares and 8,717 shares for the quarter and nine months
ended September 30, 2000, respectively. There were no anti-dilutive stock
options for the quarter and nine months ended September 30, 1999.

(4) ACQUISITIONS

    The Company acquired all the outstanding common stock of Porta-Test on
January 24, 2000, for approximately $6.3 million in cash, net of cash acquired,
which included payment of specific accrued liabilities of the former company and
the purchase of certain proprietary intellectual property of an associated U.S.
company, the issuance of a one-year promissory note for $1.0 million denominated
in Canadian dollars and a payment contingent upon certain operating criteria
being met. See "Commitments and Contingencies" (Note 12). This acquisition has
been accounted for using the purchase method of accounting, and results of
operations for Porta-Test have been included in NATCO's consolidated financial
statements since the date of acquisition. The excess of the purchase price over
the fair values of the net assets acquired is being amortized over a twenty-year
period. Goodwill and accumulated amortization related to the Porta-Test
acquisition were $5.4 million and $169,000, respectively, at September 30, 2000.

    The Company acquired all the outstanding common stock of Modular Production
Equipment, Inc. ("MPE") on February 8, 2000, for approximately $2.4 million in
cash, net of cash acquired, and the issuance of a one-year promissory note for
$338,000, which accrues interest at 10% per annum. This acquisition has been
accounted for using the purchase method of accounting, and results of operations
for MPE have been included in NATCO's consolidated financial statements since
the date of acquisition. The excess of the purchase price over the fair values
of the net assets acquired is being amortized over a twenty-year period.
Goodwill and accumulated amortization related to the MPE acquisition were $3.4
million and $122,000, respectively, at September 30, 2000.

    The Company acquired all the outstanding common stock of Engineering
Specialties, Inc. ("ESI") on April 4, 2000 for approximately $7.1 million, net
of cash and cash equivalents acquired, subject to adjustment. This acquisition,
which was financed with borrowings of $7.1 million under the existing revolving
credit facility and borrowings of $2.6 million under the existing export sales
facility, was accounted for using the purchase method of accounting, and results
of operations for ESI have been included in NATCO's consolidated financial
statements since the date of acquisition. The final purchase price adjustment
had not been determined as of September 30, 2000. The excess of the purchase
price over the fair values of the net assets acquired is being amortized over a
twenty-year period. Goodwill and accumulated amortization related to the ESI
acquisition were $5.9 million and $141,000, respectively, at September 30, 2000.

    Purchase price allocations have not yet been finalized for the Porta-Test,
MPE and ESI acquisitions, but NATCO's management does not believe that the final
purchase price allocation will differ materially from that as of September 30,
2000.

(5) UNUSUAL CHARGES

    Pursuant to an employment agreement, an executive officer was entitled to a
bonus upon the occurrence of any sale or public offering of the Company. The
bonus equaled one and one-half percent (1.5%) of the value of all securities
owned by stockholders of the Company prior to the sale or offering, including
common stock valued at the price per share received in either the sale or public
offering, and any debt held by such stockholders. In July 1999, the Company
amended the employment agreement to eliminate the bonus and agreed to lend the
officer $1.2 million to purchase 136,832 shares of common stock. Per the
agreement, the officer would receive a bonus equal to the outstanding principal
and interest of the note upon the sale or public offering of the Company. During
February 2000, after the Company completed an initial public offering of its
Class A common stock, NATCO recorded expense of $1.3 million in settlement of
its obligation under this agreement. The officer used the proceeds, net of tax,
to repay the Company approximately $665,000. The outstanding balance of this
note at September 30, 2000, was $607,000. The loan accrues interest at 6%
annually.

    During the first quarter of 2000, NATCO incurred relocation charges of
approximately $208,000 associated with the consolidation of an existing Company
facility with a facility that was acquired in connection with the acquisition of
Porta-Test.

                                       7
<PAGE>   8

(6) INVENTORIES

    Inventories consisted of the following amounts:

<TABLE>
<CAPTION>

                                       SEPTEMBER 30,    DECEMBER 31,
                                           2000             1999
                                      -------------     ------------
                                       (UNAUDITED)
                                              (IN THOUSANDS)
<S>                                    <C>              <C>
Finished goods ....................    $      7,425     $      6,828
Work-in-process ...................          11,782            4,745
Raw materials and supplies ........          11,264            9,106
                                       ------------     ------------
  Inventories at FIFO .............          30,471           20,679
Excess of FIFO over LIFO cost .....            (274)            (265)
                                       ------------     ------------
                                       $     30,197     $     20,414
                                       ============     ============
</TABLE>

(7) COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

    Cost and estimated earnings on uncompleted contracts were as follows:

<TABLE>
<CAPTION>

                                                         SEPTEMBER 30,    DECEMBER 31,
                                                             2000            1999
                                                         ------------     ------------
                                                         (UNAUDITED)
                                                                 (IN THOUSANDS)
<S>                                                      <C>              <C>
Cost incurred on uncompleted contracts ..............    $     65,400     $     47,533
Estimated earnings ..................................          29,095           15,625
                                                         ------------     ------------
                                                               94,495           63,158
Less billings to date ...............................          77,019           64,656
                                                         ------------     ------------
                                                         $     17,476     $     (1,498)
                                                         ============     ============
Included in accompanying balance sheets under the
   following captions:
  Trade accounts receivable .........................    $     17,476     $        866
  Customer advances .................................              --           (2,364)
                                                         ------------     ------------
                                                         $     17,476     $     (1,498)
                                                         ============     ============
</TABLE>

(8) SHORT-TERM DEBT

    In conjunction with the purchase of Porta-Test in January 2000, the Company
issued a one-year promissory note for $1 million denominated in Canadian
dollars, which accrues interest at 15% per annum. The note is payable, along
with accrued interest, on January 24, 2001.

    During February 2000, the Company issued a one-year promissory note, face
value of $338,000, with interest payable per annum at 10%, in conjunction with
the acquisition of MPE. This note is payable, along with accrued interest, on
February 8, 2001.

(9) LONG-TERM DEBT

    The consolidated borrowings of the Company were as follows:

<TABLE>
<CAPTION>

                                                                      SEPTEMBER 30,    DECEMBER 31,
                                                                           2000            1999
                                                                       ------------    ------------
                                                                       (UNAUDITED)
                                                                             (IN THOUSANDS)
<S>                                                                    <C>             <C>
BANK DEBT
Term loan with variable  interest rate (8.98% at December
  31, 1999) and quarterly payments of principal ($1,161) and
  interest, due November 30, 2003 .................................    $         --    $     27,858
Revolving credit bank loans with variable interest rate
  (8.86% and 7.75% at September 30, 2000 and December 31, 1999,
  respectively) and quarterly payment of interest, due
  November 30, 2001 ...............................................    $     11,209    $      3,322
          Less current installments ...............................              --          (4,643)
                                                                       ------------    ------------
          Long-term debt ..........................................    $     11,209    $     26,537
                                                                       ============    ============
</TABLE>


    As of September 30, 2000, the Company was in compliance with all restrictive
debt covenants. NATCO had letters of credit outstanding under the revolving
credit facilities totaling $2.3 million at September 30, 2000. These letters of
credit constitute contract performance and warranty collateral and expire at
various dates through September 2002.


                                       8
<PAGE>   9

    The Company maintains a working capital facility for export sales that
provides for aggregate borrowings of $10.0 million, subject to borrowing base
limitations, of which no borrowings were outstanding as of September 30, 2000.
The Company had issued letters of credit under this facility that totaled $7.1
million as of September 30, 2000. The export sales credit facility is secured by
specific project inventory and receivables, and is partially guaranteed by the
EXIM Bank. The export sales credit facility loans mature in July 2002.

    During the first quarter of 2000, NATCO retired all outstanding debt under
the term loan facility utilizing the proceeds from the initial public offering
of the Company's Class A common stock. In addition, the Company borrowed $3.0
million under the revolving credit facility to finance the acquisition of
Porta-Test, which was repaid during February 2000. The Company borrowed $7.1
million under the revolving credit facility and $2.6 million under the facility
for export sales during April 2000 to finance the purchase of ESI. In August
2000, the Company retired all outstanding borrowings under the export sales
facility. Net borrowings under the revolving credit facility for the three-month
and nine-month periods ended September 30, 2000, totaled $7.2 million and $7.9
million, respectively.

(10) INCOME TAXES

    NATCO's effective income tax rate for the three-month and nine-month periods
ended September 30, 2000, was 42.8%, which exceeds the amount that would have
resulted from applying the U.S. federal statutory tax rate, and was due
primarily to non-deductible goodwill amortization expense of $440,000 and $1.1
million for these periods, respectively. A tax benefit of $5,000 and $273,000,
respectively, associated with the exercise of employee stock options was
allocated to equity during the three-month and nine-month periods ended
September 30, 2000.

(11) INDUSTRY SEGMENTS

    The accounting policies of the reportable segments are consistent with the
policies used to prepare the Company's condensed consolidated financial
statements for the respective periods presented. The Company evaluates the
performance of its operating segments based on income before net interest
expense, income taxes, depreciation and amortization expense, accounting
changes, and nonrecurring items.

    In July 2000, the Company changed its presentation of certain assets that
were acquired from Cynara in November 1998, and the related operating results,
for segment reporting purposes. The majority of the assets were reclassified to
the traditional production equipment and services business segment from the
engineered systems business segment. This change has been retroactively
reflected in all periods presented.

    Summarized financial information concerning the Company's reportable
segments is shown in the following table.



                                       9
<PAGE>   10


<TABLE>
<CAPTION>

                                                TRADITIONAL
                                                PRODUCTION
                                  ENGINEERED    EQUIPMENT &   INSTRUMENTATION &       NATCO        CORPORATE &
                                    SYSTEMS       SERVICES    ELECTRICAL SYSTEMS      CANADA       ELIMINATIONS    CONSOLIDATED
                                 ------------   ------------  ------------------   ------------    ------------    ------------
                                                                         (UNAUDITED)
                                                                        (IN THOUSANDS)
<S>                              <C>            <C>            <C>                 <C>             <C>             <C>
THREE MONTHS ENDED
  SEPTEMBER 30, 2000
Revenues from unaffiliated
  customers ..................   $     17,936   $     22,723   $      9,163        $     10,422    $         --    $     60,244
Revenues from
  affiliates .................             96            300          1,143               1,317          (2,856)             --
Segment profit (loss) ........          3,902          1,743          1,261                 685          (1,017)          6,574
Total assets .................         27,074         72,391         18,989              22,052          10,242         150,748
Capital expenditures .........          1,296            236             73                  37             156           1,798
Depreciation and
  amortization ...............            375            573            141                 188              30           1,307
THREE MONTHS ENDED
  SEPTEMBER 30, 1999
Revenues from unaffiliated
  customers ..................   $     12,242   $     14,422   $     10,118        $      2,951    $         --    $     39,733
Revenues from
  affiliates .................            934            353            633                  --          (1,920)             --
Segment profit (loss) ........          1,795            747          1,403                (231)         (1,091)          2,623
Total assets .................         21,109         37,700         21,019              10,767          13,451         104,046
Capital expenditures .........            466            194             60                  27             (39)            708
Depreciation and
  amortization ...............            240            676            135                  89              40           1,180
NINE MONTHS ENDED
  SEPTEMBER 30, 2000
Revenues from unaffiliated
  customers ..................   $     52,721   $     58,212   $     28,448        $     28,653    $         --    $    168,034
Revenues from
  affiliates .................             96          1,165          3,157               3,644          (8,062)             --
Segment profit (loss) ........         10,286          2,785          3,759               2,817          (4,593)         15,054
Total assets .................         27,074         72,391         18,989              22,052          10,242         150,748
Capital expenditures .........          3,886            846            214                 629             563           6,138
Depreciation and
  amortization ...............          1,017          1,813            421                 494             105           3,850
NINE MONTHS ENDED
  SEPTEMBER 30, 1999
Revenues from unaffiliated
  customers ..................   $     37,152   $     44,221   $     31,988        $     12,533    $         --    $    125,894
Revenues from
  affiliates .................          1,599            612          1,577                  --          (3,788)             --
Segment profit (loss) ........          3,837          2,497          4,140                (382)         (1,890)          8,202
Total assets .................         21,109         37,700         21,019              10,767          13,451         104,046
Capital expenditures .........          1,411            583            259                 318             (39)          2,532
Depreciation and
  amortization ...............            704          2,037            408                 268             151           3,568


</TABLE>

(12) COMMITMENTS AND CONTINGENCIES

    The Company could be required to issue up to 1,400,000 shares of its Class B
Common Stock based upon certain performance criteria outlined in the November
1998 purchase agreement of Cynara. In September 1999 and June 2000, 325,836
shares and 418,145 shares, respectively, were issued pursuant to this agreement.
Additional shares may be earned throughout fiscal 2000, if the related
performance criteria are met. As of September 30, 2000, NATCO's management could
not estimate whether these shares will be earned. However, should additional
shares be earned under this agreement, a corresponding increase will be made to
goodwill.

    The Porta-Test purchase agreement, executed in January 2000, contains a
provision to calculate a payment to certain former stockholders of Porta-Test
Systems, Inc., based upon sales of a limited number of specified products
designed by or utilizing technology that existed at the time of the acquisition.
Liability under this arrangement is contingent upon attaining certain
performance criteria, including gross margins and sales volumes for the
specified products. The potential payment will be calculated each year on the
anniversary date of the acquisition, extending for a three-year period ended
January 24, 2003. As of September 30, 2000, the Company has accrued
approximately $200,000 related to its obligation under this arrangement with a
corresponding increase in goodwill. Any future liabilities incurred under this
arrangement will also result in an increase in goodwill.


                                       10
<PAGE>   11

13) CHANGE IN ACCOUNTING ESTIMATE

     During April 2000, the Company extended the service life of certain assets
based upon operational factors. The effect on net income and basic and diluted
earnings per share was an increase of $98,000 and $.01, respectively, for the
quarter ended September 30, 2000. The effect on net income and basic and diluted
earnings per share was an increase of $196,000 and $.01, respectively, for the
nine months ended September 30, 2000.

14) SUBSEQUENT EVENTS

     In October 2000, the Company's variable interest rate revolving credit bank
loan agreement was amended to extend the maturity date of the facility from
November 2001 to January 2003. No other material terms of the agreement were
modified.


                                       11
<PAGE>   12



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD-LOOKING STATEMENTS

    Management's Discussion and Analysis includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (each a
"Forward-Looking Statement"). The words "believe," "expect," "plan," "intend,"
"estimate," "project," "will," "could," "may" and similar expressions are
intended to identify Forward-Looking Statements. Forward-Looking Statements in
this document include, but are not limited to, discussions regarding synergies
and opportunities resulting from recent acquisitions (see "--Acquisitions"),
indicated trends in the level of oil and gas exploration and production and the
effect of such conditions on the Company's results of operations (see
"--Industry and Business Environment"), future uses of and requirements for
financial resources (see "--Liquidity and Capital Resources"), and anticipated
backlog levels for 2000 (see "--Liquidity and Capital Resources"). The Company's
expectations about its business outlook, customer spending, oil and gas prices
and the business environment for the Company and the industry in general are
only its expectations regarding these matters. No assurance can be given that
actual results may not differ materially from those in the Forward-Looking
Statements herein for reasons including, but not limited to: market factors such
as pricing and demand for petroleum related products, the level of petroleum
industry exploration and production expenditures, the effects of competition,
world economic conditions, the level of drilling activity, the legislative
environment in the United States and other countries, policies of the
Organization of Petroleum Exporting Countries, conflict in major petroleum
producing or consuming regions, the development of technology which could lower
overall finding and development costs, weather patterns and the overall
condition of capital and equity markets for countries in which the Company
operates.

    The following discussion should be read in conjunction with the financial
statements, related notes and other financial information appearing elsewhere in
this Form 10-Q. Readers are also urged to carefully review and consider the
various disclosures advising interested parties of the factors that affect the
Company, including without limitation, the disclosures made under the caption
"Risk Factors" and the other factors and risks discussed in the Company's
Registration Statement on Form S-1/A and subsequent reports filed with the
Securities and Exchange Commission. The Company expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
Forward-Looking Statement to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any Forward-Looking Statement is based.

OVERVIEW

    References to "NATCO" and "the Company" are used throughout this document
and relate collectively to NATCO Group Inc. and its consolidated subsidiaries.

    NATCO's operations are organized into four separate business segments:
traditional production equipment and services, a segment which primarily
provides standardized components, replacement parts and used components and
equipment servicing; engineered systems, a segment which primarily provides
customized, large scale integrated oil and gas production systems; Canadian
operations, a segment which combines traditional production equipment and
services and engineered systems; and instrumentation and electrical control
systems, a segment which provides control panels and systems that monitor and
control oil and gas production.

    NATCO recognizes revenues from significant contracts (contracts greater than
$250,000 and longer than four months in duration) and all instrumentation and
electrical contracts and orders on the percentage of completion method. The
Company records revenues and profits on other sales as shipments are made.
Earned revenue is based on the percentage that costs incurred to date bear to
total estimated costs. If estimated total costs on any contract or
work-in-process indicate a loss, the Company recognizes the entire loss
immediately. NATCO generally recognizes revenue and earnings to which the
percentage of completion method applies over a period of two to six quarters.
Customers typically retain an interest in uncompleted projects.

ACQUISITIONS

    On January 24, 2000, the Company acquired all the outstanding common stock
of Porta-Test International Inc. ("Porta-Test") for $6.3 million in cash, net of
cash acquired, which included payment of specific accrued liabilities of the
former company and the purchase of certain proprietary intellectual property of
an associated U.S. company, the issuance of a one-year promissory note for $1.0
million denominated in Canadian dollars and a payment contingent upon certain
operating performance criteria being met. The acquisition, which has been
accounted for using the purchase method of accounting, was financed with
borrowings under the existing revolving credit agreement and cash on-hand.
Borrowings for the Porta-Test acquisition and debt acquired during the
acquisition, were retired during February 2000 with the proceeds of the
Company's initial public offering of its Class A common stock. Results of
operations for Porta-Test have been included in NATCO's consolidated financial
statements since the date of acquisition. Goodwill is


                                       12
<PAGE>   13

being amortized over a twenty-year period. NATCO's management believes that this
acquisition will allow the Company to provide oil and gas producers smaller,
more efficient production facilities.

    On February 8, 2000, the Company acquired all the outstanding common stock
of Modular Production Equipment, Inc. ("MPE"), for $2.4 million in cash, net of
cash acquired, and the issuance of a one-year promissory note for $338,000,
which accrues interest at 10% per annum. This acquisition has been accounted for
using the purchase method of accounting, and was financed with the proceeds of
the Company's initial public offering of its Class A common stock. Results of
operations for MPE have been included in NATCO's consolidated financial
statements since the date of acquisition. Goodwill is being amortized over a
twenty-year period. The Company believes the water treatment technology and
expertise of MPE will allow NATCO to offer its customers an advanced and
complete turnkey process solution.

    On April 4, 2000, the Company acquired all the outstanding common stock of
Engineering Specialties, Inc. ("ESI"), a company that has proprietary water
technologies for oily water treatment and heavy metals removal from production
at or near the wellhead, for $7.1 million in cash, net of cash and cash
equivalents acquired of $2.6 million, subject to adjustment. The acquisition has
been accounted for using the purchase method of accounting, and was financed
through borrowings under the existing revolving credit agreement and export
sales facility. The final purchase price adjustment had not been determined as
of September 30, 2000. Goodwill is being amortized over twenty-years. The
purchase price allocation has not been finalized.

INDUSTRY AND BUSINESS ENVIRONMENT

    NATCO is a provider of oilfield service equipment for the oil and gas
industry. Throughout 1999, the industry suffered a downturn that resulted in a
significant decline in overall drilling and production expenditures by oil and
gas operators due to low hydrocarbon prices. Since NATCO's business is closely
linked to the market conditions of its customers, lower production results in
fewer purchases by NATCO's customers. The traditional production equipment and
services business segment was affected most significantly as this business line
primarily provides replacement parts used during the oil and gas drilling and
extraction processes.

    Two measures of customer spending in the oil and gas industry are the price
of oil per barrel and the number of operating rigs in the United States. Since
mid-1999, energy prices rose steadily as production cuts by OPEC and other oil
producing countries reduced excess inventory levels. In the spring of 2000,
these same producers elected to increase production to bring energy prices down
to more sustainable levels. At September 30, 2000, the price of West Texas
Intermediate crude oil was approximately $29 per barrel, as compared to
approximately $30 per barrel at June 30, 2000 and approximately $22 per barrel
at September 30, 1999. The increase in oil prices as compared to the respective
period in 1999 has had a positive effect on NATCO's overall sales for the first
nine months of 2000, as compared to the respective period in 1999. The recent
price stability, which has contributed to improved overall industry conditions,
should also cause NATCO's customers to continue to increase their exploration
and development efforts.

    In addition, the average operating rig count in the U.S. increased to 981
for the quarter ended September 30, 2000, as compared to an average of 637 for
the quarter ended September 30, 1999. Such increases in the rig count are
indicative of increases in spending for exploration and production. The improved
sales backlog for the Company's core business products, engineering systems and
traditional services, supports this trend. See additional discussion of backlogs
at "--Liquidity and Capital Resources."

     Market indicators suggest that stabilization in energy prices will continue
in the short-term. On October 24, 2000, light sweet crude oil futures on the New
York Mercantile Exchange were trading at $33.75 per barrel for November 2000
delivery, and exceed $30 per barrel through July 2001 delivery. Although crude
oil price increases are indicators that additional oil and gas production may
occur during 2000, there can be no assurance that overall production will
increase, that an increase in production trends will continue throughout 2000 or
that such an increase in production would result in an increase in revenues for
the Company.

    The following discussion of NATCO's historical results of operations and
financial condition should be read in conjunction with the Company's condensed
consolidated financial statements and notes thereto.

RESULTS OF OPERATIONS

    In July 2000, the Company changed its presentation of certain assets that
were acquired from The Cynara Company ("Cynara") in November 1998, and the
related operating results, for segment reporting purposes. The majority of the
assets were reclassified to the traditional production equipment and services
business segment from the engineered systems business segment. This change has
been retroactively reflected in all periods presented.


                                        13
<PAGE>   14

Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999

    Revenues. Revenues of $60.2 million for the three months ended September 30,
2000, increased $20.5 million, or 52%, from $39.7 million for the third quarter
of 1999. The following table summarizes revenues by business segment for the
three months ended September 30, 2000 and 1999, respectively:

<TABLE>
<CAPTION>

                                                 THREE MONTHS ENDED
                                                     SEPTEMBER 30,
                                           ------------------------------                           PERCENTAGE
                                               2000              1999            CHANGE                CHANGE
                                           ------------      ------------      ------------         -----------
                                                                       (UNAUDITED)
                                                       (IN THOUSANDS, EXCEPT PERCENTAGE CHANGE)

<S>                                        <C>               <C>               <C>                  <C>
Engineered Systems ...................     $     18,032      $     13,176      $      4,856                37%
Traditional Equipment and Services ...           23,023            14,775             8,248                56
Instrumentation and Electrical
   Systems............................           10,306            10,751              (445)               (4)
NATCO Canada .........................           11,739             2,951             8,788               298
Corporate and Other ..................           (2,856)           (1,920)             (936)              (49)
                                           ------------      ------------      ------------
          Total ......................     $     60,244      $     39,733      $     20,511                52%
                                           ------------      ------------      ------------
</TABLE>

    Revenues for the engineered systems segment increased $4.9 million, or 37%,
for the quarter ended September 30, 2000, as compared to the quarter ended
September 30, 1999. This increase was primarily due to the contribution of one
customer, Carigali-Triton Operating Company SDN BHD ("CTOC"), which provided
revenues of $11.6 million for the quarter ended September 30, 2000, as compared
to $5.7 million for the quarter ended September 30, 1999. See "-- Liquidity and
Capital Resources." The acquisitions of MPE and ESI in February 2000 and April
2000, respectively, also contributed to the increase in engineered systems
revenue. This increase in revenue was partially offset by a decline in other
domestic and international engineered systems, consistent with a decrease in
project awards by the Company's customers throughout 1999 and early 2000 as a
result of lower gas prices in 1999. Engineered systems revenues of $18.0 million
for the three months ended September 30, 2000, included affiliated revenues of
$96,000, as compared to $934,000 of affiliated revenues for the quarter ended
September 30, 1999.

    Traditional equipment and service revenues increased $8.2 million, or 56%,
for the quarter ended September 30, 2000, as compared to the quarter ended
September 30, 1999, due to an increase in oilfield activity resulting from an
overall increase in oil and gas prices in 2000. The Company experienced
increased demand for its production process equipment, as well as in the
domestic parts and service business. Partially offsetting this increase was a
decline in service revenues of $338,000 related to a gas plant operation that
was closed in the fourth quarter of 1999, and the reorganization of certain
Cynara operations which contributed revenues of $1.3 million for the quarter
ended September 30, 2000, as compared to revenues of $1.8 million for the
respective period in 1999. Affiliated revenues for this business segment were
approximately $300,000 and $353,000 for the quarters ended September 30, 2000
and 1999, respectively.

    Revenues for instrumentation and electrical systems decreased $445,000, or
4%, for the quarter ended September 30, 2000, as compared to the respective
period in 1999. This decrease in revenue reflects a decrease in demand for
instrumentation and electrical products and services, as several large projects
were completed in 1999. Affiliated revenues of approximately $1.1 million and
$633,000 were included in the results for September 30, 2000 and 1999,
respectively.

    NATCO Canada revenues increased $8.8 million for the quarter ended September
30, 2000, as compared to the quarter ended September 30, 1999. This increase was
partially due to the acquisition of Porta-Test, which contributed revenues of
$1.8 million for the quarter ended September 30, 2000, and an increase in
affiliated revenues of $1.3 million associated with large projects, including
CTOC. The NATCO Canada business segment results included two significant gas
plant projects for Chevron Canada completed as of September 30, 2000, and
several projects for Pemex. Overall industry market conditions in Canada
improved, which was consistent with an increase in Canadian rig count over the
past nine months. There were no affiliated revenues included in the results for
the three months ended September 30, 1999.

    The change in revenues for corporate and other represents the elimination of
revenues of affiliates as discussed above.

    Gross Profit. Gross profit for the quarter ended September 30, 2000,
increased $5.6 million, or 52%, to $16.3 million, compared to $10.7 million for
the quarter ended September 30, 1999. As a percentage of revenue, gross margins
remained constant at 27% for the third quarters of 2000 and 1999. The following
table summarizes gross profit by business segment for the three months ended
September 30, 2000 and 1999, respectively:


                                       14
<PAGE>   15

<TABLE>
<CAPTION>

                                                 THREE MONTHS ENDED
                                                   SEPTEMBER 30,
                                           -----------------------------                             PERCENTAGE
                                               2000            1999             CHANGE                 CHANGE
                                           ------------     ------------      ------------          ------------
                                                                     (UNAUDITED)
                                                      (IN THOUSANDS, EXCEPT PERCENTAGE CHANGE)

<S>                                        <C>              <C>              <C>                    <C>
Engineered Systems ...................     $      6,476     $      3,716     $      2,760                74%
Traditional Equipment and Services ...            5,531            4,004            1,527                38
Instrumentation and Electrical
Systems ..............................            2,258            2,488             (230)               (9)
NATCO Canada .........................            2,000              462            1,538               333
                                           ------------     ------------      ------------
          Total ......................     $     16,265     $     10,670     $      5,595                52%
                                           ------------     ------------      ------------
</TABLE>

    Gross profit for engineered systems for the quarter ended September 30,
2000, increased $2.8 million, or 74%. This increase was due primarily to a 37%
increase in revenues for this segment and higher margin projects included in the
sales mix for the quarter ended September 30, 2000, as compared to the
respective period in 1999. Gross margin for engineered systems represented 36%
and 28% of the segment's revenues for the quarters ended September 30, 2000 and
1999, respectively.

    Gross profit for the traditional equipment and services business segment
increased $1.5 million, or 38%, for the quarter ended September 30, 2000, as
compared to the respective period in 1999. This increase in margin was due to a
56% increase in revenues, partially offset by higher sales of lower margin
products within this business segment and reduced margins on export parts sales.
As a percentage of revenue, gross margins were 24% and 27% for the quarters
ended September 30, 2000 and 1999, respectively.

    Gross profit for the instrumentation and electrical systems business segment
decreased $230,000, or 9%, for the quarter ended September 30, 2000, as compared
to the quarter ended September 30, 1999. This decrease was directly related to a
9% decrease in third-party revenues. Gross margin as a percentage of revenue for
the quarters ended September 30, 2000 and 1999, was 22% and 23%, respectively.

    Gross profit for NATCO Canada increased $1.5 million, or 333%, for the
quarter ended September 30, 2000, as compared to the respective period in 1999.
This increase in gross margin was due to a 298% increase in revenues.
Porta-Test, which was acquired in January 2000, provided margins of $491,000 for
the quarter ended September 30, 2000. As a percentage of revenue, gross margin
was 17% for the third quarter of 2000 compared to 16% for the third quarter of
1999.

    Selling, General and Administrative Expense. Selling, general and
administrative expense of $9.7 million increased $1.6 million, or 20%, for the
quarter ended September 30, 2000, as compared to the respective period in 1999.
This increase was largely related to the execution of NATCO's business plan and
included: (1) additional costs associated with strategic acquisitions of
Porta-Test, MPE and ESI, (2) increased spending for technology and product
development, (3) additional expenses related to being a public company, (4)
continued investment in pre-order engineering expenses, and (5) additional
performance based compensation.

    Depreciation and Amortization Expense. Depreciation and amortization expense
of $1.3 million for the quarter ended September 30, 2000, increased $127,000, or
11%, compared to $1.2 million for the quarter ended September 30, 1999.
Depreciation expense of $744,000 for the quarter ended September 30, 2000,
decreased $212,000, or 22%, as compared to the respective period for 1999. This
decrease was primarily due to extending the service life of certain operational
assets. This decrease in depreciation expense for the quarter ended September
30, 2000 as compared to the quarter ended September 30, 1999, was partially
offset by: (1) depreciation on the addition of capital assets during the last
four quarters, which included renovations and expansions of existing
manufacturing plants, technological improvements to management information
systems and the purchase of computer hardware and software, and acquisitions of
and improvements to other equipment used in the Company's business; and (2)
depreciation expense due to the inclusion of results from Porta-Test, MPE and
ESI, acquired during fiscal 2000. Amortization expense of $563,000 for the
quarter ended September 30, 2000, increased $339,000, or 151%, as compared to
$224,000 for the quarter ended September 30, 1999. This increase was primarily
due to amortization of goodwill associated with the Porta-Test, MPE and ESI
acquisitions. Also, amortization expense increased due to an increase in
goodwill related to the acquisition of Cynara in November 1998. Pursuant to the
purchase agreement, NATCO issued 325,836 shares and 418,145 shares of the
Company's Class B common stock during September 1999 and June 2000,
respectively, to Cynara's former shareholders based upon the achievement of
certain performance criteria, and the cost of such shares was charged to
goodwill.

    Interest Expense. Interest expense was $355,000 for the quarter ended
September 30, 2000, as compared to $835,000 for the respective period in 1999.
This 57% decrease in interest expense was due primarily to a reduction of
long-term debt under the term loan and revolving credit facilities from $32.9
million at September 30, 1999 to $11.2 million at September 30, 2000. NATCO
retired


                                       15
<PAGE>   16

$27.9 million of long-term debt under the Company's term loan facility during
February 2000 utilizing the proceeds from its initial public offering of the
Company's Class A common stock. This decline in interest expense was partially
offset by an increase in interest rates from approximately 8% at September 30,
1999, to approximately 9% at September 30, 2000.

    Provision for Income Taxes. Income tax expense of $2.0 million for the
quarter ended September 30, 2000, increased $1.7 million from $310,000 for the
quarter ended September 30, 1999. The primary reason for this increase in tax
expense was an increase in income before income taxes, which was $4.6 million
for the quarter ended September 30, 2000, as compared to $422,000 for the
respective period in 1999. This increase in tax expense was partially offset by
a decrease in the effective tax rate from 73.5% for the third quarter of 1999,
to 42.8% for the third quarter of 2000, based on the forecasted results for the
Company during 2000.


Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999

    Revenues. Revenues of $168.0 million for the nine months ended September 30,
2000, increased $42.1 million, or 33%, from $125.9 million for the nine months
ended September 30, 1999. The following table summarizes revenues by business
segment for the nine months ended September 30, 2000 and 1999, respectively:

<TABLE>
<CAPTION>

                                                  NINE MONTHS ENDED
                                                     SEPTEMBER 30,
                                            ------------------------------                            PERCENTAGE
                                                2000              1999             CHANGE              CHANGE
                                            ------------      ------------      ------------        -------------
                                                                       (UNAUDITED)
                                                       (IN THOUSANDS, EXCEPT PERCENTAGE CHANGE)

<S>                                         <C>               <C>               <C>                       <C>
Engineered Systems ....................     $     52,817      $     38,751      $     14,066              36%
Traditional Equipment and Services ....           59,377            44,833            14,544              32
Instrumentation and Electrical
Systems ...............................           31,605            33,565            (1,960)             (6)
NATCO Canada ..........................           32,297            12,533            19,764             158
Corporate and Other ...................           (8,062)           (3,788)           (4,274)            113
                                            ------------      ------------      ------------
          Total .......................     $    168,034      $    125,894      $     42,140              33%
                                            ------------      ------------      ------------
</TABLE>


    Revenues for the engineered systems segment increased $14.1 million, or 36%,
for the nine months ended September 30, 2000, as compared to the respective
period in 1999. This increase was due primarily to a $34.8 million contribution
from one customer, CTOC, and the contributions of MPE and ESI acquired during
2000. This increase in revenues was partially offset by a decline in revenues
for other domestic and international engineered systems because these projects
typically require a lead time of several months. In addition, the Company
completed two large engineered systems projects during 1999 that contributed
$11.1 million of revenues for the nine months ended September 30, 1999.
Engineered systems revenues for the nine months ended September 30, 2000
included affiliated revenues of $96,000, as compared to $1.6 million of
affiliated revenues for the respective period in 1999.

    Traditional equipment and service revenues increased $14.5 million, or 32%,
due to an increase in overall oilfield activity, which resulted from an increase
in oil and gas prices for the nine months ended September 30, 2000, as compared
to 1999. The Company experienced increased demand for its production process
equipment, as well as in the domestic parts and service business. Partially
offsetting these increases was a decline of $1.0 million in service revenues
associated with a gas plant closed in the fourth quarter of fiscal 1999.
Affiliated revenues for this business segment were approximately $1.2 million
and $612,000 for the nine months ended September 30, 2000 and 1999,
respectively.

    Revenues for instrumentation and electrical systems decreased approximately
$2.0 million, or 6%, for the nine months ended September 30, 2000, as compared
to the respective period in 1999, primarily due to the completion of several
large projects during the first nine months of 1999. Affiliated revenues of $3.2
million and $1.6 were included in the results for September 30, 2000 and 1999,
respectively.

    NATCO Canada revenues increased $19.8 million for the nine months ended
September 30, 2000, as compared to the nine months ended September 30, 1999.
This increase was due to the acquisition of Porta-Test, which contributed
revenues of $6.6 million since the date of acquisition, January 24, 2000, and an
increase in affiliated revenues of $3.6 million associated with large projects,
including CTOC. The NATCO Canada business segment results included two
significant gas plant projects for Chevron Canada, and new gas plant projects
for Pemex. Overall results were consistent with improved industry market
conditions in Canada. No affiliated revenues were included in the results for
the nine months ended September 30, 1999.

    The change in revenues for corporate and other represented the elimination
of revenues of affiliates as discussed above.


                                       16
<PAGE>   17

    Gross Profit. Gross profit for the nine months ended September 30, 2000,
increased $14.6 million, or 47%, to $45.6 million, compared to $31.0 million for
the respective period in 1999. As a percentage of revenue, gross margins
improved to 27%, as compared to 25% for the nine months ended September 30, 2000
and 1999, respectively. The following table summarizes gross profit by business
segment for the nine months ended September 30, 2000 and 1999, respectively:

<TABLE>
<CAPTION>

                                             NINE MONTHS ENDED
                                                SEPTEMBER 30,
                                       -------------------------------                               PERCENTAGE
                                           2000              1999               CHANGE                  CHANGE
                                       -------------     -------------      -------------            -------------
                                                                   (UNAUDITED)
                                                      (IN THOUSANDS, EXCEPT PERCENTAGE CHANGE)

<S>                                    <C>               <C>               <C>                        <C>
Engineered Systems ...............     $      17,866     $       9,486     $       8,380                 88%
Traditional Equipment and Services            14,064            12,131             1,933                 16
Instrumentation and Electrical
Systems ..........................             6,826             7,539              (713)                (9)
NATCO Canada .....................             6,805             1,836             4,969                271
                                       -------------     -------------      -------------
          Total ..................     $      45,561     $      30,992     $      14,569                 47%
                                       -------------     -------------      -------------
</TABLE>

    Gross profit for engineered systems for the nine months ended September 30,
2000, increased $8.4 million, or 88%, from the same period in 1999. This
increase was due to a 36% increase in revenues for the business segment, as well
as higher margin projects included in the sales mix for 2000, as compared to the
nine months ended September 30, 1999. Two large projects, Petroquimica and BP
Northstar, contributed higher margins during the nine months ended September 30,
2000, due to favorable project performance. Gross margin for engineered systems
was 34% and 24% of the segment's revenues for the nine months ended September
30, 2000 and 1999, respectively.

    Gross profit for the traditional equipment and services business segment
increased $1.9 million, or 16%, for the nine months ended September 30, 2000, as
compared to the respective period in 1999. This increase was due to a 32%
increase in revenues, partially offset by higher sales of domestic parts and
services and traditional transmission equipment at lower margins, as compared to
the prior year. As a percentage of revenue, gross margins were 24% and 27%,
respectively, for the nine months ended September 30, 2000 and 1999.

    Gross profit for the instrumentation and electrical systems business segment
decreased $713,000 or 9%, for the nine months ended September 30, 2000, as
compared to the nine months ended September 30, 1999. This decrease was
primarily the result of a 6% decrease in revenues. Gross margin as a percentage
of revenue for the nine months ended September 30, 2000 and 1999 remained
constant at 22% for both periods.

    Gross profit for NATCO Canada increased approximately $5.0 million, or 271%,
for the nine months ended September 30, 2000, as compared to the respective
period in 1999. This increase was due to a 158% increase in revenues for 2000,
which included revenues associated with higher margin projects and margins of
$2.3 million contributed by Porta-Test. As a percentage of revenue, gross margin
was 21% for the first nine months of 2000, compared to 15% for the first nine
months of 1999.

    Selling, General and Administrative Expense. Selling, general and
administrative expense of $29.0 million increased $5.3 million, or 23%, for the
nine months ended September 30, 2000, as compared to the respective period in
1999. Consistent with the increase in expense for the quarter ended September
30, 2000, this increase was largely related to the execution of NATCO's business
plan and included: (1) additional costs associated with strategic acquisitions
of Porta-Test, MPE and ESI, (2) increased spending for technology and product
development, (3) additional expenses related to being a public company, (4)
continued investment in pre-order engineering expenses, and (5) additional
performance based compensation.

    Depreciation and Amortization Expense. Depreciation and amortization expense
of $3.9 million for the nine months ended September 30, 2000, increased
$282,000, or 8%, compared to $3.6 million for the nine months ended September
30, 1999. Depreciation expense of $2.4 million for the nine months ended
September 30, 2000, decreased $429,000, or 15%, as compared to the respective
period for 1999. This decrease was primarily due to extending the service life
of certain operational assets. This decrease in depreciation expense for the
nine months ended September 30, 2000 as compared to the nine months ended
September 30, 1999, was partially offset by: (1) depreciation on the addition of
capital assets purchased during the last four quarters, which included
renovations and expansions of existing manufacturing plants, technological
improvements to management information systems and the purchase of computer
hardware and software, and acquisitions of and improvements to other equipment
used in the Company's business; and (2) depreciation expense due to the
inclusion of results from Porta-Test, MPE and ESI, acquired during 2000.
Amortization expense of $1.5 million for the nine months ended September 30,
2000, increased $711,000, or 96%, as compared to $739,000 for the nine months
ended September 30, 1999. This increase was primarily due to amortization of
goodwill associated with the Porta-Test, MPE and ESI acquisitions. Also,
amortization expense increased due to an increase in goodwill related to the
acquisition of Cynara in November 1998. Pursuant to the purchase agreement,
NATCO issued 325,836 shares and 418,145 shares of


                                       17
<PAGE>   18

the Company's Class B common stock during September 1999 and June 2000,
respectively, to Cynara's former shareholders based upon the achievement of
certain performance criteria, and the cost of such shares was charged to
goodwill.

    Unusual Charges. Unusual charges for the nine months ended September 30,
2000, were $1.5 million. The charge was primarily for compensation expense
associated with the employment agreement of an executive officer. The terms of
the agreement entitled the officer to a sum equal to an outstanding note and
accrued interest, totaling $1.2 million at December 31, 1999, upon the sale of
the Company's Class A common stock in an initial public offering. NATCO
completed its initial public offering on January 27, 2000, and, per the
agreement, the Company recorded compensation expense for the amount of the note
and accrued interest, including related payroll burdens, totaling $1.3 million.
In addition, the Company recorded relocation expenses totaling $208,000
associated with the consolidation of an existing Company facility with a
facility that was acquired with the acquisition of Porta-Test.

    Interest Expense. Interest expense was $1.1 for the nine months ended
September 30, 2000, as compared to $2.5 million for the respective period in
1999. This 56% decrease in interest expense was due primarily to a reduction of
long-term debt in the first quarter of 2000, offset slightly by an increase in
interest rates from approximately 8% at September 30, 1999 to approximately 9%
at September 30, 2000.

     Revaluation Gain on Postretirement Benefit Liability. Revaluation gain on
postretirement benefit liability for the nine months ended September 30, 1999
was $848,000. No actuarial change was made during the nine months ended
September 30, 2000.

    Provision for Income Taxes. Income tax expense of $4.0 million for the nine
months ended September 30, 2000, increased $2.9 million, from $1.1 million for
the nine months ended September 30, 1999. This increase was attributable to an
increase in income before income taxes, which was $9.3 million for the nine
months ended September 30, 2000, as compared to $1.5 million for the respective
period in 1999. This increase was partially offset by a decrease in the
effective tax rate from 72.8% for the nine months ended September 30, 1999, to
42.8% for the nine months ended September 30, 2000, based upon the forecasted
results for the Company during 2000.

LIQUIDITY AND CAPITAL RESOURCES

    As of September 30, 2000, the Company had cash and working capital of
$863,000 and $42.7 million, respectively, as compared to cash and working
capital of $1.7 million and $25.3 million, respectively, at December 31, 1999.

    Net cash used in operating activities for the nine months ended September
30, 2000, was $4.2 million, compared to net cash provided by operations of $12.4
million for the same nine months in fiscal 1999. The increase in the use of cash
for operating activities during the nine months ended September 30, 2000, was
due to higher trade accounts receivable resulting from an increase in revenues
and an increase in inventory.

    Net cash used in investing activities for the nine months ended September
30, 2000, was $22.0 million. This use of cash was due primarily to the
acquisitions of Porta-Test, MPE and ESI, and capital expenditures of $6.1
million. Cash used in investing activities for the nine-month period ended
September 30, 1999 of $1.6 million related primarily to capital expenditures.
Funds for the Porta-Test acquisition in January 2000 were borrowed from the
Company's revolving credit agreement. These funds were repaid during February
2000 with the proceeds from NATCO's initial public offering. Funds for the MPE
acquisition in February 2000 were also provided by the proceeds of the initial
public offering. The ESI acquisition was financed with borrowings of $7.1
million under the existing revolving credit facility and borrowings of $2.6
million under the existing export sales facility. Subsequent to the acquisition
of ESI, the Company redeemed cash equivalents acquired with ESI totaling $2.2
million and used the proceeds to reduce borrowings under the revolving credit
facility.

    Net cash provided by financing activities for the nine months ended
September 30, 2000, was $25.8 million, as compared to net cash used in financing
activities for the nine months ended September 30, 1999, of $11.6 million. The
primary source of funds for financing activities during the nine months ended
September 30, 2000 was the issuance of the Company's Class A common stock
through an initial public offering and the exercise of an over-allotment option
by NATCO's underwriters, which provided $37.7 million and $10.5 million,
respectively. These proceeds were used primarily to retire $27.9 million of
outstanding debt under a term loan arrangement, to repay $3.0 million borrowed
under the revolving credit agreement for the purchase of Porta-Test, and to
repay $2.9 million of debt assumed in the acquisitions of Porta-Test and MPE.

    The Company estimates that cash generated from operations through 2000 and
funds available under credit facilities will be sufficient to meet its cash
operating requirements.


                                       18
<PAGE>   19

    The Company maintains revolving credit and term loan facilities, as well as
a working capital facility for export sales. The revolving credit facility
provides for up to $22.0 million of borrowings in the United States and up to
$10.0 million of borrowings in Canada, subject to borrowing base limitations. At
September 30, 2000, NATCO had borrowings outstanding under the revolving credit
facility of $11.2 million and had issued $2.3 million of letters of credit under
this facility. The Company amended the revolving credit agreement in October
2000 to extend the maturity date from November 2001 to January 2003, with no
other material changes to the terms of the agreement. No borrowings were
outstanding under the term loan facility at September 30, 2000. The revolving
credit and term loan facility is secured by substantially all of the Company's
assets. The Company was in compliance with all debt covenants as of September
30, 2000. As of September 30, 2000, the weighted average interest rate of the
Company's borrowings under the term loan and revolving credit agreement was
8.86%.

    The Company's export sales credit facility provides for aggregate borrowings
of $10.0 million, subject to borrowing base limitations, of which no borrowings
were outstanding as of September 30, 2000. NATCO had issued letters of credit
totaling $7.1 million under the export facility as of that date. The export
sales credit facility is secured by specific project inventory and receivables,
and is partially guaranteed by the EXIM Bank. The export sales credit facility
loans mature in July 2002.

    Capital expenditures for the nine months ended September 30, 2000, totaling
$6.1 million, consisted primarily of renovations and expansions of the Company's
manufacturing plants, technological improvements to management information
systems and acquisitions of and improvements to other equipment used in the
Company's business, including an upgrade to the membrane manufacturing facility
in Pittsburgh, California, which is scheduled for completion in the fourth
quarter of 2000.

    The Company's sales backlog at September 30, 2000, was $42.3 million and
included a substantial booking for one customer, CTOC. CTOC contributed 19% of
total revenues for the three months ended September 30, 2000, and 21% of total
revenues for the nine months ended September 30, 2000. Backlog at September 30,
2000, less the CTOC project, reflects a slight increase in backlog, consistent
with management's expectations, of $863,000 as compared to September 30, 1999.
Furthermore, NATCO's management anticipates that the backlog at December 31,
2000, excluding the CTOC project, will be higher than the backlog at September
30, 2000, due to bookings that are expected to occur during the fourth quarter
of 2000.

    At September 30, 2000, borrowing base limitations reduced the Company's
available borrowing capacity under the revolving credit agreement and export
sales credit agreement to $14.4 million and $2.4 million, respectively. However,
NATCO's management believes that the Company's operating cash flow, supported by
its borrowing capacity, will be adequate to fund operations throughout 2000.
Should the Company decide to pursue additional acquisition opportunities during
the remainder of 2000, the determination of the Company's ability to finance
these acquisitions will be a critical element of the analysis of the
opportunities.

     On October 27, 2000, the Company's board of directors agreed to provide a
full recourse loan to an executive officer to facilitate the exercise of certain
outstanding stock options. The loan matures on July 31, 2003, and provides
interest stated at the Company's current borrowing rate, and principal equal to
the cost to exercise the options plus any personal tax burdens that result from
the exercise.

    On October 27, 2000, the Company's board of directors adopted a share
repurchase plan whereby the Company may reacquire up to 750,000 shares of its
$.01 par value Class A common stock. In early November 2000, the Company
reacquired 34,000 shares of its Class A common stock pursuant to the share
repurchase plan for approximately $242,000, or an average cost per share of $7.


RECENT ACCOUNTING PRONOUNCEMENTS

    Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities, was issued by the Financial
Accounting Standards Board ("FASB") in June 1998. SFAS 133 standardizes the
accounting for derivative instruments, including derivative instruments embedded
in other contracts. Under the standard, entities are required to carry all
derivative instruments in the statement of financial position at fair value. The
Company will adopt SFAS 133 beginning in fiscal year 2001. The Company does not
expect the adoption of SFAS 133 to have a material effect on its financial
condition or results of operation because the Company does not enter into
derivative or other financial instruments for trading or speculative purposes
nor does the Company use or intend to use derivative financial instruments or
derivative commodity instruments.


                                       19
<PAGE>   20

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The Company's operations are conducted around the world in a number of
different countries. Accordingly, future earnings are exposed to changes in
foreign currency exchange rates when transactions are denominated in currencies
other than the Company's functional currencies, the primary currencies in which
the Company conducts its business in various jurisdictions. The majority of the
Company's foreign currency transactions are denominated in the Canadian dollar,
which is the functional currency of NATCO Canada. Because these contracts are
denominated and settled in the functional currency, risks associated with
currency fluctuations are minimized. The Company does not currently hedge
against foreign currency translation risks and NATCO's management believes that
foreign currency exchange risk is not significant to its operations.

    The Company's financial instruments are subject to change in interest rates,
including its revolving credit and term loan facility and its working capital
facility for export sales. At September 30, 2000, the Company had no borrowings
outstanding under the term loan portion of the revolving credit and term loan
facility. Borrowings, which bear interest at floating rates, outstanding under
the revolving credit agreement at September 30, 2000, totaled $11.2 million. The
revolving credit agreement was amended in October 2000 to extend the maturity
date of these borrowings from November 2001 to January 2003. As of September 30,
2000, the weighted average interest rate of the Company's borrowings under this
credit facility was 8.86%. There were no borrowings outstanding under the
working capital facility for export sales at September 30, 2000.

    Based on past market movements and possible near-term market movements, the
Company's management does not believe that potential near-term losses in future
earnings, fair values or cash flows from changes in interest rates are likely to
be material. Assuming the Company's current level of borrowings, a 100 basis
point increase in interest rates under the borrowings would decrease the
Company's current quarter net income and cash flow from operations by less than
$100,000. In the event of an adverse change in interest rates, the Company could
take action to mitigate its exposure. However, due to the uncertainty of actions
that could be taken and the possible effects, this analysis assumes no such
actions. Furthermore, this analysis does not consider the effects of a possible
change in the level of overall economic activity that could exist in such an
environment.



                                       20
<PAGE>   21



                                     PART II

ITEM 1. LEGAL PROCEEDINGS

    The Company is a party to various routine legal proceedings that are
incidental to its business activities. The Company insures against the risk of
these proceedings to the extent deemed prudent by its management, but the
Company offers no assurance that the type or value of this insurance will meet
the liabilities that may arise from any pending or future legal proceedings
related to its business activities. The Company's management does not, however,
believe the pending legal proceedings, individually or taken together, will have
a material adverse effect on the Company's results of operations or financial
condition.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

         None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

         None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

ITEM 5. OTHER INFORMATION

         None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    (a) See Index of Exhibits for a list of those exhibits filed herewith, which
        index includes and identifies management contracts or compensatory plans
        or arrangements required to be filed as exhibits to this Form 10-Q by
        Item 601(10)(iii) of Regulation S-K.

    (b) Reports on Form 8-K.

    (c) Index of Exhibits

                  EXHIBIT NO.                   DESCRIPTION

                      2.1     -- Amended and Restated Agreement and Plan of
                                 Merger dated November 17, 1998 but effective
                                 March 26, 1998 among the Company, NATCO
                                 Acquisition Company, National Tank Company and
                                 The Cynara Company (incorporated by reference
                                 to Exhibit 2.1 of the Company's Registration
                                 Statement No. 333-48851 on Form S-1).

                      2.2     -- Stock Purchase Agreement dated as of May 7,
                                 1997 among Enterra Petroleum Equipment Group,
                                 Inc., National Tank Company and Weatherford
                                 Enterra, Inc. (incorporated by reference to
                                 Exhibit 2.2 of the Company's Registration
                                 Statement No. 333-48851 on Form S-1).

                      3.1     -- Restated Certificate of Incorporation of the
                                 Company, as amended by Certificate of Amendment
                                 dated November 18, 1998 and Certificate of
                                 Amendment dated November 29, 1999 (incorporated
                                 by reference to Exhibit 3.1 of the Company's
                                 Registration Statement No. 333-48851 on Form
                                 S-1).

                      3.2     -- Certificate of Designations of Series A
                                 Junior Participating Preferred Stock
                                 (incorporated by reference to Exhibit 3.2 of
                                 the Company's Registration Statement No.
                                 333-48851 on Form S-1).

                      3.3     -- Amended and Restated Bylaws of the Company,
                                 as amended (incorporated by reference to
                                 Exhibit 3.3 of the Company's Quarterly Report
                                 on Form 10-Q for the period ended March 31,
                                 2000).

                                       21
<PAGE>   22
                  EXHIBIT NO.                   DESCRIPTION


                      4.1     -- Specimen Common Stock certificate
                                 (incorporated by reference to Exhibit 4.1 of
                                 the Company's Registration Statement No.
                                 333-48851 on Form S-1).

                      4.2     -- Rights Agreement dated as of May 15, 1998 by
                                 and among the Company and ChaseMellon
                                 Shareholder Services, L.L.C., as Rights Agent
                                 (incorporated by reference to Exhibit 4.2 of
                                 the Company's Registration Statement No.
                                 333-48851 on Form S-1).

                      4.3     -- Registration Rights Agreement dated as of
                                 November 18, 1998 among the Company and
                                 Capricorn Investors, L.P. and Capricorn
                                 Investors II, L.P. (incorporated by reference
                                 to Exhibit 4.3 of the Company's Registration
                                 Statement No. 333-48851 on Form S-1).

                      4.4     -- Registration Rights Agreement dated as of
                                 November 18, 1998 among the Company and the
                                 former stockholders of The Cynara Company
                                 (incorporated by reference to Exhibit 4.4 of
                                 the Company's Registration Statement No.
                                 333-48851 on Form S-1).

                      10.1**  -- Directors Compensation Plan (incorporated by
                                 reference to Exhibit 10.1 of the Company's
                                 Registration Statement No. 333-48851 on Form
                                 S-1).

                      10.2**  -- Form on Nonemployee Director's Option
                                 Agreement (incorporated by reference to Exhibit
                                 10.2 of the Company's Registration Statement
                                 No. 333-48851 on Form S-1).

                      10.3**  -- Employee Stock Incentive Plan (incorporated
                                 by reference to Exhibit 10.3 of the Company's
                                 Registration Statement No. 333-48851 on Form
                                 S-1).

                      10.4**  -- Form of Nonstatutory Stock Option Agreement
                                 (incorporated by reference to Exhibit 10.24 to
                                 the Company's Registration Statement No.
                                 333-48851 on Form S-1).

                      10.5    -- Commitment Letter dated November 24, 1994
                                 from The Bank of Nova Scotia to NATCO Canada,
                                 Ltd. (incorporated by reference to Exhibit 10.5
                                 of the Company's Registration Statement No.
                                 333-48851 on Form S-1).

                      10.6    -- Service and Reimbursement Agreement dated as
                                 of July 1, 1997 between the Company and
                                 Capricorn Management, G.P. (incorporated by
                                 reference to Exhibit 10.6 of the Company's
                                 Registration Statement No. 333-48851 on Form
                                 S-1).

                      10.7**  -- Form of Indemnification Agreement between the
                                 Company and its officers and directors
                                 (incorporated by reference to Exhibit 10.9 of
                                 the Company's Registration Statement No.
                                 333-48851 on Form S-1).

                      10.8    -- Securities Exchange Agreement dated as of
                                 March 5, 1998 by and among the Company,
                                 Capricorn Investors, L.P. and Capricorn
                                 Investors II, L.P. (incorporated by reference
                                 to Exhibit 10.10 of the Company's Registration
                                 Statement No. 333-48851 on Form S-1).

                      10.9    -- Stockholders' Agreement by and among the
                                 Company, Capricorn Investors, L.P. and
                                 Capricorn Investors II, L.P. (incorporated by
                                 reference to Exhibit 10.11 of the Company's
                                 Registration Statement No. 333-48851 on Form
                                 S-1).

                      10.10** -- Employment Agreement dated as of July 31,
                                 1997 between the Company and Nathaniel A.
                                 Gregory, as amended as of July 12, 1999
                                 (incorporated by reference to Exhibit 10.12 of
                                 the Company's Registration Statement No.
                                 333-48851 on Form S-1).


                                       22
<PAGE>   23
                  EXHIBIT NO.                   DESCRIPTION


                      10.11   -- Stockholder's Agreement dated as of November
                                 18, 1998 among the Company, Capricorn
                                 Investors, L.P., Capricorn Investors II, L.P.
                                 and the former stockholders of The Cynara
                                 Company (incorporated by reference to Exhibit
                                 10.19 of the Company's Registration Statement
                                 No. 333-48851 on Form S-1).

                      10.12** -- Change of Control Policy dated as of
                                 September 28, 1999 (incorporated by reference
                                 to Exhibit 10.20 of the Company's Registration
                                 Statement No. 333-48851 on Form S-1).

                      10.13** -- Severance Pay Summary Plan Description
                                 (incorporated by reference to Exhibit 10.21 of
                                 the Company's Registration Statement No.
                                 333-48851 on Form S-1).

                      10.14   -- Loan Agreement ($22,000,000 U.S. Revolving
                                 Loan Facility, $10,000,000 Canadian Revolving
                                 Loan Facility and $32,500,000 Term Loan
                                 Facility) dated as of November 20, 1998 among
                                 National Tank Company, NATCO Canada, Ltd.,
                                 Chase Bank of Texas, National Association, The
                                 Bank of Nova Scotia and the other lenders
                                 parties thereto and joined in by NATCO Group,
                                 Inc., as amended (incorporated by reference to
                                 Exhibit 10.22 to the Company's Registration
                                 Statement No. 333-48851 on Form S-1).

                      10.15   -- International Revolving Loan Agreement dated
                                 as of June 30, 1997 between National Tank
                                 Company and Texas Commerce Bank, National
                                 Association, as amended (incorporated by
                                 reference to Exhibit 10.23 to the Company's
                                 Registration Statement No. 333-48851 on Form
                                 S-1).

                      27.1*   -- Financial Data Schedule.

 ----------

  * Filed herewith

** Management contracts or compensatory plans or arrangements.


                                       23
<PAGE>   24




                                   SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                              NATCO Group Inc.
                                              (Registrant)

                                              By:  /s/ J. MICHAEL MAYER
                                                  ------------------------------
                                                  Name: J. Michael Mayer
                                                  Senior Vice President and
                                                  Chief Financial Officer

Date: November 14, 2000

                                              By:  /s/ RYAN S. LILES
                                                  ------------------------------
                                                  Name: Ryan S. Liles
                                                  Vice President and Controller
                                                  (Principal Accounting Officer)

Date: November 14, 2000



                                       24
<PAGE>   25




                                  EXHIBIT INDEX

<TABLE>
<CAPTION>

         EXHIBIT
          NUMBER                     DESCRIPTION
          ------                     -----------
<S>                <C>
           2.1     -- Amended and Restated Agreement and Plan of Merger dated
                      November 17, 1998 but effective March 26, 1998 among the
                      Company, NATCO Acquisition Company, National Tank Company
                      and The Cynara Company (incorporated by reference to
                      Exhibit 2.1 of the Company's Registration Statement No.
                      333-48851 on Form S-1).

           2.2     -- Stock Purchase Agreement dated as of May 7, 1997 among
                      Enterra Petroleum Equipment Group, Inc., National Tank
                      Company and Weatherford Enterra, Inc. (incorporated by
                      reference to Exhibit 2.2 of the Company's Registration
                      Statement No. 333-48851 on Form S-1).

           3.1     -- Restated Certificate of Incorporation of the Company,
                      as amended by Certificate of Amendment dated November 18,
                      1998 and Certificate of Amendment dated November 29, 1999
                      (incorporated by reference to Exhibit 3.1 of the Company's
                      Registration Statement No. 333-48851 on Form S-1).

           3.2     -- Certificate of Designations of Series A Junior
                      Participating Preferred Stock (incorporated by reference
                      to Exhibit 3.2 of the Company's Registration Statement No.
                      333-48851 on Form S-1).

           3.3     -- Amended and Restated Bylaws of the Company, as amended.
                      (incorporated by reference to Exhibit 3.3 of the Company's
                      Quarterly Report on Form 10-Q for the period ended March
                      31, 2000).

           4.1     -- Specimen Common Stock certificate (incorporated by
                      reference to Exhibit 4.1 of the Company's Registration
                      Statement No. 333-48851 on Form S-1).

           4.2     -- Rights Agreement dated as of May 15, 1998 by and among
                      the Company and ChaseMellon Shareholder Services, L.L.C.,
                      as Rights Agent (incorporated by reference to Exhibit 4.2
                      of the Company's Registration Statement No. 333-48851 on
                      Form S-1).

           4.3     -- Registration Rights Agreement dated as of November 18,
                      1998 among the Company and Capricorn Investors, L.P. and
                      Capricorn Investors II, L.P. (incorporated by reference to
                      Exhibit 4.3 of the Company's Registration Statement No.
                      333-48851 on Form S-1).

           4.4     -- Registration Rights Agreement dated as of November 18,
                      1998 among the Company and the former stockholders of The
                      Cynara Company (incorporated by reference to Exhibit 4.4
                      of the Company's Registration Statement No. 333-48851 on
                      Form S-1).

           10.1**  -- Directors Compensation Plan (incorporated by reference
                      to Exhibit 10.1 of the Company's Registration Statement
                      No. 333-48851 on Form S-1).

           10.2**  -- Form on Nonemployee Director's Option Agreement
                      (incorporated by reference to Exhibit 10.2 of the
                      Company's Registration Statement No. 333-48851 on Form
                      S-1).

           10.3**  -- Employee Stock Incentive Plan (incorporated by
                      Reference to Exhibit 10.3 of the Company's Registration
                      Statement No. 333-48851 on Form S-1).

           10.4**  -- Form on Nonstatutory Stock Option Agreement
                      (incorporated by reference to Exhibit 10.24 to the
                      Company's Registration Statement No. 333-48851 on Form
                      S-1).
</TABLE>


<PAGE>   26

<TABLE>
<CAPTION>

         EXHIBIT
          NUMBER                     DESCRIPTION
          ------                     -----------
<S>                <C>
           10.5    -- Commitment Letter dated November 24, 1994 from The Bank
                      of Nova Scotia to NATCO Canada, Ltd. (incorporated by
                      reference to Exhibit 10.5 of the Company's Registration
                      Statement No. 333-48851 on Form S-1).

           10.6    -- Service and Reimbursement Agreement dated as of July 1,
                      1997 between the Company and Capricorn Management, G.P.
                      (incorporated by reference to Exhibit 10.6 of the
                      Company's Registration Statement No. 333-48851 on Form
                      S-1).

           10.7**  -- Form of Indemnification Agreement between the Company
                      and its officers and directors (incorporated by reference
                      to Exhibit 10.9 of the Company's Registration Statement
                      No. 333-48851 on Form S-1).

           10.8    -- Securities Exchange Agreement dated as of March 5, 1998
                      by and among the Company, Capricorn Investors, L.P. and
                      Capricorn Investors II, L.P. (incorporated by reference to
                      Exhibit 10.10 of the Company's Registration Statement No.
                      333-48851 on Form S-1).

           10.9    -- Stockholders' Agreement by and among the Company,
                      Capricorn Investors, L.P. and Capricorn Investors II, L.P.
                      (incorporated by reference to Exhibit 10.11 of the
                      Company's Registration Statement No. 333-48851 on Form
                      S-1).

           10.10** -- Employment Agreement dated as of July 31, 1997 between
                      the Company and Nathaniel A. Gregory, as amended as of
                      July 12, 1999 (incorporated by reference to Exhibit 10.12
                      of the Company's Registration Statement No. 333-48851 on
                      Form S-1).

           10.11   -- Stockholder's Agreement dated as of November 18, 1998
                      among the Company, Capricorn Investors, L.P., Capricorn
                      Investors II, L.P. and the former stockholders of The
                      Cynara Company (incorporated by reference to Exhibit 10.19
                      of the Company's Registration Statement No. 333-48851 on
                      Form S-1).

           10.12** -- Change of Control Policy dated as of September 28, 1999
                      (incorporated by reference to Exhibit 10.20 of the
                      Company's Registration Statement No. 333-48851 on Form
                      S-1).

           10.13** -- Severance Pay Summary Plan Description (incorporated by
                      reference to Exhibit 10.21 of the Company's Registration
                      Statement No. 333-48851 on Form S-1).

           10.14   -- Loan Agreement ($22,000,000 U.S. Revolving Loan
                      Facility, $10,000,000 Canadian Revolving Loan Facility and
                      $32,500,000 Term Loan Facility) dated as of November 20,
                      1998 among National Tank Company, NATCO Canada, Ltd.,
                      Chase Bank of Texas, National Association, The Bank of
                      Nova Scotia and the other lenders parties thereto and
                      joined in by NATCO Group, Inc., as amended (incorporated
                      by reference to Exhibit 10.22 to the Company's
                      Registration Statement No. 333-48851 on Form S-1).

           10.15   -- International Revolving Loan Agreement dated as of June
                      30, 1997 between National Tank Company and Texas Commerce
                      Bank, National Association, as amended (incorporated by
                      reference to Exhibit 10.23 to the Company's Registration
                      Statement No. 333-48851 on Form S-1).

           27.1*   -- Financial Data Schedule.
</TABLE>

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  * Filed herewith

** Management contracts or compensatory plans or arrangements.