<PAGE>

                     SECURITIES AND EXCHANGE COMMISSION

                            Washington, DC 20549

                                  FORM 10-Q

                 Quarterly Report under Section 13 or 15 (d)
                   of the Securities Exchange Act of 1934

For the nine months ended July 31, 2004         Commission file number 0-13880

                      ENGINEERED SUPPORT SYSTEMS, INC.
           (Exact name of Registrant as specified in its charter)


                   Missouri                            43-1313242
           (State of Incorporation)       (IRS Employer Identification Number)

    201 Evans Lane, St. Louis, Missouri                   63121
  (Address of principal executive offices)              (Zip Code)

Registrant's telephone number including area code:  (314) 553-4000


      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 by check mark whether the Registrant is an accelerated filer
(as defined by Rule 12b-2 of the Exchange Act).   Yes  X     No
                                                     -----     -----


      The number of shares of the Registrant's common stock, $.01 par value,
outstanding at August 31, 2004 was 26,619,042.


                                     1

<TABLE>
                                           ENGINEERED SUPPORT SYSTEMS, INC.

                                                        INDEX

<CAPTION>
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                             <C>
Part I - Financial Information

      Item 1. Financial Statements

         Condensed Consolidated Balance Sheets as of July 31, 2004 and
           October 31, 2003............................................................................           3

         Condensed Consolidated Statements of Income for the three and nine
           months ended July 31, 2004 and 2003.........................................................           4

         Condensed Consolidated Statements of Cash Flows for the three and
           nine months ended July 31, 2004 and 2003....................................................           5

         Notes to Condensed Consolidated Financial Statements..........................................           6

      Item 2. Management's Discussion and Analysis of Financial
           Condition and Results of Operations.........................................................          16

      Item 3. Quantitative and Qualitative Disclosures About Market Risk...............................          26

      Item 4. Controls and Procedures..................................................................          26

Part II - Other Information

      Items 1-6........................................................................................          27

Signatures.............................................................................................          28

Exhibits ..............................................................................................          29
</TABLE>




                                     2

<TABLE>
                                    ENGINEERED SUPPORT SYSTEMS, INC.
                                  CONDENSED CONSOLIDATED BALANCE SHEETS
                                (in thousands, except per share amounts)

<CAPTION>
                                                                                 July 31       October 31
                                                                                  2004            2003
                                                                                ----------     ----------
                                                                               (Unaudited)
<S>                                                                             <C>             <C>
                                    ASSETS

        Current Assets
           Cash and cash equivalents                                            $ 14,273        $  2,880
           Accounts receivable                                                   110,743          90,805
           Contracts in process and inventories                                   76,793          50,959
           Deferred income taxes                                                   5,939           5,939
           Other current assets                                                    5,061           4,668
                                                                                --------        --------
              Total Current Assets                                               212,809         155,251

        Property, plant and equipment, less accumulated
          depreciation of $27,853 and $28,800                                     46,386          50,366
        Goodwill                                                                 172,200         191,332
        Acquired customer-related intangibles                                     36,123          11,049
        Deferred income taxes                                                      4,030           2,942
        Other assets                                                              13,401          11,303
                                                                                --------        --------
              Total Assets                                                      $484,949        $422,243
                                                                                ========        ========

                     LIABILITIES AND SHAREHOLDERS' EQUITY

        Current Liabilities
           Notes payable                                                        $ 27,000        $ 73,100
           Current maturities of long-term debt                                      317              90
           Accounts payable                                                       61,396          48,609
           Other current liabilities                                              43,777          63,565
                                                                                --------        --------
              Total Current Liabilities                                          132,490         185,364

        Long-term debt                                                               799
        Additional minimum pension liability                                      25,751          25,751
        Other liabilities                                                         13,424          13,961
        Shareholders' Equity
         Common stock, par value $.01 per share; 30,000
           shares authorized; 26,617 and 25,263 shares issued                        266             253
         Additional paid-in capital                                              147,024         106,512
         Retained earnings                                                       181,393         127,753
         Accumulated other comprehensive loss                                    (16,198)        (16,142)
                                                                                --------        --------
                                                                                 312,485         218,376
         Less treasury stock at cost, 0 and 561 shares                                            21,209
                                                                                --------        --------
                                                                                 312,485         197,167
                                                                                --------        --------
                  Total Liabilities and Shareholders' Equity                    $484,949        $422,243
                                                                                ========        ========


        See notes to condensed consolidated financial statements.
</TABLE>

                                     3

<TABLE>
                                    ENGINEERED SUPPORT SYSTEMS, INC.
                               CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                (in thousands, except per share amounts)
                                               (UNAUDITED)

<CAPTION>
                                                             Three Months Ended       Nine Months Ended
                                                                   July 31                 July 31
                                                           ---------------------     --------------------
                                                             2004         2003         2004         2003
                                                           --------     --------     --------    --------
<S>                                                        <C>          <C>          <C>         <C>
        Net revenues:
           Products                                        $155,179     $112,383     $419,317    $338,512
           Services                                          66,812       43,286      207,940      63,877
                                                           --------     --------     --------    --------
                                                            221,991      155,669      627,257     402,389
                                                           --------     --------     --------    --------
        Cost of revenues:
           Products                                         107,526       81,538      288,025     254,833
           Services                                          57,649       35,970      182,720      52,466
                                                           --------     --------     --------    --------
                                                            165,175      117,508      470,745     307,299
                                                           --------     --------     --------    --------

        Gross profit                                         56,816       38,161      156,512      95,090
        Selling, general and administrative expense          22,133       16,850       65,519      44,224
        Restructuring expense                                    (5)         449           61       1,642
        Gain (loss) on sale of assets                        (1,285)          11       (1,290)         17
                                                           --------     --------     --------    --------
        Operating income from continuing operations          33,403       20,873       89,642      49,241

        Interest expense                                       (156)        (632)      (1,159)     (1,359)
        Interest income                                          95          117          251         214
                                                           --------     --------     --------    --------

        Income from continuing operations                    33,342       20,358       88,734      48,096
        Income tax provision                                 12,836        7,942       34,162      18,760
                                                           --------     --------     --------    --------

        Net income from continuing operations                20,506       12,416       54,572      29,336
        Income from discontinued operations,
           net of income tax                                                                          294
                                                           --------     --------     --------    --------

        Net income                                         $ 20,506     $ 12,416     $ 54,572    $ 29,630
                                                           ========     ========     ========    ========

        Basic earnings per share:
           Continuing operations                           $   0.78     $   0.51     $   2.12    $   1.22
           Discontinued operations                                                                   0.01
                                                           --------     --------     --------    --------

              Total                                        $   0.78     $   0.51     $   2.12    $   1.23
                                                           ========     ========     ========    ========

        Diluted earnings per share:
         Continuing operations                             $   0.73     $   0.48     $   1.96    $   1.15
         Discontinued operations                                                                     0.01
                                                           --------     --------     --------    --------

              Total                                        $   0.73     $   0.48     $   1.96    $   1.16
                                                           ========     ========     ========    ========


         See notes to condensed consolidated financial statements.
</TABLE>


                                     4

<TABLE>
                                         ENGINEERED SUPPORT SYSTEMS, INC.
                                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (in thousands)
                                                    (UNAUDITED)

<CAPTION>
                                                                                           Nine Months Ended
                                                                                                July 31
                                                                                      ----------------------------
                                                                                        2004                2003
                                                                                      --------            --------
<S>                                                                                   <C>                 <C>
From operating activities:
   Net income from continuing operations                                              $ 54,572            $ 29,336
   Depreciation and amortization                                                         9,534               6,711
   (Gain) loss on sale of assets                                                         1,290                 (17)
                                                                                      --------            --------
      Cash provided before changes in operating
          assets and liabilities                                                        65,396              36,030
   Net (increase) decrease  in non-cash current assets                                 (42,105)             12,117
   Net increase in non-cash current liabilities                                            397              11,070
   Increase (decrease) in other assets                                                  (4,702)                991
                                                                                      --------            --------

      Net cash provided by continuing operations                                        18,986              60,208
      Net cash provided by discontinued operations                                                           1,821
                                                                                      --------            --------
      Net cash provided by operating activities                                         18,986              62,029
                                                                                      --------            --------

From investing activities:
   Purchase of TAMSCO, net of cash acquired                                             (7,440)            (77,385)
   Purchase of Pivotal, net of cash acquired                                           (10,064)
   Purchase of UPSI, net of cash acquired                                               (2,026)             (5,008)
   Purchase of EEI, net of cash acquired                                                   (99)
   Additions to property, plant and equipment                                           (6,228)             (8,420)
   Proceeds from sale of property, plant and equipment                                   5,674                  37
                                                                                      --------            --------

   Net cash used in continuing operations                                              (20,183)            (90,776)
   Net cash provided by discontinued operations                                                              3,696
                                                                                      --------            --------
   Net cash used in investing activities                                               (20,183)            (87,080)
                                                                                      --------            --------

From financing activities:
   Net borrowings (payments) under line-of-credit agreement                            (46,100)             68,000
   Payments of long-term debt                                                             (182)            (42,023)
   Proceeds of long-term debt                                                              378
   Purchase of treasury stock                                                                                 (557)
   Exercise of stock options                                                            56,331               9,997
   Issuance of common stock to employee stock purchase plan                              3,076               1,727
   Cash dividends                                                                         (932)               (580)
                                                                                      --------            --------

      Net cash provided by continuing operations                                        12,571              36,564
      Net cash used in discontinued operations
                                                                                      --------            --------
      Net cash provided by financing activities                                         12,571              36,564
                                                                                      --------            --------

Effect of exchange rate changes on cash                                                     19
                                                                                      --------            --------
Net increase in cash and cash equivalents                                               11,393              11,513

Cash and cash equivalents at beginning of period                                         2,880               4,793
                                                                                      --------            --------

Cash and cash equivalents at end of period                                            $ 14,273            $ 16,306
                                                                                      ========            ========

See notes to condensed consolidated financial statements.
</TABLE>


                                     5

                      ENGINEERED SUPPORT SYSTEMS, INC.
                       NOTES TO CONDENSED CONSOLIDATED
                      FINANCIAL STATEMENTS (UNAUDITED)
                  (in thousands, except per share amounts)
                                JULY 31, 2004

NOTE A - BASIS OF PRESENTATION

       The accompanying condensed consolidated financial statements have
been prepared by Engineered Support Systems, Inc. (the Company) without
audit and include the accounts of the Company and its wholly-owned
subsidiaries. These subsidiaries are organized within the Company's two
business segments: Support Systems and Support Services. The Support Systems
segment includes the operations of Systems & Electronics Inc. (SEI), Keco
Industries, Inc. (Keco), Engineered Air Systems, Inc. (Engineered Air),
Engineered Coil Company, d/b/a Marlo Coil (Marlo Coil), Engineered Electric
Company d/b/a Fermont (Fermont), Universal Power Systems, Inc. (UPSI),
Engineered Environments, Inc. (EEI), and Pivotal Power Inc. (Pivotal Power).
The Support Services segment includes the operations of Technical and
Management Services Corporation (TAMSCO), Radian, Inc. (Radian) and
ESSIbuy.com, Inc. (ESSIbuy). In the opinion of management, all adjustments
(including normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine
month periods ended July 31, 2004 are not necessarily indicative of the
results to be expected for the entire fiscal year.

       The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial statements and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report to shareholders
for the year ended October 31, 2003.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

       In December 2003, the FASB issued a revision to Interpretation 46
(FIN 46R) to clarify some of the provisions of FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities," and to exempt certain
entities from its requirements. The adoption of FIN 46R has not had a
material impact on the Company's financial statements as it does not
maintain any of the interests governed by this pronouncement.

       In December 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the Act) became law in the U.S. The act
introduces a prescription drug benefit under Medicare, as well as a federal
subsidy to sponsors of retiree health care benefit plans that provide
retiree benefits in certain circumstances. It is not yet clear what impact,
if any, the new legislation will have on the Company's postretirement health
care plans. The accumulated postretirement benefit obligation

                                     6


(APBO) reflected in the other liabilities section of the accompanying
consolidated balance sheet, and the net periodic postretirement benefit cost
(NPPBC) reflected in the accompanying consolidated statement of earnings do
not reflect the effects, if any, of the Act.

NOTE B - EARNINGS PER SHARE

       Average diluted common shares outstanding include common stock
equivalents, which represent common stock options as computed based on the
treasury stock method. Average basic and diluted common shares outstanding
have been restated to reflect a three-for-two stock split effected by the
Company on October 31, 2003 in the form of a stock dividend.

       Basic earnings per share for the three months ended July 31, 2004 and
2003 is based on average basic common shares outstanding of 26,345 and
24,257, respectively. Diluted earnings per share for the three months ended
July 31, 2004 and 2003 is based on average diluted common shares outstanding
of 28,066 and 25,791, respectively.

       Basic earnings per share for the nine months ended July 31, 2004 and
2003 is based on average basic common shares outstanding of 25,777 and
24,081, respectively. Diluted earnings per share for the nine months ended
July 31, 2004 and 2003 is based on average diluted common shares outstanding
of 27,819 and 25,524, respectively.

NOTE C - STOCK-BASED COMPENSATION

       The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for all stock option plans. Accordingly, no compensation expense
has been recognized for stock option awards. The following table illustrates
the effect on net income from continuing operations and earnings per share
had the Company applied the fair value recognition provisions of Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," to stock option awards.

<TABLE>
<CAPTION>
                                                                   Three Months Ended          Nine Months Ended
                                                                        July 31                     July 31
                                                                     2004         2003           2004        2003
                                                                  -------      -------        -------     -------
<S>                                                               <C>          <C>            <C>         <C>
Reported net income from continuing operations                    $20,506      $12,416        $54,572     $29,336
Total stock-based employee compensation expense
   determined under the fair value method for all stock
   option awards, net of income tax                                 1,936                       2,502         653
                                                                  -------      -------        -------     -------
Pro forma net income from continuing operations                   $18,570      $12,416        $52,070     $28,683
                                                                  =======      =======        =======     =======
Earnings per share from continuing operations:
  Basic - as reported                                             $  0.78      $  0.51        $  2.12     $  1.22
                                                                  =======      =======        =======     =======
  Basic - pro forma                                               $  0.70      $  0.51        $  2.02     $  1.19
                                                                  =======      =======        =======     =======
  Diluted - as reported                                           $  0.73      $  0.48        $  1.96     $  1.15
                                                                  =======      =======        =======     =======
  Diluted - pro forma                                             $  0.66      $  0.48        $  1.87     $  1.12
                                                                  =======      =======        =======     =======
</TABLE>


                                     7

       Historically, options granted have been fully vested at grant date.
The fair value of options at the grant date was estimated using the
Black-Scholes model with the following weighted average assumptions for the
three and nine months ended July 31, 2004 and 2003: an expected life of 1.5
years, volatility of 36% and 51%, a dividend yield of 0.12% and 0.16% and a
risk-free interest rate of 3.25% and 3.74%, respectively. The weighted
average fair value of options granted in the three and nine months ended
July 31, 2004 and 2003 was $7.55 and $5.11, respectively.

NOTE D - ACQUISITIONS

       On May 1, 2003, the Company acquired all of the outstanding common
stock of TAMSCO, a provider of information technology logistics and
digitization services and a designer and integrator of telecommunication
systems primarily for the U.S. Department of Defense (DoD). The purchase
price was approximately $71.1 million, which is net of $0.1 million of cash
acquired. Approximately $1.1 million of the purchase price has not yet been
paid subject to final collection of accounts receivable. In connection with
this transaction, the Company also assumed and paid $14.9 million of TAMSCO
indebtedness. The purchase of TAMSCO, net of cash acquired, totals $84.9
million, which represents the $71.1 million purchase price plus assumed
indebtedness of $14.9 million and less $1.1 million of purchase price not
yet paid. ($84.9 million of purchase price paid through July 31, 2004
represents $77.4 million paid during the Company's year ended October 31,
2003 plus an additional $7.5 million related to tax adjustments and
accounts receivable collection, paid during the nine months ended July 31,
2004).

       The initial purchase price allocation for TAMSCO was based on
preliminary information, which was subject to adjustment upon obtaining
complete valuation information. During the second quarter of 2004, the
Company obtained the final valuation report from an independent third party
valuation firm of the assets acquired and liabilities assumed. As a result,
the Company reclassified $29.9 million from goodwill, as recorded in the
preliminary allocation, to acquired customer-related intangibles and
recorded a $2.2 million non-cash charge in the quarter ended April 30, 2004
to reflect the related amortization expense from acquisition date. The fair
value of assets acquired, including goodwill of $36.1 million and acquired
customer-related intangibles of $29.9 million, was $103.9 million and
liabilities assumed totaled $32.8 million.

       The following unaudited pro forma summary presents the combined
historical results of operations for the nine month period ended July 31,
2003 as adjusted to reflect the TAMSCO purchase transaction assuming the
acquisition had occurred at November 1, 2002. These pro forma results are
not necessarily indicative of the combined results that would have occurred
had the acquisition actually taken place on November 1, 2002, nor are they
necessarily indicative of the combined results that may occur in the future.


                                     8

<TABLE>
<CAPTION>
                                                             Nine Months Ended
                                                               July 31, 2003
                                                             -----------------
       <S>                                                       <C>
       Net revenues                                              $482,343
                                                                 ========

       Net income from continuing operations                     $ 32,197
                                                                 ========

       Basic earnings per share from continuing
                   operations                                    $   1.34
                                                                 ========

       Diluted earnings per share from continuing
                   operations                                    $   1.26
                                                                 ========
</TABLE>


       On December 5, 2003, the Company acquired all of the outstanding
stock of Pivotal Power, a supplier of high-performance static power
conversion equipment primarily to military customers. The purchase price was
approximately $10.1 million, net of cash acquired. The purchase price was
financed with short-term borrowings under the Company's revolving credit
facility. The fair value of assets acquired, including goodwill of $6.0
million, was $11.6 million and liabilities assumed totaled $1.5 million.
This allocation is preliminary and subject to final valuation and
adjustment.

       On September 24, 2003, the Company acquired all of the outstanding
common stock of EEI, a designer and manufacturer of specialized
environmental control units and heat transfer systems for defense and
industrial markets. The purchase price was approximately $15.6 million. The
purchase price was financed with short-term borrowings under the Company's
revolving credit facility. The purchase of EEI, net of cash acquired,
totaled $16.7 million, which represents the $15.6 million purchase price
plus assumed indebtedness of $1.1 million. The fair value of assets
acquired, including goodwill of $14.4 million, was $19.8 million and
liabilities assumed totaled $4.3 million. This allocation is preliminary and
subject to final valuation and adjustment.

       On June 27, 2002, the Company acquired all of the outstanding common
stock of UPSI, a provider of uninterruptible power supply systems for the
DoD, intelligence agencies and commercial customers. The purchase price was
approximately $5.5 million plus certain contingent cash consideration based
upon UPSI's net revenue levels through two measurement dates, December 31,
2002 and October 31, 2003. Based upon UPSI's net revenue through the
December 31, 2002 measurement date, $5.0 million of cash consideration was
added to purchase price and paid during the year ended October 31, 2003.
Based upon UPSI's net revenue through the October 31, 2003 measurement date,
$2.0 million of cash consideration was added to purchase price and paid in
December 2003. The fair value of the assets acquired, including goodwill of
$12.5 million, was $13.6 million and liabilities assumed totaled $1.1
million. The purchase price was financed with short-term borrowings under
the Company's revolving credit facility.

       TAMSCO is included in the Support Services segment. Pivotal Power,
EEI and UPSI are included in the Support Systems segment. The operating
results of each are included in consolidated operations since their
respective dates of acquisition.


                                     9

NOTE E - OTHER COMPREHENSIVE INCOME

       A reconciliation of net income to other comprehensive income for the
three and nine month periods ended July 31, 2004 and 2003 is as follows:

<TABLE>
<CAPTION>
                                                     Three Months Ended             Nine Months Ended
                                                          July 31                        July 31
                                                   ----------------------        -----------------------
                                                    2004           2003           2004            2003
                                                    ----           ----           ----            ----
<S>                                                <C>            <C>            <C>             <C>
Net income                                         $20,506        $12,416        $54,572         $29,630

Other components of
   comprehensive
   income, net of tax:

   Currency translation adjustments                    166                           (56)
   Adjustments to fair value
      of derivatives                                                                                 177
                                                   -------        -------        -------         -------

Total comprehensive income                         $20,672        $12,416        $54,516         $29,807
                                                   =======        =======        =======         =======
</TABLE>


NOTE F - INTANGIBLE ASSETS

       The following disclosure presents certain information on the
Company's acquired intangible assets. All acquired intangible assets are
being amortized over their estimated useful lives with no estimated residual
values.

<TABLE>
<CAPTION>
                                        Weighted Average
                                          Amortization           Gross            Accumulated             Net
                                            Period               Amount           Amortization           Amount
                                            ------               ------           ------------           ------
       <S>                                 <C>                   <C>                <C>                  <C>
       Customer-related intangibles:
          July 31, 2004                    12.1 years            $45,159            $ 9,036              $36,123
          October 31, 2003                  5.4 years             15,300              4,251               11,049
</TABLE>

       The amortization expense related to acquired intangible assets was
$1,205 for the three months ended July 31, 2004 and $4,785 for the nine
months ended July 31, 2004. Amortization expense related to acquired
intangible assets totaled $710 for the three months ended July 31, 2003 and
$2,130 for the nine months ended July 31, 2003. Related estimated
amortization expense is $5,982 for the year ending October 31, 2004, $4,821
for the years ending October 31, 2005 and 2006, $4,453 for the year ending
October 31, 2007 and approximately $1,800 for the years ending October 31,
2008 through October 31, 2018.


                                     10

NOTE G - OPERATIONAL RESTRUCTURING

       During the quarter ended April 30, 2003, the Company announced a
restructuring plan under which the electronics assembly work performed at
the Company's Sanford, Florida facility of its SEI subsidiary would be
relocated to alternate SEI facilities. Statement of Financial Accounting
Standards No. 146 (SFAS 146), "Accounting for Costs Associated with Exit or
Disposal Activities", applies to all disposal activities initiated after
December 31, 2002 and prospectively nullifies EITF 94-3. SFAS 146 requires
that a liability for employee termination costs associated with an exit or
disposal activity be recognized when the liability is incurred. (EITF 94-3
had previously required that a liability for such costs be recognized at the
date of the Company's commitment to an exit or disposal plan). The Company
recorded expense related to this plan of $2.1 million during the year ended
October 31, 2003, consisting of $1.2 million for severance and related
benefits and $0.9 million for non-cash costs. The Company anticipates that
it will record no additional restructuring expense related to this plan for
periods ending after July 31, 2004. The plan involved the termination of 106
employees, all of which were terminated as of July 31, 2004.

       During the nine months ended July 31, 2004, the Company recorded the
following costs in connection with this restructuring plan.

<TABLE>
<CAPTION>
                                                Accrued at                                           Accrued at
                                                October 31                                             July 31
                                                   2003               Expensed         Utilized         2004
                                                   ----               --------         --------         ----
<S>                                               <C>                  <C>             <C>             <C>
Severance and related benefits                    $ 983                $   61          $ 1,041         $    3
                                                  =====                ======          =======         ======
</TABLE>


NOTE H - DISCONTINUED OPERATIONS

       During the quarter ended April 30, 2002, the Company formally adopted
a plan to dispose of Engineered Specialty Plastics, Inc. (ESP), a
wholly-owned subsidiary representing the entirety of the Plastic Products
business segment. The Company completed the sale of ESP in the quarter ended
April 30, 2003 to a private equity group. Consideration received by the
Company included $4.1 million of cash, a $3.3 million two-year note from the
buyers secured by the real property of ESP, and contingent consideration
based upon ESP's future revenues, net of a $0.8 million working capital
adjustment paid by the Company. In conjunction with the intended disposition
of ESP, the Company had previously recorded an estimated loss on disposal of
discontinued operations of $4.2 million during the year ended October 31,
2002 to reduce the carrying value of ESP's net assets to their estimated
fair value less estimated selling costs. The completion of the sale resulted
in an additional $0.2 million loss on disposal during the year ended October
31, 2003. The Company has reported the results of operations of ESP as
discontinued operations for the nine month period ended July 31, 2003 in the
Condensed Consolidated Statements of Income.


                                     11

       Certain information with respect to the discontinued operations of
ESP is as follows:

<TABLE>
<CAPTION>
                                                                   Nine Months Ended
                                                                     July 31, 2003
                                                                   -----------------
       <S>                                                              <C>
       Net revenues                                                     $ 9,136
                                                                        =======


       Income from discontinued operations,
          net of income tax                                             $   294
                                                                        =======
</TABLE>


NOTE I - NOTES PAYABLE

       Effective April 23, 2003, the Company retired all borrowings under
its existing credit facility and entered into a new bank agreement which
provided a $125 million unsecured, revolving credit facility. Borrowings
under the new agreement, which expires April 23, 2007, are subject to
interest, at the Company's option, at either the Eurodollar rate plus an
applicable margin or at the prime rate plus an applicable margin. The margin
applicable to the Eurodollar rate varies from 0.875% to 1.625% and the
margin applicable to the prime rate varies from 0.0% to 0.25% depending upon
the Company's ratio of total indebtedness to earnings before interest,
taxes, depreciation and amortization (leverage ratio). As of July 31, 2004,
the Company had borrowings of $27.0 million against the revolving credit
facility at an average annual interest rate of 2.285%.

NOTE J - CONTRACTS IN PROCESS AND INVENTORIES

       Contracts in process and inventories of certain of the Company's
operating subsidiaries (SEI, Engineered Air, Keco, Fermont, Radian, TAMSCO
and Pivotal Power) represent accumulated contract costs, estimated earnings
thereon based upon the percentage of completion method and contract
inventories reduced by the contract value of delivered items. Inventories of
Marlo Coil, UPSI and EEI are valued at the lower of cost or market using the
first-in, first-out method. Contracts in process and inventories are
comprised of the following:

<TABLE>
<CAPTION>
                                                                 July 31, 2004                October 31, 2003
                                                                 -------------                ----------------
       <S>                                                          <C>                           <C>
       Raw materials                                                $ 2,072                       $ 2,669
       Work-in-process                                                4,375                         2,332
       Finished goods                                                   512                           185
       Inventories substantially applicable to
          government contracts in process, less
          progress payments of $77,375 and
          $55,010                                                    69,834                        45,773
                                                                    -------                       -------
                                                                    $76,793                       $50,959
                                                                    =======                       =======
</TABLE>


                                     12

NOTE K - SEGMENT INFORMATION

       The Company operates in two business segments: Support Systems and
Support Services. The Support Systems segment designs, engineers and
manufactures integrated military electronics and other military support
equipment primarily for the DoD, as well as related heat transfer and air
handling equipment for domestic commercial and industrial users, and
material handling equipment primarily for the U.S. Postal Service. Segment
products include environmental control systems, load management and
transport systems, power generation, distribution and conditioning systems,
airborne radar systems, reconnaissance, surveillance and target acquisition
systems, chemical and biological protection systems, petroleum and water
distribution systems and other multipurpose military support equipment. The
Support Services group provides engineering services, logistics and training
services, advanced technology services, asset protection systems and
services, telecommunication systems integration and information technology
services primarily for the DoD. The Support Services segment also provides
certain power generation and distribution equipment to the DoD.

       The Company previously defined its business segments as Light
Military Support Equipment, Heavy Military Support Equipment and Electronics
and Automation Systems. With the Company's entry into the services area
through the acquisitions of Radian on May 10, 2002 and TAMSCO on May 1,
2003, the growth of the Company's logistics support capabilities and the
continuing rationalization of its operations, the Company has reorganized
into the Support Systems and Support Services segments from the previous
three segments. The new reporting structure reflects how the Company manages
operations, reports results and allocates resources.

       Total assets at July 31, 2004, by segment were $279,774 for Support
Systems and $205,175 for Support Services. Goodwill by segment as of July
31, 2004 totaled $104,374 for Support Systems and $67,826 for Support
Services.

       The differences in net revenues between the accompanying condensed
consolidated statements of income and the reporting segment information as
presented below are due to certain reclassifications made to categorize net
revenues by their functional nature, as required, on the face of the
financial statements.

<TABLE>
<CAPTION>
                                                             Three Months Ended              Nine Months Ended
                                                                   July 31                        July 31
                                                           -----------------------        ------------------------
                                                             2004           2003            2004            2003
                                                             ----           ----            ----            ----
<S>                                                        <C>            <C>             <C>             <C>
Net Revenues:
   Support Systems                                         $134,907       $ 92,143        $376,735        $289,943
   Support Services                                          96,064         65,601         271,721         115,841
   Intersegment Revenues                                     (8,980)        (2,075)        (21,199)         (3,395)
                                                           --------       --------        --------        --------
       Total                                               $221,991       $155,669        $627,257        $402,389
                                                           ========       ========        ========        ========

Operating Income from Continuing Operations:
   Support Systems                                         $ 24,317       $ 12,801        $ 71,634        $ 36,068
   Support Services                                           9,086          8,072          18,008          13,173
                                                           --------       --------        --------        --------
                                                             33,403         20,873          89,642          49,241
Interest expense, net                                           (61)          (515)           (908)         (1,145)
                                                           --------       --------        --------        --------
Income from continuing operations
     before income taxes                                   $ 33,342       $ 20,358        $ 88,734        $ 48,096
                                                           ========       ========        ========        ========
</TABLE>


                                     13

NOTE L - SHAREHOLDERS' EQUITY

       The following summary presents a reconciliation of total
shareholders' equity from October 31, 2003 to July 31, 2004:


         Balance at October 31, 2003                             $197,167
         Comprehensive income:
            Net income                                             54,572
            Currency translation adjustments                          (56)
                                                                 --------
               Total comprehensive income                          54,516
                                                                 --------

         Cash dividends                                              (932)
         Exercise of stock options                                 56,331
         Issuance of common stock                                   3,705
         Issuance of treasury stock                                 1,698
                                                                 --------
         Balance at July 31, 2004                                $312,485
                                                                 ========


NOTE M - PENSION AND OTHER POSTRETIREMENT BENEFITS

       The following tables detail the amount of net periodic benefit cost
recognized related to the Company's pension and other postretirement
benefits for the three and nine month periods ended July 31, 2004 and 2003.

<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                             July 31
                                                      ------------------------------------------------------
                                                                                              Other
                                                         Pension Benefits            Postretirement Benefits
                                                      ----------------------         -----------------------
                                                       2004           2003            2004             2003
                                                       ----           ----            ----             ----
<S>                                                   <C>            <C>              <C>              <C>
Service cost                                          $   706        $   639          $  71            $  90
Interest cost                                           1,743          1,443            169              235
Expected return on plan assets                         (1,823)        (1,433)
Amortization of prior service cost                         78             77
Actuarial loss                                            641            314            110              113
Other                                                                      8
                                                      -------        -------          -----            -----
                                                      $ 1,345        $ 1,048          $ 350            $ 438
                                                      =======        =======          =====            =====





                                     14

<CAPTION>
                                                                        Nine Months Ended
                                                                             July 31
                                                      -----------------------------------------------------
                                                                                             Other
                                                         Pension Benefits           Postretirement Benefits
                                                      ----------------------        -----------------------
                                                       2004            2003           2004            2003
                                                       ----            ----           ----            ----
<S>                                                   <C>            <C>            <C>             <C>
Service cost                                          $ 2,119        $ 1,728        $   212         $   208
Interest cost                                           5,228          3,951            507             544
Expected return on plan assets                         (5,470)        (3,947)
Amortization of prior service cost                        375            252
Actuarial loss                                          1,923            850            331             261
Other                                                                     23
                                                      -------        -------        -------         -------
                                                      $ 4,175        $ 2,857        $ 1,050         $ 1,013
                                                      =======        =======        =======         =======
</TABLE>

         As of July 31, 2004, $6,179 of contributions have been made to
pension and other postretirement benefit plans. The Company anticipates
contributing an additional $1,950 to fund the pension and other
postretirement benefit plans in 2004 for a total of $8,129.

NOTE N - CONTINGENCIES

         As discussed in Note H, the Company completed the sale of ESP, a
wholly-owned subsidiary representing the entirety of the Plastic Products
business segment, in the quarter ended April 30, 2003 to a private equity
group (the Buyers). The Buyers subsequently alleged that the Company
breached certain representations made under the related Stock Purchase
Agreement (the Agreement) and are seeking $6.0 million in damages from the
Company. Under the terms of the Agreement, this claim is subject to binding
arbitration which the Company believes will be completed by April 30, 2005.
The Company believes that this claim is without merit and that awarded
damages, if any, will not have a material effect on the consolidated
financial position, results of operations or cash flows of the Company.

NOTE O - SUBSEQUENT EVENT

         In the quarter ending October 31, 2004, the Company recorded a
charge of $5.0 million ($3.1 million on an after-tax basis) for severance
and related benefit costs incurred in connection with the resignation of the
Company's former Chief Executive Officer. Of this amount, approximately $4.2
million ($2.6 million on an after-tax basis) represents a non-cash charge
associated with the extension of the exercise period of vested non-qualified
stock options in accordance with FASB Interpretation No. 44 (FIN 44),
"Accounting for Certain Transactions Involving Stock Compensation".


                                     15

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


CRITICAL ACCOUNTING POLICIES

       Refer to Management's Discussion and Analysis of Financial Condition
and Results of Operations from the Company's 2003 Annual Report to
Shareholders into the Company's Annual Report on Form 10-K for the period
ended October 31, 2003 for a discussion of the critical accounting policies
which we believe are most difficult, subjective or complex.

       The following analysis should be read in this context.

RESULTS OF OPERATIONS

       Consolidated net revenues from continuing operations increased $66.3
million, or 42.6%, to $222.0 million in the third quarter of 2004 compared
to $155.7 million in the third quarter of 2003. The increase was primarily
due to the inclusion of the results of the Company's most recent
acquisitions combined with solid organic revenue growth. Engineered
Environments, Inc. (EEI) and Pivotal Power Inc. (Pivotal Power), each
acquired within the past twelve months, generated net revenues (prior to the
exclusion of intersegment revenues) of $3.0 million and $2.5 million,
respectively, during the third quarter of 2004. All other operating
subsidiaries contributed a combined 39.1% increase in net revenues during
the quarter. Gross profit from continuing operations for the three months
ended July 31, 2004 increased $18.6 million, or 48.9%, to $56.8 million
(25.6% of consolidated net revenues) from $38.2 million (24.5% of
consolidated net revenues) in the comparable 2003 period. Gross profit from
the above recent acquisitions totaled $2.2


                                     16

million. Revenue growth of $60.8 million at previously existing operations,
coupled with improved gross margins at these existing operations, primarily
within the Support Systems segment, drove the additional $16.4 million
increase in gross profit. Selling, general and administrative expense from
continuing operations increased $5.2 million, or 30.8%, in the third quarter
of 2004 to $22.1 million (10.0% of consolidated net revenues) from $16.9
million (10.8% of consolidated net revenues) in the third quarter of 2003.
Selling, general and administrative expense for EEI and Pivotal Power
accounted for $1.5 million of the $5.2 million increase. Primarily as a
result of the sale of its Blue Ash, Ohio and Sanford, Florida facilities,
the Company realized a loss on sale of assets of $1.3 million in the third
quarter of 2004. As a result of the above, operating income from continuing
operations increased $12.5 million, or 60.0%, in the quarter ended July 31,
2004 to $33.4 million from $20.9 million in the third quarter of 2003.

       Consolidated net revenues from continuing operations increased $224.9
million, or 55.9%, to $627.3 million in the nine months ended July 31, 2004
compared to $402.4 million in the first three quarters of 2003. This
increase was primarily due to the inclusion of the results of the Company's
most recent acquisitions combined with solid organic revenue growth. TAMSCO
(acquired May 1, 2003) contributed incremental net revenues of $114.6 (prior
to the exclusion of intersegment revenues) while EEI and Pivotal Power
generated net revenues (prior to the exclusion of intersegment revenues) of
$10.0 million and $5.7 million, respectively, during the nine months ended
July 31, 2004. All other operating subsidiaries contributed a combined 23.5%
increase in net revenues during the first three quarters of 2004. Gross
profit from continuing operations for the nine months ended July 31, 2004
increased $61.4 million, or 64.6%, to $156.5 million (25.0% of consolidated
net revenues) from $95.1 million (23.6% of consolidated net revenues) in the
comparable 2003 period. Gross profit from the acquisitions of


                                     17

TAMSCO, EEI and Pivotal Power totaled $18.1 million. Revenue growth of $94.6
million at previously existing operations, coupled with improved gross
margins at these existing operations, primarily within the Support Systems
segment, drove the additional $43.3 million increase in gross profit.
Selling, general and administrative expense from continuing operations
increased $21.3 million, or 48.2%, in the nine months ended July 31, 2004 to
$65.5 million (10.4% of consolidated net revenues) from $44.2 million (11.0%
of consolidated net revenues) in the first nine months of 2003. Selling,
general and administrative expense for TAMSCO, EEI and Pivotal Power
accounted for $11.1 million of the $21.3 million increase. During the first
three quarters of 2003, the Company recorded a restructuring expense of $1.6
million related to its plan to relocate electronics assembly work performed
at the Company's Sanford, Florida facility of its Systems & Electronics Inc.
(SEI) subsidiary to alternate SEI facilities. Primarily as a result of the
sale of its Blue Ash, Ohio and Sanford, Florida facilities, the Company
realized a loss on sale of assets of $1.3 million for the nine months ended
July 31, 2004. As a result of the above, operating income from continuing
operations increased $40.4 million, or 82.0%, in the nine months ended July
31, 2004 to $89.6 million from $49.2 million in the first nine months of
2003.

       SUPPORT SYSTEMS. Net revenues in the third quarter of 2004 for the
Support Systems segment totaled $134.9 million compared to $92.1 million
(prior to the elimination of intersegment revenues in each period) for the
same period in the prior year, a 46.4% increase. The improved results
reflect the inclusion of a combined $5.5 million in net revenues from EEI
and Pivotal Power during the third quarter and net organic revenue growth
for existing operations within the Support Systems segment of $37.3 million,
an increase of 40.5%. The programs with the largest revenue gains during


                                     18

the quarter include $21.0 million from the Manportable Surveillance and
Target Acquisition Radar (MSTAR), which is serving a wide range of defense
applications including base perimeter security and $3.9 million from the
M1000 Heavy Equipment Transporters which are being refurbished after their
recent battlefield deployment, as well as a variety of other military
support equipment. Gross profit for the segment increased by $15.0 million,
or 60.4%, in the three months ended July 31, 2004 to $39.9 million (29.6% of
segment revenues) from $24.9 million (27.0% of segment revenues) primarily
on the strength of significant revenue increases. Primarily as a result of
the sale of its Blue Ash, Ohio and Sanford, Florida facilities, the Company
realized a loss on sale of assets of $1.3 million for the quarter ended July
31, 2004. Quarterly operating income for the segment climbed to $24.3
million (18.0% of segment revenues) compared to $12.8 million (13.9% of
segment revenues) last year. Incremental gross profit contributions, cost
savings realized under the Company's facility rationalization initiatives
and the absorption of corporate overhead costs by the Support Services
business segment led to the improved results for the Support Systems
segment.

         Net revenues in the nine months ended July 31, 2004 for the Support
Systems segment totaled $376.7 million compared to $289.9 million (prior to
the elimination of intersegment revenues in each period) for the first nine
months of 2003. The improved results reflect the inclusion of a combined
$15.7 million in net revenues from EEI and Pivotal Power during the nine
months ended July 31, 2004 and overall higher revenues at existing business
units. Net organic revenue growth for the Support Systems segment during the
first nine months of 2004 totaled $71.1 million, an increase of 24.5%.
Significant revenue gains from the MSTAR ($51.8 million) and the Field
Deployable Environmental Control Unit (FDECU) ($14.9 million) programs were
prime contributors to this increase. Comparatively lower revenue levels on
the Tunner 60K Aircraft Cargo


                                     19

Loader / Transporter of $11.6 million partially offset these increases for
the nine month period. Gross profit for the segment increased by $43.1, or
60.9%, in the nine months ended July 31, 2004 to $113.8 million (30.2% of
segment revenues) compared to $70.7 million (24.4% of segment revenues) last
year primarily on the strength of significant revenue increases. Both the
MSTAR and FDECU programs discussed above carry higher gross margins than the
overall Support Systems segment product portfolio. Primarily as a result of
the sale of its Blue Ash, Ohio and Sanford, Florida facilities, the Company
realized a loss on sale of assets of $1.3 million for the nine months ended
July 31, 2004. Quarterly operating income for the segment increased to $71.6
million (19.0% of segment revenues) compared to $36.1 million (12.4% of
segment revenues) in the prior year. Again, incremental gross profit
contributions, cost savings realized under the Company's facility
rationalization initiatives and an increased allocation of corporate
overhead costs to the Support Services business segment, as a result of the
TAMSCO acquisition, led to the improved results for the Support Systems
segment.

       SUPPORT SERVICES. Net revenues for the Support Services segment
increased to $96.1 million, an increase of $30.5 million, or 46.4%, compared
to $65.6 million (prior to the elimination of intersegment revenues in each
period) for the third quarter of 2003, due to the emergence of significant
internal growth opportunities in several business areas. In particular,
satellite telecommunications support for deployed forces remained robust,
several security system integration projects were ongoing and work on
vehicle uparmor kits commenced during the third quarter. Net organic revenue
growth for the Support Services segment was 46.4% during the third quarter.
Gross profit for the segment increased by $3.6 million, or 27.4%, in the
three months ended July 31, 2004 to $16.9 million (17.6% of segment
revenues) from $13.3 million (20.2% of segment revenues). Task orders
awarded under the R2 contract for goods and services typically


                                     20

carry a lower fee, or mark-up, than those projects that contain a high level
of labor content. Segment operating income for the third quarter of 2004
totaled $9.1 million (9.5% of segment revenues) compared to $8.1 million
(12.3% of segment revenues) in the same period last year.

       Net revenues for the Support Services segment increased to $271.7
million, an increase of $155.9 million, or 134.6%, compared to $115.8
million (prior to the elimination of intersegment revenues in each period)
for the first nine months of 2003, principally due to the inclusion of
results from TAMSCO ($114.6 million in incremental revenues). TAMSCO's
revenues for the nine months ended July 31, 2004 were above Company
forecasts primarily due to additional activity under the R2 contract. Net
organic revenue growth for the Support Services segment was 135.7% during
the first nine months of 2004, primarily as a result of Radian's Up-Armor
contract ($12.8 million), as well as its security and asset protection
service offerings, and a $7.3 million increase in ESSIbuy revenues. Gross
profit for the segment increased by $18.3 million, or 75.2%, in the nine
months ended July 31, 2004 to $42.7 million (15.7% of segment revenues) from
$24.4 million (21.1% of segment revenues) in the prior year. Task orders
awarded under the R2 contract typically carry a lower fee, or mark-up, than
those projects that contain a high level of labor content. The initial
purchase price allocation for TAMSCO was based on preliminary information,
which was subject to adjustment upon obtaining complete valuation
information. During the second quarter of 2004, the Company obtained the
final valuation report from an independent third party valuation firm of the
assets acquired and adjustments assumed. As a result, the Company
reclassified $29.9 million from goodwill, as recorded in the preliminary
allocation, to acquired


                                     21

customer-related intangibles and recorded a $2.2 million non-cash charge in
the quarter ended April 30, 2004 to reflect amortization expense from
acquisition date and $0.5 million in the quarter ended July 31, 2004. Segment
operating income for the first nine months of 2004 totaled $18.0 million
(6.6% of segment revenues) compared to $13.2 million (11.4% of segment
revenues) in the same period last year.

       CONSOLIDATED RESULTS OF OPERATIONS. Net interest expense decreased by
$0.4 million to $0.1 million in the third quarter of 2004, and decreased by
$0.2 million to $0.9 million in the nine months ended July 31, 2004,
reflecting slightly higher average borrowing levels in 2004 offset by
decreased interest rates in the credit facility. The effective income tax
rate was 38.5% for the three and nine month periods ended July 31, 2004 and
was 39% for the three and nine month periods ended July 31, 2003. This
reduction is primarily a result of the Company's ongoing state income tax
reduction initiatives. As a result of the foregoing, net income from
continuing operations increased 63.8 % to $33.3 million (15.0% of
consolidated net revenues) in the quarter ended July 31, 2004 as compared to
$20.4 million (13.1% of consolidated net revenues) in the third quarter of
2003. For the nine months ended July 31, 2004, net income from continuing
operations increased 84.5% to $88.7 million (14.1% of consolidated net
revenues) from $48.1 million (12.0% of consolidated net revenues) for the
first nine months of 2003.

       During the second quarter of 2002, the Company formally adopted a
plan to dispose of ESP. The Company completed the sale of ESP in the quarter
ended April 30, 2003 to a private equity group. In conjunction with this
plan, the Company recorded an estimated loss, net of income tax, of $4.2
million during the year ended October 31, 2002. The completion of the sale
resulted in an additional $0.2 million loss on disposal during the year
ended October 31, 2003.


                                     22


       Based on third quarter results, existing backlog and anticipated
orders, the Company anticipates that 2004 revenues will approximate $840
million, and that earnings per share will approximate between $2.65 and
$2.70. These forecasts include the fourth quarter impact of a charge of $5.0
million ($3.1 million on an after-tax basis) for severance and related
benefit costs incurred in connection with the resignation of the Company's
former Chief Executive Officer. Of this amount, approximately $4.2 million
($2.6 million on an after-tax basis) represents a non-cash charge associated
with the extension of the exercise period of vested non-qualified stock
options in accordance with FASB Interpretation No. 44 (FIN 44), "Accounting
for Certain Transactions Involving Stock Compensation."

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

       In December 2003, the FASB issued a revision to Interpretation 46
(FIN 46R) to clarify some of the provisions of FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities," and to exempt certain
entities from its requirements. The adoption of FIN 46R has not had a
material impact on the Company's financial statements as it does not
maintain any of the interests governed by this pronouncement.


                                     23

       In December 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the Act) became law in the U.S. The act
introduces a prescription drug benefit under Medicare, as well as a federal
subsidy to sponsors of retiree health care benefit plans that provide
retiree benefits in certain circumstances. It is not yet clear what impact,
if any, the new legislation will have on the Company's postretirement health
care plans. The accumulated postretirement benefit obligation (APBO)
reflected in the other liabilities section of the accompanying consolidated
balance sheet, and the net periodic postretirement benefit cost (NPPBC)
reflected in the accompanying consolidated statement of earnings do not
reflect the effects, if any, of the Act.

LIQUIDITY AND CAPITAL RESOURCES

       On April 16, 2003, the Company completed the sale of ESP to a private
equity group. Consideration received by the Company included $4.1 million of
cash, a $3.3 million two-year note from the buyers secured by the real
property of ESP, and contingent consideration based upon ESP's future
revenues, net of a $0.8 million working capital adjustment paid by the
Company.

       Effective April 23, 2003, the Company retired all borrowings under
its existing credit facility and entered into a new bank agreement which
provided a $125 million unsecured, revolving credit facility. Borrowings
under the new agreement, which expires April 23, 2007, are subject to
interest, at the Company's option, at either the Eurodollar rate plus an
applicable margin or at the prime rate plus an applicable margin. The margin
applicable to the Eurodollar rate varies from 0.875% to 1.625% and the
margin applicable to the prime rate varies from 0.0% to 0.25% depending upon
the Company's ratio of total indebtedness to earnings before interest,
taxes, depreciation and amortization (leverage ratio). As of July 31, 2004,
the Company had borrowings of $27 million against the revolving credit
facility, at an average annual interest rate of 2.285%, and a cash balance
of $14.3 million.

       Effective December 5, 2003, the Company acquired all of the
outstanding stock of Pivotal Power, Inc. (Pivotal Power), a supplier of high
performance static power conversion equipment primarily to military
customers. The purchase price of Pivotal Power, net of cash acquired,
required $10.1 million in cash which the Company financed with short-term
borrowings under its revolving credit facility.

       At July 31, 2004, the Company's working capital and ratio of current
assets to current liabilities were $80.3 million and 1.61 to 1 as compared
with $(30.1) million and 0.84 to 1 at October 31, 2003. The Company
generated cash from continuing operations of $19.0 million in the nine
months ended July 31, 2004 as compared to generating $60.2 million of cash
flow from continuing operations in the first nine months of 2003. This
decrease in operating cash flows was a result of a significant growth in
accounts receivable and contract inventories relating to the Company's
increasing revenue base and to the contractual requirements of certain
programs. Investment in property, plant and equipment totaled $6.2 million
and $8.4 million for the first nine months of 2004 and 2003, respectively.
The Company anticipates that capital expenditures in 2004 should not exceed
$10.0 million. Management believes that cash flow generated from operations,
together with the available line of credit, will provide the necessary
resources to meet the needs of the Company in the foreseeable future.


                                     24

       During the nine months ended July 31, 2004 and 2003, the Company
received proceeds of $56.3 million and $10.0 million related to the exercise
of stock options.

       There have been no material changes in the total contractual and
contingent obligations included in the Company's annual report to
shareholders for the year ended October 31, 2003, except as follows. The
Company completed the sale of ESP, a wholly-owned subsidiary representing
the entirety of the Plastic Products business segment, in the quarter ended
April 30, 2003 to a private equity group (the Buyers). The Buyers
subsequently alleged that the Company breached certain representations made
under the related Stock Purchase Agreement (the Agreement) and are seeking
$6.0 million in damages from the Company. Under the terms of the Agreement,
this claim is subject to binding arbitration which the Company believes will
be completed by April 30, 2005. The Company believes that this claim is
without merit and that awarded damages, if any, will not have a material
effect on the consolidated financial position, results of operations or cash
flows of the Company.

BUSINESS AND MARKET CONSIDERATIONS

       Approximately 98% of consolidated net revenues from continuing
operations for the nine months ended July 31, 2004 were directly or
indirectly derived from defense orders by the U.S. government and its
agencies. As of July 31, 2004, the Company's funded backlog of orders
totaled $658.4 million, with related customer options of an additional
$643.5 million. These amounts compare to funded backlog of $533.4 million
and related customer options of an additional $922.7 million as of October
31, 2003.

       Management continues to pursue potential acquisitions, primarily of
those companies providing strategic consolidation within the defense
industry.

FORWARD-LOOKING STATEMENTS

       In addition to historical information, this report includes certain
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, which are intended to be covered by the
safe harbors created thereby. The forward-looking statements involve certain
risks and uncertainties, including, but not limited to acquisitions,
additional financing requirements, the decision of any of the Company's key
customers (including the U.S. government) to reduce or terminate orders with
the Company, cutbacks in defense spending by the U.S. government and
increased competition in the Company's markets, which could cause the
Company's actual results to differ materially from those projected in, or
inferred by, the forward-looking statements.


                                     25

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

       Market risks relating to the Company's operations result primarily
from changes in interest rates. In order to manage this risk, the Company
periodically converts its variable-rate debt to fixed rates via interest
rate swaps. In November 2002, Company interest rate swaps on $23.6 million
of variable-rate debt, matured. Given outstanding debt levels, significant
cash flows and anticipated expenditures during fiscal years 2003 and 2004,
Company management has not utilized interest rate swaps or other derivative
contracts to hedge this risk since November 2002. Management does not
believe its exposure to interest rate fluctuations has had, or will have, a
significant impact on the Company's operations.

ITEM 4. CONTROLS AND PROCEDURES.

       As of July 31, 2004, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures as defined in Rules 13a-14(c) and 15d-14(c) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based
upon the evaluation, the Company's Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective. Disclosure controls and procedures are controls
and procedures that are designed to ensure that information required to be
disclosed in Company reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms.

       There have been no changes in the Company's internal controls over
financial reporting during the period covered by this report that have
materially affected, or are reasonably likely to materially affect, the
Company's internal controls over financial reporting.



                                     26

                                   PART II
                              OTHER INFORMATION

Items 1-5. Not applicable.


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

         (a)     Exhibits

                 11.     Statement Re: Computation of Earnings Per Share

                 31.1    Certification of Chief Executive Officer

                 31.2    Certification of Chief Financial Officer

                 32.1    Certification of Chief Executive Officer pursuant to
                         Section 906 of the Sarbanes-Oxley Act of 2002

                 32.2    Certification of Chief Financial Officer pursuant to
                         Section 906 of the Sarbanes-Oxley Act of 2002

         (b)     During the quarter ended July 31, 2004, the Company
                 filed the following reports on Form 8-K:

                 (1)     Form 8-K dated May 27, 2004
                         regarding release of the Company's
                         financial results for the three months
                         ended April 30, 2004



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       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.

                                       ENGINEERED SUPPORT SYSTEMS, INC.

       Date: September 14, 2004
             ------------------
                                             By: /s/ Gerald A. Potthoff
                                                -----------------------
                                                Gerald A. Potthoff
                                                Vice Chairman, Chief Executive
                                                Officer and President

       Date: September 14, 2004
             ------------------
                                             By: /s/ Gary C. Gerhardt
                                                ---------------------
                                                Gary C. Gerhardt
                                                Vice Chairman and Chief
                                                Financial Officer




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