Dover Reports First Quarter 2002 Results
Segment earnings for the quarter were $87.0 million, down 36% or $49.6 million from $136.6 million last year. In the Dover Technologies segment, markets remain depressed, resulting in a 46% decline in sales as compared to the prior year and losses of $11.4 million. On a sequential basis, Technologies' sales decreased 6% from the levels of the 2001 fourth quarter. In the Dover Industries segment, income increased 15% to $41.7 million from the comparable quarter last year on a sales decline of 4%, and income was ahead of the 2001 fourth quarter by 23% with a slight sales decline. In Dover Resources, quarterly sales and income were down from the prior year by 11% and 15% respectively, and both were down from the fourth quarter of 2001 as well, due to weaker oil and gas production markets. Dover Diversified quarterly sales and earnings increased from the prior year 14% and 47% respectively, and both were up from the fourth quarter, largely due to improvements at Crenlo.
Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. As required, Dover identified and tested individual reporting units for goodwill impairment. Dover tested each of its 41 identified reporting units (the SEC, CBAT, and Marking businesses in Technologies and the reported operating companies in the other three segments) for goodwill impairment by comparing the fair market value of each individual reporting unit with its related book value. The fair market valuations were derived by management using consistent and supportable assumptions that were, to some extent, impacted by current economic conditions. This testing resulted in an impairment charge of $345.1 million ($293.0 million net of tax) for Dover, which was recognized as a change in accounting principle on the income statement in this quarter. Of this impairment total, $148.0 million, $127.5 million and $69.6 million were recorded in the Dover Diversified, Dover Industries and Dover Resources segments, respectively. The net loss after the cumulative impact of the change in accounting principle was $247.9 million. The statement also discontinues the amortization of goodwill, effective January 1, 2002. The impact of goodwill amortization for each quarter of 2001 is disclosed in the financial tables attached.
Commenting on the results and the current outlook, Mr. Thomas L. Reece, Chairman and CEO said, "The general economic and market conditions for most of our companies continued weak in the first quarter. The timing of an economic recovery and impact on the capital spending of many of our companies' customers is still unclear. However, like many, we are cautiously optimistic that as the year progresses our markets will improve. When that happens, we have done the right things, and are poised to respond positively. Until then we remain focused on improving our market competitiveness, and our margins at current sales levels. This is particularly true in Technologies, where the market for capital equipment is likely to recover slowly."
SEGMENT RESULTSDover Industries' first quarter segment income compared to the same period last year increased 15% or $5.3 million to $41.7, and sales declined 4% or $11.9 million to $278.3 million. The impact of goodwill amortization on earnings in the first quarter of 2001 was $3.5 million. Segment bookings in the quarter were down 13% to $270.0 million and the book-to-bill ratio was .97 for the current quarter. Backlog decreased 16% from last year to $158.0 million and 4% from the fourth quarter of 2001. Acquisitions completed in the last year added approximately $9.2 million to sales in the quarter, with almost no impact on segment earnings after acquisition write-offs.
Industries' results were led by Heil Environmental, and to a lesser extent by the other waste haulage-related business, Marathon Equipment. Heil Environmental continues to face challenging markets, but sales and earnings compared to the same period last year and the fourth quarter were boosted substantially by the release of orders by one large waste haulage company and the shipment of those orders within the quarter. Backlog and order entry rates do not support continuation of this performance in the second quarter.
Rotary Lift still faces sluggish markets with sales flat to the comparable period last year but 14% higher than the prior quarter. Earnings were higher than both earlier periods due to continued market share gains driven by cost competitive new products.
For the balance of Industries' businesses, market conditions remained weak and sales declined. Triton's earnings, though lower than the previous comparable period, improved substantially from the fourth quarter of 2001, the result of recent cost reductions. Heil Trailer's quarterly sales and earnings fell to levels last seen in 1996, substantially below the comparable prior year period and last year's fourth quarter due to the impact of a weak economy in the dry bulk market, and current soft demand for petroleum trailers. PDQ also had a challenging quarter as neither the petroleum retailers nor investor/entrepreneurial markets have recovered after September 11th. Market weakness apparent at the end of 2001 resulted in weaker performance at Dovatech and Somero.
Dover Diversified's first quarter earnings were $30.0 million, an increase of $9.5 million or 47% over the comparative period last year, and sales in the quarter were $288.4 million, a $34.6 million or 14% increase. The impact of goodwill amortization on earnings in the first quarter of 2001 was $3.5 million. Bookings in the quarter were $295.6 million, resulting in a book-to-bill ratio of 1.02 with backlog at the end of the quarter of $389.4 million, 17% higher than last year and 2% higher than the fourth quarter of 2001. Acquisitions completed in the last year added approximately $9.0 million to sales in the quarter, with almost no impact on segment earnings after acquisition write-offs.
The primary reason for the earnings improvement compared to the same period last year and the fourth quarter was the elimination of losses at Crenlo, largely due to internal improvements, with sales flat relative to last year's first quarter. Hill Phoenix, whose earnings substantially outperformed these prior periods, continues to be well positioned in the market, and margins have improved. PMI outperformed both prior periods, benefiting from both internal improvements and the effect of acquisitions. Waukesha Bearings sales and earnings were sharply higher than last year, due to a satisfactory market and the contribution of acquisitions. Sargent has maintained solid sales comparisons despite the impact of weakening markets for its aerospace products, and was also helped by the transfer of the Airtomic business from Dover Resources. Tranter continues to suffer from a weak market, resulting in lower sales and earnings than both the comparable period and the fourth quarter of last year. Belvac operated near breakeven on roughly 40% of the sales of the prior years' comparable quarter.
Dover Resources' earnings declined $4.8 million or 15% to $26.7 million on a sales decrease of 11% or $25.1 million to $208.0 million, as compared to the same period of the prior year. The impact on earnings of goodwill amortization in the first quarter of 2001 was $2.6 million. Segment bookings in the quarter were down 15% from the prior year to $209.5 million and the book-to-bill ratio was 1.01. Ending backlog was $79.5 million, a 24% decrease from last year and a 1% decrease from the fourth quarter. Acquisitions completed in the last year added approximately $.3 million to sales in the quarter, with almost no impact on segment earnings after acquisition write-offs.
The oil and gas production equipment companies (Petroleum Equipment Group, Cook and Quartzdyne), which were the most important contributors last year, experienced sales and earnings declines compared to last year's first quarter, due to customers current caution regarding capital spending, continuing the trend apparent at the end of 2001. These businesses will be impacted by the turmoil in the global energy markets, and the near-term outlook is uncertain.
Blackmer, Wilden and RPA, which serve the currently stagnant process industry market, collectively had a slight earnings decrease on flat sales compared with first quarter 2001. De-Sta-Co Manufacturing and De-Sta-Co Industries had lower sales and earnings than in the same quarter last year, but experienced somewhat stronger automotive related markets than at the end of 2001. Tulsa Winch's markets deteriorated throughout 2001, and the first quarter results, while flat with the fourth quarter, were substantially below those of the comparable period last year. OPW Fueling Components' service station markets continued to decline, with sales and earnings below the same period last year and the fourth quarter. OPW Fluid Transfer Group cost management initiatives generated higher margins in the first quarter on slightly lower sales compared to last year, but its transportation related markets deteriorated compared to the fourth quarter.
Dover Technologies' first quarter sales were $236.5 million, a decline of $197.9 million or 46% from the same period of the prior year, generating a loss of $11.4 million compared to segment earnings of $48.2 million last year. The impact of goodwill amortization on earnings in the first quarter of 2001 was $2.9 million. Acquisitions completed in the last year added approximately $15.2 million to sales in the quarter, with a loss of $1.0 million after acquisition write-offs.
Technologies' CBAT business recorded a loss of $13.4 million for the first quarter compared to earnings of $15.6 million for last year's comparable period. First quarter sales were $125.5 million, a decline of $102.8 million or 45% from last year. Bookings, at $139.5 million, were down 26% from the same period last year but were 8% higher than the fourth quarter of 2001. The CBAT book-to-bill ratio was 1.11 for the first quarter, with all businesses above 1.0. Backlog, while still at depressed levels at $65.3 million, was 22% higher than at the end of 2001. Though these metrics and some broader industry data suggest that the market for CBAT's capital equipment products may have stopped declining, substantial industry overcapacity still exists, and thus a sales recovery is not expected soon. Efforts to return CBAT to profitability, even in this depressed market, should succeed in the second or third quarter, despite the strategic decision to continue heavy spending on research and new product development.
In Technologies' SEC business, sales in the quarter were $60.7 million, a decline of $101.7 million or 63% from the same period last year. SEC reported a loss of $3.4 million, as compared to earnings of $32.6 million in last year's first quarter. Net bookings in the first quarter of $56.3 million were down from $91.5 million from the same period last year but increased 20% from the fourth quarter. The book-to-bill ratio was .93 for the quarter with backlog at $49.2 million at the end of the period (a 7% decline from the prior quarter). SEC's datacom, telecom, and networking markets remain very weak, and the timing of any improvement in demand remains unclear. Much of current demand comes from industrial, aerospace, military, medical, and other high-performance, high-reliability markets. The SEC companies continue to invest judiciously in new product development, in coordination with customers, to protect the currently available market, and to insure placement in new products when the market recovers as well. All of the SEC businesses except for Quadrant are operating at or near breakeven levels currently. In the quarter a new management team at Quadrant continued the restructuring program provided for in the second half of last year, including the closure of several facilities.
In the quarter, Imaje, the French-based industrial ink-jet printer and ink manufacturer, had sales and earnings increases, in a difficult market environment, due to both operational improvements and an increasingly successful recent acquisition.
Dover Corporation also reports its pretax earnings on an EBITACQ basis (Earnings before Interest, Taxes, and non-cash charges arising from purchase accounting for Acquisitions). First quarter EBITACQ for continuing operations of $91.0 million was 42% lower than the prior year's first quarter.
Dover's tax rate for continuing operations for the current quarter was 31.0% for the first quarter compared to last year's recurring rate of 32.1%. The slightly lower effective rate reflects the benefit of eliminating non-taxable goodwill amortization in the current year due to the adoption of the accounting change, partially offset by unrecognized foreign tax loss carryforwards.
In the first quarter Dover invested $46.1 million in completing four strategic, add on acquisitions. Dover is actively seeking attractive acquisition candidates although in this distressed market many potential sellers are awaiting clearer signs of economic recovery. Acquisitions completed in the last twelve months added $33.7 million in sales for the quarter, with almost no impact on segment earnings after acquisition write-offs.
Net debt levels increased from the end of the fourth quarter by $143.0 million to $1,043.2 million on March 31, 2002, due to tax and incentive compensation payments in the first quarter, acquisitions and a modest increase in receivables. No shares were repurchased in the open market during the quarter.
Additional unaudited information on Dover and its operating companies can be found on the company website. (http://www.dovercorporation.com). In addition to updates to financial information already posted to the website, additional information about the performance of Dover Technologies' CBAT business compared to certain available industry data has also been posted for the purpose of potentially aiding investors studying this business. Dover makes no representation about the utility of this data or the validity of any conclusions that might be reached by referring to it. In addition, Dover will post to the website the segment detail of EBITACQ, as well as supplemental cash flow disclosure.
The Dover website will host a Webcast of the first quarter conference call at 8:30 AM Eastern Time on Tuesday, April 16, 2002. The conference call will also be made available for replay on the website.
Dover Corporation makes information available to the public, orally and in writing, which may use words like "expects" and "believes," which are "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. This press release contains forward-looking statements regarding future events and the performance of Dover Corporation that involve risks and uncertainties that could cause actual results to differ materially including, but not limited to, failure to achieve expected synergies, failure to successfully integrate acquisitions, failure to service debt, continuing impacts from the terrorist events of September 11, 2001 on the worldwide economy, economic conditions, customer demand, increased competition in the relevant market, and others. Dover Corporation refers you to the documents that it files from time to time with the Securities and Exchange Commission, such as the Form 10-K, Form 10-Q and Form 8-K, which contain additional important factors that could cause its actual results to differ from its current expectations and from the forward-looking statements contained in this press release.
DOVER CORPORATION CONSOLIDATED MARKET SEGMENT RESULTS (unaudited) First quarter ended March 31, Percent SALES 2002 2001 Change Dover Industries $278,323,000 $290,263,000 -4% Dover Diversified 288,437,000 253,820,000 14% Dover Resources 208,023,000 233,090,000 -11% Dover Technologies 236,533,000 434,430,000 -46% Total Continuing (after intramarket eliminations) $1,009,932,000 $1,210,174,000 -17% EARNINGS (Loss) Dover Industries $41,650,000 $36,356,000 15% Dover Diversified 30,047,000 20,509,000 47% Dover Resources 26,712,000 31,481,000 -15% Dover Technologies (11,405,000) 48,226,000 -124% Subtotal Continuing 87,004,000 136,572,000 -36% Corporate expense (4,475,000) (4,557,000) -2% Net interest expense (17,166,000) (19,430,000) -12% Earnings from Continuing Operations, before taxes on income 65,363,000 112,585,000 -42% Taxes on income 20,251,000 34,640,000 -42% Net earnings from Continuing Operations 45,112,000 77,945,000 -42% Net earnings from Discontinued Operations* 4,000 1,141,000 Net earnings before cumulative effect of change in accounting principle 45,116,000 79,086,000 -43% Cumulative effect of change in accounting principle** (293,049,000) -- Net earnings $(247,933,000) $79,086,000 Net earnings per diluted common share: Continuing Operations $0.22 $0.38 -42% Discontinued Operations* -- 0.01 Net earnings before cumulative effect of change in accounting principle 0.22 0.39 -44% Cumulative effect of change in accounting principle** (1.44) -- Net earnings $(1.22) $0.39 Average number of diluted shares outstanding 203,818,000 204,468,000 Impact of acquisition write-offs on continuing diluted EPS: EPS from Continuing Operations $0.22 $0.38 -42% Goodwill amortization (net of tax)** -- 0.05 EPS before goodwill amortization $0.22 $0.43 -49% Other acquisition write-offs (net of tax) 0.03 0.04 EPS before all acquisition write-offs $0.25 $0.47 -47% * In accordance with the 2001 adoption of SFAS No. 144, the earnings (net of tax) from discontinued operations were separately presented for all reported periods in earnings from discontinued operations. ** Reflects the transitional provisions of SFAS No. 142 "Goodwill and Other Intangible Assets" (adopted 1/1/02), which resulted in a $293 million write down (net of $52 million in tax) of impaired goodwill to fair value. In addition, beginning in 2002 goodwill and indefinite-lived intangible assets are no longer amortized under SFAS No. 142. DOVER CORPORATION CONSOLIDATED (unaudited) March 31, December 31, BALANCE SHEET ('000) 2002 2001 Assets: Cash, equivalents and marketable securities $166,283 $176,862 Receivables, net of allowances for doubtful accounts 704,472 675,233 Inventories 651,486 660,601 Prepaid expenses & deferred tax asset 146,559 142,232 Net property, plant & equipment 740,347 761,361 Goodwill** 1,628,687 1,946,423 Intangibles, net of amortization 188,868 173,194 Other assets 61,655 56,359 Assets of discontinued operations* 13,866 9,937 $4,302,223 $4,602,202 Liabilities & Stockholders' Equity: Short term debt $177,299 $43,780 Payables and accrued expenses 562,000 620,092 Taxes payable (including deferred) 150,969 258,152 Other Deferrals 123,268 107,555 Long-term debt 1,032,172 1,033,243 Liabilities of discontinued operations* 19,185 19,841 Stockholders' equity 2,237,330 2,519,539 $4,302,223 $4,602,202 * In accordance with the 2001 adoption of SFAS No. 144, the assets and liabilities from discontinued operations have been separately presented on the Balance Sheet for all periods. ** The transitional provisions of SFAS No. 142 "Goodwill and Other Intangible Assets" (adopted 1/1/02) resulted in a $345 million write down of impaired goodwill to fair value. Three Months Ended March 31, CASH FLOWS ('000) 2002 2001 Operating activities: Net earnings $45,116 $79,086 (Earnings) loss from discontinued operations, net of tax (4) (1,141) Depreciation 35,918 33,869 Amortization - goodwill -- 12,465 Amortization - other 5,103 4,052 Increase (decrease) in other deferrals 16,603 (26,277) Working capital changes* (140,977) 5,812 Other, net (7,287) (4,477) Net cash from (used in) operating activities (45,528) 103,389 Investing activities: Capital expenditures (21,338) (61,130) Acquisitions, net of cash and cash equivalents (45,824) (82,361) Net cash from (used in) investing activities (67,162) (143,491) Financing activities: Increase (decrease) in notes payable 133,083 (337,410) Increase (decrease) in long-term debt (876) 400,769 Cash dividends (27,362) (25,412) Purchase of treasury stock (802) (3,067) Proceeds from exercise of stock options 3,011 2,266 Net cash from (used in) financing activities 107,054 37,146 Discontinued operations (4,581) (8,459) Net increase (decrease) in cash & equivalents (10,217) (11,415) Cash & cash equivalents at beginning of period 175,865 180,648 Cash & cash equivalents at end of period $165,648 $169,233 * Working capital use of funds in 2002 primarily attributable to federal tax payments of $75 million, 2001 incentive performance payments and an increase in accounts receivable of $32 million. DOVER GOODWILL AMORTIZATION SUMMARY - 2001 (000's) 1st 2nd 3rd 4th Total Quarter Quarter Quarter Quarter 2001 Dover Industries $3,453 $3,441 $3,643 $4,079 $14,616 Dover Diversified 3,469 3,469 3,751 3,713 14,402 Dover Resources 2,636 2,636 2,636 2,637 10,545 Dover Technologies * 2,907 3,054 3,336 3,302 12,599 Total Goodwill $12,465 $12,600 $13,366 $13,731 $52,162 Tax on Goodwill 2,255 2,256 2,259 2,430 9,200 Net Goodwill $10,210 $10,344 $11,107 $11,301 $42,962 EPS $0.05 $0.05 $0.05 $0.06 $0.21 * CBAT 2,029 2,140 2,266 2,247 8,682 SEC 528 562 562 474 2,126 DOVER CORPORATION ACQUISITIONS - FIRST QUARTER 2002 DATE TYPE ACQUIRED LOCATION SEGMENT Operating Co. COMPANIES (Near) 02-Jan Asset Impell, Inc. Suwanee, GA DTI OK International Manufacturer of air purification equipment and systems for the electronic assembly industry. 11-Jan Stock Brevetti Nettuno Bologna, Italy DRI OPW Fueling Components Manufactures LPG (propane) nozzles and accessories. 15-Feb Stock Multi-test AG Rosenheim, Germany DTI ECT (minority interest) Manufactures semiconductor test handling equipment. 25-Mar Asset Emco Electronics Cary, NC DRI OPW Fueling Components Manufactures fuel management and automatic tank gauging systems.SOURCE Dover Corporation
CONTACT: David S. Smith, Vice President Finance of Dover, +1-212-922-1640 URL: http://www.dovercorporation.com http://www.prnewswire.com
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