Dover Reports First Quarter Results
NEW YORK, April 16 /PRNewswire/ -- Dover Corporation (NYSE: DOV) earned $.39 per diluted share in the first quarter ended March 31, 2001. This was a decrease of 32% from the $.57 per diluted share earned in the comparable quarter last year. Sales in the first quarter were $1.25 billion, equal to last year, and segment earnings for the quarter were $138.5 million, down 32% from $202.2 million last year. Net income from continuing operations for the first quarter was $79.1 million, down 33% from $117.3 million last year.
All four segments showed earnings declines compared to the same period last year. Dover Technologies' income decreased 43%, on a 7% sales decline. Dover Industries and Dover Diversified's earnings declined by 25% and 39% respectively, on essentially flat sales, and Dover Resources' earnings declined 5% on a 9% sales increase.
The margin decline at many Dover companies reflects the lower levels of demand in their served markets, and expenses incurred to reduce costs in response to this environment. These factors will also impact the second quarter.
Commenting on the results and the current outlook, Mr. Thomas L. Reece, Chairman and CEO said, "While the first quarter was disappointing after the strong growth experienced in 1999 and 2000, our operating company presidents are taking the right actions to manage their businesses in these challenging economic times, and are also making appropriate investments to grow their market shares. We are confident that this will have a positive impact on results when we get back into a growth mode. Meanwhile results should improve quarter over quarter in the second half but will not compare favorably with 2000 results."
Dover completed five add-on acquisitions during the quarter at a combined investment of $82.9 million. The profit impact of these acquisitions in 2001 was small due to acquisition write-offs, and imputed financing costs. Acquisitions completed in the last twelve months added $69 million in sales and $9 million in operating profit in the first quarter.
Dover Technologies' first quarter sales decreased 7% to $434.4 million, and earnings decreased 43% to $48.2 million compared to the same period last year, due to the broad-based contraction in the electronics industry. Technologies' disproportionate decline in earnings was due to the higher level of fixed costs added to respond as this market grew rapidly from second half of 1999 through most of 2000, and difficulty in adjusting variable costs in the rapidly declining market since late in 2000. Technologies continues to incur high levels of expenses for new product and market development. Acquisitions completed in the last year added approximately $31 million to sales in the quarter, with no material impact on segment earnings after acquisition write-offs.
In Technologies' Circuit Board Assembly and Test (CBAT) business, first quarter sales decreased 27% to $228.4 million, and earnings decreased 75% to $15.6 million. Bookings, at $187.6 million, were down 47% from the same period last year. The book-to-bill ratio was .82. All CBAT companies owned for a full year had lower results and demand for new CBAT machines is low in all customer segments. Recently acquired OK International consumables and workbench handtools for circuit board manufacturers are less impacted by the capital goods cycle in this industry. Long-term growth attributes of the CBAT business remain strong, and therefore new product and market development activities are being emphasized. However, because of these expenses and lower backlog, second quarter sales and earnings will be lower than the first quarter.
Technologies' Specialty Electronic Components (SEC) sales increased 57% from the same period last year to $162.4 million and earnings increased 85% to $32.6 million. Bookings in the first quarter of $91.5 million were down 42% from last year. The book-to-bill ratio was .56. The SEC companies entered the year with high backlogs, which allowed sales and earnings to remain at roughly the same level as last year's fourth quarter. However, the first quarter's low bookings, exacerbated by $40 million of order cancellations, means that sales and earnings will decline in the second quarter. SEC sales are concentrated in higher value applications. These are found disproportionately in the datacom/telecom/networking markets which have been particularly hard hit, a factor somewhat mitigated by the SEC's focus on "high-end" components that tend to be included in its customers' new product introductions.
Dover Industries' first quarter sales were flat at $299.7 million and segment income decreased 25% to $38.0 million compared to the same period last year. Sales and earnings were both lower than the fourth quarter of 2000. Segment bookings were up 9% to $319.7 million and the book-to-bill ratio was 1.07. Acquisitions completed in the last year added approximately $15 million to sales in the quarter, with almost no impact on segment earnings after acquisition write-offs.
Most of Industries' companies had lower earnings. This was most notable at Heil Environmental, where the earnings decline was caused by delayed chassis deliveries to Heil and customer delayed deliveries on major contracts. Though backlogs in this business have improved recently, the impact of capital constraints on the major waste haulage customers' spending makes a recovery to last year's record results unlikely. Heil Trailer's earnings comparisons continue to suffer despite continued cost reduction in a market for dry bulk trailers that has declined for more than a year. Tipper Tie has been adversely impacted by the effect of "Mad-Cow" and hoof-and-mouth disease scares on meat consumption, particularly in Europe. The markets served by both the automotive service companies (Rotary Lift and Chief) and the food service equipment companies (Groen and Randell) have also been weak.
Somero, a 1999 acquisition and Industries' smallest company, experienced a dramatic earnings improvement from a very depressed prior year, the result of both market conditions and management's new marketing strategies for used equipment. Both PDQ and Texas Hydraulics had modest earnings improvements on higher sales as a result of product and market initiatives to combat difficult markets.
Dover Diversified's first quarter sales increased 2% from the prior year to $276.1 million, and segment income decreased 39% to $20.5 million compared to the same period last year. Sales and earnings were both lower than the fourth quarter of 2000. Segment bookings in the quarter were down 8% to $287.5 million and the book-to-bill ratio was 1.04. Acquisitions completed in the last year added approximately $8 million to sales in the quarter, with almost no impact on segment earnings after acquisition write-offs.
The primary reason for the decline in earnings at Diversified was the recognition in late March of $9.4 million of losses at Crenlo, primarily related to write-off of overstated costs in inventory, exacerbated by a decline in the market for its electronics enclosure products. A surprisingly weak market negatively impacted earnings at Mark Andy, and despite a favorable outlook in the repair and overhaul markets, A/C Compressors' sales and earnings were lower, compared to a very strong first quarter last year. Tranter was hurt, to a lesser degree, by weak demand and fierce competition in its radiator market.
Hill Phoenix's sales and earnings both showed double digit increases from the prior year, and while the full year is still anticipated to show favorable comparisons, much of this improvement is expected in the second half.
Sargent, Performance Motorsports, Waukesha, and SWF all had earnings improvements in generally more favorable market environments, with SWF further helped by the effective integration of its recent acquisitions.
Dover Resources' first quarter sales increased 9% to $238.7 million and segment earnings decreased 5% to $31.7 million compared to the same period last year. Sales and earnings were both higher than the fourth quarter, with earnings up 30%. Segment bookings in the quarter were up 11% to $255.1 million and the book-to-bill ratio was 1.07. Acquisitions completed in the last year added approximately $15 million to sales in the quarter, with almost no impact on segment earnings after acquisition write-offs.
Those Resources companies serving the energy production markets (Petroleum Equipment Group, Quartzdyne, and C. Lee Cook), together increased earnings by 40%, the result of a strong market and good operating leverage. Tulsa Winch, the result of multiple acquisitions in the winch industry, continued to perform extremely well. This was more than offset by very weak transportation markets served by OPW Fluid Transfer Group and Blackmer, and the impact of the automotive market slowdown on De-Sta-Co Manufacturing.
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 of $160 million was 27% lower than the prior year's first quarter.
The first quarter tax rate was 30.8%, down 1.7 points from a comparable full year 2000 rate of 32.5%. Dover does not reduce research and development spending when earnings decline, keeping related tax credits high, and export tax credits lag sales declines slightly. As a result, the tax rate declines when earnings are lower. Interest expense was lower than the fourth quarter due to lower interest rates and the favorable impact on interest income from a tax refund recognized in the first quarter.
During the first quarter, Dover issued $400.0 million of 6.50% notes due February 15, 2011. The proceeds were used to reduce short-term debt. Also during the quarter, Dover re-purchased 81,940 of its shares at a cost of $3.1 million at an average price of $37.45.
On April 10, after the end of the first fiscal quarter Dover announced the sale of its welding equipment business. The gain on sale, which will be reported in the second quarter is expected to be approximately $.20 per diluted share.
Additional information on Dover and its operating companies can be found on the company website. (http://www.dovercorporation.com). The Dover website will host a Webcast of the first quarter conference call at 9:00 AM Eastern Time on Tuesday, April 17. 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, failure to sell non-core properties, including without limitation, as a result of the failure to obtain regulatory approvals or of conditions to closing to occur, 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.
TABLES TO FOLLOW
DOVER CORPORATION CONSOLIDATED MARKET SEGMENT RESULTS (unaudited)
First quarter ended March 31, Percent SALES 2001 2000 Change Dover Technologies $434,430,000 $466,366,000 -7% Dover Industries 299,707,000 299,041,000 Dover Diversified 276,132,000 269,538,000 2% Dover Resources 238,724,000 218,156,000 9% Total (after intramarket eliminations) $1,247,564,000 $1,251,283,000 EARNINGS Dover Technologies $48,226,000 $84,795,000 -43% Dover Industries 37,994,000 50,415,000 -25% Dover Diversified 20,518,000 33,465,000 -39% Dover Resources 31,718,000 33,541,000 -5% Subtotal (after intramarket eliminations) 138,456,000 202,216,000 -32% Loss on disposition -- (1,400,000) Corporate expense (4,558,000) (6,241,000) -27% Net interest expense (19,534,000) (15,582,000) 25% Earnings before taxes on income 114,364,000 178,993,000 -36% Taxes on income 35,278,000 61,674,000 -43% Net earnings $79,086,000 $117,319,000 -33% Net earnings per diluted common share: $0.39 $0.57 -32% Average number of diluted shares outstanding 204,468,000 204,440,000 Impact of acquisition write-offs on diluted EPS: Diluted EPS $0.39 $0.57 -32% Goodwill write-offs (net of tax) 0.05 0.05 EPS before goodwill 0.44 0.62 -29% Other acquisition write-offs (net of tax) 0.04 0.04 EPS before all acquisition write- offs $0.48 $0.66 -27% DOVER CORPORATION OPERATIONAL INCOME (in millions) (unaudited)
2001 - Three 2000 - Three Months Months 2000 - Full Year SALES INCOME % SALES INCOME % SALES INCOME % Circuit board assembly / test $228 $16 7 $315 $61 19 $1,369 $265 19 Electronic components 162 33 20 103 18 17 531 104 20 Marking 44 9 20 48 14 29 200 60 30 Dover Technologies 434 58 13 466 93 20 2,100 429 20 Dover Industries 300 45 15 299 56 19 1,246 224 18 Dover Diversified 276 25 9 270 41 15 1,176 194 17 Dover Resources 239 39 16 218 42 19 887 149 17 Operational subtotal (after elim.) $1,248 167 13 $1,251 232 19 $5,401 996 18 Corporates and other (7) (14) (49) EBITACQ 160 218 947 Gain (loss) on dispositions & Sale of equity securities -- (1) 10 Interest (20) (16) (89) Acquisition Write-offs (26) (22) (96) Dover Pre-tax income $114 $179 $772
"Operational Income" -- differs from segment operating profits because it excludes all non-cash write-offs relating to acquisitions, the expenses of each segment's corporate group, and foreign exchange gains or losses.
"EBITACQ" -- earnings before taxes, interest, acquisition write-offs and non-recurring gains.
Dover Corporation and Subsidiaries Analysis of Cash Flow: Depreciation, Amortization & Acquisition write-offs, with tax effects (unaudited) (in millions)
2001 - Three Months Tax Deductible Total Yes No Tax EBIT $134 $42 Acquisition related: Goodwill amortization 13 7 6 2 Other Amortization 4 Depreciation 4 Inventory write-offs 5 Subtotal other write-offs 13 11 2 5 Total acquisition write-offs 26 18 8 7 EBITACQ 160 $49 Other depreciation 32 Other amortization -- EBITDAI 192 Inventory write-offs (5) EBITDA $187 2000 - Three Months Tax Deductible Total Yes No Tax EBIT $196 $68 Acquisition related: Goodwill amortization 11 6 5 2 Other Amortization 5 Depreciation 4 Inventory write-offs 2 Subtotal other write-offs 11 7 4 3 Total acquisition write-offs 22 13 9 5 EBITACQ 218 $73 Other depreciation 28 Other amortization -- EBITDAI 246 Inventory write-offs (2) EBITDA $244 2000 - Full Year Tax Deductible Total Yes No Tax EBIT $851 $267 Acquisition related: Goodwill amortization 49 24 25 9 Other Amortization 15 Depreciation 18 Inventory write-offs 14 Subtotal other write-offs 47 38 9 13 Total acquisition write-offs 96 62 34 22 EBITACQ 947 $289 Other depreciation 118 Other amortization 3 EBITDAI 1,068 Inventory write-offs (14) EBITDA $1,054
"EBIT" -- represents earnings before interest and taxes.
"EBITACQ" -- represents earnings before interest, taxes and acquisition
"EBITDAI" -- represents earnings before interest, taxes, depreciation,
amortization and inventory write-offs.
"EBITDA" -- represents earnings before interest, taxes, depreciation and
EBIT, EBITACQ, EBITDAI and EBITDA -- all exclude gains (losses) on sale of
businesses and equity investment. DOVER CORPORATION CONSOLIDATED (unaudited)
March 31, December 31, BALANCE SHEET ('000) 2001 2000 Assets: Cash, equivalents and marketable securities $171,580 $186,740 Receivables, net of allowances for doubtful accounts 864,052 903,177 Inventories 794,056 783,200 Prepaid expenses 109,988 101,732 Net property, plant & equipment 787,458 755,548 Goodwill, net of amortization 1,915,823 1,896,715 Other intangibles and assets, net 276,171 265,004 $4,919,128 $4,892,116 Liabilities & stockholders' equity: Short term debt $504,948 $842,537 Payables and accrued expenses 738,679 762,103 Deferred credits 184,359 214,055 Long-term debt 1,033,292 631,846 Stockholders' equity 2,457,850 2,441,575 $4,919,128 $4,892,116 Three Months CASH FLOWS ('000) 2001 2000 Operating activities: Net earnings $79,086 $117,319 Loss on sale of business -- 1,400 Depreciation 35,768 31,963 Amortization of goodwill 13,371 11,490 Amortization - other 4,051 4,558 Working capital changes (8,354) (155,123) Other, net (27,820) 4,540 Net cash from operating activities 96,102 16,147 Investing activities: Capital expenditures (62,518) (35,231) Acquisitions, net of cash and cash equivalents (82,361) (154,080) Proceeds from sale of businesses and equity investments -- 14,923 Net cash from (used in) investing activities (144,879) (174,388) Financing activities: Increase (decrease) in notes payable (337,410) 456,975 Increase (decrease) in long-term debt 400,769 12,728 Cash dividends (25,412) (23,339) Purchase of treasury stock (3,067) (3,037) Proceeds from exercise of stock options 2,266 2,142 Net cash from (used in) financing activities 37,146 448,506 Discontinued operations - tax payments -- (307,428) Net increase (decrease) in cash & equivalents (11,631) (17,163) Cash & cash equivalents at beginning of period 181,399 138,038 Cash & cash equivalents at end of period $169,768 $120,875 DOVER CORPORATION ACQUISITIONS - FIRST QUARTER 2001 DATE TYPE ACQUIRED LOCATION (Near) SEGMENT - COMPANIES Operating Co. 01-Jan Asset CPI Products Plymouth, MI DRI De-Sta-Co Industries
Manufactures a broad array of end-of-arm, transfer press, and assembly tooling products.
04-Jan Stock Bayne Machine Greenville, SC DII Heil Works, Inc. Environmental Manufactures hydraulic lift systems utilized in the waste industry. 31-Jan Stock Adhoc Logiciel Hautmont, France DTI Imaje
Develops software systems for traceability, identification and product flow management.
28-Feb Stock Schreiber Cerritos, Ca DII DovaTech
Manufactures small and medium-sized chillers. 31-Mar Stock Comco Cincinnati, Oh DDI Mark Andy
Manufactures narrow and mid-web flexographic printing presses. SOURCE Dover Corporation
CONTACT: David S. Smith, Vice President Finance of Dover, 212-922-1640/