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Dover Reports Second Quarter 2002 Results
NEW YORK, Jul 17, 2002 -- Dover Corporation (NYSE: DOV) earned $64.1 million or $.31 per diluted share from continuing operations in the second quarter ended June 30, 2002 compared to $48.8 million or $.24 per diluted share from continuing operations in the comparable period last year. Goodwill amortization (no longer required with the adoption of FAS 142 in the first quarter of 2002) totaled $12.6 million or $.05 per diluted share in the second quarter of 2001.
Net earnings for the second quarter of 2002 were $55.2 million or $.27 per diluted share compared to $143.3 million or $.70 per diluted share in the second quarter of last year. The second quarter of 2001 included in discontinued operations a net gain of $93.1 million (or $.45 per share) on the sale of A-C Compressor and the DovaTech welding businesses. In the second quarter of 2002, discontinued operations generated a net loss of $8.9 million or $.04 per diluted share and included a net loss on the sale of Vectron GmbH of $7.3 million. Sales in the second quarter of 2002 were $1.1 billion, flat with the comparable quarter in the prior year.
Net earnings from continuing operations for the first six months of 2002 were $110.8 million or $.54 per diluted share compared to $126.6 million or $.62 per diluted share from continuing operations in the comparable period last year. For the first six months of 2002, net earnings before changes in accounting principles were $100.3 million or $.49 per diluted share, including $10.5 million or $.05 per diluted share in losses from discontinued operations, compared to $222.4 million or $1.09 per share in 2001, which included $95.8 million or $.47 per share in earnings from discontinued operations. Year-to-date sales for 2002 were $2.1 billion compared to $2.3 billion last year, a decrease of 9%.
Segment earnings for the quarter were $111.3 million, an increase of 7% or $7.0 million from $104.3 million last year. In the Dover Industries segment, earnings increased 1% to $39.9 million from the comparable quarter last year on a sales decline of 4%. Dover Diversified's quarterly sales and earnings increased from the prior year 11% and 12% respectively, and showed substantial gains from the first quarter of the current year. In Dover Resources, quarterly earnings were $30.4 million, a 3% increase over last year on a sales decrease of 6%.
The Dover Technologies segment recorded a profit of $1.7 million on a 5% decrease in sales, a slight increase from last year's second quarter results. Compared to the first quarter of 2002, earnings increased by $10.6 million on a sales increase of $45.3 million.
Commenting on the results and the current outlook, Mr. Thomas L. Reece, Chairman and CEO, said, "We are heartened by the improvement in our profitability this quarter as compared to both the prior year and the first quarter. These gains are largely due to the relative strengthening of Dover's non-technology businesses. It is often the case that Dover's second quarter is stronger than the first, due to seasonal spending patterns in many capital goods markets. It also remains to be seen whether increased uncertainty in U.S. financial markets will undermine the pick-up in industrial capital spending, which is so critical to many of our businesses. Additionally, while the electronics markets are registering some improvement, there is no question that they continue to face weak fundamentals. Assuming demand has stabilized, we hope to return to profitability soon in the businesses serving these markets, but we do not expect a rapid sales recovery. It is also worth noting that, although we remain active in seeking good acquisitions, we are not currently seeing opportunities that meet our criteria. We have the discipline to wait until our criteria are met."
Segment Results
Dover Industries' second quarter segment earnings increased 1% or $.4 million to $39.9 and sales declined 4% or $13.0 million to $286.4 million. The impact of goodwill amortization on earnings in the second quarter of 2001 was $3.4 million. Segment bookings in the quarter were equal to last year and the book-to-bill ratio was 1.04 for the current quarter. Backlog increased 5% from the beginning of the current year to $174.1 million. Sales and earnings were lower at most companies compared to the same quarter last year, but compared to the first quarter of 2002, 11 of 14 companies had increased sales and higher earnings.
As expected, after a strong first quarter of 2002, Heil Environmental's second quarter sales and earnings were substantially lower than both the prior quarter, and the comparable period last year, due to weak market demand. For Marathon, also serving the waste haulage market but with a broader and less capital-intensive product line and a less concentrated customer base, sales and earnings compared favorably to both prior quarter and prior year periods.
Among the other larger Industries companies, Rotary Lift, while still facing soft markets, improved both sales and earnings compared to the first quarter and the comparable period last year. Heil Trailer, while also still facing weak markets, which resulted in lower sales and earnings than the comparable quarter last year, had higher results than the first quarter due to stronger demand from major oil companies in its international operations, reinforcing its global product strategy. At Texas Hydraulics and PDQ, markets remain weak, hence sales and earnings were lower than the same period last year, though in both cases higher than in the very slow first quarter of 2002.
Triton favorably impacted Industries' comparisons, particularly compared to a very weak quarter last year, as sales and margins continued to improve due to the benefits of lower costs and favorable new product introductions. This improvement at Triton was largely offset by continued weak results at Somero.
Dover Diversified's second quarter segment earnings were $39.4 million, an increase of $4.4 million or 12% over the comparative period last year, and sales in the quarter were $309.0 million, a $31.1 million or 11% increase. The impact of goodwill amortization on earnings in the second quarter of 2001 was $3.5 million. Bookings in the quarter were $295.1 million and the book-to-bill ratio was .95 for the quarter. Backlog at the end of the quarter was $378.7 million, 2% lower than last year. Acquisitions completed in the last year added approximately $14.6 million to sales in the quarter, with minimal impact on segment earnings after acquisition write-offs. Seven out of ten of Diversified's companies had higher sales and earnings than in the first quarter of 2002, and about half had better results than the prior year.
The primary reason for the earnings increases compared to the same period last year and the first quarter of 2002 were substantial improvements at Crenlo and Hill Phoenix, and for second quarter 2002 comparisons, Belvac. At Crenlo, substantial losses last year have been eliminated, and profits restored, primarily as the result of management-led cost reduction and restructuring efforts. As expected, Hill Phoenix's continued focus on higher growth customers has led to higher sales, earnings, and margins, particularly as compared to the prior year. Belvac benefited from large orders in Europe in the quarter, and now has a strong backlog. Another large Diversified company, Mark Andy, experienced higher printing press demand, and its backlog is now higher than it has been in a year. This increased demand helped Mark Andy's comparisons to the first quarter of 2002, though results still substantially lagged the comparable period last year. Tranter, another larger Diversified unit, saw a pick-up in heat exchanger demand, and while still reporting weaker results than in the same period last year, improved its performance from the first quarter.
Dover Resources' segment earnings increased $1.0 million or 3% to $30.4 million on a sales decrease of 6% or $14.2 million to $223.7 million, as compared to the same period of the prior year. The impact of goodwill amortization on earnings in the second quarter of 2001 was $2.6 million. Bookings in the quarter of $229.6 million were down 3% from the prior year and the book-to-bill ratio for the quarter was 1.03. Ending backlog was $87.2 million, a 16% decrease from last year's second quarter, an 11% increase from the end of last year. Acquisitions completed in the last year added approximately $2.7 million to sales in the quarter, with almost no impact on segment earnings after acquisition write-offs. As was true in the other "non- Technologies" segments, sales and earnings at most Resources companies were up when compared to the first quarter of 2002.
Solid oil and gas prices have favorably impacted recent sales and earnings trends at the oil and gas production related companies (Petroleum Equipment Group, C. Lee Cook, and Quartzdyne) and capital spending in this sector would be helped by continued price stability. At another of Resources' largest companies, OPW Fueling Components, although results were stronger than the first quarter of 2002, the lack of new construction activity will continue to hamper results. Demand at the automotive market impacted the De-Sta-Co companies, where sales and earnings, while above the prior quarter and stable to last year, will likely weaken. It is unclear whether demand in the process industry markets and general industrial markets served by many of the rest of Resources' companies, which modestly helped results as compared to the first quarter, will be sustainable.
Dover Technologies' segment earnings for the current quarter were $1.7 million compared to $.5 million last year. Second quarter sales were $279.4 million, a decline of $15.7 million or 5% from the same period of the prior year. The impact of goodwill amortization on earnings in the second quarter of 2001 was $3.1 million. Sequentially, sales increased $45.3 million or 19% from the prior quarter with an earnings increase of $10.6 million.
Technologies' CBAT business recorded a loss of $4.4 million for the second quarter compared to loss of $18.9 million for last year's comparable period, and a loss of $13.4 million in the first quarter of 2002. Second quarter sales were $159.4 million, an increase of $12.0 million or 8% from last year, and increased $33.9 million or 27% from the first quarter. Bookings, at $176.6 million, were up 37% from the same period last year and 27% higher than the first quarter of 2002. The CBAT book-to-bill ratio was 1.11 for the second quarter with backlog at $84 million, 57% higher than at the end of 2001. Continuation of recent order rates would result in CBAT's return to profitability in the third quarter, though with substantial excess capacity remaining in the market, the stability of customer capital spending trends is far from assured.
In Technologies' SEC business, for which results in all periods have been reclassified to show Vectron GmbH as a discontinued operation, sales in the quarter were $62.2 million, a decline of $33.4 million or 35% from the same period last year, and a modest $3.8 million or 7% increase from the first quarter of 2002. SEC reported a loss of $2.4 million, as compared to earnings of $10.9 million in last year's second quarter, and earnings in the first quarter of 2002 of $.5 million. Net bookings in the second quarter of $58.6 million were 41% higher than the same period last year and slightly higher than the first quarter of the current year. The book-to-bill ratio was .94 for the quarter with backlog at $44.8 million at the end of the period (an 11% decline from the beginning of the current year). As the impact of prior and continuing cost reductions takes hold, some stability in demand could also result in a return to profitability in SEC in the third quarter. However, these businesses now expect a more prolonged downturn in demand for products for telecommunications applications than had been earlier expected, and thus, face a slow, and likely uneven, sales recovery. Operational and product restructuring efforts continue.
In the quarter, Imaje, the French-based industrial ink-jet printer and ink manufacturer, had sales of $57.8 million, up 11% from the comparable period last year and 15% from the prior quarter. Earnings for the quarter fell by 12% to $12.4 million from the comparable 2001 quarter, although they were up 31% over the first quarter of 2002. This year's margin declines reflect increased sales of lower margin Markpoint products (a second quarter 2001 acquisition), lower ink sales to a major OEM customer whose business declined, and an aggressive investment in expanding the sales network. Margins returned to historical levels toward the end of the quarter despite a rather soft market for capital spending in some of the industries served by Imaje.
Dover Corporation is actively seeking attractive acquisition candidates, but the volume of opportunities remains at a very low level. Acquisitions completed in the last twelve months added $17.8 million in sales for the quarter, with almost no impact on segment earnings after acquisition write-offs.
Dover's tax rate for continuing operations was 24.9% for the second quarter and 27.7% for the current year. This low effective tax rate is attributable to non-recurring benefits related to foreign tax planning strategies.
Dover's net debt levels decreased from the end of the first quarter by $81.6 million to $962.0 million and the debt to total capital ratio fell to 29.2% from 31.8%, reflecting positive operational cash flow coupled with low levels of acquisition activity.
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 supplemental financial information.
The Dover website will host a Webcast of the second quarter conference call at 9:00 AM Eastern Time on Thursday, July 18, 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.
TABLES TO FOLLOW
DOVER CORPORATION AND SUBSIDIARIES
MARKET SEGMENT RESULTS
(unaudited)
Second quarter ended June 30,
Percent
SALES 2002 2001 Change
Dover Industries $286,427,000 $299,383,000 -4%
Dover Diversified 309,026,000 277,898,000 11%
Dover Resources 223,679,000 237,843,000 -6%
Dover Technologies 279,446,000 295,144,000 -5%
Total Continuing (after
intramarket eliminations) $1,097,152,000 $1,108,777,000 -1%
EARNINGS (Loss)
Dover Industries $39,853,000 $39,410,000 1%
Dover Diversified 39,396,000 35,036,000 12%
Dover Resources 30,356,000 29,373,000 3%
Dover Technologies 1,679,000 482,000 248%
Subtotal Continuing 111,284,000 104,301,000 7%
Corporate expense (8,475,000) (7,186,000) 18%
Net interest expense (17,409,000) (19,969,000) -13%
Earnings from Continuing
Operations, before taxes on income 85,400,000 77,146,000 11%
Taxes on income 21,293,000 28,359,000 -25%
Net Earnings from Continuing
Operations 64,107,000 48,787,000 31%
Net Earnings (Loss) from
Discontinued Operations* (8,906,000) 94,512,000 -109%
Net Earnings before cumulative
effect of change in accounting
principle 55,201,000 143,299,000 -61%
Cumulative effect of change in
accounting principle** -- --
Net Earnings (Loss) $55,201,000 $143,299,000 -61%
Net Earnings (Loss) per diluted
common share:
Continuing Operations $0.31 $0.24 29%
Discontinued Operations* (0.04) 0.46 -109%
Net Earnings before cumulative
effect of change in accounting
principle 0.27 0.70 -61%
Cumulative effect of change in
accounting principle** -- --
Net Earnings (Loss) $0.27 $0.70 -61%
Average number of diluted shares
outstanding 203,713,000 204,353,000
Impact of acquisition write-offs on
continuing diluted EPS:
EPS from Continuing Operations $0.31 $0.24 29%
Goodwill amortization (net of
tax)** -- 0.05
EPS before goodwill amortization $0.31 $0.29 7%
Other acquisition write-offs
(net of tax)*** 0.03 0.03
EPS before all acquisition write-
offs $0.34 $0.32 6%
* In accordance with the 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. In the
second quarter of 2002, Vectron GMBH, formerly of the Technologies
segment, qualified for discontinued operations presentation.
** In accordance with the 1/1/2002 adoption of SFAS No.142, goodwill and
indefinite-lived intangible assets are no longer amortized on a
periodic basis but are subjected to impairment testing on at least an
annual basis.
*** Acquisition write-offs include depreciation and amortization of APB 16
asset step-ups.
DOVER CORPORATION AND SUBSIDIARIES
MARKET SEGMENT RESULTS
(unaudited)
Six months ended June 30,
Percent
SALES 2002 2001 Change
Dover Industries $564,750,000 $589,646,000 -4%
Dover Diversified 597,463,000 531,719,000 12%
Dover Resources 431,702,000 470,933,000 -8%
Dover Technologies 513,593,000 721,979,000 -29%
Total Continuing (after
intramarket eliminations) $2,104,697,000 $2,311,356,000 -9%
EARNINGS (Loss)
Dover Industries $81,503,000 $75,767,000 8%
Dover Diversified 69,443,000 55,545,000 25%
Dover Resources 57,068,000 60,853,000 -6%
Dover Technologies (7,225,000) 48,512,000 -115%
Subtotal Continuing 200,789,000 240,677,000 -17%
Corporate expense (12,950,000) (11,743,000) 10%
Net interest expense (34,585,000) (39,408,000) -12%
Earnings from Continuing
Operations, before taxes on income 153,254,000 189,526,000 -19%
Taxes on Income 42,456,000 62,948,000 -33%
Net Earnings from Continuing
Operations 110,798,000 126,578,000 -12%
Net Earnings (Loss) from
Discontinued Operations* (10,481,000) 95,806,000 -111%
Net Earnings before cumulative
effect of change in accounting
principle 100,317,000 222,384,000 -55%
Cumulative effect of change in
accounting principle** (293,049,000) --
Net Earnings (Loss) $(192,732,000) $222,384,000 -187%
Net Earnings (Loss) per diluted
common share:
Continuing Operations $0.54 $0.62 -13%
Discontinued Operations* (0.05) 0.47
Net Earnings before cumulative
effect of change in accounting
principle $0.49 $1.09 -55%
Cumulative effect of change in
accounting principle** (1.44) --
Net Earnings (Loss) $(0.95) $1.09 -187%
Average number of diluted shares
outstanding 203,713,000 204,353,000
Impact of acquisition write-offs on
continuing diluted EPS:
EPS from Continuing Operations $0.54 $0.62 -13%
Goodwill amortization (net of
tax)** -- 0.10
EPS before goodwill amortization $0.54 $0.72 -25%
Other acquisition write-offs
(net of tax)*** 0.06 0.07
EPS before all acquisition write-
offs $0.60 $0.79 -24%
* In accordance with the 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. In the
second quarter of 2002, Vectron GMBH, formerly of the Technologies
segment, qualified for discontinued operations presentation.
** 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 on a
periodic basis.
*** Acquisition write-offs include depreciation and amortization of APB 16
asset step-ups.
DOVER CORPORATION CONSOLIDATED
(unaudited)
June 30, December 31,
CONDENSED BALANCE SHEET ('000) 2002 2001
Assets:
Cash, equivalents and marketable
securities $116,861 $176,598
Receivables, net of allowances for
doubtful accounts 733,969 672,789
Inventories 646,472 653,548
Prepaid expenses & deferred tax asset 149,772 142,230
Net property, plant & equipment 736,208 756,351
Goodwill** 1,658,934 1,946,423
Intangibles, net of amortization 188,796 173,194
Other assets 67,362 55,990
Assets of discontinued operations* 17,584 25,602
$4,315,958 $4,602,725
Liabilities & Stockholders' Equity:
Short term debt $44,161 $43,780
Payables and accrued expenses 615,064 616,131
Taxes payable (including deferred) 134,846 258,676
Other deferrals 127,963 106,878
Long-term debt 1,034,688 1,033,243
Liabilities of discontinued
operations* 26,601 24,478
Stockholders' equity 2,332,635 2,519,539
$4,315,958 $4,602,725
* 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.
Six Months Ended June 30,
CONDENSED CASH FLOWS ('000) 2002 2001
Operating activities:
Net Earnings (Loss) $( 192,732) $222,384
Cumulative effective of change in
accounting principle 293,049 --
(Earnings) loss from discontinued
operations, net of tax 3,173 (2,668)
(Gain) loss on sale of discontinued
business, net of tax 7,308 (93,138)
Depreciation 71,416 69,911
Amortization - goodwill -- 25,199
Amortization - other 9,161 8,431
Increase (decrease) in other
deferrals 22,736 (26,034)
Working capital changes (excluding
taxes)* (43,899) 72,647
Federal & other taxes on income** (81,309) 62,259
Other, net (3,701) 11,593
Net cash from (used in)
operating activities 85,202 350,584
Investing activities:
Capital expenditures (45,623) (100,682)
Acquisitions, net of cash and cash
equivalents (49,482) (236,266)
Net cash from (used in)
investing activities (95,105) (336,948)
Financing activities:
Increase (decrease) in notes payable 206 (452,997)
Increase (decrease) in long-term debt 1,379 398,826
Cash dividends (54,747) (50,798)
Purchase of treasury stock (1,100) (10,005)
Proceeds from exercise of stock
options 5,322 2,812
Net cash from (used in)
financing activities (48,940) (112,162)
Discontinued operations (341) 277,445
Net increase (decrease) in cash &
equivalents (59,184) 178,919
Cash & cash equivalents at beginning
of period 175,601 180,560
Cash & cash equivalents at end of
period $116,417 $359,479
* Working capital use of funds in 2002 primarily attributable to an
increase in accounts receivable of $44 million.
** Federal & other taxes use of funds primarily attributable to federal
tax payments of $99 million.
SOURCE Dover Corporation
CONTACT: David S. Smith, Vice President Finance, Dover Corporation,
+1-212-922-1640
URL: http://www.dovercorporation.com
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