Dover Reports Second Quarter Results

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Dover Reports Second Quarter Results

NEW YORK, July 16 /PRNewswire/ -- Dover Corporation (NYSE: DOV) earned $.70 per diluted share in the second quarter ended June 30, 2001. Of this total, the gains on the Donates welding equipment group and AC Compressor divestitures contributed $.45 per diluted share to the quarter's results. Excluding these gains, earnings in the quarter were $.25 per diluted share, a decrease of 63% from the $.67 per diluted share earned in the comparable quarter last year. Sales in the second quarter were $1.14 billion, a 17% decline from $1.38 billion last year, and segment earnings for the quarter were $106.5 million, down 55% or $131.6 million from $238.1 million last year. Excluding the gains on sales of businesses, net income from continuing operations for the second quarter was $50.2 million, down 63% or $86.6 million from $136.7 million last year.

The dominant reason for the sales and earnings decline was the impact of the downturn in the electronics industry on Dover Technologies, where income totaled $.5 million, compared to $110.3 million last year, on a 43% or $225.5 million sales decline. The other three market segments also had earnings declines due to the weak general economic environment. Dover Industries and Dover Diversified's earnings declined by 24% and 18% respectively, on lower sales, and Dover Resources' earnings declined 6% on a 12% sales increase. Except for Technologies, all segments reported higher sales and earnings than the first quarter.

Commenting on the results and the current outlook, Mr. Thomas L. Reece, Chairman and CEO said, "The challenges presented by the unexpectedly severe downturn in the electronics markets served by Dover Technologies, coming so shortly after a period of unprecedented growth, have had a significant adverse impact on Dover's earnings so far this year. However, Dover's niche market positions in this long-term high growth industry remain very strong, and we expect to come out of this period stronger than we entered it. Dover remains firmly committed to what has been, and we are confident remains, a very successful investment for our shareholders. At this point, the electronics industry is unlikely to recover this year, and weak general economic conditions are impacting the balance of our industrial manufacturing businesses. Nevertheless, we are hopeful that Dover's earnings will begin to recover in the second half as we believe any remaining risk in Technologies is likely to be offset by improvements in the other segments."

Dover completed one stand-alone and three add-on acquisitions during the quarter at a combined investment of $156.5 million. The net income impact of these acquisitions in the second quarter was small due to acquisition-related amortization and depreciation, which are typically higher in the first year after acquisition. Acquisitions completed in the last twelve months added $59 million in sales and $7 million in operating profit in the second quarter.


Dover Technologies' second quarter sales decreased 43% or $225.5 million to $301.9 million, and earnings were $.5 million compared to $110.3 million in the same period last year. These results are due to the continued dramatic decline in the electronics industry served by the Circuit Board Assembly and Test (CBAT) and Specialty Electronics Components (SEC) businesses. Acquisitions completed in the last year added approximately $28 million to sales in the quarter, with no material impact on segment earnings after acquisition write-offs.

In Technologies' CBAT business, second quarter sales decreased 59% or $208.7 million to $147.4 million, and for the quarter CBAT reported a loss of $18.9 million, compared to earnings of $73.6 million in the same period last year. Bookings, at $128.9 million, were down 67% from the same period last year and were 31% lower than the first quarter of 2001. The book-to-bill ratio was .87 for the second quarter. While all CBAT companies (which all manufacture capital equipment used to build or test circuit boards or semiconductors) experienced very weak markets after what was clearly a period of unsustainably robust customer spending last year, the impact at Universal Instruments, CBAT's largest company, was particularly pronounced. Sales levels at Universal have declined precipitously to a quarterly level not seen since the first quarter of 1993. Sales in the second quarter were merely 25% of the level experienced as recently as the third quarter last year. The magnitude and speed of this change has driven Universal into a quarterly loss position for the first time in its history. Though headcount reductions and other efforts to reduce costs rapidly to restore profitability continue, appropriate focus is also being given to sustaining the business for the still positive longer-term future in this market. Universal's book-to-bill ratio for the quarter was .95 (higher than the CBAT average), and while June was the strongest bookings month of the quarter, no clear signs of recovery in this market are yet visible. If the market does not recover this year, Universal will remain unprofitable for the balance of the year. Declining backlogs in the rest of CBAT, which was profitable in the quarter, are unlikely to be sufficient to offset these losses. In total, CBAT losses are currently expected to be in the same range in the third quarter.

In Technologies' SEC business, sales declined 15% or $18.7 million from the same period last year to $102.3 million, and earnings declined 52% or $11.7 million to $10.9 million. Net bookings in the second quarter of $44.4 million were down 76% from last year, and the book-to-bill ratio was .43 for the quarter. SEC's customer concentration in the datacom/telecom/networking markets drove growth last year, but has now resulted in a dramatic decline in bookings and backlog as those markets decline. SEC is also responding to the rapid change in market conditions with appropriate cost reductions, while continuing to invest in product development linked to specific customer requirements. However, it is unclear at this time when market demand will improve, and with declining backlogs, earnings will be lower in the third quarter.

Imaje, the French-based industrial ink-jet printer and ink manufacturing portion of this segment, with slightly lower earnings on sales approaching prior year levels, had substantially higher sales, earnings and bookings than the first quarter.

Dover Industries' second quarter sales declined 8% or $26.9 million to $299.4 million and segment income declined 24% or $12.1 million to $39.4 million compared to the same period last year. Segment bookings were down 2% to $299.7 million and the book-to-bill ratio was 1.00. Acquisitions completed in the last year added approximately $10 million to sales in the quarter, with almost no impact on segment earnings after acquisition write-offs. Most of Industries' companies had lower sales and earnings as compared to the prior year due to weaker economic conditions in their markets. However, Industries' combined earnings and margins were slightly higher than the first quarter, with a majority of Industries' companies contributing to this favorable comparison.

Heil Environmental's sales and earnings, while not quite as robust as the very strong prior year, recovered markedly from the first quarter's slow start. However, the full year will lag last year in a much weaker market. Heil Trailer's sales, profit and bookings performance compared favorably to both a weak comparable period last year and the prior quarter, and with this long awaited favorable trend comparison and a favorable book-to-bill in the quarter comes guarded optimism that this depressed market may be recovering slightly. Rotary Lift's performance matched last year's second quarter and the first quarter this year despite weak markets, with effective new products, marketing programs and cost reduction, and PDQ outperformed previous periods for the same reasons. Tipper Tie still suffers from the impact of disease scares on its primary meat packing markets. Triton's earnings comparisons to the prior year were very unfavorable, and it is focused on several product, marketing and manufacturing improvements.

Dover Diversified's second quarter sales declined 5% or $15.5 million from the prior year to $294.9 million, and segment income decreased 18% or $7.8 million to $36.4 million compared to the same period last year. Sales were up 7% from the first quarter and earnings improved more sharply in the absence of inventory write-offs at Crenlo. Segment bookings in the quarter were up 10% to $324.3 million and the book-to-bill ratio was favorable at 1.10. Backlog at the end of the quarter, after adjusting for divestitures, was 15% ahead of last year. Acquisitions completed in the last year added approximately $11 million to sales in the quarter, with almost no impact on segment earnings after acquisition write-offs. AC Compressor, divested at the end of May, had recently contributed between 5 and 10% of segment sales with lower than average margins.

While many of Diversified's companies also experienced difficult conditions in their markets, most also had higher margins than in the prior quarter. Hill Phoenix, though operating in a tough market, turned in favorable sales, earnings and bookings comparisons to both last year and the prior quarter, and expects an even stronger second half. Waukesha, Performance Motorsports, Sargent, and SWF again turned in stronger earnings than the same period last year in satisfactory market environments, with the latter two of these also showing improvement from more recent trends. Crenlo reported losses in the quarter compared to strong profits in the prior year and is realigning its cost structure in the current weak market. Belvac's market also remains challenging.

Dover Resources' second quarter sales increased 12% or $26.5 million to $244.0 million, and segment earnings declined 6% or $1.9 million to $30.1 million, compared to the same period last year. Segment bookings in the quarter were up 10% to $241.7 million and the book-to-bill ratio was .99. Acquisitions completed in the last year added approximately $9 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), all reported higher sales and earnings than in the comparable period last year as they continue to benefit from the strong energy markets they serve. Outside of the "oil patch", OPW Fueling Components' cost improvement efforts in a still difficult market are driving favorable comparisons to the prior period, and Tulsa Winch (the winch industry "roll-up") continues to benefit from acquisition synergies and some pockets of market strength. The balance of Resources' businesses serving the process industries, the automotive industry, and general industrial and transportation markets, were adversely impacted by weak economic conditions.

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). Second quarter EBITACQ of $123 million was 51% lower than the prior year's second quarter.

The high overall book tax rate for the quarter of 43.0% resulted from the lack of tax deductibility of a substantial goodwill amount included in the divestiture transactions. The divestitures resulted in a pre-tax gain of $172.4 million, tax expense of $79.2 million and a net book gain of $93.1 million. The after-tax proceeds from the divestitures were $279.4 million. Dover's tax rate for the second quarter, excluding the impact of the disposition gains, was 36.7% compared to 30.8% for the first quarter and 32.5% for the full year 2000. This high tax rate on operating results was due to losses in low tax rate jurisdictions, primarily in Technologies.

Through the end of the second quarter, Dover invested $239.4 million in acquisitions compared to the $358.9 million divestiture proceeds. The earnings per share impact of these acquisitions on the second half of 2001 will not fully offset the earnings per share contribution that the divested companies would have made on the second half had they been retained. This difference is approximately $.05 per diluted share for the second half of 2001. However, the comparative earnings impact of the acquired businesses is expected to be substantially accretive to earnings in 2002.

As a result of the favorable impact of the second quarter divestitures on book equity and the cash proceeds from the sales, which were used to reduce debt and fund acquisitions, Dover's net debt to capitalization ratio declined to 29.4%, its lowest level since December 1999. This will provide substantial flexibility for profitable reinvestment. Repurchases of 192,000 shares in the open market were completed in the second quarter at an average price of $35.92.

Additional information on Dover and its operating companies can be found on the company website. ( 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 second quarter conference call at 9:00 AM Eastern Time on Tuesday, July 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.

                            MARKET SEGMENT RESULTS

                              Second quarter ended June 30,
    SALES                         2001            2000           Change

    Dover Technologies    $301,850,000    $527,352,000             -43%
    Dover Industries       299,383,000     326,289,000              -8%
    Dover Diversified      294,865,000     310,412,000              -5%
    Dover Resources        243,967,000     217,506,000              12%

      Total (after
       eliminations)    $1,138,573,000  $1,379,260,000             -17%


    Dover Technologies        $499,000    $110,344,000            -100%
    Dover Industries        39,398,000      51,502,000             -24%
    Dover Diversified       36,427,000      44,214,000             -18%
    Dover Resources         30,146,000      32,012,000              -6%

      Subtotal (after
       eliminations)       106,470,000     238,072,000             -55%

    Gain (loss)
     on disposition        172,367,000              --
    Corporate expense       (7,185,000)     (6,876,000)              4%
    Net interest expense   (20,034,000)    (21,784,000)             -8%
    Earnings before
     taxes on income       251,618,000     209,412,000              20%
    Taxes on income        108,320,000      72,679,000              49%
    Net earnings          $143,298,000    $136,733,000               5%

    Net earnings per
     common share  *             $0.70           $0.67               4%

    Average number of
     diluted shares
     outstanding           204,353,000     204,683,000

    Impact of acquisition
    write-offs on diluted EPS:
    Diluted EPS  *            $  $0.70           $0.67                4%
    Goodwill write-offs
     (net of tax)                 0.06            0.05
    EPS before goodwill  *        0.76            0.72                6%
    Other acquisition
     write-offs (net of tax)      0.03            0.03
    EPS before all
     write-offs  *               $0.79           $0.75                5%

  • 2001 Includes gain on sale of businesses of $.25.

                              MARKET SEGMENT RESULTS

                                  Six months ended June 30,

                  SALES                        2001           2000

    Dover Technologies                     $736,280,000    $993,718,000  -26%
    Dover Industries                        599,090,000    $625,330,000   -4%
    Dover Diversified                       570,997,000     579,950,000   -2%
    Dover Resources                         482,691,000     435,662,000   11%

       Total (after intramarket
        eliminations)                    $2,386,137,000  $2,630,543,000   -9%


    Dover Technologies                      $48,725,000    $195,139,000  -75%
    Dover Industries                         77,392,000     101,917,000  -24%
    Dover Diversified                        56,945,000      77,679,000  -27%
    Dover Resources                          61,864,000      65,553,000   -6%

       Subtotal (after intramarket
        eliminations)                       244,926,000     440,288,000  -44%

    Gain (loss)  on disposition             172,367,000      (1,400,000)
    Corporate expense                       (11,743,000)    (13,117,000) -10%
    Net interest expense                    (39,568,000)    (37,366,000)   6%
    Earnings before taxes on income         365,982,000     388,405,000   -6%
    Taxes on Income                         143,598,000     134,353,000    7%
    Net earnings                           $222,384,000    $254,052,000

    Net earnings per diluted common
     share  *                                     $1.09           $1.24

    Average number of diluted shares
     outstanding                            204,353,000     204,683,000

    Impact of acquisition write-offs on
     diluted EPS:
      Diluted EPS  *                              $1.09           $1.24  -12%
        Goodwill write-offs (net of tax)           0.11            0.10
      EPS before goodwill  *                       1.20            1.34  -10%
        Other acquisition write-offs
         (net of tax)                              0.07            0.07
      EPS before all acquisition write-
       offs  *                                    $1.27           $1.41  -10%

  • 2001 Includes gain on sale of businesses of $.25.

                             MARKET SEGMENT RESULTS

                                                 June 30,        December 31,
    BALANCE SHEET ('000)                           2001              2000

    Cash, equivalents and marketable
     securities                                   $361,210          $186,740
    Receivables, net of allowances for
     doubtful accounts                             769,302           903,177
    Inventories                                    784,444           783,200
    Prepaid expenses                               106,888           101,732
    Net property, plant & equipment                769,207           755,548
    Goodwill, net of amortization                1,879,652         1,896,715
    Other intangibles and assets, net              333,398           265,004
                                                $5,004,101        $4,892,116

    Liabilities & stockholders' equity:
    Short term debt                               $391,003          $842,537
    Payables and accrued expenses                  828,272           762,103
    Deferred credits                               199,191           214,055
    Long-term debt                               1,032,999           631,846
    Stockholders' equity                         2,552,636         2,441,575
                                                $5,004,101        $4,892,116

                                                          Six Months
    CASH FLOWS ('000)                                 2001              2000

    Operating activities:
    Net earnings                                  $222,384          $254,052
    (Gain) loss on sale of business               (172,367)            1,400
    Depreciation                                    73,730            68,462
    Amortization of goodwill                        26,669            23,612
    Amortization - other                             8,493             9,027
    Working capital changes                        150,810          (228,915)
    Other, net                                     (38,313)            7,610
      Net cash from operating activities           271,406           135,248

    Investing activities:
    Capital expenditures                          (103,029)          (77,347)
    Acquisitions, net of cash and cash
     equivalents                                  (236,266)         (224,606)
    Proceeds from sale of businesses and
     equity investments                            358,916            14,923
      Net cash from (used in) investing
       activities                                   19,621          (287,030)

    Financing activities:
    Increase (decrease) in notes payable          (452,997)          485,097
    Increase (decrease) in long-term debt          398,592            16,309
    Cash dividends                                 (50,798)          (46,691)
    Purchase of treasury stock                     (10,005)           (3,906)
    Proceeds from exercise of stock
     options                                         2,812             6,697
      Net cash from (used in) financing
       activities                                 (112,396)          457,506

    Discontinued operations - tax
     payments                                            --         (308,051)

    Net increase (decrease) in cash &
     equivalents                                   178,631            (2,327)
    Cash & cash equivalents at beginning
     of period                                     181,399           138,038

    Cash & cash equivalents at end of
     period                                       $360,030          $135,711

                              DOVER CORPORATION
                      ACQUISITIONS - SECOND QUARTER 2001

                      COMPANIES          LOCATION (Near)         SEGMENT -
                                                                 Operating Co.

     31-Mar   Stock    Tisma Machinery
                       Corporation       Elk Grove Village, IL    DDI    SWF

     Manufactures and designs automated packaging machinery used in forming,
     packing and sealing of corrugated packages.

     31-May   Asset    Kurz-Kasch, Inc.  Dayton, OH              DII   Stand-

     Manufactures coil based electro magnetic switches and sensors that are
     encapsulated in thermo set plastic.

     31-May   Stock    Multi-test AG     Rosenheim, Germany      DTI     ECT

     Manufactures semiconductor test handling equipment.

     20-Jun   Stock    Markpoint
                       Holding AB        Goteborg, Sweden        DTI    Imaje

Manufactures and designs marking solutions for packaging industries. SOURCE Dover Corporation

CONTACT: David S. Smith, Vice President Finance of Dover Corporation, +1-212-922-1640/