1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For six months ended June 30, 1995 Commission File No. 1-4018
DOVER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 53-0257888
(State of Incorporation) (I.R.S. Employer Identification No.)
280 Park Avenue, New York, NY 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 922-1640
Indicate by checkmark 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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the Registrant's common stock as of the
close of the period covered by this report was 56,702,974.
2
Part. I. FINANCIAL INFORMATION
Item 1. Financial Statements
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended June 30, 1995 and 1994
(000 omitted)
1995 1994
-------- --------
Net sales $948,164 $761,225
Cost of sales 645,128 523,329
-------- --------
Gross profit 303,036 237,896
Selling & administrative expenses 180,080 151,009
-------- --------
Operating profit 122,956 86,887
-------- --------
Other deductions (income):
Interest expense 8,688 8,538
Interest income (3,853) (3,068)
Foreign exchange (477) 308
All other, net (2,251) (341)
-------- --------
Total 2,107 5,437
-------- --------
Earnings before taxes on income 120,849 81,450
Federal & other taxes on income 41,957 29,010
-------- --------
Net earnings $ 78,892 $ 52,440
======== ========
Weighted average number of common shares
outstanding during the period 56,688 57,195
======== ========
Net earnings per common share $ 1.39 $ 0.92
======== ========
3
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Six Months Ended June 30, 1995 and 1994
(000 omitted)
1995 1994
---------- ----------
Net sales $1,802,293 $1,441,952
Cost of sales 1,229,221 993,124
---------- ----------
Gross profit 573,072 448,828
Selling & administrative expenses 356,082 293,500
---------- ----------
Operating profit 216,990 155,328
---------- ----------
Other deductions (income):
Interest expense 17,542 15,118
Interest income (10,069) (9,693)
Foreign exchange (81) 281
All other, net (3,270) 181
---------- ----------
Total 4,122 5,887
---------- ----------
Earnings before taxes on income 212,868 149,441
Federal & other taxes on income 74,177 54,428
---------- ----------
Net earnings $ 138,691 $ 95,013
========== ==========
Weighted average number of common shares
outstanding during the period 56,688 57,195
========== ==========
Net earnings per common share $ 2.45 $ 1.66
========== ==========
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Six Months Ended June 30, 1995 and 1994
(000 omitted)
1995 1994
---------- ----------
Retained earnings at January 1 $1,268,115 $1,121,817
Net earnings 138,691 95,013
---------- ----------
1,406,806 1,216,830
Deduct:
Common stock cash dividends
$0.52 per share ($0.46 in 1994) 29,482 26,314
Treasury stock retired 273,902 --
---------- ----------
Retained earnings at end of period $1,103,422 $1,190,516
========== ==========
4
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(000 omitted)
June 30, December 31,
1995 1994
---------- ------------
Assets:
Current assets:
Cash & cash equivalents $ 80,643 $ 90,304
Marketable securities 63,680 54,583
Receivables, net of allowance for doubtful accounts 664,295 576,628
Inventories at cost (determined principally on the last-in, first-out
basis, which is less than market value) 424,857 364,604
Prepaid expenses 50,134 47,020
---------- ----------
Total current assets 1,283,609 1,133,139
---------- ----------
Property, plant & equipment (at cost) 881,395 812,175
Accumulated depreciation (504,383) (469,490)
---------- ----------
Net property, plant & equipment 377,012 342,685
---------- ----------
Intangible assets, net of amortization 597,470 564,420
Other intangible assets 10,258 10,258
Deferred charges & other assets 55,676 20,135
---------- ----------
$2,324,025 $2,070,637
========== ==========
Liabilities:
Current liabilities:
Notes payable $ 329,003 $ 263,605
Current maturities of long-term debt 298 455
Accounts payable 160,842 155,186
Accrued compensation & employee benefits 88,382 88,235
Accrued insurance 104,185 98,712
Other accrued expenses 184,145 147,585
Income taxes 29,893 18,445
---------- ----------
Total current liabilities 896,748 772,223
Long-term debt 256,103 253,587
Deferred taxes 1,859 2,545
Deferred compensation 50,355 46,423
Stockholders' equity:
Preferred stock -- --
Common stock 58,104 66,441
Additional paid-in surplus 412 17,676
Cumulative translation adjustments 6,509 (8,206)
Unrealized holding gains (losses) 888 (550)
Retained earnings 1,103,422 1,268,114
---------- ----------
Subtotal 1,169,335 1,343,475
Less: treasury stock 50,375 347,616
---------- ----------
1,118,960 995,859
---------- ----------
$2,324,025 $2,070,637
========== ==========
5
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Six Months Ended June 30, 1995 and 1994
(000 omitted)
1995 1994
--------- ---------
Cash flows from operating activities:
Net income $ 138,691 $ 95,013
--------- ---------
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation 32,674 27,033
Amortization 17,002 17,924
Net increase (decrease) in deferred taxes (2,871) (2,620)
Net increase (decrease) in LIFO reserves 2,334 188
Increase (decrease) in deferred compensation 2,362 4,359
Other, net 5,237 2,744
Changes in assets & liabilities (excluding acquisitions):
Decrease (increase) in accounts receivable (77,833) (24,499)
Decrease (increase) in inventories, excluding LIFO reserve (45,418) (37,846)
Decrease (increase) in prepaid expenses (2,438) (3,464)
Increase (decrease) in accounts payable 2,321 13,418
Increase (decrease) in accrued expenses 26,458 35,831
Increase (decrease) in federal & other taxes on income 11,010 5,239
--------- ---------
Total adjustments (29,162) 38,307
--------- ---------
Net cash provided by operating activities 109,529 133,320
--------- ---------
Cash flows from (used in) investing activities:
Net sale (purchase) of marketable securities (9,097) (19,485)
Additions to property, plant & equipment (47,062) (34,221)
Acquisitions, net of cash & cash equivalents (98,692) (149,781)
Proceeds from sale of business 5,000 --
Purchase of treasury stock (9,285) (105)
--------- ---------
Net cash from (used in) investing activities (159,136) (203,592)
--------- ---------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable 69,171 109,277
Reduction of long-term debt (1,142) 6,640
Proceeds from exercise of stock options 1,400 1,131
Cash dividends to stockholders (29,482) (26,314)
--------- ---------
Net cash from (used in) financing activities 39,947 90,734
--------- ---------
Net increase (decrease) in cash & cash equivalents (9,660) 20,462
Cash & cash equivalents at beginning of period 90,303 63,685
--------- ---------
Cash & cash equivalents at end of period $ 80,643 $ 84,147
========= =========
6
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and changes in financial position in
conformity with generally accepted accounting principles. In the opinion of the
Company, all adjustments, consisting only of normal recurring items necessary
for a fair presentation of the operating results have been made. The results of
operations of any interim period are subject to year-end audit and adjustments,
and are not necessarily indicative of the results of operations for the fiscal
year.
NOTE B - Inventory
Inventories, by components, are summarized as follows:
JUNE 30 DECEMBER 31,
1995 1994
------------------------------
Raw materials $131,141 $116,829
Work in progress 163,926 167,251
Finished goods 173,292 121,828
------------------------------
Total 468,359 405,908
Less LIFO reserve 43,502 41,304
------------------------------
Net amount per balance sheet $424,857 $364,604
==============================
NOTE C - Additional Information
For a more adequate understanding of the Company's financial position,
operating results, business properties and other matters, reference is made to
the Company's annual form 10-K which was filed with the Securities and Exchange
Commission in March 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(1) MATERIAL CHANGES IN CONSOLIDATED FINANCIAL CONDITION:
The Company's liquidity increased during the first half of 1995 as
compared to the position at December 31, 1994.
Working capital increased from $360.9 million at the end of last year to
$386.9 million at June 30, 1995. The $26.2 million increase represents positive
cash flow over and above the $98.7 million paid for acquisitions during this six
month period.
At June 30, 1995, net debt (defined as long-term debt plus current
maturities on long-term debt plus notes payable less cash and equivalents and
marketable securities) of $441 million representing 28% of total capital.
During the second quarter Dover invested $83 million buying 3
companies--Hasstech (now part of OPW Fueling Components in Dover Resources),
Mark Andy (a stand alone company within Dover Diversified), and the Frequency
Control Products division of AT&T, which is being combined with the Vectron
company in Dover Technologies. This brings Dover's 1995 acquisition investment
to $99 million with further investment, possibly of greater magnitude,
anticipated during the balance of the year. Dover repurchased no common stock
during the second quarter.
7
(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:
The Company earned $1.39 per share in its second quarter ended June 30,
an increase of 51% from last year. Sales of $948 million were 25% ahead of last
year. Both sales and earnings established new quarterly records.
Profit improved at each of Dover's five Independent Subsidiaries by
amounts ranging from 9% at Dover Resources to 111% at Dover Technologies. These
strong results brought first half EPS to $2.45, up 48% from the previous year.
DOVER RESOURCES
Profits at Dover Resources advanced 9% compared to prior year following
a 27% growth in the first quarter. Sales exceeded prior year by 13% but were
flat with the first quarter of this year while profits dipped slightly.
De-Sta-Co, OPW Fueling Component, Blackmer, and Midland continued as the largest
profit producers, but both OPW and Blackmer trailed prior year as demand for
gasoline vapor recovery products has weakened. De-Sta-Co weathered declining
volume for the overall auto industry with participation in new programs and
market share gains, but also saw its rate of profit growth slow. The three oil
field production companies were strongly ahead of a poor profit result in last
year's second quarter but were below 1995 first quarter sales and earnings
levels. Overall, 11 of Resources' 16 separate companies had earnings gains in
the quarter and the same number are ahead for 6 months.
DOVER INDUSTRIES
Dover Industries profits rose 42% in the second quarter setting a new
record for this subsidiary. Nine of twelve individual operating companies
achieved earnings gains led by Heil, Marathon, Texas Hydraulics, and Davenport.
The sale by Groen of its AMW product line generated an unusual gain of $1.9
million which was more than offset by a charge taken to settle an environmental
claim. Continued expansion of margins (profits improved 42% on a 16% sales gain)
represents the combined effect of volume gains and efficient internal
operations. Overall, salaried employment is up less than 5% from one year ago.
Although Industries' sales and earnings grew compared to the first quarter of
this year, the seasonal increase was less than normal, which Dover views as
evidence of the delayed impact (on Dover's business) of the U.S. economic
slowdown. Second quarter bookings were 20% lower than in the first quarter with
virtually all of the drop in Heil's aluminum tank trailer business. Fortunately,
backlog for this product line will support a high level of operations for the
remainder of the year.
DOVER TECHNOLOGIES
Dover Technologies' profits more than doubled, driven by the
exceptional sales and earnings performance of Universal Instruments which
provided all of Technologies' net gain. Declines at three other companies,
principally DEK, were balanced by increases at TNI, Quandrant, and Soltec. The
Vectron operation of Quadrant purchased the FCP group from AT&T creating a $100
million sales volume leadership position in frequency generation for
communications devices, with technology covering crystal oscillators, TCXO's,
SAW and ASIC based designs, that will be called Vectron Technologies.
Universal was successful in expanding production during the second
quarter as shipments rose over 30% from the first quarter. This led to higher
margins and better customer service. Bookings were 39% higher than last year's
second quarter but dropped 8% from the record-breaking first quarter of this
year. The resulting book-to-bill of .88 in the second quarter, reduced
Universal's backlog by $20 million during the quarter to a level that is still
32% ahead of last year. Universal's GSM-1 machine continues to be well received
with important new customers added during the quarter.
DOVER DIVERSIFIED
Profit at Dover Diversified rose 21% from last year's second quarter
and expanded about 30% from this year's first quarter. Belvac (higher shipments
due to capacity expansion) and Tranter (full quarter's impact of acquisitions
made last year) both had sales and earnings gains of more than 40%.
8
Profit remained depressed at A-C Compressor due to low shipments, but a 2 to 1
book-to-bill in the second quarter following a 2.1 to 1 in the first quarter has
raised A-C's backlog by 78% from this time last year and to a level more than 3
times first half shipments. Better profits are expected in the second half.
Belvac's orders continued to outpace shipments with a second quarter
book-to-bill of 1.46 that raised backlog to more than 4 times first half
shipments. Belvac again expanded capacity during the quarter. Dover Diversified
purchased Mark Andy (St. Louis), the leading maker of flexographic printing
machines which are primarily used for printing of self-adhesive labels. Their
customer base consists of approximately 3,000 printing companies worldwide. The
acquisition added to Diversified's pretax earnings in the second quarter due to
a strong month for operating profit but was essentially neutral to Dover after
tax and interest expense. Mark Andy's second half may be slightly dilutive to
Dover's EPS. Dover Diversified's prospects for the second half of the year are
excellent. Overall, backlog is 29% higher than at the start of the year which
should lead to further profit increases.
DOVER ELEVATOR
Dover Elevator International recovered from an unusually low first
quarter earnings performance with a doubling of profit to a level 31% ahead of
last year's second quarter. For the first half of the year, profits trailed 1994
by 6% on a 2% sales gain. A catch-up of factory shipments at Dover Elevator
Systems, improved construction margins, and a turnaround of General Elevator's
1994 loss were the key factors in the improved earnings. New elevator bookings
in the second quarter were 12% ahead of last year which put the June 30 backlog
equal to prior year and up 2% since the start of 1995. The North American and UK
markets remain depressed and highly price competitive. Second quarter profit
includes some catch-up from the first quarter and probably will not be matched
in either of the two remaining quarters of 1995, both of which should, however,
exceed the prior year.
OUTLOOK
Dover expects second quarter earnings to be the strongest of the
current year. Second half earnings will exceed prior year but will be at a lower
rate than the second quarter due to normal seasonality, the expected impact of
the economic slowdown now rolling through the U.S. economy, the $20 million
reduction in backlog at Universal, and the near term dilutive effect of
acquisitions completed in the second quarter or which may be made during the
rest of 1995. Assuming that the "soft landing" projections for the U.S. economy
are correct, Dover expects continued earnings growth in 1996.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
The Annual Meeting of Stockholders was held in Wilmington, Delaware on
April 25,1995. Stockholders representing 45,520,561 shares of common stock, or
approximately 80% of the outstanding stock, were present in person or by proxy.
All of the nominees for director, namely David H. Benson, Magalen O.
Bryant, Jean-Pierre M. Ergas, Roderick J. Fleming, John J. Fort, James J.
Koley, Anthony J. Ormsby, Thomas L. Reece, Gary L. Roubos, David G. Thomas and
Jerry W. Yochum, were elected directors for a one year term, each receiving at
least 45,411,918 votes.
In addition, two other proposals were presented for stockholder
approval. Management's proposal that stockholders ratify and approve the 1995
Incentive Stock Option Plan and 1995 Cash Performance Program was approved as
follows:
For Against Withheld
--- ------- --------
32,886,164 10,143,003 449,298
9
Management's proposal that stockholders ratify and approve an amendment
to the 1984 Incentive Stock Option Plan to allow for possible loans under that
Plan was approved as follows:
For Against Withheld
--- ------- --------
29,213,020 13,742,967 524,484
Item 6. Exhibits and Reports on Form 8-K
No report on Form 8-K was filed during the quarter for which
this report is filed.
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.
DOVER CORPORATION
Date: 7/21/95 /s/ John F. McNiff
----------- ------------------------------
John F. McNiff, Vice President
and Treasurer
Date: 7/21/95 /s/ Alfred Suesser
----------- ------------------------------
Alfred Suesser, Controller and
Assistant Treasurer
10
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5
1000
3-MOS
DEC-31-1995
APR-01-1995
JUN-30-1995
80,643
63,680
681,990
17,695
424,857
1,283,609
881,395
504,383
2,324,025
896,748
256,103
58,104
0
0
1,060,857
2,324,025
948,164
948,164
645,128
825,209
(2,729)
0
8,688
120,849
41,957
78,892
0
0
0
78,892
1.39
0
Information is not materially different than [EPS-PRIMARY]
