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 Nine months ended September 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 113,577,531.
2
Part. I. FINANCIAL INFORMATION
Item 1. Financial Statements
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended September 30, 1995 and 1994
(000 omitted)
1995 1994
-------- --------
Net sales $934,543 $804,460
Cost of sales 644,924 559,232
-------- --------
Gross profit 289,619 245,228
Selling & administrative expenses 177,111 157,149
-------- --------
Operating profit 112,508 88,079
-------- --------
Other deductions (income):
Interest expense 9,559 9,911
Interest income (5,024) (3,164)
Foreign exchange (33) 547
All other, net 4,811 1,193
-------- --------
Total 9,313 8,487
-------- --------
Earnings before taxes on income 103,195 79,592
Federal & other taxes on income 32,047 27,722
-------- --------
Net earnings $ 71,148 $ 51,870
======== ========
Weighted average number of common shares
outstanding during the period * 113,399 114,409
======== ========
Net earnings per common share * $ 0.63 $ 0.45
======== ========
* Adjusted to give retroactive effect to the September 1995 two for one stock
split.
3
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Nine Months Ended September 30, 1995 and 1994
(000 omitted)
1995 1994
---- ----
Net sales $2,736,836 $2,246,411
Cost of sales 1,874,145 1,552,355
---------- ----------
Gross profit 862,691 694,056
Selling & administrative expenses 533,193 450,649
---------- ----------
Operating profit 329,498 243,407
---------- ----------
Other deductions (income):
Interest expense 27,101 25,029
Interest income (15,093) (12,857)
Foreign exchange (114) 828
All other, net 1,541 1,374
---------- ----------
Total 13,435 14,374
---------- ----------
Earnings before taxes on income 316,063 229,033
Federal & other taxes on income 106,224 82,150
---------- ----------
Net earnings $ 209,839 $ 146,883
========== ==========
Weighted average number of common shares
outstanding during the period* 113,399 114,409
========== ==========
Net earnings per common share* $ 1.85 $ 1.28
========== ==========
*Adjusted to give retroactive effect to the September 1995 two for one stock
split.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Nine Months Ended September 30, 1995 and 1994
(000 omitted)
1995 1994
---- ----
Retained earnings at January 1 $1,268,114 $1,121,817
Net earnings 209,839 146,883
---------- ----------
1,477,953 1,268,700
Deduct:
Common stock cash dividends
$0.41 per share ($0.36 in 1994) 46,502 41,178
Treasury stock retired 273,900 --
Stock split (2 for 1) 56,793 --
---------- ----------
Retained earnings at end of period $1,100,758 $1,227,522
========== ==========
4
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000 omitted)
September 30, 1995 December 31, 1994
------------------ -----------------
Assets:
Current assets:
Cash & cash equivalents $ 93,216 $ 90,304
Marketable securities at market 66,938 54,583
Receivables (less allowance for doubtful
accounts of $18,833 at 9/30/95,
$14,326 at 12/31/94) 661,353 576,628
Inventories at cost (determined principally
on the last-in, first-out basis, which is
less than market value) 440,439 364,604
Prepaid expenses 52,294 47,020
---------- ----------
Total current assets 1,314,240 1,133,139
---------- ----------
Property, plant & equipment (at cost) 909,971 812,175
Accumulated depreciation (517,782) (469,490)
---------- ----------
Net property, plant & equipment 392,189 342,685
---------- ----------
Intangible assets, net of amortization 813,054 564,420
Other intangible assets 10,258 10,258
Other assets & deferred charges 27,929 20,135
---------- ----------
$2,557,670 $2,070,637
========== ==========
Liabilities:
Current liabilities:
Notes payable $ 497,315 $ 263,605
Current maturities of long-term debt 297 455
Accounts payable 160,241 155,186
Accrued compensation & employee benefits 102,239 88,235
Accrued insurance 102,810 98,712
Other accrued expenses 198,273 147,585
Income taxes 6,768 18,445
---------- ----------
Total current liabilities 1,067,943 772,223
Long-term debt 252,208 253,587
Deferred taxes 8,282 2,545
Deferred compensation 54,114 46,423
Stockholders' equity:
Preferred stock -- --
Common stock 116,467 66,441
Additional paid-in surplus 4,529 17,676
Cumulative translation adjustments 4,346 (8,206)
Unrealized holding gains (losses) 2,618 (550)
Retained earnings 1,100,758 1,268,114
---------- ----------
Subtotal 1,228,718 1,343,475
Less: treasury stock at cost, 2,889 shares at
9/30/95 (9,711 shares at 12/31/94) 53,595 347,616
---------- ----------
1,175,123 995,859
---------- ----------
$2,557,670 $2,070,637
========== ==========
5
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Nine Months Ended September 30, 1995 and 1994
(000 omitted)
1995 1994
------------ ------------
Cash flows from operating activities:
Net income $ 209,839 $ 146,883
--------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 50,928 41,818
Amortization 26,677 27,781
Net increase (decrease) in deferred taxes 3,553 (3,514)
Net increase (decrease) in LIFO reserves 2,755 148
Increase (decrease) in deferred compensation 6,119 7,519
Other, net 2,672 6,573
Changes in assets & liabilities (excluding acquisitions):
Decrease (increase) in accounts receivable (74,890) (39,086)
Decrease (increase) in inventories, excluding LIFO reserve (53,520) (19,182)
Decrease (increase) in prepaid expenses (4,298) (2,382)
Increase (decrease) in accounts payable 1,721 (6,216)
Increase (decrease) in accrued expenses 51,206 47,230
Increase (decrease) in federal & other taxes on income (12,116) 3,413
--------- ---------
Total adjustments 807 64,102
--------- ---------
Net cash provided by operating activities 210,646 210,985
--------- ---------
Cash flows from (used in) investing activities:
Net sale (purchase) of marketable securities (12,355) (20,571)
Additions to property, plant & equipment (71,269) (55,256)
Acquisitions, net of cash & cash equivalents (304,569) (182,615)
Proceeds from sale of business 5,000 --
Purchase of treasury stock (8,873) (105)
--------- ---------
Net cash from (used in) investing activities (392,066) (258,547)
--------- ---------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable 233,710 109,229
Reduction of long-term debt (5,037) 7,950
Proceeds from exercise of stock options 2,161 1,867
Cash dividends to stockholders (46,502) (41,178)
--------- ---------
Net cash from (used in) financing activities 184,332 77,868
--------- ---------
Net increase (decrease) in cash & cash equivalents 2,912 30,306
Cash & cash equivalents at beginning of period 90,304 63,685
--------- ---------
Cash & cash equivalents at end of period $ 93,216 $ 93,991
========= =========
6
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 cash flows 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 calendar
year.
NOTE B - Inventory
Inventories, by components, are summarized as follows: (000's)
SEPTEMBER 30, DECEMBER 31,
1995 1994
---- ----
Raw materials $140,465 $116,829
Work in progress 198,588 167,251
Finished goods 145,308 121,828
-------- --------
Total 484,361 405,908
Less LIFO reserve 43,922 41,304
-------- --------
Net amount per balance sheet $440,439 $364,604
======== ========
NOTE C - Material Business Acquisition
The following table summarizes, on a pro forma (unaudited) basis, the
estimated results of operations as if the Imaje acquisition (which closed on
September 29, 1995) had taken place at the beginning of 1994, with appropriate
adjustment for interest, depreciation, inventory charges, amortization and
income taxes (in thousands except for per share figures).
NINE MONTHS
ENDED SEPTEMBER 30
----------------------------
1995 1994
---- ----
Net sales $2,860,330 $2,350,039
Net earnings 218,265 144,897
Earnings per share $ 1.92 $ 1.27
NOTE D - Additional Information
For a more comprehensive discussion of the Company's financial position,
operating results, business properties and other matters, reference is made to
the Company's Annual Report on Form 10-K which was filed with the Securities and
Exchange Commission in March 1995.
7
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 decreased during the first nine months of 1995 as
compared to the position at December 31, 1994.
Working capital decreased from $360.9 million at the end of last year to
$246.3 million at September 30, 1995. The $114.6 million decrease represents
positive cash flow during 1995 net of $302 million paid for acquisitions.
At September 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) amounted to $590 million representing 33% of total
capital. This compares with 27% at December 31, 1994.
(2)MATERIAL CHANGES IN RESULTS OF OPERATIONS:
The Company earned $.63 per share in the quarter ended September 30, up 40%
from $.45 earned in the year earlier period. The earnings per share figures are
adjusted retroactively for a 2 for 1 stock split that was distributed on
September 15 to stockholders of record on August 31. Sales of $935 million
gained 16% from last year's third quarter.
The 1995 third quarter results included two non-recurring items--a $15
million pre-tax provision for costs to close an elevator manufacturing facility
(included in the Dover Elevator International segment) and a gain of $9.5
million from settlement of contract claims on a government program (included in
the Dover Diversified segment). The net effect of these items was to reduce
pre-tax profit by $5.5 million and earnings per share by $.03 per share.
For the nine months Dover's earnings per share of $1.85 was up 45% from the
$1.28 reported in the first nine months of 1994. Sales of $2.7 billion increased
22%. The 1995 nine month sales and earnings per share were new records for
Dover, topping the record results reported last year.
During the third quarter, Dover split its stock 2 for 1, raised its dividend
to an annual rate of $.60 per post-split share, and completed its previously
announced acquisition of Imaje S.A. for an economic cost of $205 million. This
brought Dover's acquisition spending to $302 million for the first nine months
of the year. Some further acquisition activity is expected in the fourth
quarter, possibly leading to a new annual record. Dover's previous record for
acquisition spending was $321 million in 1993. The 1995 acquisitions will
modestly dilute current year earnings, due to acquisition write-offs and
interest expense, but should contribute strongly to 1996.
Four of Dover's 5 market segments had higher operating income in the third
quarter, excluding the 2 non-recurring items. Dover Technologies gained 59%,
Dover Diversified 47%, Dover Elevator 40%, and Dover Industries 25%. Dover
Resources had a modest decline of 5%. Year-to-date operating income is ahead of
prior year in all 5 segments.
DOVER TECHNOLOGIES
Technologies was again Dover's largest segment in terms of earnings, aided
by continued strong sales and earnings comparisons at Universal Instruments.
Almost all of Technologies' $12.3 million profit increase was achieved by
Universal, which also provided about two-thirds of Technologies' total sales and
a higher percentage of earnings. Four of Dover Technologies' other 6 businesses
also achieved sales and earnings gains. Universal's shipments and profit levels
reflected their large order backlog at June 30, 1995 and included a favorable
mix of thru-hole products which carry higher margins than more rapidly growing
surface mount equipment. Universal's book-to-bill ratio in the quarter was .85
with most of the imbalance in thru-hole, where the market has turned decidedly
weaker. Total orders were 16% above last year. Capacity additions continue to be
made for surface mount products and Universal plans to introduce several new
models of its successful GSM line in the December-January timeframe.
Technologies' overall book-to-bill was .95 as all companies except Universal had
ratios above 1.0. Backlog at September 30 was 36% higher than last year (19%
higher at Universal). The Imaje acquisition, while dilutive to Dover on
8
an after-tax basis, should favorably affect Technologies' fourth quarter pretax,
pre-interest segment reporting. Comparisons to fourth quarter of 1994 will be
very strong but earnings may decrease from the level of this year's third
quarter. The outlook for 1996 is quite positive, largely due to the expected
favorable impact of Imaje.
DOVER INDUSTRIES
Dover Industries achieved a 10% sales increase in the third quarter--a
smaller gain than in the first half of the year (which was up 20%)--but the
pattern of earnings gains in excess of sales gains continued, with profit growth
of 25% compared to last year. Heil, Marathon, Davenport, and Texas Hydraulics
all had profit growth in excess of 25% as 7 of Industries' 12 companies posted
earnings gains. Auto service equipment (Rotary and Chief) and commercial
restaurant equipment (Groen and Randell) had weaker sales and earnings as a
result of the softness in the U.S. economy earlier this year. However, incoming
orders at these four businesses in the third quarter were very close to last
year and three had higher orders than sales. Heil's tank trailer orders were
much lower than in the 1994 third quarter, which was a particularly strong
period, reducing Heil's total backlog to 95% of last year's level. Absent the
tank trailer decline, overall Dover Industries' orders were up 2% from 1994.
DOVER ELEVATOR INTERNATIONAL
Dover Elevator International recorded its strongest quarterly operating
profit ($16,995,000) in more than three years, representing a gain of 40% from a
disappointing third quarter last year. Last year's third quarter reflected
problems at General Elevator which recorded a loss compared to a profit this
year. In this year's third quarter, Dover Elevator International established a
$15 million provision for cash costs and property carrying value write-downs
associated with a decision to close manufacturing operations in Canada. Dover
will continue its market-leading elevator sales and construction and service
operations in Canada while consolidating production in existing facilities in
the United States. Profit improvement in excess of $5 million per year is
expected from these actions beginning in 1996.
Nigel Davis, President of Dover Elevator International's Hammond and
Champness subsidiary in the UK since 1986, was appointed Executive Vice
President-Chief Operating Officer of Dover Elevator International during the
third quarter. In October, John Apple, who will remain as a Vice President of
Dover Corporation, resigned as Chief Executive of Dover Elevator International.
Mr. Apple spent his entire business career--spanning more than 35 years--with
Dover Elevator and its associated companies. He was a key factor in the growth
of this business from an internal product line start-up to its current position
as the leading North American elevator company (although he would be first to
acknowledge that Otis still deserves the leadership title on a worldwide basis).
Further changes in operating management have been made in North America
reflecting Dover's intention to conduct operations here in a more unitary
fashion. This shift in focus is intended to bring customers everywhere in North
America the very best practices and services developed anywhere within Dover's
elevator businesses.
DOVER RESOURCES
The Dover Resources' market segment had a 5% decline in third quarter
earnings but remained 9% ahead of last year for the 9 months. Lower sales of
vapor recovery products at Blackmer and OPW were the primary factor, reflecting
weaker market conditions in this product area after very strong growth in recent
years. Seven of Dover Resources' 16 companies achieved earnings gains in the
quarter, led by Norris Sucker Rods, Ronningen-Petter, and Midland. De-Sta-Co
continued to post sales increases but margins dropped due to sales mix and
higher-than-normal costs in its Detroit facilities. A temporary shortage of
skilled labor has resulted in excessive overtime, higher turnover, and increased
training costs. Third quarter total bookings in Dover Resources were only 2%
above last year; however, September was an encouraging month with orders 13%
ahead of last year and backlog at September 30th 15% above the 1994 level.
9
DOVER DIVERSIFIED
Profits at Dover Diversified for the third quarter rose 47% compared to last
year, excluding the contract settlement contribution of $9.5 million. The
operating improvement was primarily due to strong gains at Belvac (beverage can
making equipment) and Tranter (heat transfer products). Belvac's orders were
(finally) less than shipments but their backlog equals more than a year's sales
at third quarter production levels. Tranter had a book-to-bill ratio of 1.04 and
enters the fourth quarter with backlog 65% higher than last year. Overall
operating margins continued below normal for Dover Diversified because of
disappointing profit levels at Hill Phoenix and A-C Compressor, whose combined
third quarter sales exceeded $70 million. Hill is struggling with the start-up
costs of its new plant in Virginia and the closing of its old facility as well
as the initially expensive impact of a newly-introduced product line. A-C has
found some of the projects in its very large backlog more difficult and costly
to produce than expected. Newly acquired Mark Andy (flexographic printing
equipment) completed a successful initial quarter as part of Dover with sales
and earnings above prior year. Diversified's third quarter bookings were
slightly below sales, but September 30 backlog is 37% higher than last year (30%
excluding the impact of Mark Andy). Diversified has substantial internal growth
and profit improvement opportunities that should lead to a strong fourth quarter
and an excellent 1996 year.
OUTLOOK
Commenting on third quarter results, Thomas L. Reece, Dover's President and CEO,
said, "As expected, we began to see some impact from the U.S. economic slow-down
in our third quarter results. There is some evidence that this was temporary and
will be followed by renewed, if more modest, economic growth. That being the
case, Dover will have a strong year in 1996 as well as the strong finish to 1995
that we are confident of achieving."
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A Form 8-K dated August 7, 1995 was filed on August 11, 1995 (and
subsequently amended on August 17, 1995 to incorporate an exhibit) regarding the
change in principal accountants to audit the Company's financial statements for
the calendar year ending December 31, 1995.
A Form 8-K dated September 29, 1995 was filed on October 16, 1995
(and subsequently amended on October 25, 1995) regarding the acquisition of
Imaje, S.A.
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: October 25, 1995 /s/ John F. McNiff
---------------- ----------------------------------
John F. McNiff, Vice President and
Treasurer
Date: October 25, 1995 /s/ Alfred Suesser
---------------- ----------------------------------
Alfred Suesser, Controller and
Assistant Treasurer
10
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
5
1000
9-MOS
DEC-31-1995
JAN-01-1995
SEP-30-1995
93,216
66,938
680,236
18,883
440,439
1,314,240
909,971
(517,782)
2,557,670
1,067,943
252,208
116,467
0
0
0
2,557,670
2,736,836
2,736,836
1,874,145
2,407,338
1,427
0
27,101
316,063
106,224
209,839
0
0
0
209,839
1.85
0
Information is not materially different than (EPS-Primary).
