SEC Filing | Dover Corporation

1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities /X/ Exchange Act of 1934 For the fiscal year ended December 31, 1995 OR Transaction Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from____________to____________. 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 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ------------------- Common Stock, par value $1. New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Title of class -------------- 6.45% Notes due November 15, 2005 1 2 Indicate by check mark 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 (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past ninety days. Yes X No______ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X The aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 4, 1996 was $4,841,421,685. Registrant's price as reported on the New York Stock Exchange-Composite Transactions for March 4, 1996 was $45.625 per share. The number of outstanding shares of the Registrant's common stock as of March 4, 1996 was 113,786,101. DOCUMENTS INCORPORATED BY REFERENCE Parts I, II, and IV - Certain portions of the Annual Report to Stockholders for Fiscal Year Ended December 31, 1995 (the "1995 Annual Report"). Parts II, and III - Certain portions of the Proxy Statement for Annual Meeting to be held on April 30, 1996 (the "1996 Proxy Statement"). 2 3 PART I Item 1. BUSINESS General Dover Corporation ("Dover" or the "Company"), originally incorporated in 1947 in the State of Delaware, is a diversified industrial manufacturing corporation encompassing over 50 different operating companies which manufacture a broad range of specialized industrial products and sophisticated manufacturing equipment. The Company's businesses are divided into five business segments. Dover Resources manufactures products primarily for the automotive, fluid handling, petroleum and chemical industries. Dover Industries makes products for use in the waste handling, bulk transport, automotive service, commercial food service and machine tool industries. Dover Technologies builds primarily sophisticated automated assembly equipment for the electronics industry, industrial printers for coding and marking and, to a lesser degree, specialized electronic components. Dover Diversified builds sophisticated assembly and production machines, heat transfer equipment and specialized compressors, as well as sophisticated products and control systems for use in the defense, aerospace and commercial building industries. Dover Elevator manufactures, installs and services elevators primarily in North America. The Company emphasizes growth and strong internal cash flow. It has a long-standing and successful acquisition program pursuant to which, from January 1, 1991 through December 31, 1995, the Company made 47 acquisitions at a total acquisition cost of $962 million. For more detail regarding acquisitions over the past three years, see page 3 of the 1995 Annual Report as well as Note 2 to the Consolidated Financial Statements on pages 27-28 of the 1995 Annual Report, which are hereby incorporated by reference. These acquisitions have had a substantial impact on the Company's increase in sales and earnings since 1991. The Company's acquisition program traditionally focused on acquiring new or stand-alone businesses. However, since 1993, increased emphasis has been placed on acquiring businesses which can be added on to existing operations. The Company aims to be in businesses marked by growth, innovation and higher than average profit margins. It seeks to have each of its businesses be a leader in its market as measured by market share, innovation, profitability and return on assets. The Company practices a highly decentralized management style. The presidents of operating companies are very autonomous and have a high level of independent responsibility for their businesses and their performance. This is in keeping with the Company's operating philosophy that small independent operations are better able to serve customers by focusing closely on their products and reacting quickly to customer needs. The Company's executive management becomes involved 3 4 only to guide and manage capital, assist in major acquisitions, evaluate, motivate and, if necessary, replace operating management, and provide selected other services. Dover Resources manufactures components and equipment primarily for the automotive, fluid handling, petroleum and chemical industries. Its largest businesses are De-Sta-Co (compressor valves and workholding devices), OPW Fueling Components (gasoline nozzles and related service station equipment), and Blackmer (rotary vein and progressive cavity pumps and gas compressors). At the beginning of 1994, Dover Resources acquired Midland Manufacturing, a market leader in safety valves and gauging equipment for rail tank cars. Other Dover Resources companies produce liquid monitoring, filtration and control systems, oil and gas production equipment, and other valve, instrumentation and control systems and products. Dover Industries manufactures a diverse mix of equipment and components for use in the waste handling, bulk transport, automotive service, commercial food service, machine tool and other industries. The largest operations are Heil, acquired in 1993 (trailerized tanks and refuse collecting vehicles), Tipper Tie (clip closures for food packaging), Marathon, acquired at the end of 1990 (solid waste compaction, transporting and recycling equipment), Rotary Lift (automotive lifts), and Groen (food service equipment). In 1994, Tipper Tie acquired Technopack of Hamburg, Germany, a former licensee, and combined it with Tipper Tie's European operations. Other Dover Industries operations produce auto collision measuring and repair systems, commercial refrigeration, welding torches, plasma cutting products and screw machines. Dover Technologies sells assembly equipment, screen printers, and soldering machines for the printed circuit board industry, as well as components for communications (including wireless) and military applications. Its primary competitors are Japanese producers, including Fuji Machine, Panasonic and TDK. The most significant business in this segment is Universal Instruments which, in 1995, accounted for approximately 65% of the sales and a much higher percentage of the operating profit of Dover Technologies. Universal Instruments' sales and operating profit for 1995 grew 36% and 81%, respectively, over 1994. Universal Instruments is the world's largest producer of thru-hole printed circuit board assembly equipment, as well as a significant manufacturer of surface mount printed circuit board assembly equipment. At the end of the third quarter of 1995, Dover Technologies acquired Imaje, S.A., for approximately $212 million. Based in Valence, France, Imaje is one of the world's three largest manufacturers of industrial continuous ink jet printers and specialized inks used for coding and marking a wide variety of products and consumables. It also produces laser and contact marking printers. Dover Diversified manufactures equipment and components for industrial, commercial, and defense applications. The largest operations are Belvac, acquired in 1993 (can-making machinery), Tranter (process industry heat exchangers), A-C Compressor, acquired in 1992 (process industry compressors), and Hill Phoenix, acquired in 1993-94 (refrigeration cases and systems for supermarkets). In the second quarter of 1995, Dover Diversified acquired Mark Andy, a leading manufacturer of 4 5 narrow web flexographic printing presses. Other Dover Diversified businesses produce such products as fluid film and self-lubricating bearings, metal and fabric expansion joints, submarine and aircraft hydraulic controls, remote manipulators and industrial cleaning equipment. Dover Elevator is the nation's largest manufacturer and installer, and one of the largest servicers, of elevators for low- and mid-rise buildings. Dover Elevator also participates in the high-rise market for new equipment and service. Its primary competitors are Otis, Westinghouse/Schindler and Montgomery/Kone. Dover Elevator also sells and services elevators in foreign markets, principally the United Kingdom and Canada. Somewhat less than half of Dover Elevator's sales and all of its profits are generated by the service business. During 1994 and 1995, Dover Elevator took charges against earnings of $12 and $32 million, respectively, in connection with the reorganization of Dover Elevator Company and General Elevator Company in 1994, and a restructuring of North American operations in 1995, including consolidation of manufacturing operations and a 12% reduction in the salaried workforce. Dover sells its products and services both directly and through various distributors, sales and commission agents and manufacturers representatives, in all cases consistent generally with the custom of the industry and market being served. For more information on these segments and their products, sales, markets served, earnings before tax and total assets for the six years ended December 31, 1995, see pages 6 through 22 of the 1995 Annual Report, which are hereby incorporated by reference. Raw Materials Dover's operating companies use a wide variety of raw materials, primarily metals and semi-processed or finished components, which are generally available from a number of sources. Temporary shortages may occur occasionally, but have not resulted in business interruptions or major problems, nor are any such problems anticipated. Through the first half of 1995, prices for steel and aluminum, which are used by a large number of Dover companies, increased. Thereafter, prices for aluminum have generally declined about 10% through the first quarter of 1996 and steel prices have remained stable. To date these cost increases have not had a material impact on operating profits. Research and Development Dover's operating companies are encouraged to develop new products as well as upgrade and improve existing products to satisfy customer needs, expand sales opportunities, improve product reliability and reduce production costs. During 1995, approximately $94 million was spent on research and development, compared with $97 million and $60 million in 1994 and 1993, respectively. 5 6 Dover holds or is licensed to use a substantial number of U.S. patents covering a number of its product lines, and to a far lesser degree patents in certain foreign countries where it conducts business. Dover licenses some of its patents to other companies for which it collects royalties which are not significant. These patents have been obtained over a number of years and expire at various times. Although patents in the aggregate are important to Dover, the loss or expiration of any one patent or group of patents would not materially affect Dover or any of its segments. Where patents have expired, Dover believes that its commitment to leadership in continuous engineering improvements, manufacturing techniques, and other sales, service and marketing efforts are significant to maintaining its general market leadership position. Trademarks and Tradenames Many of the Company's products are sold under various registered and unregistered trademarks and tradenames owned or licensed by the Company. Among the most significant are: A-C Compressor, Annubar, Blackmer, De-Sta-Co., Davenport, DEK, Dover, Duncan, Groen, Heil, Marathon, Norris, OPW, Rotary Lift, Sargent ,SWEP, Tipper Tie, Tranter and Universal. Seasonality Dover's operations are generally not seasonal, although their performance tends to be stronger in the second and fourth quarters of the year. Customers Dover's businesses serve thousands of customers, no one of which accounted for more than 10% of sales in 1995. Within each of the five segments, no customer accounted for more than 10% of segment sales in 1995. Backlog Backlog generally is not considered a significant factor in Dover's businesses, as most products have relatively short delivery periods. It is more revelant to those businesses which produce larger and more sophisticated machines, or have long-term government contracts, primarily A-C Compressor, Belvac, Dover Elevator International, Heil Trailer, Mark Andy, Sargent Controls and Universal. Total Company backlog as of December 31, 1995 and 1994 was $997 million and $927 million, respectively. Competition Dover's competitive environment is complex because of the wide diversity of products manufactured and markets served. In general, Dover companies are 6 7 market leaders which compete with only a few companies. In addition, since most of Dover's manufacturing operations are in the United States, Dover usually is a more significant competitor domestically than in foreign markets In the Elevator segment, Dover competes for the manufacture and installation of elevators with a few generally large multinational competitors and maintains a strong domestic position. For service work, there are numerous local, regional and national competitors. In the Technologies segment, Dover competes globally against a few very large companies, primarily based in Japan or Europe. Within the other three segments, competition is primarily domestic, although an increasing number see more international competitors and several serve markets which are predominantly international, particularly A-C Compressor, Alberta Oil Tool, Belvac, Civacon, CRL, De-Sta-Co, Dieterich Standard, Duncan, Norris, OPW Fueling Components, Ronningen-Petter, Tipper Tie/Technopak, Tranter and Wittemann. International For foreign sales and assets, see Note 15 to the Consolidated Financial Statements on page 33 of the 1995 Annual Report, which is incorporated herein by reference. Export sales of domestic operations were $773 million in 1995, $560 million in 1994 and $413 million in 1993. Although international operations are subject to certain risks, such as price and exchange rate fluctuations and foreign governmental restrictions, Dover intends to increase its expansion into foreign markets, particularly with respect to its elevator business, as domestic markets mature. The countries where most of Dover's foreign subsidiaries and affiliates are based are Canada, France, Great Britain, Germany and Sweden. Environmental Matters Dover believes its operations generally are in substantial compliance with applicable regulations. In some instances, particular plants and businesses have been the subject of administrative and legal proceedings with governmental agencies relating to the discharge or potential discharge of substances. Where necessary, these matters have been addressed with specific consent orders to achieve compliance. Dover believes that continued compliance will not have any material impact on the Company's financial position going forward and will not require significant capital expenditures. 7 8 Employees The Company had approximately 25,300 employees as of December 31, 1995. Item 2. PROPERTIES The number, type, location and size of the Company's properties are shown on the following charts, by segment.

The facilities are generally well maintained and suitable for the operations conducted. While the productive capacity of its plants is generally adequate for current needs, several businesses, particularly Heil, Hill Phoenix and Universal, have completed or are committed to significant plant expansion to meet current and future demand. Item 3. LEGAL PROCEEDINGS Dover is party to a number of legal proceedings arising out of the normal course of its businesses. In general, most claims arise in connection with activities of its Elevator segment operations and certain of its other businesses which make products used by the public. For several years, Dover has also been involved with the Internal Revenue Service regarding tax assessments for the eight years ended December 31, 1989, which matters were settled in early 1995. In addition, matters 8 9 have arisen under various environmental laws, as well as under local regulatory compliance agencies. For a further description of such matters, see Note 12 to the Consolidated Financial Statements on pages 32-33 of the 1995 Annual Report, which is incorporated herein by reference. Based on insurance availability, established reserves and periodic reviews of those matters, management is of the opinion that the ultimate resolution of current pending claims and known contingencies should not have a material adverse effect on Dover's financial position taken as a whole. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. EXECUTIVE OFFICERS OF THE REGISTRANT All officers are elected annually at the first meeting of the Board of Directors following the annual meeting of stockholders and are subject to removal at any time by the Board of Directors. The executive officers of Dover as of March 22, 1996, and their positions with the Company (and, where relevant, prior business experience) for the past five years are as follows:

9 10 Robert A. Tyre 51 Vice President-Corporate Development (since February 1995); prior thereto President, Rye Transaction Consultants, Inc. (acquisition consultants), from February 1993 to January 1995; prior thereto for more than five years, Vice President, Booz-Allen & Hamilton, Inc. (management consultants). Alfred Suesser 63 Controller John B. Apple 61 Vice President Lewis E. Burns 57 Vice President and President of Dover Industries, Inc. Rudolf J. Herrmann 45 Vice President (since November 1993) and President of Dover Resources, Inc. (since May 1993); prior thereto, President of Rotary Lift division of Dover Industries, Inc. John E. Pomeroy 54 Vice President (since November 1993) and President of Dover Technology International, Inc. Jerry W. Yochum 57 Vice President, Director (since May 1993) and President of Dover Diversified, Inc.

PART II Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The principal market in which the Company's Common Stock is traded is the New York Stock Exchange. Information on the high and low sales prices of such stock, and the frequency and the amount of dividends paid during the last two years, is set forth on Page 35 of the 1995 Annual Report and incorporated herein by reference. On September 15, 1995, Registrant effected a 2 for 1 stock split in the form of a stock dividend payable to holders of record on August 31, 1995. The number of holders of record of the Registrant's Common Stock as of March 4, 1996 is approximately 3,000. Item 6. SELECTED FINANCIAL DATA 10 11 The information for the years 1985 through 1995 is set forth in the 1995 Annual Report on pages 38 and 39 and is incorporated herein by reference. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information set forth in the 1995 Annual Report on pages 36 and 37 is incorporated herein by reference. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information set forth in the 1995 Annual Report on pages 22 through 35 is incorporated herein by reference. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE For information regarding Registrant's change in independent accountants, see "Miscellaneous Relationship with Independent Accountants" in the 1996 Proxy Statement, which is incorporated herin by reference. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information with respect to the directors of the Company required to be included pursuant to this Item 10 is included under the caption "1. Election of Directors" in the 1996 Proxy Statement to be filed with the Securities and Exchange Commission (the "Commission") pursuant to Rule 14a-6 under the Securities Exchange Act of 1934, as amended, and is incorporated in this Item 10 by reference. The information with respect to the executive officers of the Company required to be included pursuant to this Item 10 is included under the caption "Executive Officers of the Registrant" in Part I of this Annual Report on Form 10-K and is incorporated in this Item 10 by reference. Item 11. EXECUTIVE COMPENSATION The information with respect to executive compensation required to be included pursuant to this Item 11 is included under the caption "Executive Compensation" in the 1996 Proxy Statement and is incorporated in this Item 11 by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 11 12 MANAGEMENT The information regarding security ownership of certain beneficial owners and management that is required to be included pursuant to this Item 12 is included under the captions "General" and "Security Ownership" in the 1996 Proxy Statement and is incorporated in this Item 12 by reference. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information with respect to any reportable transaction, business relationship or indebtedness between the Company and the beneficial owners of more than 5% of the Common Stock, the directors or nominees for director of the Company, the executive officers of the Company or the members of the immediate families of such individuals that is required to be included pursuant to this Item 13 is included under the caption "1. Election of Directors-Directors' Compensation" in the 1996 Proxy Statement and is incorporated in this Item 13 by reference. 12 13 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) Financial Statements The following consolidated financial statements of Dover Corporation and its subsidiaries are set forth in the 1995 Annual Report, which financial statements are incorporated herein by reference: (A) Independent Accountants' Report. (B) Consolidated balance sheets as of December 31, 1995, 1994 and 1993. (C) Consolidated statements of earnings for the years ended December 31, 1995 1994 and 1993. (D) Consolidated statements of retained earnings for the years ended December 31, 1995, 1994 and 1993. (E) Consolidated statements of cash flows for the years ended December 31, 1995, 1994 and 1993. (F) Notes to consolidated financial statements. (2) Financial Statement Schedule The following financial statement schedule is attached to Part IV of this Annual Report report on form 10-K: Independent Accountants' Report on Schedules and Consent. II -- Valuation and Qualifying Accounts All other schedules are not required and have been omitted. (3) See (c) below. (b) A Form 8-K dated September 29, 1995 was filed on October 16, and subsequently amended on Form 8-K/A No.1 dated October 25, 1995 regarding the Company's acquisition of Image, S.A. 13 14 (c) Exhibits: (3) (a) Restated Certificate of Incorporation and Amendments thereto. (b) By-laws, as amended. (4) The Company agrees to furnish to the Commission, upon request, copies of any instruments with respect to long-term debt which does not exceed 10 percent of the total consolidated assets of the Company. (10) (a) 1984 Incentive Stock Option and Cash Performance Program.* (b) Employee Savings and Investment Plan.* (c) 1995 Incentive Stock Option and Cash Performance Program.* (d) 1996 Non-Employee Directors' Stock Compensation Plan. (13) Incorporated portions of Dover's Annual Report to Stockholders for its fiscal year ended December 31, 1995. (21) Subsidiaries of Dover. (23) Independent Accountants' Consents. (a) Coopers & Lybrand L.L.P.. (b) KPMG Peat Marwick LLP. (24) Form of Power of Attorney. (27) Financial Data Schedules (in Edgar filing only). * Executive compensation plan or arrangement. (d) Not applicable. 14 15 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) 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 By:/s/Thomas L. Reece ------------------------- Thomas L. Reece President and Chief Executive Officer Date: March 22, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/Thomas L. Reece - ----------------------- Thomas L. Reece President and Chief Executive Officer and Director (Principal Executive Officer) March 22, 1996 /s/John F. McNiff - ----------------------- John F. McNiff Treasurer (Principal Financial Officer) March 22, 1996 /s/Alfred Suesser - ----------------------- Alfred Suesser Controller March 22, 1996 (Principal Accounting Officer) /s/Gary L. Roubos - ----------------------- Gary L. Roubos Chairman and Director* March 22, 1996
15 16 /s/David H. Benson - ----------------------- David H. Benson Director* March 22, 1996 /s/Magalen O. Bryant - ----------------------- Magalen O. Bryant Director* March 22, 1996 /s/Jean-Pierre M. Ergas - ----------------------- Jean-Pierre M. Ergas Director* March 22, 1996 /s/Roderick J. Fleming - ----------------------- Roderick J. Fleming Director* March 22, 1996 /s/John F. Fort - ----------------------- John F. Fort Director* March 22, 1996 /s/James L. Koley - ----------------------- James L. Koley Director* March 22, 1996 /s/Anthony J. Ormsby - ----------------------- Anthony J. Ormsby Director* March 22, 1996 /s/Jerry W. Yochum - ----------------------- Jerry W. Yochum Director* March 22, 1996 * By: /s/Robert G, Kuhbach ----------------------- Robert G. Kuhbach Attorney-in-Fact 16 17 SCHEDULE II DOVER CORPORATION AND SUBSIDIARIES Valuation and Qualifying Accounts Years Ended December 31, 1995, 1994, 1993
Additions Balance at Charged to Balance at Beginning of Cost and Deductions Close of Year Expense (1) Year ---- ------- --- ---- (000's omitted) Year Ended December 31, 1995 Allowance for Doubtful Accounts $ 14,326 $ 9,616 $ 1,617 $ 22,325 Year Ended December 31, 1994 Allowance for Doubtful Accounts $ 10,199 $ 898 $ (3,229) $ 14,326 Year Ended December 31, 1993 Allowance for Doubtful Accounts $ 9,753 $ 5,546 $ 5,100 $ 10,199
Notes: (1) Represents uncollectible accounts written off and reduction of prior years' over-provision less recoveries of accounts previously written off, net of $ 3,260, $827 and $705 related to acquisitions and divestitures in 1995, 1994 and 1993, respectively. 17 18 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Dover Corporation: Our report on our audit of the consolidated financial statements of Dover Corporation has been incorporated by reference in this Form 10-K from the 1995 annual report to stockholders of Dover Corporation and appears on page 34 therein. In connection with our audit of such financial statements we have also audited the related financial statement schedule as listed in the index under Item 14 (a) on page 14 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. Coopers & Lybrand L.L.P. New York, New York February 20, 1996 18 19 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Dover Corporation: We have audited the accompanying consolidated balance sheets of Dover Corporation and subsidiaries as of December 31, 1994 and 1993 and the related consolidated statements of earnings, retained earnings and cash flows for the years then ended. These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dover Corporation and subsidiaries at December 31, 1994 and 1993 and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the consolidated financial statements taken as a whole. The supplementary information included in Schedule II for the years ended December 31, 1994 and 1993 is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. Such information has been subjected to the auditing procedures applied in the audits of the consolidated financial statements and, in our opinion, based on our audits, is fairly stated in all material respects in relation to the consolidated financial statements taken as a whole. KPMG Peat Marwick LLP 345 Park Avenue New York, New York 10154 February 22, 1995 19 20 EXHIBIT INDEX (3) (a) Restated Certificate of Incorporation and Amendments thereto, filed as Exhibit 3(a) to Annual Report on Form 10-K for year ended December 31, 1989, is incorporated by reference. (b) By-laws, as amended, filed as Exhibit 3(ii) to Quarterly Report on Form 10-Q for period ended September 30, 1993, is incorporated by reference. (10) (a) 1984 Incentive Stock Option and Cash Performance Program, filed as Exhibit 10(a) to Annual Report on Form 10-K for year ended December 31, 1984, is incorporated by reference. (b) Employee Savings and Investment Plan, filed as Exhibit 99 to Registration Statement on Form S-8 filed under Securities Act of 1933 (Reg. No.33-01419), is incorporated by reference. (c) 1995 Incentive Stock Option and Cash Performance Program, included as Exhibit A to the 1995 Proxy Statement relating to the 1995 Annual Meeting of Stockholders and dated March 15, 1995, is incorporated by reference. (d) 1996 Non-Employee Directors' Stock Compensation Plan, included as Exhibit A to the 1996 Proxy Statement, is incorporated by reference. (13) Incorporated portions of Dover's Annual Report to Stockholders for its fiscal year ended December 31, 1995. (21) Subsidiaries of Dover. (23) Independent Accountants' Consents. (See Independent Accountants' Report on Schedules and Consents in Part IV hereof) (a) Coopers & Lybrand L.L.P. (b) KPMG Peat Marwick LLP (24) Form of Power of Attorney. (27) Financial Data Schedule (in Edgar filing only). 20

1 DOVER CORPORATION [FIGURE 1] HEIL 1995 ANNUAL REPORT 2 DOVER'S BUSINESS GOAL IS TO BE THE LEADER IN ALL THE MARKETS WE SERVE. WE EARN THAT STATUS BY APPLYING A SIMPLE PHILOSOPHY TO THE MANAGEMENT OF OUR BUSINESSES. THIS REQUIRES US TO: - Perceive our customers' real needs for products and support. - Provide better products and services than the competition. - Invest to maintain our competitive edge. - Ask our customers to pay a fair price for the extra value we add. SERVICE TO OUR CUSTOMERS, PRODUCT QUALITY, INNOVATION AND A LONG-TERM ORIENTATION ARE IMPLICIT IN THIS CREDO. PURSUIT OF THIS MARKET LEADERSHIP PHILOSOPHY BY ALL OUR BUSINESSES, PLUS... VALUE ORIENTED ACQUISITIONS OF COMPANIES THAT SHARE THIS PHILOSOPHY, PLUS... A DECENTRALIZED MANAGEMENT STYLE THAT GIVES THE GREATEST SCOPE TO THE TALENTED PEOPLE WHO MANAGE THESE COMPANIES... HAVE COMBINED TO PRODUCE RESULTS FEATURING: - Long-term earnings growth. - High cash flow. - Superior returns on stockholders' equity.
TABLE OF CONTENTS Comparative Highlights ........ 1 To Our Stockholders ........... 2 Dover Resources ............... 6 Dover Industries .............. 9 Dover Diversified ............. 12 Dover Technologies ............ 15 Dover Elevator International .. 18
3 1995 COMPARATIVE HIGHLIGHTS (Dollars in thousands except per share figures)
Increase 1995 1995 1994 1993 versus 1994 - --------------------------------------------------------------------------------------------------------------------------- Net sales ........................ $3,745,877 $3,085,276 $2,483,928 21% Earnings before taxes ............ $ 417,111 $ 306,859 $ 245,542 36% Net Earnings ..................... $ 278,311 $ 202,373 $ 158,254 38% Per Common Share Net Earnings ................... $ 2.45 $ 1.77 $ 1.39 38% Dividends ...................... $ .56 $ .49 $ .45 14% Book value ..................... $ 10.80 $ 8.78 $ 7.61 Capital expenditures ............. $ 102,668 $ 84,473 $ 47,532 Acquisitions(1) .................. $ 323,292 $ 187,704 $ 321,002 Purchase of treasury stock ....... $ 3,834 $ 29,733 $ 2,329 Cash flow(2) ..................... $ 386,147 $ 298,162 $ 235,223 Return on average equity ......... 25.0% 21.7% 18.9% Approximate number of stockholders 16,000 10,000 10,000 Number of employees .............. 25,332 22,992 20,445 - ---------------------------------------------------------------------------------------------------------------------------
(1) See Notes to Consolidated Financial Statements, note 2. (2) Represents net earnings plus depreciation and amortization. Adjusted, where applicable, to give retroactive effect to the 2 for 1 stock split in 1995. EARNINGS PER SHARE GROWTH (AVERAGE ANNUAL RETURN)
10 YEARS ENDING 12/31 DOVER S&P 500 - --------------------- ----- ------- 1986 10% 4% 1987 12 5 1988 13 7 1989 10 4.5 1990 11 3.5 1991 5 0.1 1992 6 4 1993 10 4.5 1994 10 6.5 1995 13 9.5
TOTAL RETURN TO INVESTORS (AVERAGE ANNUAL GROWTH RATE)
10 YEARS ENDING 12/31 DOVER(1) S&P 500(2) - --------------------- ----- ------- 1986 19.6% 13.8% 1987 22.1 15.3 1988 21.2 16.3 1989 18.9 17.5 1990 12.1 13.9 1991 12.1 17.6 1992 13.9 16.1 1993 17.7 14.9 1994 14.2 14.4 1995 16.4 14.9
(1) Goldman Sachs Investment Research (2) Standard & Poors Corp. 4 Top row, left to right; Rob Kuhbach, Nigel Davis, Lew Burns, Rudy Herrmann, Bob Tyre, Front row, left to right; John McNiff, Jerry Yochum, Tom Reece, Fred Suesser, John Pomeroy [PHOTO] TO OUR STOCKHOLDERS DOVER'S EARNINGS PER SHARE ROSE 38% IN 1995 TO A NEW RECORD OF $2.45 PER SHARE. THIS IS THE THIRD CONSECUTIVE YEAR IN WHICH DOVER'S EARNINGS PER SHARE HAVE GROWN BY MORE THAN 20%. The cumulative gain of 119% since 1992 represents the strongest three-year period of earnings growth in Dover's history. For the first half of the decade of the `90s, our compound annual rate of earnings growth stands at 14%, which is four full percentage points higher than we achieved during the decade of the `80s. I believe these results indicate that we are achieving success in the "tilt toward growth" program that we initiated in 1990, and on which I have commented in previous letters. The very rapid and above-trend growth of the past three years has been gratifying. However, our financial policies are aimed at creating wealth for long-term investors, just as our operational strategies are targeted at providing consistent high value to long-term, repeat customers. Long-term to us is certainly not next quarter, or even next year. Perhaps it should be five years (the SEC asks for some 5-year data in proxy statements), but even this does not seem "long," given the life of our products and the duration of our customer and employee relationships. The chart at the left on the preceding page looks at 10-year periods. It compares Dover's earnings per share growth with that of the Standard & Poor's 500 Stock Index for each of the last ten 10-year periods. In each period, Dover grew faster than the S&P 500. The other table on this page compares Dover and the S&P 500 for total return to stockholders over these same periods. Dover outperformed the S&P 500 in a majority of these 10-year stretches. Small differences in annual growth rates add up over time. Over the entire 20-year period -- 1975-1995 -- a dollar invested in Dover would have grown to $42, while a dollar invested in the S&P 500 would have grown only to $15. Sophisticated investors will recognize that these pre-tax, dividend-reinvested figures, although reflecting the standard measurement practice used by professional investment managers and mutual funds, do not tell the full story. Almost all of the return from the Dover investment has come in the form of capital gains, which are taxed at a lower rate than dividends. Additionally, for Dover investors, all of the capital gain remains tax-deferred until the shares are sold. On an after-tax basis, we estimate that an investment in Dover outperformed the S&P 500 in at least nine of the last ten 10-year periods. I cannot promise stockholders 20% earnings gains every year. But we do intend to achieve long-term earnings growth that is consistently well above average and solidly supported by cash flow. We expect that this will continue to provide investors with superior returns. HIGHLIGHTS In so fine a year as 1995, many events seem to deserve mention. But there are four that I would especially like to comment on because of their importance to the longer-term value of your Dover investment. 2 5 First, Universal Instruments' transformation into a "major league" player in the surface mount portion of the electronic circuit board assembly equipment business is extremely important -- and even more gratifying than the record earnings Universal contributed in 1995. The company's "platform" based technology has been well received by customers needing flexible and highly accurate component placement. This segment of the world surface mount equipment market exceeds $1 billion in a total assembly equipment market that is now close to $3 billion. Most industry watchers predict that this total market will exceed $5 billion by the year 2000, with growth in all segments. Universal has opportunities both to improve its share in the "flexible" placement segment and to expand its competitive range through new offerings that build upon the proven success of its platform products. Second, our elevator business significantly changed its organizational structure to refocus on its key strengths within the North American market. The actions associated with the $31.9 million in charges taken in the year's second half should lead to significant growth in Dover Elevator's operating earnings in 1996. This has been a very difficult period for everyone in our elevator companies. I am grateful to our managers for their courage in stepping up to the realities of a depressed market with actions that were as unpleasant as they were necessary. I also thank our thousands of elevator employees for their support. We hope that their collective efforts have established the base for a new era of prosperity for Dover Elevator International. Third, in a number of ways, Dover became a more international company in 1995. Imaje became our first large scale acquisition of a non-U.S. manufacturing business. Our companies opened many new foreign sales offices while expanding their overseas distributor and representative networks. Dover's companies now have hundreds of employees in China, Hong Kong, Singapore and Thailand, and participate in a number of joint ventures in rapidly growing Asian countries. Excluding our domestic elevator installation and service business -- and looking only at our manufacturing activities -- we estimate that more than 40% of Dover's products are either manufactured or sold outside the United States, up from 30% two years ago. This figure is likely to continue to grow, partly as a result of higher economic growth rates in some foreign countries, but more importantly because of the emphasis that the management teams of Dover's operating companies are placing on these activities. Finally, we set a new record for acquisition activity, investing $323 million in two stand-alone and seven add-on acquisitions. Our acquisition activity during the three years 1993-95 has totaled $832 million, which is more than Dover was able to invest in this fashion during the preceding 10 years. In part, this increased level reflects more favorable -- from our point of view -- conditions in the acquisition marketplace, especially with regard to the activities of "financial" buyers. While we cannot predict how long these favorable conditions will prevail, it is significant that almost $250 million of the $832 million represented strategic add-ons to existing Dover companies. This is a new dimension for our acquisition growth efforts and one that we think we can sustain into the future. ACQUISITIONS We completed the largest acquisition in Dover's history -- Imaje, S.A., based in Valence, France -- in October. This company is one of three large, worldwide players in the manufacture of continuous inkjet printing equipment. Imaje's technology can electronically deposit specially formulated, fast drying inks onto a wide variety of products, typically moving at high speed on an assembly line, and is capable of a unique marking for each item. It is primarily used in industrial applications for the marking of such items as medicine bottles and beverage containers. Our other stand-alone acquisition, Mark Andy of St. Louis, Missouri, serves a different segment of the commercial/ industrial printing business. Its flexographic presses are used principally in the printing of self-adhesive labels. The relatively low cost of flexographic plates and ease of plate changeovers make flexography the preferred method for high graphic quality, low to medium volume label production. Our seven add-on acquisitions, involving investment of $70 million, are described elsewhere in this report. The largest of these, AT&T Frequency Control Products, was relocated from AT&T and renamed Vectron Technologies, Inc. This, together with Vectron Labs, acquired in 1992, and Oscillatek, has given us a position of world leadership in the precision crystal oscillator market. It is worth noting that our acquisition program has not been the primary factor in our EPS growth over the past several years. The acquisitions made in 1995 actually reduced earnings per share by $.03 (because of initial acquisition-related costs), while the acquisitions made in 1994 added only $.07 (primarily as a result of costs associated with Hill). We expect these acquired companies to make an important contribution to earnings in 1996. In 1995 non-cash charges for amortization of acquisition premiums amounted to $.36 per share, up from $.29 per share in 1994 -- numbers that we believe to be of interest to investors. In 1996 this charge will decline to $.31 per share, in the unlikely event that Dover makes no further acquisitions. FINANCIAL At its August meeting, the board increased Dover's dividend by 14% and split the common stock two shares for 3 6 one. This was the Company's 35th consecutive increase in the annual dividend rate. Since Dover became a public company in 1955, its shares have now split more than 100 for one.
EARNINGS PER SHARE ------------------------ ~~1990 1.28 91 1.07 92 1.12 93 1.39 94 1.77 95 2.45~~
We also had our first public offering of long-term debt securities, issuing $250 million in 10-year notes, which were rated A+ by Standard & Poors and A-2 by Moody's Investor Services. Most of our acquisition activity has been financed by internal cash flow, but the strength of our program over the past three years has caused our net debt (total debt less cash and marketable securities) to increase as a percentage of total capital from 13% at the end of 1992 to 30% at the end of 1995. While our net debt position has increased, the relationship of net year-end debt to EBITA (earnings before interest, taxes and amortization) is very low at 1.07 to 1. Dover remains in its usual strong financial position -- fully capable of supporting internal growth, our add-on acquisition program, and any stand-alone acquisition or share repurchase opportunities that may arise. DOVER TECHNOLOGIES Dover Technologies' profits improved 75% on a sales gain of 45%. The sales gain reflects growth at all companies as well as the acquisitions of Imaje and AT&T Frequency Control Products. TNI also acquired GFS Manufacturing in November. Seven of the eight companies achieved earnings gains, with the largest increase, in percentage and dollars, at Universal Instruments. Universal's profits benefited from strong growth in its highly profitable thru-hole assembly equipment business. This older technology, which has been declared "mature" since the mid-1980s, achieved record sales and profits. Many consumer electronics products continue to be designed using thru-hole technology because of its lower cost and greater ease of manufacture. Cyclical growth in this market and the movement of production to emerging countries caused a surge in demand which boosted sales. Universal is well positioned to benefit from such opportunities. The company's surface mount margins improved in 1995 as sales grew 60%. The company has developed several new products, which will be introduced in early 1996. PROFITABILITY MEASURES
OROI ROE 1990 31 20 91 25 16 92 27 16 93 29 19 94 31 22 95 33 25
Imaje's first quarter with Dover Technologies provided strong sales and operating earnings and added substantially to the international character of Dover Technologies. In the fourth quarter, approximately 60% of Dover Technologies' $258 million of sales involved products either made or sold outside the U.S. DOVER INDUSTRIES Profits at Dover Industries improved 45% on a gain of only 15% in sales. Almost all of these gains represented internal growth and margin improvement. Most of Dover Industries' businesses achieved earnings gains, led by Heil, Marathon, Davenport, Texas Hydraulics and Tipper Tie. A small acquisition by Heil (Trailmaster) in the fourth quarter of 1995 was followed in January, 1996 by DovaTech's acquisition of PRC, a maker of laser cutting and welding equipment, and by Davenport's purchase of Light Machine, a manufacturer of benchtop vertical machining tools. At year-end, Heil was officially divided into two separate businesses -- Heil Trailer International (petroleum tankers and dry bulk carriers) and Heil Environmental (refuse and recycling equipment and dump bodies). Both of these companies are strong leaders in their respective market segments and both achieved record sales and earnings in 1995. Most Dover Industries companies have a high level of marginal profit in their incremental sales dollar and did an excellent job during 1995 of controlling costs, thereby leveraging moderate sales gains into very strong profit increases. DOVER DIVERSIFIED Dover Diversified achieved a 38% profit increase on a sales gain of 42%. The apparent margin contraction reflects acquisition activity in 1994-95. The Hill and Margeaux acquisitions contributed approximately $100 million in sales in 1995 but no profits because of the costs associated with closing Hill's manufacturing plant, starting up a new facility in Virginia, and integrating Hill and Margeaux into the existing Phoenix Refrigeration Co. Mark Andy contributed approximately $40 million of sales, but only a small profit because of acquisition write-offs. 4 7 Strong operating gains were achieved by Belvac and Tranter. The growth of Belvac's can-necking equipment business and of Tranter's European HTT/SWEP operation has been dramatic, providing us with opportunities to invest in capacity expansion. Amidst the many positive accomplishments at Dover Diversified were a few disappointments -- lower margins at A-C Compressor, the slower-than-planned turnaround of Hill, and a small loss at Thermal Equipment. These problems led to several changes in management. Substantial earnings improvements are expected for these companies in 1996. DOVER RESOURCES Profits at Dover Resources rose 8% from last year's record level, while sales also set a new record with an 11% gain. At OPW Fueling Components and Blackmer, profits remained strong but were down from the record levels of 1994 because of slowness in the gasoline vapor recovery market and the delayed introduction of their new VaporEZ(TM) system. De-Sta-Co almost matched its 1994 record earnings, while Midland, Ronningen-Petter, and Wittemann all set earnings records by substantial amounts. Almost all Dover Resources companies see opportunities for further profit gains in 1996, especially Blackmer, which will benefit from the add-on acquisition of Hammond Engineering (U.K.), and De-Sta-Co, whose valve capacity was expanded during the past year and whose Industrial Products business should be stronger. DOVER ELEVATOR INTERNATIONAL Dover Elevator earned $63 million in 1995 before the special charges of $32 million. This result was slightly better than the $58 million earned in 1994 (before special costs in that year, as covered in our 1994 Annual Report). The special charges in 1995 reflect the cost of a broad reorganization of our North American elevator activities. DEI's objective has been to combine North American activities into a more unitary business, focused on elevator service and new elevator installation, especially low-rise, hydraulic elevators. Specific actions included the appointment of Nigel Davis -- a 12-year employee and previous president of our Hammond & Champness Company in the United Kingdom - -- as President of Dover Elevator International. Elevator management closed a manufacturing plant in Canada, and terminated approximately 300 salaried employees, including one level of senior managers. Field activities in North America were divided into seven regions, and factory operations were consolidated, both functions reporting to Mr. Davis. This difficult reorganization was implemented professionally and with great support from our employees. Despite the distractions and uncertainties inherent in such a program, total sales increased modestly, and the second half of the year showed significantly improved operating profit ($70 million at an annual rate), which we hope can not only be maintained but improved upon in the years ahead. ORGANIZATION CHANGES In addition to the important changes in our elevator business, described above, and the split of Heil into two companies, which made Glenn Chambers and Bob Foster Dover presidents, we began 1996 with nine new company presidents. Ed Furnari, a longtime Marathon Equipment employee, became president of that company. At Ronningen-Petter, Dan Kaiser retired after 26 years with the company and was succeeded by Pete Scovic, himself a longtime Ronningen-Petter manager. Jerry Portis, who co-founded Midland Manufacturing, named Don Rodda, a Dover manager for over 10 years and most recently executive vice president of Midland, to succeed him as president of the company. Jerry remains active as chairman. The retirement of Nico Visser at IST (Germany) and Dick Dawson at Stark led to the appointment of Rainer van Essen and Grif Griffey as the new leaders of those companies. Wade Wnuk joined Dover as president of Norriseal, while Ralph Coppola, previously general manager of Hill Phoenix's systems business, became president of Hill Phoenix. Ken Stevens, a veteran Phoenix Systems manager, became president of newly-formed Phoenix Diversified Products, a maker of electrical distribution systems. Also at year-end, Tom Bell, former CFO of Dover Diversified, became president of A-C Compressor. In our Independent Subsidiary organizations, Larry Gray, formerly President of Heil, was appointed Executive Vice President and Chief Operating Officer of Dover Industries. Vicki Walker was named Vice President and Chief Financial Officer at Industries while Jack Ditterline assumed the same title at Dover Diversified. OUTLOOK We ended 1995 with an encouraging fourth quarter performance, and Dover's outlook for 1996 is positive. The key factors favorably affecting the 1996 outlook are the expected reduction in special charges; the positive contribution of 1995 acquisitions, particularly Imaje; strong growth potential at Dover Elevator and Hill Phoenix because of major changes made in 1995; and the growth expected by most Dover operating companies. These gains will be somewhat offset by the expected decline at Universal, as the surge in high-margin thru-hole shipments gives way to lower-margin surface mount equipment sales. The balance of these factors is strongly positive. We are anticipating another good year -- one that we hope will at least sustain our growth rate of the 90s. /s/ Thomas L. Reece - ------------------- Thomas L. Reece President and Chief Executive Officer 5 8 DOVER RESOURCES
OPERATING EARNING OROI --------- ---- ~~91 62 28 92 59 26 93 70 32 94 84 36 95 91 32~~
DOVER RESOURCES DOVER RESOURCES' PROFITS SET A NEW RECORD IN 1995, RISING 8% FROM PRIOR YEAR ON A SALES GAIN OF 11%. THE OVERALL RESULTS REFLECTED MIXED PERFORMANCES FROM THE SEGMENT'S 16 BUSINESSES, WITH NINE ACHIEVING INCREASES IN PROFITS Three add-on acquisitions were completed during the year by OPW Fueling Components, Civacon and Blackmer. These acquired companies, with annualized volume of approximately $20 million, added $14 million to Dover Resources' reported sales for 1995, but contributed no profit because of acquisition premium write-offs. PROFITS DECLINE AT THREE LARGEST COMPANIES Profits declined modestly at OPW Fueling Components, Blackmer and De-Sta-Co, which provide more than half of Dover Resources' total earnings, as none of these companies was able to match its record 1994 results. OPW and Blackmer experienced a slowdown in the gasoline vapor recovery market and encountered extra costs and delays in introducing their jointly developed VaporEZ(TM) product. This offset gains at both companies in other product lines. OPW purchased Hasstech, a maker of gasoline vapor recovery equipment, during the year. Blackmer acquired Hammond Engineering, Ltd., broadening its mobile transfer pump line and adding to its international presence. At De-Sta-Co, sales hit a new high, but profits fell just short of the 1994 record. A record performance by the Valve Group was offset by reduced margins in Industrial Products. Increasing manufacturing capacity for the Industrial Products Group led to higher costs in the short term, but will enhance De-Sta-Co's growth opportunities in 1996. Despite their modest profit downturn, which totaled only 6%, these businesses continued to invest in new product development, international sales expansion, and capital equipment, setting the stage for solid gains in 1996. PROFIT RECORDS AT SEVEN COMPANIES Sales and income advanced to record levels at Ronningen-Petter, which makes liquid filtration systems; at Midland Manufacturing, which produces rail tank car valve and safety devices, and at Wittemann, a producer of CO(2) generation and recovery systems. New sales and earnings records were also set by Stark, which makes refrigeration tubing, 6 9 De-Sta-Co's precision stamping and proprietary finishing processes allow production of millions of valves with superb quality and on-time delivery. This creates unique customer value for this critical part used in refrigeration and automotive air conditioning compressors. 1 Petro-Vend Doug Stewart, President Products: Commercial key/card fuel control systems, retail service station systems, and tank level monitoring equipment 1 Stark Manufacturing Grif Griffey Products: Specialized aluminum tubing and manifold assemblies 1 Norris* James L. Mitchell, President Products: Sucker rods, couplings, well servicing equipment, polished rods I.S.T. Molchtechnik GmbH (Germany) Rainer van Essen, Managing Director Products: Industrial pigging systems, manifolds, and blending systems 1 De-Sta-Co* William D. Rogerson, President Products: Reed valves for compressors; Toggle clamps and workholding devices; Robohand grippers 1 OPW Fueling Components* Robert Conner, President Products: Gasoline nozzles, fittings, valves, and environmental products 1 Blackmer Ray Pilch, President Products: rotary P.D. pumps for delivery of fuel oil, propane and industrial products, industrial gas compressors; Tarby Progressing cavity pumps; Hammond Engineering Rotary vane and screw compressors, vacuum pumps, and blowers 1 C. Lee Cook David Jackson, President Products: Piston rings, packings for gas compressors and aerospace sealing applications; Compressor Component compressor rods, pistons, and repair services: Cook Manley compressor valves 1 Midland Manufacturing Jerry Portis, Chairman Donald Rodda, President Products: Tank car and barge valves, safety valves, and liquid level measuring devices From left to right; Bob Leisure, Bill Rogerson, Oscar Parman [PHOTO] 1 Duncan Parking Systems* Richard Farrell, President Products: Parking control products and systems 1 Alberta Oil Tool (Canada)** James R. Kosh, President Products: Sucker rods, fittings, valves, and controls 1 Civacon* James Johnson, President Products: Kamloks(R), Kamvaloks(R), and transport tank monitoring and control systems; Knappco manhole/access covers and valves 1 Ronningen-Petter* Peter Scovic, President Products: filtration systems; RP Products bag filters and high efficiency media 1 Norriseal Controls Wade Wnuk, President Products: Process valves and instrumentation systems; Ferguson-Beauregard/Logic Controls oil and gas production systems 1 OPW Engineered Systems Tom Niehaus, President Products: Loading arms, swivels, and sight flow indicators 1 Wittemann* William Geiger, President Products: CO2 gas generation and recovery systems, and industrial refrigeration systems Numbers indicate position in primary market served, generally North America, except as noted. *worldwide **Canada 7 10 and at OPW Engineered Systems, which manufactures loading arms and swivels for petroleum transfer. Civacon, which produces valves and other products used in transportation of chemicals and petroleum, purchased Knappco during the year, thereby expanding its line of products for tank trucks. Alberta Oil Tool, a Canadian producer of sucker rods and other equipment for oil production, also reported record earnings, as the Canadian "oil patch" remained strong. Total profits for these seven companies increased 22%, with the largest gains at Midland and Ronningen-Petter. Ronningen-Petter's DCF filters have become a standard within the pulp and paper industry and its bag filter businesses continued to grow. Midland benefited from heavy production of rail tank cars by its major customers in response to a strong fleet replacement market. SALES AND INCOME ADVANCED TO RECORD LEVELS AT RONNINGEN-PETTER, WHICH MAKES LIQUID FILTRATION SYSTEMS; AT MIDLAND MANUFACTURING, WHICH PRODUCES RAIL TANK CAR VALVE AND SAFETY DEVICES, AND AT WITTEMANN, A PRODUCER OF CO(2) RECOVERY SYSTEMS. RESULTS MIXED AT OTHER COMPANIES Dover Resources' other six businesses reported mixed results that reflected their individual circumstances. Norris had a substantial profit gain on the strength of improved efficiencies and the company's 1994 departure from the downhole pump business. The domestic market for sucker rods did not improve but Norris modestly increased its market share and benefited from strong international activity. Conversely, reduced demand for Norriseal's equipment, especially valves from its Houston facility, resulted in a disappointing income drop and the need for cutbacks that in the short term reduced profits. Duncan Parking Systems introduced new products for the parking industry and improved its share of large-scale municipal parking meter orders, leading to significantly improved profitability. C. Lee Cook, Petro Vend and IST could not match their 1994 profits. In the course of the year, Cook undertook an aggressive program of manufacturing modernization in its Louisville facility, while expanding its Compressor Components and Manley Valve operations. The substantial capital investment and process change should lead to an improved profit performance in 1996 and enhanced service to Cook's customers. OUTLOOK Dover Resources' companies occupy strong positions within their respective market niches, and as a group are highly profitable. There is no one company or product line which is expected to drive 1996 results, but all the companies see opportunities for sales and earnings improvement and the outlook for Dover Resources is positive. A key objective for 1996 is to leverage expected sales growth into higher profit gains through close control of costs. 8 11
INDUSTRIES ---------- OPERATING EARNING OROI ------- ---- ~~91 38 27 92 38 34 93 60 34 94 81 35 95 118 38~~
DOVER INDUSTRIES DOVER INDUSTRIES TURNED IN RECORD SALES AND EARNINGS IN 1995, ACHIEVING AN ALL-TIME HIGH IN OPERATING RETURN ON OPERATING INVESTMENT, WHICH DOVER VIEWS AS THE KEY MEASURE OF EFFECTIVE USE OF STOCKHOLDERS' INVESTMENT. The reported margin of 14.8% understates the true operating performance of Dover Industries' "average" company by almost three percentage points because of acquisition premium amortization and the net effect of unusual items, including environmental costs. Sales growth was almost entirely internal, with the effect of 1994 acquisitions, now included for the full year, and of one small add-on acquisition in 1995 contributing only 2 of the nearly 15 percentage point sales gain. All of Dover Industries' companies had sales gains, and 10 of the 12 had profit gains as well. FIVE LARGEST BUSINESSES GROW Approximately 65% of Dover Industries' sales and a slightly smaller percentage of its profit derived from five businesses: Rotary Lift, Tipper Tie, Marathon and Heil, now considered as two separate businesses -- Heil Environmental and Heil Trailer International. All improved their profits in 1995 by amounts ranging from modest, at Rotary Lift, to very large at both Heil companies and at Marathon. Heil reorganized itself during the year into two separate businesses, one focusing on refuse trucks and dump bodies, the other on petroleum tanker and dry bulk carriers (see picture on Page 10). Larry Gray, formerly president of Heil, became Executive Vice President of Dover Industries, adding to the management depth within this Dover subsidiary. He will have primary oversight responsibility for the two Heil companies, Marathon and Tipper Tie. Both Heil companies had record sales and earnings. The environmental business benefited from a stronger, more confident marketplace and from cost reductions initiated in 1994. Heil Trailer International had large order increases during 1994 and early 1995 that forced extension of delivery times despite capacity expansion and high levels of productivity. It ended the year with a large backlog but a rapidly softening market and will need some order recovery to achieve further profit gains. Rotary Lift had a slight profit gain in a slowing market that reflected a drop in activity by car dealers and mass merchandisers. Rotary continued its emphasis on new products, factory investments to reduce cost, and aggressive management of its multiple distribution channels for automotive lifts. With a view to expanding internationally, Rotary opened a sales office in London and invested in an Italian assembler and marketer of automotive scissors lifts. 9 12 [PHOTO] From left to right; Glenn Chambers, Larry Gray, Bob Foster 1 H.E.I.L. Glenn M. Chambers, President Products: Refuse collection vehicles and dump bodies 1 Heil Trailer International Robert A. Foster, President Products: Trailerized tanks 1 Marathon Equipment Edward A. Furnari, President Products: Solid waste compaction, balers, and recycling equipment 1 Tipper Tie/technopack Charles M. Heard, President Products: Clip closures, packaging systems, netting, and wire products 1 Rotary Lift Timothy J. Sandker, President Products: Automotive lifts and alignment racks 1 Groen Louise E. O'Sullivan, President Products: Commercial food service cooking equipment/industrial processing equipment 1 Texas Hydraulics Vernon E. Pontes, President Products: Specialty hydraulic cylinders 2 DovaTech A. Patrick Cunningham, President Products: Bernard MIG welding, Weldcraft TIG welding, PlazCraft plasma cutting, PRC laser equipment The Heil company set new sales and profit records for both of its major product groups. It will split into two separate companies in 1996, focusing on Refuse Trucks and on Tank Trailers. 1 Chief Automotive Systems James E. Aylward, President Products: Auto collision measuring and repair systems 1 Davenport Donald L. Firm, President Products: Multi-spindle screw machines, benchtop machine tools, and spare parts and attachments 1 Dieterich Standard Eugene M. Shanahan, President Products: Annubar(R) flow sensors 2 Randell Lynn L. Bay, President Products:Commercial refrigeration; Food service preparation and holding equipment Numbers indicate position in primary market served, generally North America 10 13 Marathon also set sales and income records, benefiting from the same market strength that lifted Heil Environmental. Ed Furnari, a longtime Marathon marketing executive, became president and has focused the company on sales of its traditional compactors and on widening its range of balers and other recycling products. Tipper Tie's association with technopak, acquired in 1994, continued to benefit both companies, which set substantial earnings records in markets that were up only modestly. Both have gained from each other's technology, introducing new packaging products in Europe and the U.S. GAINS AT FIVE OTHER COMPANIES Texas Hydraulics' focus on value-creating product engineering solutions and effective cost control resulted in record profits. In the past three years, the company has more than doubled sales and almost tripled income. In 1996, it will focus on capacity expansion and on investment to reduce manufacturing costs. APPROXIMATELY 65% OF DOVER INDUSTRIES' SALES AND A SLIGHTLY SMALLER PERCENTAGE OF ITS PROFIT DERIVED FROM FIVE BUSINESSES: ROTARY LIFT, TIPPER TIE, MARATHON AND HEIL, NOW CONSIDERED AS TWO SEPARATE BUSINESSES -- HEIL ENVIRONMENTAL AND HEIL TRAILER INTERNATIONAL. Groen refocused its efforts on cooking equipment, selling its AMW coffee-brewing equipment line during the year. Improved manufacturing performance, especially at the Jackson, Mississippi facility, enabled Groen to leverage a small sales gain to record profits. Davenport saw strong activity, both in new multiple spindle screw machine sales (the highest level of units shipped in over a decade) and in spare parts sales, which reflected increased machine usage. Davenport assumed responsibility for B&S, a manufacturer/marketer of spare parts for Brown & Sharpe screw machines. This, plus the acquisition of Light Machine in January, 1996 and the introduction of new products, should push Davenport to new records in 1996. DovaTech, formerly Bernard, also leveraged a modest sales gain into record profits. The January, 1996 acquisition of PRC, a maker of laser welding and cutting equipment, should fuel further gains in 1996. Dieterich Standard, Dover Industries, manufacturer of flow measurement devices, again achieved record earnings, with modest growth in a relatively flat market. PROFIT DECLINES IN TWO BUSINESSES Randell and Chief Automotive were unable to translate small sales gains into higher profits because of unfavorable sales mix, new product costs, and very competitive markets. Both businesses were solidly profitable and maintained their market positions. New products and manufacturing cost improvements are expected to yield sales and earnings gains in 1996. OUTLOOK All 12 Dover Industries companies have planned for profit increases in 1996, with the best opportunities seen at Marathon and Heil Environmental, as well as at Davenport, as it integrates B&S into its management structure and makes more effective use of B&S's new plant facilities in the U.K. After making only one small add-on acquisition in 1995, Dover Industries hopes to step up its acquisition activity in 1996. A good start was made with two "add-ons" in January. Barring an economic downturn, strong growth is expected in 1996, although at a lower rate than in 1995. 11 14
DIVERSIFIED ----------- OPERATING EARNING OROI -------- ---- 91 36 32 92 37 45 93 39 47 94 67 36 95 93 35
DOVER DIVERSIFIED DOVER DIVERSIFIED'S PROFITS ROSE 38% IN 1995, ACHIEVING A NEW RECORD BY A SUBSTANTIAL AMOUNT ON THE STRENGTH OF EXCELLENT PERFORMANCES BY BELVAC AND TRANTER. PROFITS ALSO BENEFITED FROM A ONE-SHOT GAIN ON CONTRACT SETTLEMENTS AT SARGENT CONTROLS. The segment's reported margin of 13.8% does not reflect the profitability of most Dover Diversified businesses. Diversified derived 25% of its sales from A-C Compressor, which had unusually low margins in 1995, and from Hill Phoenix's refrigerated display case business which operated at a loss. In addition, although Mark Andy contributed approximately $40 million in sales and had strong operating profits, it added little to reported earnings because of acquisition premium write-offs. Dover Diversified's operating return on operating investment remained strong at 34% after taxes. TWO COMPANIES ARE STAR PERFORMERS Belvac increased its sales 41%, setting a new record for the fifteenth consecutive year. Customer service and delivery time remained a challenge, despite aggressive capital spending and facility expansion. As the preferred producer of high-speed equipment to reduce the top diameter of aluminum beverage cans -- by "necking" the diameter down through a series of progressive dies -- Belvac has enjoyed extraordinarily strong demand in recent years. This has been driven by can producers' desire to reduce aluminum content, which is by far their largest cost element. Belvac introduced a new, modular necker (pictured on page 13), as well as new versions of its trimming machines and new "reformer" and "reprofiler" machines that alter the shape of can bottoms, permitting further aluminum content reduction. Demand for Belvac's products is expected to stay strong throughout 1996. Tranter increased its sales almost 50%, reflecting a full year's results from its 1994 acquisitions, HTT/SWEP and ReHeat, as well as strong growth in the U.S. and Europe. The combination of bolted and brazed plate and frame heat transfer technology within one company is proving helpful to both product lines. Tranter expanded its European manufacturing capacity. MIXED RESULTS AT OTHER BUSINESSES Waukesha Bearings set sales and profit records by narrow margins. The company's focus on specially engineered bearing "solutions" enabled it to maintain its leadership position in this industry. Pathway Bellows recovered from a disappointing profit performance in 1994 to achieve a new earnings record on a small sales gain through better control of costs. Several poorly priced jobs and cost overruns adversely affected results in 1994. 12 15 2 Waukesha Bearings Donald A. Fancher, President Products: Fluid film bearings; Sweeney torquing tools; CRL manipulators and isolators 1 Pathway Bellows Keith Cole, President Products: Metal and fabric expansion joints 1 Sargent Controls & Aerospace** Donald C. Tarquin, President; Products: Submarine fluid controls; aircraft hydraulic controls; self-lubricating bearings 1 Mark Andy* John Eulich, President Products: Flexographic presses Phoenix Diversified Products Ken Stevens, President Products: Electrical distribution systems 1 Thermal Equipment Todd L. Taricco, President Products:Autoclaves; industrial cleaning equipment; medical waste treatment [PHOTO] From left to right; Wendell Bates, Charlie Price, Jim Schneiders, Jim Marshall 1 Belvac* Jim Schneiders, President Products: Can necking and trimming equipment 1 Tranter Kenneth L. Kaltz, President Products: Plate/frame and compact brazed heat exchangers; transformer radiators 2 A-C Compressor Thomas Bell, President Products: Centrifugal, oil-free-screw, and rotary compressors 2 Hill Phoenix Ralph Coppola, President Products: Commercial refrigeration systems; refrigerated display cases Belvac's new, model 595K modular necker is expandable to 16 turret stations, allowing die necking to 202 diameter tops plus bottom profiling, reforming, flanging, and inspection -reducing aluminum usage and expensive can handling. Numbers indicate position in primary market served, generally North America, except as noted. *Worldwide **Position for submarine fluid controls 13 16 Besides an earnings gain from its contract settlements, Sargent Controls improved its sales and operating margins, while further consolidating operations in a single facility. At year-end, it won a new contract for valves on the third Seawolf class submarine, improving the outlook for 1996-97. Profit progress at Thermal Equipment proved elusive, as the aerospace market for autoclaves remained depressed and price-competitive. The management team was strengthened and new products will be introduced in 1996. Dover Diversified's two major disappointments occurred at A-C Compressor and the Refrigerated Display Case division of Hill Phoenix. New operating management was appointed at both companies in the fourth quarter. A loss had been anticipated at the Hill case business, acquired in August, 1994, because of the expected costs associated with moving production facilities and introducing a new product line, but the move from Trenton, New Jersey to Richmond, Virginia was more disruptive and costly than expected. The refrigeration systems portion of Hill Phoenix partially offset this disappointment with an outstanding year. The Phoenix Refrigeration Company (acquired in 1993) and Margeaux (acquired in 1995) combined for record sales and earnings. The outlook for Hill Phoenix in 1996 is positive with improvement expected in the display case business. AS THE PREFERRED PRODUCER OF HIGH-SPEED EQUIPMENT TO REDUCE THE TOP DIAMETER OF ALUMINUM BEVERAGE CANS -- BY "NECKING" THE DIAMETER DOWN THROUGH A SERIES OF PROGRESSIVE DIES -- BELVAC HAS ENJOYED EXTRAORDINARILY STRONG DEMAND IN RECENT YEARS. At A-C Compressor, several large compressor jobs outside of the company's traditional technology niche, taken at very competitive prices, plus a delivery schedule that overloaded manufacturing capacities in the second half, led to a sharp drop in margins from historic levels. A-C expects to work through the difficult portion of its order book in the first half of 1996 and has refocused its efforts under a newly appointed president. ACQUISITION The Mark Andy company, acquired in May, 1995, achieved record sales and (pre-acquisition cost) earnings and further solidified its leadership position in the manufacture of flexographic presses. Flexography is the most effective method for high quality, low-to-medium volume printing of self-adhesive labels, a rapidly growing segment of the huge, worldwide printing industry. In 1996, Mark Andy will expand its product offerings while investing in manufacturing and process improvements to reduce costs. OUTLOOK The outlook is positive for all of Dover Diversified's businesses with "turnaround" opportunities in several areas. As a result, earnings at Dover Diversified are expected to grow strongly again in 1996. 14 17 TECHNOLOGIES
Operating After-Tax Earnings Operating Return ($ millions) on Investment (%) 91 27 15 92 30 16 93 42 18 94 76 30 95 134 45
DOVER TECHNOLOGIES. ON A SALES GAIN OF 45%, DOVER TECHNOLOGIES' PROFITS SURGED 75% IN 1995. THE PROFIT INCREASE WAS NEARLY $70 MILLION, MEASURED BEFORE ACQUISITION PREMIUM WRITE-OFFS, CORPORATE EXPENSES AND OTHER ADJUSTMENTS. Of this, the largest share was provided by Universal Instruments, with the balance from the fourth-quarter inclusion of Imaje and the growth of other Dover Technologies companies', notably DEK and Quadrant. The segment's companies also made good strategic progress toward their goals of becoming significant players in surface mount equipment and of building leadership roles in other focused market niches. A RECORD YEAR FOR UNIVERSAL Universal set a profit record in 1995 by a wide margin on record sales of more than $500 million. The profit gain derived partly from improved sales and margins in surface mount assembly equipment, but more from a surge in demand for Universal's highly profitable thru-hole equipment. Thru-hole orders rose sharply, beginning in the latter part of 1994 and continuing through the first half of 1995, because of the development of new consumer electronic products designed for thru-hole components (such as direct TV) and the movement of manufacturing to low-cost environments, notably China, Malaysia and Mexico. Bookings of thru-hole product dropped sharply in the second half of 1995. Sales of surface mount products exceeded those of thru-hole equipment and made a solid contribution to Universal's profits. Universal's share of the $3 billion worldwide market for all types of surface mount equipment is less than 10%. However, in the flexible/fine pitch segment, which accounts for about one-third of the total market, Universal's share is well into double digits and the company may be the sales leader in North America. Universal developed several new options for its GSM-1 machine during 1995 and will begin shipping its new GSM-2 early in 1996 (see picture, p. 16). The overall market for surface mount assembly equipment is expected to reach $5 billion by the year 2000. Universal hopes to grow faster than the market by expanding the application range of "flexible" machines and achieving deeper penetration of that market. GAINS AT MOST COMPANIES DEK also set sales and profit records, although margins were below desired levels because of new product development 15 18 1 Universal Instruments Corporation Gerhard D. Meese, President Products: Automated assembly equipment for printed circuit boards 2 Imaje, S.A. Albert Journo, President Products: Continuous Ink Jet printers, consumables 1 DEK Printing Machines Ltd (U.K.) John B. Knowles, Managing Director Products: Screen printers for surface mount printed circuit boards; BSL flying probe testers 1 Quadrant Technologies Terence W. Ede, President Company/Products: Vectron Technologies, Inc.: SAW devices, oscillators Vectron Laboratories, Inc.: Crystal oscillators Oscillatek, Inc.: Crystal oscillators Dielectric Laboratories, Inc.: High frequency capacitors Communication Techniques, Inc.: Microwave synthesizers Measurement Systems, Inc.: Manual positioning controls [PHOTO] From left to right; Koen Gieskes, Mark Ragard, Gerhard Meese. Back row; John Yurger, Gene Heiser Universal Instruments is introducing the GSM-2 Surface Mount Placement Machine, adding to its range of products for the accurate, flexible placement market segment. 1 K&L Microwave, Inc. Charles J. Schaub, President Products: Microwave/R.F. filters, Dow-Key coaxial switches 2 TNI, Inc. James M. Strathmeyer, President Products: Ferrite transformers, GFS transformers Novacap, Inc. Dr. Andre P. Galliath, President Products: Multilayer ceramic capacitors 2 Soltec International, B.V. (Netherlands) Michiel J. van Schaik, Managing Director Products: Automated soldering equipment for printed circuit boards Numbers indicate position in primary market served, generally North America 16 19 costs and a need for better manufacturing performance on its basic Model 265 product line. In early 1996, DEK began shipping two new models that are expected to add greater value for customers and lead to further sales gains. Quadrant Technologies achieved strong gains, primarily from its acquisition of AT&T Frequency Control Products (renamed Vectron Technologies, Inc.) at mid-year. The movement of this business from AT&T to a new, focused manufacturing site will be completed in the first quarter. Quadrant's Vectron Technologies, Vectron Labs and Oscillatek companies now occupy a leadership position in the oscillator market, with product offerings covering a wide range of technologies and annual sales of $100 million. THE OVERALL MARKET FOR SURFACE MOUNT ASSEMBLY EQUIPMENT IS EXPECTED TO REACH $5 BILLION BY THE YEAR 2000. UNIVERSAL HOPES TO GROW FASTER THAN THE MARKET BY EXPANDING THE APPLICATION RANGE OF "FLEXIBLE" MACHINES AND ACHIEVING DEEPER PENETRATION OF THAT MARKET K&L Microwave and Novacap improved sales and profits, helped by strong niche markets and new products. TNI and Soltec reported flat profits, but their outlook for 1996 is positive, as Soltec is introducing two new soldering machines (Delta Wave(TM) and Prisma(TM)), while TNI will benefit from the fourth quarter add-on acquisition of GFS Manufacturing. ACQUISITION OF IMAJE In purchasing Imaje for approximately $200 million, Dover made its largest acquisition. Imaje, based in Valence, France, is one of three major producers worldwide of continuous inkjet printers. These machines electronically "throw" specially formulated, proprietary, fast-drying inks onto products moving along the customer's assembly lines. High speeds, low operating cost and the ability to change markings on the fly make this the preferred technology for industrial product-marking applications. For the full year 1995 Imaje set a (pre-acquisition cost) profit record with sales in excess of $160 million, gaining share in a growing market. This was Imaje's fourth year of improvement since a management team led by Albert Journo took over direction of the company. This management team will continue to direct and expand the business with access to Dover Technologies' financial resources. OUTLOOK Earnings will decline at Universal in 1996, as surface mount sales and profits are unlikely to grow fast enough to offset the expected decline in thru-hole assembly equipment shipments. The inclusion of Imaje for a full year and a reduced rate of acquisition premium write-off should more than make up for Universal's decline. In addition, two add-on acquisitions were completed in January, 1996 -- BSL by DEK, and Dow-Key Microwave by K&L. With all other Dover Technologies companies seeing profit opportunities, especially DEK with its new products and Quadrant with the AT&T product line, the outlook is for another record year. 17 20 DOVER ELEVATOR INTERNATIONAL
Operating After-Tax Earnings Operating Return on ($ millions) Investment (%) 91 58 26 92 59 26 93 56 25 94 46 58 21 25 95 32 63 25 28 Reported Excluding Excluding Special Special Items Items
DOVER ELEVATOR INTERNATIONAL, INC. ALTHOUGH NON-RECURRING CHARGES OF $11.5 MILLION IN 1994 AND $31.9 MILLION IN 1995 DISTORT THE TREND OF SEGMENT REPORTING, THE $63 MILLION DOVER ELEVATOR INTERNATIONAL EARNED IN 1995 BEFORE THESE CHARGES WAS ITS BEST RESULT SINCE 1990. During this five-year period, sales were flat at $800 million, plus or minus 3%. The North American market, where most Dover Elevator activity is concentrated, has been in a major recession since the 1990-91 real estate crash. REORGANIZATION The continuing flat performance, with no indication of a near-term upturn in markets, created the need for a structural reorganization of Dover Elevator International. In 1994, General Elevator, which was an independent service company with a national network of offices, was integrated into Dover Elevator operations. Responsibility for all elevator manufacturing management was also concentrated around Horn Lake, Mississippi, as the Canadian company was divided into separate factory and field operations. In 1995, North America was restructured as a "wholly unitary" business. Field operations (sales, service and construction) were divided into seven regions -- five covering areas east of the Rockies and one each for the Pacific Coast region and Canada. Dover Elevator also closed its manufacturing operations in Canada and consolidated production in the Horn Lake area. Additionally, it shut down its separate companies for accessibility products and for elevator components in Germany. The restructuring reduced Dover Elevator International's salaried employment by approximately 300 people -- 12% -- between January, 1994 and December, 1995, with the largest cuts coming in the fourth quarter of 1995. SPECIAL CHARGE The special charges of $43 million reported over the past two years were largely non-cash in nature. The largest elements were the write-down of facilities to estimated market value, the write-off of fixed assets and inventories, and severance pay. In addition, Dover Elevator adopted a new method of measuring the percentage of completion in its new elevator operations that spreads revenue more evenly over the project cycle. This resulted in a $7 million cost adjustment in the fourth quarter of 1995, which was included in the special charge for the year. This measurement change will even out somewhat the peaks and valleys in reported income caused by changes in the level of activity in the elevator business. 18 21 [PHOTO] From left to right; Gary Bailey, Bill Wilkinson, Nigel Davis, Steve Bailey, Buzz Dana, Marc Beckers Dover Elevator International Nigel Davis, President Gary Bailey, Steve Bailey, VPs, Eastern Marketing Group Buzz Dana, VP, Pacific/Canadian Marketing Group Bill Wilkinson, VP, International Operations Paul Nickel, VP, Finance Hammond & Champness LTD UK Marc Beckers, Managing Director Dover is North America's largest new elevator company, and second in total sales, including service. [FIGURE OF AN ARROW POINTING TOWARDS GROUP PHOTO] The senior management group is placing emphasis on cost control, hydraulic elevator sales, and exports - especially to the booming China market. 19 22 NEW MANAGEMENT TEAM Nigel Davis is president of the new unitary Dover Elevator International. He has been a Dover manager for 12 years, the last nine as president of Hammond & Champness, Dover Elevator's European elevator company. The five Eastern field regions are directed by Gary and Steve Bailey, who have directed various Dover elevator companies for many years. Buzz Dana, formerly president of Dover's Sound Elevator (Seattle), now has responsibility for the Pacific region and for Canada. International operations are headed by Bill Wilkinson, previously president of Dover Elevator Canada. He will direct export activities, as well as H & C's U.K. and German operations, and Dover Elevator's Chinese joint ventures. In addition, Paul Nickel, a former Dover senior financial executive who rejoined the company two years ago as controller, will direct Dover Elevator's financial affairs. DOVER ELEVATOR MANAGEMENT'S FOCUS WILL BE ON INCREASING THE EFFICIENCY OF OPERATIONS, ON IMPROVING VALUE-ADDED SERVICES TO CUSTOMERS, ON STRENGTHENING SALES IN THE HYDRAULIC ELEVATOR MARKET, AND ON EXPANDING EXPORTS, ESPECIALLY TO CHINA. MARKETS The overall market for new elevators in North America and the U.K. remained very flat and price competitive. Service and modernization activities have seen some recovery, but also remain very competitive. Dover Elevator's operating pattern of previous years continued: little sales growth, large losses in new elevators (the combined process of manufacturing elevators and installing them in buildings), offset by continued good profitability in service and modernization. These "aftermarket" businesses, while no longer growing at the double-digit rates they enjoyed for a number of years, now account for more than half of overall sales. The near-extinction of the high-rise (gearless) elevator market in North America since 1990 has led to increased competitive pressure on Dover's mid-rise (geared) and low-rise (hydraulic) elevator segments. Dover continues as the largest manufacturer/ installer of new elevators in North America, although Otis has larger total sales because of its much bigger installed base for service. Exports from our U.S. elevator factories continued to grow, especially to China, which is the largest world market where actual building construction exceeds local elevator component manufacturing capacity. OUTLOOK AND MISSION Dover Elevator's reorganization should increase operating profits in 1996 to a level at or above the annualized rate of $70 million that the company achieved in the second half of 1995. Dover Elevator management's focus will be on increasing the efficiency of operations, on improving value-added services to customers, on strengthening sales in the hydraulic elevator market, and on expanding exports, especially to China. Although Dover Elevator now represents a much smaller portion of Dover Corporation's income stream than it did in the 1980s, the company's financial performance has been good relative to other large elevator companies. It represents a valuable franchise and will continue to play an important role in creating long-term value for Dover stockholders. 20 23 FINANCIAL REVIEW TABLE OF CONTENTS Market Segment Information...................................... 22 Consolidated Statements of Earnings............................. 23 Consolidated Statements of Retained Earnings.................... 23 Consolidated Balance Sheets..................................... 24 Consolidated Statements of Cash Flows........................... 25 Notes to Consolidated Financial Statements...................... 26 Independent Accountants' Report................................. 34 Quarterly Data.................................................. 35 Common Stock Cash Dividends and Market Prices................... 35 Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 36 11-Year Consolidated Summary of Selected Financial Data......... 38 Directors and Officers.......................................... 40 Stockholder Information......................................... 40 21 24 SALES AND OPERATING PROFIT BY MARKET SEGMENT DOVER CORPORATION AND SUBSIDIARIES (IN THOUSANDS)
For the Years Ended December 31, 1995 1994 1993 1992 1991 1990 - ----------------------------------------------------------------------------------------------------------------------------- Sales to unaffiliated customers: Dover Technologies $ 873,505 $ 603,068 $ 488,248 $ 458,603 $ 421,943 $ 424,704 Dover Industries 798,173 691,342 501,364 357,054 339,255 324,967 Dover Diversified 672,503 472,706 244,597 225,771 196,464 209,961 Dover Resources 583,727 525,971 472,643 439,389 447,079 420,163 Dover Elevator International 822,833 793,559 777,720 791,099 791,400 830,589 Intramarket sales (4,864) (1,370) (644) (336) (355) (39) ---------------------------------------------------------------------------------------- Consolidated total $3,745,877 $3,085,276 $2,483,928 $2,271,580 $2,195,786 $2,210,345 ---------------------------------------------------------------------------------------- Operating profit: Dover Technologies $ 133,641 $ 76,205 $ 41,797 $ 29,793 $ 27,439 $ 27,737 Dover Industries 117,841 81,028 59,942 37,837 37,812 49,637 Dover Diversified 92,948 67,220 39,360 37,373 35,955 36,142 Dover Resources 90,745 83,979 70,290 58,594 62,323 66,268 Dover Elevator International 31,550 46,123 56,404 59,198 57,947 95,936 Interest income, interest expense and general corporate expenses, net (49,614) (47,696) (22,251) (22,460) (17,388) (31,602) ---------------------------------------------------------------------------------------- Consolidated income before income taxes $ 417,111 $ 306,859 $ 245,542 $ 200,335 $ 204,088 $ 244,118 ---------------------------------------------------------------------------------------- Profit margin (pretax): Dover Technologies 15.3% 12.6% 8.6% 6.5% 6.5% 6.5% Dover Industries 14.8 11.7 12.0 10.6 11.1 15.3 Dover Diversified 13.8 14.2 16.1 16.6 18.3 17.2 Dover Resources 15.5 16.0 14.9 13.3 13.9 15.8 Dover Elevator International 3.8 5.8 7.3 7.5 7.3 11.6 ---------------------------------------------------------------------------------------- Consolidated profit margin 11.1% 9.9% 9.9% 8.8% 9.3% 11.0% ---------------------------------------------------------------------------------------- Identifiable assets at December 31: Dover Technologies $ 721,831 $ 330,661 $ 278,871 $ 285,749 $ 247,562 $ 271,959 Dover Industries 591,228 541,109 485,419 302,821 314,037 257,645 Dover Diversified 570,269 452,074 340,072 183,262 116,432 148,108 Dover Resources 326,047 291,480 218,473 219,216 228,152 221,900 Dover Elevator International 380,889 362,924 381,587 376,508 378,385 377,059 Corporate (principally cash and equivalents, and marketable securities) 76,387 92,389 69,267 58,568 72,052 191,695 ---------------------------------------------------------------------------------------- Consolidated total $2,666,651 $2,070,637 $1,773,689 $1,426,124 $1,356,620 $1,468,366 ---------------------------------------------------------------------------------------- Depreciation and amortization: Dover Technologies $ 19,750 $ 13,904 $ 13,401 $ 19,755 $ 20,144 $ 23,628 Dover Industries 26,783 25,453 20,520 17,840 26,112 17,050 Dover Diversified 27,141 21,948 14,837 10,756 9,623 10,008 Dover Resources 17,816 19,089 13,300 13,602 14,689 13,930 Dover Elevator International 14,953 13,744 13,319 13,683 14,366 12,692 Corporate 1,393 1,651 1,592 1,821 432 222 ---------------------------------------------------------------------------------------- Consolidated total $ 107,836 $ 95,789 $ 76,969 $ 77,457 $ 85,366 $ 77,530 ---------------------------------------------------------------------------------------- Capital expenditures: Dover Technologies $ 18,546 $ 13,425 $ 11,769 $ 11,665 $ 12,373 $ 9,380 Dover Industries 20,675 23,299 11,146 8,225 5,675 5,584 Dover Diversified 31,299 19,419 4,802 5,767 6,243 5,943 Dover Resources 21,127 16,340 11,515 11,560 12,307 11,859 Dover Elevator International 10,949 11,764 8,112 5,137 9,947 12,049 Corporate 72 226 188 87 73 165 ---------------------------------------------------------------------------------------- Consolidated total $ 102,668 $ 84,473 $ 47,532 $ 42,441 $ 46,618 $ 44,980 - -----------------------------------------------------------------------------------------------------------------------------
22 25 CONSOLIDATED STATEMENTS OF EARNINGS* DOVER CORPORATION AND SUBSIDIARIES (IN THOUSANDS EXCEPT PER SHARE FIGURES)*
Years ended December 31, 1995 1994 1993 - -------------------------------------------------------------------------------------------- Net sales $3,745,877 $3,085,276 $2,483,928 Cost of sales 2,564,344 2,137,477 1,733,256 ------------------------------------------ Gross profit 1,181,533 947,799 750,672 Selling and administrative expenses 743,133 622,434 496,799 ------------------------------------------ Operating profit 438,400 325,365 253,873 ------------------------------------------ Other deductions (income): Interest expense 40,113 36,461 22,338 Interest income (20,060) (18,619) (19,601) All other, net 1,236 664 5,594 ------------------------------------------ Total 21,289 18,506 8,331 ------------------------------------------ Earnings before taxes on income 417,111 306,859 245,542 Federal and other taxes on income 138,800 104,486 87,288 ------------------------------------------ Net earnings (per common share 1995 $2.45; 1994 $1.77; 1993 $1.39) $ 278,311 $ 202,373 $ 158,254 - --------------------------------------------------------------------------------------------
Earnings per share computed on the basis of the weighted average number of common shares outstanding during the year (113,453 in 1995, 114,370 in 1994 and 114,220 in 1993).* CONSOLIDATED STATEMENTS OF RETAINED EARNINGS* DOVER CORPORATION AND SUBSIDIARIES (IN THOUSANDS EXCEPT PER SHARE FIGURES)
Years ended December 31, 1995 1994 1993 - -------------------------------------------------------------------------------------------- Balance at beginning of year $1,268,114 $1,121,817 $1,051,949 Net earnings 278,311 202,373 158,254 ------------------------------------------ 1,546,425 1,324,190 1,210,203 Deductions: Distribution of contract electronics manufacturing business - - 36,982 Stock split 56,793 - - Treasury stock retired 273,900 - - Common stock cash dividends of $.56 per share ($.49 in 1994; $.45 in 1993) 63,545 56,076 51,404 ------------------------------------------ Balance at end of year $1,152,187 $1,268,114 $1,121,817 - --------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements. 23 26 CONSOLIDATED BALANCE SHEETS DOVER CORPORATION AND SUBSIDIARIES (IN THOUSANDS EXCEPT PER SHARE FIGURES)
December 31, 1995 1994 1993 - -------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 121,698 $ 90,304 $ 63,685 Marketable securities, at market (1993 at cost, which approximates market) 27,054 54,583 32,592 Receivables (less allowance for doubtful accounts of $22,325 in 1995, $14,326 in 1994 and $10,198 in 1993) 706,889 576,628 475,155 Inventories 479,327 364,604 294,319 Prepaid expenses and other current assets 49,391 47,020 37,889 ------------------------------------------ Total current assets 1,384,359 1,133,139 903,640 ------------------------------------------ PROPERTY, PLANT AND EQUIPMENT, AT COST: Land 26,565 26,546 24,134 Buildings 223,227 185,545 160,294 Machinery and equipment 725,335 600,084 530,209 ------------------------------------------ 975,127 812,175 714,637 Less accumulated depreciation (551,187) (469,490) (431,274) ------------------------------------------ Net property, plant and equipment 423,940 342,685 283,363 ------------------------------------------ INTANGIBLE ASSETS, NET OF AMORTIZATION 811,182 564,420 535,136 OTHER INTANGIBLE ASSETS 10,258 10,258 10,258 OTHER ASSETS AND DEFERRED CHARGES 36,912 20,135 41,292 ------------------------------------------ $2,666,651 $2,070,637 $1,773,689 ------------------------------------------ - -------------------------------------------------------------------------------------------- LIABILITIES CURRENT LIABILITIES: Notes payable $ 417,478 $ 263,605 $ 174,980 Current maturities of long-term debt 2,502 455 312 Accounts payable 190,850 155,186 117,206 Accrued compensation and employee benefits 125,600 88,235 71,084 Accrued insurance 106,274 98,712 74,501 Other accrued expenses 209,455 147,585 116,915 Federal and other taxes on income 28,888 18,445 40,796 ------------------------------------------ Total current liabilities 1,081,047 772,223 595,794 ------------------------------------------ LONG-TERM DEBT 255,600 253,587 252,065 DEFERRED INCOME TAXES 46,328 2,545 20,409 OTHER DEFERRALS (PRINCIPALLY COMPENSATION) 55,970 46,423 35,419 COMMITMENTS AND CONTINGENCIES (NOTES 11 AND 12) STOCKHOLDERS' EQUITY CAPITAL STOCK: Preferred, $100 par value per share. Authorized 100,000 shares; issued none - - - Common, $1 par value per share. Authorized 200,000,000 shares; issued 116,562,662 shares (66,440,674 shares in 1994 and 66,298,575 in 1993) 116,563 66,441 66,298 ADDITIONAL PAID-IN CAPITAL 6,424 17,676 12,531 CUMULATIVE TRANSLATION ADJUSTMENTS 2,268 (8,206) (12,761) UNREALIZED HOLDING GAINS (LOSSES) 3,994 (550) - RETAINED EARNINGS 1,152,187 1,268,114 1,121,817 ------------------------------------------ 1,281,436 1,343,475 1,187,885 Less common stock in treasury, at cost, 2,892,592 shares(9,710,570 shares in 1994 and 9,135,689 in 1993) 53,730 347,616 317,883 ------------------------------------------ Net stockholders' equity 1,227,706 995,859 870,002 ------------------------------------------ $2,666,651 $2,070,637 $1,773,689 - --------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements. 24 27 CONSOLIDATED STATEMENTS OF CASH FLOWS* DOVER CORPORATION AND SUBSIDIARIES INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (IN THOUSANDS)*
Years Ended December 31, 1995 1994 1993 - --------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 278,311 $ 202,373 $ 158,254 ------------------------------------------ Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 107,836 95,789 76,969 Provision for losses on accounts receivable 9,616 898 5,546 Net increase (decrease) in LIFO reserve 4,647 (2,079) (7,714) Deferred income taxes (13,688) (18,958) 505 Loss (gain) on sale of property and equipment (219) (3,510) 2,435 Decrease (increase) in deferred compensation 7,538 11,431 (367) Acquisition inventory write-off 11,656 7,254 9,108 Gain on sale of business (1,900) Other, net (18,026) (5,780) (3,064) Changes in assets and liabilities (excluding effects of acquisitions and dispositions): Decrease (increase) in accounts receivable (84,212) (56,834) (52,913) Decrease (increase) in inventories excluding LIFO reserve (69,454) (29,763) 5,164 Decrease (increase) in prepaid expenses 54 (6,989) (2,150) Decrease (increase) in other assets (13,150) 21,161 5,460 Increase in accounts payable 25,939 19,595 6,739 Increase in accrued expenses 53,845 57,118 35,915 Increase (decrease) in federal and other taxes on income 4,779 16,680 (13,583) ------------------------------------------ Total adjustments 25,261 106,013 68,050 ------------------------------------------ Net cash provided by operating activities 303,572 308,386 226,304 ------------------------------------------ CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: Net sale (purchase) of marketable securities 31,524 (21,991) (3,012) Proceeds from sale of property and equipment 16,556 6,733 4,108 Additions to property, plant and equipment (includes rental equipment: $1,149 in 1995, $455 in 1994 and $1,217 in 1993) (103,817) (84,928) (48,749) Acquisitions (net of cash and cash equivalents: $32,840 in 1995, $5,682 in 1994 and $2,034 in 1993) (297,427) (180,754) (318,968) Proceeds from sale of businesses 5,000 - 1,557 Purchase of treasury stock (249 shares in 1995, 1,150 shares in 1994 and 90 shares in 1993) (7,601) (29,733) (2,329) ------------------------------------------ Net cash used in investing activities (355,765) (310,673) (367,393) ------------------------------------------ CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: Increase (decrease) in notes payable 153,853 88,594 (45,741) Reduction of long-term debt (266,447) (7,603) (15,700) Proceeds from long-term debt 250,211 - 250,000 Proceeds from exercise of stock options 9,944 5,288 3,145 Proceeds from sale (repurchases) of lease receivables 750 1,863 (6,450) Cash dividends to stockholders (63,545) (56,075) (51,404) ------------------------------------------ Net cash from financing activities 84,766 32,067 133,850 ------------------------------------------ Effect of exchange rates on cash (1,179) (3,161) (708) ------------------------------------------ Net increase (decrease) in cash and cash equivalents 31,394 26,619 (7,947) Cash and cash equivalents at beginning of year 90,304 63,685 71,632 ------------------------------------------ Cash and cash equivalents at end of year $ 121,698 $ 90,304 $ 63,685 ------------------------------------------ SUPPLEMENTAL INFORMATION, CASH PAID DURING THE PERIOD FOR: Income taxes $ 147,439 $ 106,717 $ 101,574 Interest 32,669 40,076 17,057 - ---------------------------------------------------------------------------------------------
1994 & 1993 reclassified to conform to 1995 presentation. See Notes to Consolidated Financial Statements. 25 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The Company is a multinational, diversified manufacturing corporation comprised of over 50 different operating companies which manufacture a broad range of specialized industrial products and sophisticated manufacturing equipment. The Company groups its products and services by industry into five segments as set forth in the tables shown on page 22. A description of the products manufactured and services performed by each of the five segments is given on pages 10 through 20. The accounting policies that affect the more significant elements of the Company's financial statements are described briefly below: A. CONSOLIDATION: The consolidated financial statements include the accounts of the Company and its subsidiaries after elimination of all significant intercompany accounts and transactions, and include the results of operations of purchased businesses from the dates of acquisition. In conformity with the Financial Accounting Standards Board Statement No. 52, "Foreign Currency Translation," the accounts of foreign subsidiaries have been translated into U.S. dollars as follows: assets and liabilities have been translated at year-end rates, profit and loss accounts have been translated at average rates for the year, and the difference has been reflected in the equity section of the balance sheet as cumulative translation adjustments. An analysis of the changes during 1995, 1994 and 1993 in the cumulative translation adjustments shown on the balance sheets follows:
(in thousands) 1995 1994 1993 - ---------------------------------------------------------- Balance at beginning of year $(8,206) $(12,761) $ (7,142) Aggregate adjustment for year $10,474 4,555 (5,619) - ---------------------------------------------------------- Balance at end of year $ 2,268 $ (8,206) $(12,761) - ----------------------------------------------------------
B. PERVASIVENESS OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. C. INVENTORIES: Approximately 48% of net inventory is stated at cost, determined on the last-in, first-out (LIFO) basis, which is less than market value. Inventory of foreign subsidiaries and inventory of some recently acquired domestic companies is stated at the lower of cost, determined on the first-in, first-out (FIFO) basis or market. The remaining inventory principally represents the sum of actual production and erection costs incurred to date on uncompleted elevator installation contracts plus a percentage of estimated profit (where applicable) reduced by progress billings. The net amounts so reflected in the balance sheets are not considered material. D. PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION: Property, plant and equipment includes the cost of land, buildings, equipment and significant improvements of existing plant and equipment. Expenditures for maintenance, repairs and minor renewals are expensed as incurred. When property or equipment is sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and gain or loss realized on disposition is reflected in earnings. Plant and equipment is generally depreciated based upon accelerated methods, utilizing estimated useful property lives, for both accounting and tax purposes. Depreciation expense in 1995 was $70,125,000 compared with $57,774,000 in 1994 and $50,907,000 in 1993. E. INTANGIBLE ASSETS: Intangible assets subject to amortization include goodwill purchased after 1970, and the cost of certain patents, drawings, trademarks, work force, customer lists, service contracts and covenants not to compete. Goodwill is being amortized on a straight-line basis over a period, generally, of 40 years; the remaining amortization is based on estimated useful lives which range from 6 to 20 years. The Company evaluates its amortization policies regularly to determine whether later events and circumstances warrant revised estimates of useful lives. The Company periodically evaluates the recoverability of goodwill and makes adjustments when warranted. Other intangible assets represent principally goodwill attributable to businesses purchased prior to 1970. These intangibles are also regularly evaluated and in the opinion of management have not diminished in value, and accordingly have not been amortized. Goodwill, net of amortization, aggregated $591,543,000 at December 31, 1995, $465,518,000 at December 31, 1994, and $446,961,000 at December 31, 1993. F. RECOGNITION OF INCOME AND EXPENSE ON ELEVATOR INSTALLATION CONTRACTS: Substantially all of the Company's income from elevator installation contracts is recorded on the percentage of completion method. Under the percentage of completion method, contract revenue is recognized as costs are incurred using estimated gross profit percentages. G. INCOME TAXES: The provision for income taxes includes Federal, state, local and foreign taxes. Tax credits, primarily for research and experimentation, are recognized as a reduction of the provision for income taxes in the year in which they are available for tax purposes, and aggregated $1,215,000 from January 1 to June 30, 1995, (when the credit expired), $4,982,000 in 1994, and $1,514,000 in 1993. Research and experimentation expenditures charged to earnings amounted to $94,372,000 in 1995, $96,855,000 in 1994 and $60,430,000 in 1993. Generally, no provision is made for U.S. income taxes on unremitted earnings of foreign subsidiaries since any U.S. taxes payable would be offset by foreign tax credits. 26 29 H. CASH FLOWS: For purposes of the statement of cash flows, the Company considers all highly liquid investments, including highly liquid debt instruments purchased with an original maturity of three months or less, to be cash equivalents. I. SELF INSURANCE: The Company is generally self-insured for losses and liabilities related primarily to workers' compensation, and health and welfare claims resulting from certain events and comprehensive general, product and vehicle liability. Losses are accrued based upon the Company's estimates of the aggregate liability for claims incurred using certain actuarial assumptions followed in the insurance industry and based on Company experience. J. CHANGES IN ACCOUNTING PRINCIPLES: Effective January 1, 1994, the Company adopted the Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." As applicable here the statement requires that investments in such securities be designated either as trading, or available-for-sale. Trading securities are reported at fair value with unrealized gains and losses recognized in earnings. Available-for-sale securities are also reported at fair value but unrealized gains and losses are shown in the caption "unrealized holding gains (losses)" included in stockholders' equity. The Company did not hold any trading securities at December 31, 1995. The net realized gains for the years ended December 31, 1995, 1994 and 1993 were $2,140,000, $4,047,000, and $1,523,000 respectively. As of December 31, 1995, available-for-sale securities totaled $27,054,000 with a related gross unrealized gain of $3,994,000 and consisted of investments in certain mutual funds which invest primarily in equity securities. In March 1995, the Financial Accounting Standards Board issued SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," which is effective for the fiscal years beginning after December 15, 1995. The Company believes that SFAS No. 121 will not have a material impact on the Company's financial position or results of operations. During October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." The disclosure requirements under this Standard will affect the Company beginning in 1996 for all of its stock options granted after December 15, 1994. The Statement allows alternative accounting methods and the Company has chosen to account for stock options as in the past under Accounting Principles Board Opinion No. 25. In addition, the Company will disclose certain pro forma information required by the Statement beginning with the Company's next annual report. 2. ACQUISITIONS AND DISPOSITIONS: 1993 -- On May 21 the Company spun-off its contract electronics manufacturing business to its stockholders in a tax free distribution of stock of DOVatron International, Inc., formerly Dover Electronics Manufacturing. The Company's stockholders received one share of DOVatron for every ten shares of Company stock owned on the record date, also May 21. No gain or loss was recognized from the distribution and the net assets of DOVatron were eliminated from the Company's retained earnings. Effective January 1 the Company acquired all of the capital stock of Lift Service and Montage, GmbH, a regional elevator company headquartered in Saarbrucken, Germany. On April 1 the Company acquired certain assets of Atlanta Elevator Company, a regional elevator service and repair company. On April 14 the Company acquired from Brown & Sharpe Manufacturing Company (U.S.) and Brown & Sharpe Ltd. (U.K.), all assets relating to their screw machine repair business. Also on April 14 the Company acquired the assets of Plymslade Screw Machine Services, Ltd., a U.K. manufacturer and distributor of Brown & Sharpe repair parts. On July 1 the Company acquired all of the capital stock of The Heil Co., the United States' largest manufacturer of refuse trucks, trailerized tanks and construction dump bodies. On August 23 the Company acquired 100% of the capital stock of BTD Holdings, Inc. (Belvac). Belvac is a leading manufacturer of quality machinery used in the production of two piece beverage cans, principally can trimming and necking machines. On August 31 the Company acquired the assets of Richland, Inc., a regional steel supplier as well as a provider of custom steel fabrication and plant maintenance service. Effective September 1 the Company acquired the assets of Viking Elevator Company, Inc., of Los Angeles County, a regional elevator service and repair company. On September 1 the Company acquired the assets of J&L Tank, Inc., a tank trailer manufacturer. On October 12 the Company acquired certain assets of Dynapert (a subsidiary of Emhart Industries, Inc.) and its subsidiaries; these assets relate to through-hole mounting for use in assembling electronic circuit boards. As of October 22 the Company acquired the stock of Thermal Equipment Corporation, and related corporations. Thermal is the leading designer and producer of autoclaves used in curing composite and bonded materials in high-stress, demanding applications. On November 3 the Company acquired the stock of Phoenix Refrigeration Systems, Inc., a producer of commercial refrigeration systems for retail grocery stores and food markets, and its affiliate, Electrical Distribution Systems, Inc., a designer and manufacturer of commercial electrical distribution systems. On November 16 the Company acquired the oscillator product line of the E G & G Frequency Products Division for the Company's Oscillatek Division. On December 3 the Company acquired certain assets of Global Equipment Co. The aggregate cost of these 1993 acquisitions, including all direct costs was approximately $321,002,000 cash, of which $171,047,000 represents goodwill and is being amortized over a forty-year period. 1994 -- On January 3 the Company acquired the assets of Midland Manufacturing Corp., the leading manufacturer of valves, gauges, fittings and other fluid handling and control devices for the rail tank car industry. Effective March 1 the Company acquired the assets of Rantom, Inc., a Michigan based manufacturer of hydraulic and pneumatic cylinders and nitrogen air springs. On March 24 the Company acquired the stock of HTT Heat Transfer Technologies S.A., a European based designer and manufacturer of brazed plate heat exchangers and plate and frame gasketed heat exchangers. On March 30 the Company acquired the assets of Technopack Ewald Hagenorn GmbH & Co., KG (Technopack) located near Hamburg, Germany. Technopack, a former licensee of the Company's U.S. subsidiary, Tipper Tie, is a manufacturer of clipping equipment and clip closures operating primarily in the European market. On May 9 the Company acquired 27 30 the stock of Reheat AB, a Swedish manufacturer of heat transfer plates for plate heat exchangers. On May 24 the Company acquired the assets of Koolrad Design & Manufacturing Company of Ontario, Canada. Koolrad is a major manufacturer of plate-type radiators for Canadian transformer manufacturers. On June 10 the Company acquired the stock of Tarby, Inc., a progressing cavity pump manufacturer. On June 29 the Company acquired the assets of Transmission Networks International (TNI), of Knightdale, North Carolina. TNI is a leading manufacturer of specialty transformers, primarily with ferrite cores. On July 29 the Company acquired certain assets of Midstate Elevator Company, a New York regional elevator and escalator installation, service and repair company. On August 5 the Company acquired the assets of Hill Refrigeration, Inc., a manufacturer of refrigeration cases and refrigeration systems for commercial use. On September 6 a subsidiary of the Company purchased certain assets of its long time supplier, Tie Net International. Tie Net manufactures specialty netting products used primarily in the meat sector of the food industry. The aggregate cost of these 1994 acquisitions, including all direct costs was approximately $186,436,000 of which $91,087,000 represents goodwill and is being amortized over a forty-year period. The $186,436,000 purchase price accounting cost can be reconciled to the $187,704,000 "economic cost" amount shown elsewhere in this report by considering long-term debt acquired, cash acquired on date of acquisition and reorganization costs assumed. 1995 -- On January 2 the Company acquired all of the capital stock of Knappco Corporation. Knappco located in Kansas City, Missouri, manufactures manhole/access covers and valves for petroleum, dry-bulk and chemical transportation and storage. On March 6 the Company acquired certain assets of Margaux Inc. Margaux, based in Conyers, Georgia, is a manufacturer of commercial refrigeration systems for supermarkets. On April 11 the Company acquired all of the capital stock of Hasstech, Inc. Hasstech, located in San Diego, California, is a manufacturer of Stage II vapor recovery systems used at service stations. On May 22 the Company acquired all of the capital stock of Mark Andy, Inc. Mark Andy, located in St. Louis, Missouri, designs and manufactures printing presses utilizing narrow web flexographic covering technology for the small container market. On June 9 the Company sold 100% of the capital stock of its American Metal Ware subsidiary. On June 30 the Company acquired certain assets of the Frequency Control Products ("FCP") Division of AT&T, North Andover, Massachusetts. FCP manufactures several high tech, high volume oscillators utilizing unique technology. On September 29 the Company acquired 88% of the capital stock of Imaje, S.A. ("Imaje") and has since then increased this ownership to almost 100%. Imaje, based in Valance, France, is one of the world's three largest manufacturers of industrial continuous ink jet printers and specialized inks used for coding and marking products and consumables. On October 3 the Company acquired all of the stock of Trailmaster Corporation, located in Ft. Worth, Texas. Trailmaster manufactures aluminum and stainless steel tank trailers, aircraft refuelers and hydraulic head disking machines. On October 4 the Company acquired all of the stock of Hammond Engineering, Limited. Hammond, located in Enfield, U.K., manufactures rotary vane and screw compressors and hydraulic control units for the trucking industry. On November 8 the Company acquired all of the stock of GFS Manufacturing Co., Inc. GFS, located in Dover New Hampshire, manufactures custom transformers for the industrial control and computer control industries. The aggregate cost of these 1995 acquisitions, including all direct costs was approximately $330,267,000 of which $224,414,000 represents goodwill and certain other long lived intangible assets which are primarily being amortized over a forty-year period. The $330,267,000 purchase price accounting cost can be reconciled to the $323,292,000 "economic cost" amount shown elsewhere in this report by considering long-term debt acquired and cash acquired on date of acquisition. All of the above acquisitions have been accounted for by the purchase method of accounting. Accordingly, the accounts of the acquired companies, after adjustment to reflect fair market values assigned to assets and liabilities have been included in the consolidated financial statements from their respective dates of acquisition. The following table summarizes, on a pro-forma (unaudited) basis, the estimated results of operations as if the 1995 acquisition of Imaje (a material business combination) had taken place at the beginning of 1994, with appropriate adjustments for interest, depreciation, inventory charges, amortization and income taxes (in thousands except for per share figures).
(in thousands) 1995 1994 - ------------------------------------------------------------ Net sales $3,870,572 $3,245,848 Net earnings 286,003 194,034 Net earnings per common $ 2.52 $ 1.70 ------------------------
3. ACCOUNTS RECEIVABLE: Accounts receivable include retainage which has been billed, but which is not due pursuant to retainage provisions in construction contracts until completion of performance and acceptance by the customer. This retainage aggregated $33,894,000 at December 31, 1995, $38,254,000 at December 31, 1994, and $41,969,000 at December 31, 1993. Substantially all retained balances are collectible within one year. 4. INVENTORIES: Inventories, by components, are summarized as follows:
- ------------------------------------------------------------------------------------------ (in thousands) at December 31, 1995 1994 1993 - ------------------------------------------------------------------------------------------ Raw materials $153,094 $116,829 $ 92,341 Work in process 221,371 167,251 136,031 Finished goods 150,677 121,828 109,329 ----------------------------------------------- Total 525,142 405,908 337,701 Less LIFO reserve 45,815 41,304 43,382 ----------------------------------------------- $479,327 $364,604 $294,319 - ------------------------------------------------------------------------------------------
During each of the years in the three year period ended December 31, 1995, some inventory quantities were reduced. This reduction resulted in a liquidation of certain LIFO inventory quantities carried at lower costs prevailing in prior years as compared with costs at December 31 of each year. The effect of these liquidation's increased net earnings by 1 cent per share in 1995 and 1994, and by 1.5 cents per share in 1993. 28 31 5. BANK LINES OF CREDIT: The Company has open bank lines of credit and other bank credit agreements totaling $504,000,000 which support its commercial paper. These lines are in amounts requested by the Company and not the maximum that could be obtained. Under the borrowing arrangements, the Company has generally agreed to either maintain average collected bank compensating balances or pay fees, the total of which is not material. 6. DEBT: A summary of long-term debt follows:
(in thousands) 1995 1994 1993 - -------------------------------------------------------------------------- Commercial paper - $250,000 $250,000 6.45% Notes due Nov. 15, 2005 (less unamortized discount of $508) with an effective interest rate of 6.51% $249,492 - - Canadian mortgage note bearing interest at 11.25%, matured in 1993 - - 672 Other 8,610 4,042 1,705 -------------------------------------- Total long-term debt 258,102 254,042 252,377 Less current installments 2,502 455 312 -------------------------------------- Long-term debt excluding current installments $255,600 $253,587 $252,065 - --------------------------------------------------------------------------
Annual repayments of long-term debt in the four years following 1996 are scheduled as follows: 1997-$4,412,000, 1998-$323,000, 1999-$210,000, and 2000-$203,000. On December 10, 1993 the Company signed a three year $250 million credit agreement with a group of 19 banks. Given the Company's ability and intent to maintain, on a long-term basis, $250 million principal amount of its commercial paper borrowings, that amount had been classified as long-term debt in the consolidated financial statements at December 31, 1993 and 1994. The credit facility remained unused and was terminated in November 1995. The notes payable shown on the balance sheets for 1995, 1994 and 1993 represent principally commercial paper. The weighted average interest rate at December 31, 1995 was 5.8%. 7. CAPITAL STOCK, ADDITIONAL PAID-IN CAPITAL AND TREASURY STOCK: The Board of Directors has been authorized to issue preferred stock, in one or more series up to 100,000 shares, with such designations, preferences and relative rights and limitations as may be stated in the resolution relating to each issue. On September 15, 1995 the Company effected a 2 for 1 common stock split in the form of a stock dividend, resulting in the issuance of 58,058,000 additional shares of common stock and the transfer of $1,546,000 from additional paid-in capital and $56,793,000 from retained earnings. All references to per share amounts throughout this report have been restated to reflect this stock split. Prior to the stock split, 8,389,000 treasury shares were retired resulting in a charge to paid-in capital of $19,197,000 and a charge to retained earnings of $273,900,000. Changes in common stock, additional paid-in capital and treasury stock are summarized below:
Common Stock Additional Treasury Stock (in thousands) $1 Par Value Paid-in Capital Shares Amount - ------------------------------------------------------------------------------------------------- Balance at January 1, 1993 $ 66,176 $ 9,508 9,091 $ 315,554 Stock options exercised 122 3,023 20* 1,087 Treasury stock purchased - - 25 1,242 --------------------------------------------------------------- Balance at December 31, 1993 $ 66,298 $ 12,531 9,136 $ 317,883 Stock options exercised 143 5,145 2* 133 Treasury stock purchased - - 573 29,600 --------------------------------------------------------------- Balance at December 31, 1994 $ 66,441 $ 17,676 9,711 $ 347,616 Stock options exercised 453 9,491 104* 3,768 Treasury stock purchased - - 145 3,833 --------------------------------------------------------------- Treasury stock retired (8,389) (19,197) (8,389) (301,487) --------------------------------------------------------------- Stock split 58,058 (1,546) 1,322 - --------------------------------------------------------------- Balance at December 31, 1995 $116,563 $ 6,424 2,893 $ 53,730 - -------------------------------------------------------------------------------------------------
*Shares received as consideration for exercise price.* During 1987 the Board of Directors adopted a Stockholders' Rights Plan that is designed to protect stockholders from attempts to acquire control of the Company at an inadequate price. In accordance with the Board's resolution, a dividend distribution of one Preferred Stock Purchase Right for each outstanding share of common stock was made on November 23, 1987. Under certain circumstances, including the acquisition of 20 percent of the Company's stock, all rights holders except the acquiror may purchase the Company's common stock at a 50 percent discount. If the Company is acquired in a merger after the acquisition of 20 percent of the Company's common stock, rights holders may purchase the acquiror's shares at a similar discount. 8. STOCK OPTION AND PERFORMANCE INCENTIVE PROGRAM (ADJUSTED FOR 2 FOR 1 STOCK SPLIT): On April 24, 1984, the stockholders approved an incentive stock option plan and cash performance program under which a maximum aggregate of 4,800,000 (unadjusted) shares was reserved for grant to key personnel until January 30, 1994. This plan expired on January 30, 1995, but certain previous grants remain outstanding at December 31, 1995. On April 28, 1987, the stockholders approved an amendment to permit the grant or exercise of nonqualified stock options under this plan. The stockholders also approved a cash bonus covering a portion of the option holder's income tax liability to compensate any optionee who amends his option changing its exercise from qualified to nonqualified. A nonqualified exercise reduces the Company's after tax cost of the program. During 1995, cash bonuses in connection with nonqualified exercises aggregated $620,000 ($302,000 in 1994 and $1,562,000 in 1993). 29 32 On April 25, 1995, the stockholders approved an incentive stock option plan and a cash performance program to replace the expired 1984 plan and program. Under the new plan a maximum aggregate of 10 million shares was reserved for grant to key personnel until January 30, 2005. The option price may not be less than the fair market value of the stock at the time the options are granted. The period during which these options are exercisable is fixed by the Company's Compensation Committee at the time of grant but is not to exceed ten years. Transactions in stock options under this plan are summarized as follows:
Shares Under Option Price Range - ----------------------------------------------------------------------- Outstanding at Jan. 1, 1993 2,372,620 $ 7.50-$19.36 Granted 493,940 $ 22.85 Exercised (244,938) $ 7.50-$17.36 Spin-off adjustment 67,196 - Canceled (141,440) $ 7.50-$22.85 --------------------------------- Outstanding at Dec. 31, 1993 2,547,378 $ 8.29-$22.85 --------------------------------- Exercisable at Dec. 31, 1993 through Feb. 28, 2000 1,345,316 $ 8.29-$22.85 --------------------------------- Outstanding at Jan. 1, 1994 2,547,378 $ 8.29-$22.85 Granted 391,610 $ 29.75 Exercised (284,200) $ 8.29-$19.36 Canceled (96,458) $13.19-$29.75 --------------------------------- Outstanding at Dec. 31, 1994 2,558,330 $ 9.14-$29.75 --------------------------------- Exercisable at Dec. 31, 1994 through Feb. 28, 2001 1,444,578 $ 9.14-$22.85 --------------------------------- Outstanding at Jan. 1, 1995 2,558,330 $ 9.14-$29.75 Granted 638,672 $ 28.44 Exercised (453,066) $ 9.56-$19.36 Canceled (63,687) $ 9.56-$29.75 --------------------------------- Outstanding at Dec. 31, 1995 2,680,249 $ 9.56-$29.75 - ----------------------------------------------------------------------- Exercisable at December 31, 1995 through: January 30, 1996 26,989 shares @ $ 9.56-$22.85 February 28, 1997 99,702 shares @ $13.19-$22.85 March 3, 1998 181,635 shares @ $15.23-$22.85 March 28, 1999 212,275 shares @ $14.87-$22.85 February 28, 2000 244,333 shares @ $17.36-$22.85 February 28, 2001 271,874 shares @ $19.25-$22.85 March 6, 2002 344,528 shares @ $19.36-$22.85* - -----------------------------------------------------------------------
9. EMPLOYEE BENEFIT PLANS: The Company has many defined benefit and defined contribution pension plans covering substantially all employees of the Company and its domestic and foreign subsidiaries. Plan benefits are generally based on years of service and employee compensation. The Company's funding policy is consistent with the funding requirements of ERISA and applicable foreign law. The financial statements and related disclosures reflect Statement of Financial Accounting Standard No. 87 "Employers' Accounting for Pensions", for U.S. defined benefit pension plans; foreign defined benefit pension plans are not considered material. Pension cost and related disclosures for U.S. funded defined benefit plans for 1995, 1994 and 1993 include the following components:
(in thousands) 1995 1994 1993 - ------------------------------------------------------------------------- Actual return on plan assets $ 55,107 $ 5,098 $ 26,898 Less deferred (gain) loss (34,860) 14,866 (7,914) ------------------------------------ Net return 20,247 19,964 18,984 Net amortization 69 1,612 1,387 Deduct: Benefits earned during year (7,920) (7,872) (6,251) Interest accrued on projected benefit obligation (12,847) (12,302) (11,978) ------------------------------------ Net pension (expense) credit $ (451) $ 1,402 $ 2,142 - -------------------------------------------------------------------------
The funded status and resulting prepaid pension cost of U.S. defined benefit plans for the three years ended December 31, 1995, were as follows:
- --------------------------------------------------------------------------------------- Funded Plans - --------------------------------------------------------------------------------------- (in thousands) 1995 1994 1993 - --------------------------------------------------------------------------------------- Plan assets at fair value $248,822 $203,549 $214,542 ------------------------------------ Actuarial present value of benefit obligation: Vested 160,938 146,322 137,643 Nonvested 10,166 8,590 15,791 ------------------------------------ Accumulated benefit obligation 171,104 154,912 153,434 Effect of projected future salary increases 27,422 30,104 28,239 ------------------------------------ Projected benefit obligation 198,526 185,016 181,673 ------------------------------------ Plan assets in excess of projected benefit obligation 50,296 18,533 32,869 Unrecognized net (gain) loss (12,861) 20,489 4,199 Unrecognized FAS 87 transition (gain) (17,986) (19,665) (21,345) Unrecognized prior service cost 4,695 3,749 5,298 ------------------------------------ Prepaid pension cost at December 31 $ 24,144 $ 23,106 $ 21,021 - ---------------------------------------------------------------------------------------
The assumptions used in determining the above were as follows: a weighted average discount rate of 7% (7% for 1994 and 7.1% for 1993), an average wage increase of 5% and an expected long-term rate of return on plan assets of 10%. Approximately 69% (68% in 1994 and 72% in 1993) of defined benefit plan assets were invested in equity securities with the remainder in fixed income and short term investments. 30 33 The Company also provides, through nonqualified plans, supplemental pension payments in excess of qualified plan limits imposed by Federal tax law. These plans cover officers and certain key employees and serve to restore the combined pension amount to original benefit levels. The plans are unfunded apart from the general assets of the Company. The pension benefit obligation and pension expense under these plans follow:
(in thousands) 1995 1994 1993 - ----------------------------------------------------------------------- Pension benefit obligation $12,143 $13,902 $11,986 Pension expense 2,404 3,599 1,679 - -----------------------------------------------------------------------
For measurement purposes a discount rate of 7% was used together with an average wage increase of 5%. Pension cost for all plans was $36,719,000 for 1995, $33,474,000 for 1994 and $25,546,000 for 1993. In addition to the pension plans described above, certain of the Company's subsidiaries sponsor twelve separate health care plans for retirees which provide medical coverage and/or life insurance. None of these plans are funded. The financial statements and related disclosures reflect Statement of Financial Accounting Standards No. 106 "Employers Accounting for Postretirement Benefits Other Than Pensions," for these plans. The following table details the amounts recognized in the Company's Consolidated Balance Sheet at December 31 of each year:
(in thousands) 1995 1994 1993 - --------------------------------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees $16,055 $16,637 $17,942 Fully eligible active plan participants 11,068 9,990 10,822 Unamortized gain (loss) 957 1,133 (1,513) --------------------------------- Accrued postretirement benefit cost included in accrued liabilities $28,080 $27,760 $27,251 - ---------------------------------------------------------------------------------------
Net period postretirement benefit cost for 1995, 1994 and 1993 included the following components:
(in thousands) 1995 1994 1993 - --------------------------------------------------------------------------------------- Service cost $ 483 $ 504 $ 426 Interest cost 1,773 1,907 1,545 Gain on settlement - (410) (285) Amortization gain (253) (72) (35) --------------------------------- Net periodic postretirement benefit cost $ 2,003 $1,929 $ 1,651 - ---------------------------------------------------------------------------------------
For measurement purposes a discount rate of 7% was used for the plan liability and rates from 2% to 15% annual rate of increase in the per capita cost covered benefit (i.e., health care cost trend rates) was assumed for 1996; the rates were assumed to decrease gradually to 5% by the year 2004 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amount reported. For example, increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1995 by $1,989,000 and the net periodic postretirement benefit cost for 1995 by approximately $528,000. 10. TAXES ON INCOME: Total income taxes for the years ended December 31, 1995, 1994 and 1993 were allocated as follows:
(in thousands) 1995 1994 1993 - --------------------------------------------------------------------------------------- Income from continuing operations $138,800 $104,486 $87,288 Stockholders' equity, for compensation expense for tax purposes in excess of amounts recognized for financial reporting purposes (3,285) (1,491) (1,849) ---------------------------------- $135,515 $102,995 $85,439 - ---------------------------------------------------------------------------------------
Income taxes have been based on the following components of earnings before taxes on income.
(in thousands) 1995 1994 1993 - --------------------------------------------------------------------------------------- Domestic $374,911 $267,427 $220,968 Foreign 42,200 39,432 24,574 ---------------------------------- $417,111 $306,859 $245,542* - ---------------------------------------------------------------------------------------
Income tax expense (benefit) is made up of the following components:
(in thousands) 1995 1994 1993 - --------------------------------------------------------------------------------------- Current: U.S. Federal $117,911 $ 98,895 $74,651 State and local 10,331 7,259 4,400 Foreign 24,246 17,290 7,732 ---------------------------------- Total current 152,488 123,444 86,783 ---------------------------------- Deferred: U.S. Federal (1,609) (15,922) (1,643) State and local (2,671) (182) 1,700 Foreign (9,408) (2,854) 448 ---------------------------------- Total deferred (13,688) (18,958) 505 ---------------------------------- Total expense $138,800 $104,486 $87,288 ---------------------------------- Effective rate 33.3% 34.1% 35.5% - ---------------------------------------------------------------------------------------
31 34 The reasons for the difference between the effective rate and the U.S. Federal income statutory rate of 35% follow:
(in thousands) 1995 1994 1993 - ---------------------------------------------------------------- U.S. Federal income tax rate 35.0% 35.0% 35.0% State and local taxes, net of Federal income tax benefit 1.2 1.5 1.6 R&E tax credits (.3) (1.6) (.6) FSC benefit (3.4) (2.0) (1.9) Foreign tax credit (.4) - - Non tax deductible items 2.4 1.2 2.9 Miscellaneous items (1.2) - (1.5) ---------------------------- 33.3% 34.1% 35.5%* - ----------------------------------------------------------------
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31 of each year are:
(in thousands) 1995 1994 1993 - ----------------------------------------------------------------------------- DEFERRED TAX ASSETS: Accrued insurance $ 27,636 $ 25,248 $ 17,994 Accrued compensation, principally postretirement benefits, and compensated absences 23,487 21,226 17,768 Accrued expenses, principally for disposition of businesses, interest and warranty 17,958 16,519 13,087 Inventories, principally due to reserves for financial reporting purposes and capitalization for tax purposes 9,310 6,365 5,505 Accounts receivable, principally due to allowance for doubtful accounts 6,563 4,609 3,439 Other 2,234 2,072 6,505 ------------------------------------ Total deferred tax assets 87,188 76,039 64,298 ------------------------------------ DEFERRED TAX LIABILITIES: Accounts receivable, principally due to retainage and accrual acceptance on elevator contracts (42,813) (40,330) (39,520) Plant and equipment, principally due to differences in depreciation (19,638) (18,823) (14,554) Intangible assets, principally due to different tax and financial reporting bases (48,433) (2,720) (25,040) Prepaid expenses, principally due to overfunded pension plans (6,542) (5,936) (7,103) Other (6,480) (4,288) (5,217) ------------------------------------ Total gross deferred liabilities (123,906) (72,097) (91,434) ------------------------------------ Net deferred tax (liability) asset (36,718) 3,942 (27,136) ------------------------------------ Net current deferred (liability) asset 9,610 6,487 (6,727) ------------------------------------ Net non-current deferred tax liability $(46,328) $ (2,545) $(20,409) - -----------------------------------------------------------------------------
11. RENTAL AND LEASE INFORMATION: The Company leases certain facilities and equipment under operating leases, many of which contain renewal options. Total rental expense, net of insignificant sublease rental income, on all operating leases was $27,353,000, $25,916,000 and $24,923,000 for 1995, 1994 and 1993, respectively. Contingent rentals under the operating leases were not significant. Minimum future rental commitments under operating leases having noncancelable lease terms in excess of one year aggregate $82 million as of December 31, 1995 and are payable as follows (in millions): 1996 - $22.4; 1997 - $17.4; 1998 - $11.2; 1999 - $8.1; 2000 - $5.7; and after 2000 - $17.2. 12. CONTINGENCIES: Several of the Company's subsidiaries are involved in legal proceedings relating to the cleanup of waste disposal sites identified under Federal and State statutes which provide for the allocation of such costs among "potentially responsible parties." In each instance the extent of the Company's liability appears to be small in relation to the total projected expenditures and the number of other "potentially responsible parties" involved and is anticipated to be immaterial to the Company. In addition, several of the Company's subsidiaries are involved in ongoing remedial activities at certain plant sites, in cooperation with regulatory agencies, and appropriate reserves have been established. As previously reported, the Internal Revenue Service (IRS) proposed significant additional taxes plus interest as a result of its examination of the Company's Federal income tax returns for the eight years ended December 31, 1989. The underlying issues related primarily to allocations of purchase price of acquisitions made during those years, plus acquisitions made in 1990 and 1991. On January 13, 1995, the Company reached agreement with the Appeals Office of IRS settling substantially all issues relating to such acquisitions. Under this agreement, allocations to tangible assets have been accepted while allocations to intangibles have been adjusted in accordance with the Intangible Settlement Initiative introduced by the IRS National Office in March 1994. The Settlement was recorded as of December 31, 1994, as a result of which excess tax reserves in the amount of $26 million were released with a corresponding reduction in goodwill. During 1994, the IRS completed its examination of the Company's 1990 and 1991 Federal income tax returns and has proposed additional taxes aggregating $36.2 million plus interest which action is being vigorously contested by the Company. If ultimately the Company must pay certain of these additional taxes, such taxes will be recovered in future years. During 1995, the IRS began its examination of the Company's 1992 and 1993 Federal income tax returns. The Company and certain of its subsidiaries are also parties to a number of other legal proceedings incidental to their businesses. Management and legal counsel periodically review the probable outcome of such proceedings, the costs and expenses reasonably expected to be incurred, the availability and extent of insurance coverage and established reserves. While it is not possible at this time to predict the outcome of these legal actions, in 32 35 the opinion of management, based on these reviews, the disposition of the lawsuits and the other matters mentioned above will not have a material effect on financial position. Certain lease receivables entered into by the Company's finance divisions were sold to a third party during 1993, 1994 and 1995, with limited recourse. The leases cover machinery and equipment manufactured by the Company and involve thousands of customers. There is no significant concentration of credit risk. Generally, the lease period does not exceed five years. The leases are collateralized by security deposits and Uniform Commercial Code filings; equipment is subject to repossession in the event of lease default. The outstanding balance on such receivables at December 31, 1995 was $42 million ($41 million in 1994 and $39 million in 1993) of which the Company has a contingent liability of $7.6 million should all of the receivables become uncollectible. 13. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS: Statement of Financial Accounting Standards No. 107, requires all entities to disclose the fair value of certain financial instruments in their financial statements. Accordingly, the Company reports that the carrying amount of cash and cash equivalents, trade receivables, accounts payable, notes payable and accrued expenses approximates fair value due to the short maturity of these instruments, and that the carrying amount of marketable securities is stated at fair value. In addition, the Company believes the recently issued long-term debt approximates fair value. 14. OPERATING RETURN ON OPERATING INVESTMENT (UNAUDITED): When companies are acquired, Dover's purchase price generally exceeds the book value of the acquired company. Increases in the book value of the assets, including goodwill, arising in such instances, are assigned to the business segments in which acquired companies are included. Similarly, the amortization of these increased asset values is charged against the income of that business segment. These asset values and charges to income are also reflected in the computation of Dover's net income and return on equity. However, to monitor the progress of business operations on a continuous basis and in relation to industry norms, Dover does not include these asset values or cost in the calculation of "Operating Return on Investment" as shown in the unaudited charts on pages 4, 6, 9, 12, 15, and 18. Additionally, the "Investment" figure reflected in these charts is reduced by applicable current liabilities for accounts payable and accrued expenses and for certain deferred taxes. 15. INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT GEOGRAPHIC AREAS
(in thousands) For the Years Ended December 31, 1995 1994 1993 1992 1991 1990 - ---------------------------------------------------------------------------------------------------------------------------------- Sales to unaffiliated customers: United States $3,010,667 $2,559,897 $2,093,354 $1,884,051 $1,805,133 $1,812,612 Foreign 735,211 525,379 390,574 387,529 390,653 397,733 Transfers between geographic areas: United States 199,818 129,690 82,772 75,226 85,514 98,929 Foreign 50,197 26,603 20,983 19,147 10,448 14,258 Eliminations (250,016) (156,293) (103,755) (94,373) (95,962) (113,187) -------------------------------------------------------------------------------- Consolidated sales $3,745,877 $3,085,276 $2,483,928 $2,271,580 $2,195,786 $2,210,345 -------------------------------------------------------------------------------- Operating profit: United States $ 412,366 $ 306,881 $ 237,847 $ 187,118 $ 170,265 $ 223,350 Foreign 54,359 47,674 29,946 35,677 51,211 52,370 -------------------------------------------------------------------------------- Consolidated total (excluding corporate) $ 466,725 $ 354,555 $ 267,793 $ 222,795 $ 221,476 $ 275,720 -------------------------------------------------------------------------------- Identifiable assets at December 31: United States $1,884,644 $1,603,191 $1,454,198 $1,111,017 $1,017,003 $1,033,969 Foreign 705,621 375,057 265,260 256,539 267,565 242,702 -------------------------------------------------------------------------------- Consolidated total (excluding corporate) $2,590,265 $1,987,248 $1,719,458 $1,367,556 $1,284,568 $1,276,671 -------------------------------------------------------------------------------- Export sales as a percentage of United States sales 26% 22% 20% 22% 22% 20% - ----------------------------------------------------------------------------------------------------------------------------------
33 36 To the Board of Directors and Stockholders of Dover Corporation: We have audited the accompanying consolidated balance sheet of Dover Corporation and subsidiaries as of December 31, 1995 and the related consolidated statements of earnings, retained earnings and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on those financial statements based on our audit. The consolidated financial statements of Dover Corporation and subsidiaries as of December 31, 1994 and 1993 were audited by other auditors whose report dated February 22, 1995 expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 1995 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dover Corporation and subsidiaries at December 31, 1995, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. 1301 Avenue of the Americas /s/ COOPERS & LYBRAND L.L.P. New York, N.Y. 10019-6013 ---------------------------- February 20, 1996 COOPERS & LYBRAND L.L.P. 34 37 QUARTERLY DATA* DOVER CORPORATION AND SUBSIDIARIES (UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE FIGURES)
Quarter Net Sales Gross Profit Net Earnings Per Share - ------------------------------------------------------------------------------------------------------- 1995 FIRST $ 854,129 $270,036 $ 59,799 $ .53 SECOND 948,164 303,036 78,892 .69 THIRD 934,543 289,619 71,148 .63 FOURTH 1,009,041 318,842 68,472 .60 ----------------------------------------------------------------------- $3,745,877 $1,181,533 $278,311 $2.45 - ------------------------------------------------------------------------------------------------------- 1994 First $ 680,727 $ 210,932 $ 42,573 $ .37 Second 761,224 237,896 52,440 .46 Third 804,460 245,228 51,870 .45 Fourth 838,865 253,743 55,490 .49 ----------------------------------------------------------------------- $3,085,276 $ 947,799 $202,373 $1.77 - -------------------------------------------------------------------------------------------------------
COMMON STOCK CASH DIVIDENDS AND MARKET PRICES* DOVER CORPORATION AND SUBSIDIARIES
Market Prices* ------------------ Dividends Quarter High Low Per Share - --------------------------------------------------------------------------------------- 1995 FIRST $32.82 $25.82 $.13 SECOND 36.57 31.50 .13 THIRD 41.69 36.00 .15 FOURTH 40.75 35.13 .15 ---------------------------------------- $.56 - --------------------------------------------------------------------------------------- 1994 First $33.44 $28.82 $.11-1/2 Second 31.44 25.44 .11-1/2 Third 30.32 27.32 .13 Fourth 28.69 24.88 .13 ---------------------------------------- $.49 - ---------------------------------------------------------------------------------------
* As reported in the Wall Street Journal. Adjusted to give retroactive effect to the 2 for 1 stock split in 1995. 35 38 LIQUIDITY AND CAPITAL RESOURCES: The Company continues to be in excellent financial condition. However, the record amount spent during 1995 on our acquisition program, $323 million, resulted in decreased liquidity measures. The Company's current ratio (current assets divided by current liabilities) decreased to 1.28 at December 31, 1995, compared with 1.47 at December 31, 1994, and 1.52 at December 31, 1993. The quick ratio (current assets net of inventories, divided by current liabilities) also decreased, to .84 at December 31, 1995, compared with 1.00 at December 31, 1994, and 1.02 at December 31, 1993. Year-end working capital for the last three years expressed as a percentage of sales shows a similar decline in each year: 8.1% in 1995, 11.7% 1994 and 12.4% in 1993. At December 31, 1995, the Company had bank lines of $504 million, all of which were unused. Additional bank lines of credit are available at the Company's request. The Company's commercial paper is rated A-1 by Standard & Poors and F-1 by Fitch Investor services. The Company issued $250 million long-term notes during 1995, its first public debt offering. These 10 year securities have been rated A-2 by Moody's Investor Services and A+ by Standard & Poors. With respect to debt percentages, the substantial amounts spent in recent years for acquisitions has caused these percentages to increase. The net debt (notes payable plus long-term debt and current maturities of long-term debt less cash and equivalents and marketable securities) to total capital ratio increased to 30.0% at December 31, 1995 compared with 27.2% at December 31, 1994 and 27.6% at December 31, 1993. The Company's net debt (total debt less cash, cash equivalents and marketable securities) increased by $154 million, during 1995, and the debt to equity ratio increased from 37% at December 31, 1994 to 43% at year-end, 1995. Long-term debt maturities for the four years 1996 to 1999 aggregate $7.5 million. Management is not aware of any potential impairment to the Company's liquidity, other than contingent liabilities as discussed in Note 12 to the Consolidated Financial Statements. Historically, capital expenditures have been financed with internally generated funds. During 1995 the entire capital expenditure program was financed internally. Internal financing is also expected to provide all of the funds for capital expenditures in 1996, which the Company believes will aggregate approximately $125 million. The Company plans to continue its acquisition program, combining external financing, if necessary, with internally generated cash. RESULTS OF OPERATIONS 1995: Results of operations are explained in detail in the stockholders' letter and operations review, pages 2 through 20. 1994 COMPARED WITH 1993: Dover set a new earnings per share record in 1994, at $1.77, a gain of 28% over the prior year's $1.39 per share. This was an even stronger increase than the 24% gain achieved in 1993. Sales rose 24% to almost $3.1 billion, an increase of $601 million, reflecting both internal growth at most Dover companies and the effect of our vigorous acquisition activity in 1993 and 1994. Companies acquired in 1993 added $155 million to Dover's 1993 sales. The internal growth of these businesses, and their inclusion for a full year, led to a further sales contribution in 1994 of approximately $260 million, representing about 10 percentage points of the 24% year-to-year sales gain. Additionally, the companies acquired during 1994 added $151 million to our 1994 sales, accounting for 6 percentage points of the sales gain. The 1994 sales growth of businesses Dover owned at the start of 1993 averaged approximately 10% (adjusted for the effect of the spin-off of DOVatron in mid-1993). While these acquisitions provided the bulk of our sales growth, the major portion of our earnings gain came from the internal growth of our existing companies. Companies acquired in 1994 made no contributions to earnings per share because of acquisition-related costs and interest income foregone. Companies acquired in 1993 contributed about $.35 cents per share to our overall reported gain, with a portion of this reflecting their internal growth after acquisition. A discussion of operations by industry segments follows: DOVER RESOURCES: Profits at Dover Resources improved 19% on an 11% sales gain. Some of the sales and earnings gains resulted from the acquisition of Midland Manufacturing at the start of the year, but the largest portion came from internal growth. De-Sta-Co reported record sales and earnings as a result of strength in its domestic valve and clamp businesses and the beginning of recovery in its German operation. De-Sta- Co undertook capacity additions at each of its three valve plants to support continuing growth. Contrary to our expectations at the beginning of 1994, OPW Fueling Components surpassed its excellent earnings level of 1993 with new earnings and sales records again in 1994. The market for OPW's vapor recovery products remained stronger than anticipated and the demand for its other gasoline station product lines was solid as well. As the year ended, final regulatory approvals were being secured for OPW's VaporEz(TM) product. 36 39 DOVER INDUSTRIES: Dover Industries achieved record sales of $691 million, up 38% from prior year, and operating income of $81 million, up 35%, also a record level. These results reflect both acquisitions and strong internal growth. Each of Dover Industries' 12 businesses achieved an earnings improvement in 1994 with particularly impressive percentage increases at Rotary Lift, Texas Hydraulics, Tipper Tie and Bernard. Rotary Lift achieved its gain through successful implementation of an internal growth strategy involving substantial manufacturing investment for cost reduction, lower product selling prices, and, increased market share and business volume. Margins improved at Rotary despite these lower selling prices. Tipper Tie's growth primarily reflected the acquisition of Technopack and the successful integration of this company with Tipper Tie's European business. The Heil Company, which was acquired in mid-1993 and is Dover Industries' largest company, achieved record sales and profits in its first full year of Dover ownership. Heil's tank trailer business was particularly strong, and the company expanded its capacity through the J&L acquisition in late 1993 and a major addition to the Athens, Tennessee plant in the course of 1994. DOVER TECHNOLOGIES: Dover Technologies also had a record year, with an earnings gain of 82% on a sales gain of 24%. Most of the gains in this segment were attributable to a record performance by Universal Instruments. Strong sales gains and record earnings were also achieved by DEK Printing Machines. Universal benefited from the continuing upswing in demand for capital equipment within the electronics industry, as well as from market share gains by its very profitable thru-hole technology business and the success of new product offerings in the surface mount technology sector. The combined results of Dover Technologies companies serving the communications and components markets were essentially flat. Improved earnings at K&L Microwave, as well as the net gain provided by TNI, acquired at mid-year, were offset by modest declines at other companies resulting from continuing defense cutbacks and very competitive commercial markets. Incoming orders for the capital equipment companies were strong throughout 1994 and ended the year on a high note, pushing Dover Technologies' year-end backlog 35% higher than at the end of 1993. DOVER DIVERSIFIED: Profits at Dover Diversified also set a record, rising 71% on a sales gain of $228 million, or more than 90%. Acquisitions made during 1994 provided $93 million of this sales gain, but made no contribution to earnings, as acquisition-related write-offs and the expected low operating margins at the Hill Refrigeration company offset good profit results at Tranter's newly acquired European companies. A further portion of the sales gain -- approximately $110 million -- resulted from having several 1993 acquisitions, most notably Belvac and Phoenix Refrigeration, for a full year, and from growth at those companies. Most Dover Diversified companies showed sales and earnings growth in 1994, with particular strength at Belvac because of the widespread acceptance of its die-necking technology within the can-making industry. This industry's rapid conversion to soft drink and beer cans with smaller top diameters, in order to save aluminum costs, accelerated Belvac to record sales, earnings and bookings. Consolidation continued in defense/aerospace markets. Sargent Technologies' ball-screw product line was sold and the remaining business was combined with Sargent Controls as a single company in one facility. DOVER ELEVATOR INTERNATIONAL: Profits at Dover Elevator International fell a disappointing 18% on flat sales. All of the decline was attributable to poor results at General Elevator, which has been primarily a service and modernization company serving the U.S. elevator aftermarket for non-Dover equipment. A modest operating loss here was exacerbated by approximately $11.5 million in write-offs and unusual expense incurred during the year. A change in management and an action program to reduce costs and improve margins (along with the impact of the reorganization of Dover Elevator International's North American Operations discussed below) are expected to return General to profitability. This creates the opportunity for a substantial earnings improvement at Dover Elevator International as a whole. The problem at General Elevator obscured meaningful progress in the North American market, as profits from our other businesses serving this market improved. Worldwide new elevator manufacturing and product engineering has been unified under one management group -- Dover Elevator Systems, North American field activities, consisting of new elevator construction, service and modernization, are organized geographically into seven field companies: Miami, General, Sound, Lagerquist, Security, Dover Elevator Company and Dover Elevator-Canada. This structure will allow Dover Elevator International to service its customers better while eliminating cost duplication, and provides a structure for profit growth in North America. 37 40 11-YEAR CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA DOVER CORPORATION AND SUBSIDIARIES (DOLLARS IN THOUSANDS EXCEPT PER SHARE FIGURES)
1995 1994 1993 1992 1991 1990 ========================================================================================================================= Summary of Operations Net sales $3,745,877 3,085,276 2,483,928 2,271,580 2,195,786 2,210,345 Cost of sales 2,564,344 2,137,477 1,733,256 1,601,596 1,580,051 1,516,753 Selling and administrative expenses 743,133 622,434 496,798 466,777 452,394 440,313 Interest expense 40,113 36,461 22,339 20,059 23,161 30,658 Other income, net 18,824 17,955 14,007 17,187 63,908 21,497 Earnings before taxes 417,111 306,859 245,542 200,335 204,088 244,118 Income taxes 138,800 104,486 87,288 71,192 75,880 88,439 - ------------------------------------------------------------------------------------------------------------------------- Net earnings $ 278,311 202,373 158,254 129,707* 128,208 155,679 % of sales 7.4% 6.6% 6.4% 5.7% 5.8% 7.0* Return on average equity 25.0% 21.7% 18.9% 15.9% 15.9% 20.3* Net earnings per common share $ 2.45 1.77 1.39 1.12* 1.07 1.27 Dividends per common share $ .56 .49 .45 .43 .41 .38 - ------------------------------------------------------------------------------------------------------------------------- Book value per common share $ 10.80 8.78 7.61 7.05 7.03 6.57 Depreciation and amortization $ 107,836 95,789 76,969 77,457 85,366 77,530 Capital expenditures $ 102,668 84,473 47,532 42,441 46,618 44,980 Acquisitions $ 323,292 187,704 321,002 111,243 13,192 102,834 Cash flow** $ 386,147 298,162 235,223 207,164 213,575 233,210 Weighted average number of common shares outstanding (`000s) 113,453 114,370 114,220 115,976 119,500 122,338 Number of employees 25,332 22,992 20,445 18,827 18,898 20,461 - ------------------------------------------------------------------------------------------------------------------------- Financial Position at December 31 Working capital $ 303,312 360,916 307,846 201,641 280,902 206,748 Net property, plant and equipment $ 423,940 342,685 283,363 251,270 251,145 268,386 Total assets $2,666,651 2,070,637 1,773,689 1,426,124 1,356,620 1,468,366 Long-term debt $ 255,600 253,587 252,065 1,230 6,317 20,955 Common stockholders' equity $1,227,706 995,859 870,002 804,937 828,374 787,660 Common shares outstanding (`000s) 113,670 113,460 114,326 114,170 117,956 119,942 =========================================================================================================================
[GRAPH] [GRAPH] 38 41
1989 1988 1987 1986 1985 ========================================================================================================= Summary of Operations Net sales 2,120,434 1,953,754 1,588,224 1,440,745 1,439,548 Cost of sales 1,480,880 1,363,852 1,096,612 1,028,394 1,028,530 Selling and administrative expenses 404,043 360,122 306,792 270,432 250,176 Interest expense 29,644 21,324 15,044 16,475 12,677 Other income, net 21,112 16,304 11,083 9,022 11,923 Earnings before taxes 226,979 224,760 180,859 134,466 160,088 Income taxes 82,999 78,988 69,158 50,637 60,060 - --------------------------------------------------------------------------------------------------------- Net earnings 143,980 145,772 111,701 83,829 100,028 % of sales 6.8% 7.5% 7.0% 5.8% 6.9% Return on average equity 19.4% 20.6% 17.2% 13.4% 16.9% Net earnings per common share 1.14 1.11 .83 .61 .71 Dividends per common share .35 .31 .26 .23 .22 - --------------------------------------------------------------------------------------------------------- Book value per common share 6.00 5.69 5.07 4.63 4.44 Depreciation and amortization 78,813 73,797 63,505 57,008 53,096 Capital expenditures 62,504 56,779 40,397 44,416 35,196 Acquisitions -- 205,765 57,718 76,142 29,244 Cash flow** 222,793 219,569 175,205 140,836 153,124 Weighted average number of common shares outstanding (`000s) 126,500 131,452 135,104 138,580 141,604 Number of employees 20,049 20,412 17,592 16,539 16,071 - --------------------------------------------------------------------------------------------------------- Financial Position at December 31 Working capital 245,755 198,038 316,116 295,370 368,998 Net property, plant and equipment 272,158 268,139 219,031 210,908 186,114 Total assets 1,406,376 1,365,630 1,155,226 1,036,846 1,017,019 Long-term debt 26,691 27,773 35,134 41,711 73,523 Common stockholders' equity 746,809 741,142 671,950 627,674 625,541 Common shares outstanding (`000s) 124,486 130,416 132,504 135,624 140,952 =========================================================================================================
* Net earnings and net earnings per common share include $565 and .5 cent per share, respectively, applicable to the cumulative effects of changes in accounting principles for FAS 109, "Accounting for Income Taxes" and FAS 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions." ** Represents net earnings plus depreciation and amortization. Adjusted to give retroactive effect to the 2 for 1 stock split, in 1988 and 1995. [GRAPH] [GRAPH] 39 42 DIRECTORS AND OFFICERS* DOVER CORPORATION AND SUBSIDIARIES BOARD OF DIRECTORS David H. Benson+ Non-Executive Director, Kleinwort-Benson Group, Plc. Magalen O. Bryant*# Director of various corporations Jean-Pierre M. Ergas# Senior Adviser to President/CEO Alcan Aluminum Ltd. Roderick J. Fleming+ Director, Robert Fleming Holdings, Limited John F. Fort*# Director of Tyco Laboratories, Inc. James L. Koley+* Chairman, Koley, Jessen, Daubman & Rupiper, P.C. John F. McNiff (Nominee) Anthony J. Ormsby*+ Director of various corporations Thomas L. Reece* Gary L. Roubos* * Members of Executive Committee + Members of Audit Committee # Members of Compensation Committee Design: Robert Webster Inc. Copy: Holcomb Associates Photographer: Enrico Ferorelli Printed on recycled paper. OFFICERS HEADQUARTERS: Gary L. Roubos Chairman Thomas L. Reece President and Chief Executive Officer John F. McNiff Vice President--Finance Robert G. Kuhbach Vice President, General Counsel and Secretary Robert A. Tyre Vice President--Corporate Development Alfred Suesser Controller Dover Resources, Inc: Rudolf J. Herrmann President and Chief Executive Officer Dover Industries, Inc: Lewis E. Burns President and Chief Executive Officer Dover Technologies International, Inc: John E. Pomeroy President and Chief Executive Officer Dover Diversified, Inc: Jerry W. Yochum President and Chief Executive Officer Dover Elevator International, Inc: Nigel P. Davis President STOCKHOLDER INFORMATION TRANSFER AGENT/REGISTRAR: Harris Trust & Savings Bank Chicago, Illinois Requests concerning stockholder records, issuance of stock certificates, and distribution of our dividends and the IRS Form 1099 are most efficiently answered by corresponding directly with Harris Trust at the following address: Harris Trust & Savings Bank 311 West Monroe Street Post Office Box 755 Chicago, Illinois 60690 (312) 461-6832 (tel.) (312) 461-1530 (fax) Dover common stock is listed on the New York Stock Exchange with symbol DOV. The common stock is also listed on The London Stock Exchange. INDEPENDENT ACCOUNTANTS: Coopers & Lybrand L.L.P. New York, New York EXECUTIVE OFFICES: Dover Corporation 280 Park Avenue, New York, New York 10017-1292 (212) 922-1640 40 43 EXHIBIT 13 The electronic filing includes the following numeric tables which replace graphical charts contained within the 1995 Annual Report for the Dover Corporation. Page 1: Dover Corporation's earnings per share growth for years 1986-1995. Dover Corporation's total return to investors for the years 1986-1995. Page 4: Dover Corporation's earnings per share for years 1990-1995. Dover Corporation's after tax return on investment and stockholder's equity for the years 1990-1995. Page 6: Dover Resources' operating earnings for the years 1991-1995. Dover Resources' after-tax operating return on investment for the years 1991-1995. Page 9: Dover Industries' operating earnings for the years 1991-1995. Dover Industries' after-tax operating return on investment for the years 1991-1995. Page 12: Dover Diversified's operating earnings for the years 1991-1995. Dover Diversified's after-tax operating return on investment for the years 1991-1995. Page 15: Dover Technologies' operating earnings for the years 1991-1995. Dover Technologies' after-tax operating return on investment for the years 1991-1995. Page 18: Dover Elevator International Inc.'s operating earnings for the years 1991-1995. Dover Elevator International Inc.'s after-tax operating return on investment for the years 1991-1995. Page 38: Dover Corporation's long term investment for years 1985-1995. Dover Corporation's return on average equity for the years ended 1985-1995. Page 39: Dover Corporation's cash flow for years 1985-1995. Dover Corporation's free cash flow as a percentage of sales for the years 1985-1995. Pages 2, 7, 10, 13, 16, and 19 of the Annual Report contain photographs that are not included in the Edgar filing. The captions, relating to these photographs, have been retained in the filing and provide sufficient descriptive detail.

1 EXHIBIT 21 LIST OF SUBSIDIARIES Domestic Subsidiaries State of Name Incorporation - ---- ------------- A-C Compressor Corporation Delaware Arizona Elevator, Inc. Delaware Belvac Production Machinery, Inc. Delaware Bernard International, Inc. Delaware Chief Automotive Management Systems Inc. Delaware Chief Automotive Systems, Inc. Delaware Communications Techniques, Inc. Delaware De-Sta-Co Cylinders, Inc. Delaware DEK U.S.A., Inc. Delaware Delaware Capital Formation, Inc. Delaware Delaware Capital Holdings, Inc. Delaware Dielectric Laboratories, Inc. Delaware Dover Caribbean, Inc. Delaware Dover Elevator Company Delaware Dover Elevator International, Inc. Delaware Dover Elevator Service of Puerto Rico, Inc. Puerto Rico Dover Elevator Systems, Inc Delaware Dover Europe Corporation Delaware Dover Industries Acceptance, Inc. Delaware Dover Industries, Inc. Delaware Dover Resources, Inc. Delaware Dover Soltec, Inc. Delaware Dover Technology International, Inc. Delaware Duncan Industries Parking ControlSystems Corp. Delaware Empire Elevator Corporation Delaware General Elevator Company, Incorporated Maryland GFS Manufacturing, Inc. Delaware Hasstech, Inc. Delaware Hawaiian Pacific Elevator Corporation Delaware Hill-Phoenix, Inc. Delaware Hudson Elevator Corp. Delaware K&L Microwave, Inc. Delaware Knappco Corporation Delaware Lagerquist Corporation Delaware Marathon Equipment Company Delaware Mark Andy, Inc. Missouri Measurement Systems, Incorporated Delaware Miami Elevator Company Delaware Midland Manufacturing, Inc. Delaware Midstate Elevator Company, Inc. Delaware 2 Novacap, Inc. Delaware Pathway Bellows, Inc. Delaware Petro Vend, Inc. Delaware Phoenix Refrigeration Systems, Inc. Georgia Pomeco Corporation Delaware Randell Manufacturing, Inc. Delaware Randell Refrigeration, Inc. Delaware Randell Warehouse of Arizona, Inc. Delaware Refrigeration Systems, Inc. Delaware Revod Corporation Delaware Sargent Industries, Inc. Delaware Security Elevator Company Delaware Sound Elevator Company Delaware Stark Manufacturing, Inc. Delaware Swep Inc., USA Delaware Tarby, Inc. Delaware Texas Hydraulics, Inc. Delaware The Heil Company Delaware The Wittemann Company, Inc. Delaware Tipper Tie, Inc. Delaware TNI, Inc. Delaware Trailmaster Corporation Texas Tranter, Inc. Michigan Universal Instruments Corporation Delaware Vectron Laboratories, Inc. Delaware Vectron Technologies, Inc. Delaware Waukesha Bearings Corp. Wisconsin Weldcraft Products, Inc. Delaware 3 Foreign Subsidiaries Name Jurisdiction - ---- ------------ A-C Compressor Canada Canada Allgemeine Aufzugswartung GmbH Germany Chief Automotive Limited United Kingdom Chief Automotive Systems Canada, Inc. Canada Christian Hein GmbH Germany Copco A. G. Switzerland De-Sta-Co (Asia) Company, Limited Thailand De-Sta-Co Metallerzeugnisse GmbH Germany DEK GmbH Germany DEK Japan Limited Japan DEK Printing Machines Ltd. United Kingdom Dover Corporation (Canada) Limited Canada Dover Europe Aufzug GmbH Germany Dover Exports, Ltd. Barbados Dover International, B.V. Netherlands Dover UK Finance Limited United Kingdom Dover UK Finance Services Limited United Kingdom Dover UK Holdings Limited United Kingdom Dr. Rotert/Dieterich Standard GmbH Germany DTI-ARB, Inc. Canada European Lift Engineering GmbH Germany Grapas Nacionales de Mexico C.V. de S.A. Mexico Hammond & Champness, Limited United Kingdom Hammond Engineering, Ltd. United Kingdom Heat Transfer Technology S.A. (HTT) Switzerland I.S.T. Molchtecknik GmbH Germany Imaje, S.A. France Koolrad Design & Manufacturing Co., Inc. Canada Petro Vend Europe Inc. United Kingdom Petro Vend of Canada, Inc. Canada Petro Vend, Inc. Poland ReHeat A.B. Sweden ReHeat N.V. Belgium Sincotron - Nordic Sweden Sincotron AB Sweden Soltec Group B.V. Netherlands Soltec International, B.V. Netherlands Swep A.G. Switzerland Swep France France Swep Heat Exchangers Pty., Ltd. Australia Swep Iberica S.A. Spain Swep International A.B. Sweden Swep Italia S.R.L. Italy Swep Ltd. United Kingdom Swep Marketing B.V. Netherlands Swep Reheat A.B. Sweden Swep Warmetauscher Deutschland A.G Germany 4 Technopack ewald hagedoen Nederland b.v Netherlands Tipper Tie (UK) Limited United Kingdom Tipper Tie Verschlusstechnik Deutchland, Gmbh Germany Tipper Tie-Technopack GmbH Germany Unibras A.G. Switzerland Universal Hong Kong Hong Kong Universal Instruments (Electronics) Ltd. United Kingdom Universal Instruments (Malaysia) Sdn Bhd Malaysia Universal Instruments Corporation (Singapore) Pte. Ltd. Singapore Universal Instruments GmbH Germany Universal Instruments Korea Limited Korea Universal Instruments S.a.r.l. France

1 Exhibit 23 (a) CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statement of Dover Corporation on Form S-8 fine No. 33-01419 of our reports dated February 20, 1996, on our audit of (i) the consolidated financial statements of Dover Corporation as of December 31, 1995, and for the year ended December 31, 1995 which report is included in the 1995 Annual Report to Stockholders and incorporated by reference in this Annual Report on Form 10-K and (ii) the 1995 financial statement schedule of Dover Corporation which report is included in this Annual Report on Form 10-K. Coopers & Lybrand L.L.P. New York, New York March 21, 1996

1 Exhibit 23(b) Independent Auditors' Consent The Board of Directors and Shareholders Dover Corporation We consent to the incorporation by reference in the Registration Statement (No. 33-11229 ) on Form S-8 dated January 28, 1987 (1987 Incentive Stock Option Plan) and in the Registration Statement (No. 33- 01419) on Form S-8 dated March 4, 1996 (Dover Corporation Employee Savings and Investment Plan) of our report dated February 22, 1995 relating to the consolidated balance sheets of Dover Corporation and subsidiaries as of December 31, 1994 and 1993 and the related consolidated statements of earnings, retained earnings, and cash flows for the years then ended and the related schedule, which Report appears in the December 31, 1995 Annual Report on Form 10-K of Dover Corporation. KPMG Peat Marwick LLP 345 Park Avenue New York, New York March 21, 1996

1 EXHIBIT 24 P O W E R O F A T T O R N E Y KNOW ALL MEN BY THESE PRESENTS that , a director of Dover Corporation, a Delaware corporation (the "Company"), hereby constitutes and appoints Thomas L. Reece, John F. McNiff and Robert G. Kuhbach, and each of them (with full power to each of them to act alone), his true and lawful attorney-in-fact and agent, for him/her on his/her behalf and in his/her name, place and stead, to sign, execute and affix his/her name thereto and file the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, with the Securities and Exchange Commission and any other appropriate authority, granting unto said attorneys and each of them, full power and authority to do and perform each and every act and thing required and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he/she himself might or could do if personally present, hereby ratifying and confirming all that said attorneys-in-fact and agents, of any of them may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his/her hand this 31st day of January, 1996. /s/David H. Benson -------------------------- David H. Benson /s/Magalen O. Bryant -------------------------- Magalen O. Bryant /s/ John-Pierre Ergas -------------------------- John-Pierre Ergas /s/ Roderick J. Fleming -------------------------- John-Pierre Ergas /s/John F. Fort -------------------------- John F. Fort /s/James L. Koley -------------------------- James L. Koley /s/Anthony J. Ormsby -------------------------- Anthony J. Ormsby /s/Thomas L. Reece -------------------------- Thomas L. Reece /s/Gary L. Roubos -------------------------- Gary L. Roubos /s/Jerry W. Yochum -------------------------- Jerry W. Yochum

5 This Schedule contains summary financial information extracted from Dover Corporation Annual Report to stockholders for the fiscal year ended December 31, 1995, and is qualified in its entirety by reference to such financial statements. 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 121,698 27,054 729,214 22,325 479,327 1,384,359 975,127 551,187 2,666,651 1,081,048 255,600 0 0 116,563 1,111,143 2,666,651 3,745,877 3,745,877 2,564,344 3,307,477 1,236 0 40,113 417,111 138,800 278,311 0 0 0 278,311 2.45 2.45