1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For six months ended June 30, 1996 Commission File No. 1-4018
DOVER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 53-0257888
(State of Incorporation) (I.R.S. Employer Identification No.)
280 Park Avenue, New York, NY 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 922-1640
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
The number of shares outstanding of the Registrant's common stock as of the
close of the period covered by this report was 113,887,685.
2
Part. I. FINANCIAL INFORMATION
Item 1. Financial Statements
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended June 30, 1996 and 1995
(000 omitted)
1996 1995
------------- --------------
Net sales $ 1,023,423 $ 948,164
Cost of sales 674,637 645,128
------------- --------------
Gross profit 348,786 303,036
Selling & administrative expenses 204,635 180,082
------------- --------------
Operating profit 144,151 122,954
------------- --------------
Other deductions (income):
Interest expense 10,733 8,688
Interest income (1,845) (3,853)
Foreign exchange (293) (477)
All other, net (2,174) (2,253)
------------- --------------
Total 6,421 2,105
============= ==============
Earnings before taxes on income 137,730 120,849
Federal & other taxes on income 49,872 41,957
------------- --------------
Net earnings $ 87,858 $ 78,892
============= ==============
Weighted average number of common shares
outstanding during the period 113,798 113,376
============= ==============
Net earnings per common share $ 0.78 $ 0.69
============= ==============
3
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Six Months Ended June 30, 1996 and 1995
(000 omitted)
1996 1995
--------------- ----------------
Net sales $ 2,022,896 $ 1,802,293
Cost of sales 1,338,913 1,229,221
--------------- ----------------
Gross profit 683,983 573,072
Selling & administrative expenses 411,380 356,083
--------------- ----------------
Operating profit 272,603 216,989
--------------- ----------------
Other deductions (income):
Interest expense 22,259 17,542
Interest income (7,477) (10,069)
Foreign exchange (603) (81)
All other, net (3,361) (3,271)
--------------- ----------------
Total 10,818 4,121
--------------- ----------------
Earnings before taxes on income 261,785 212,868
Federal & other taxes on income 96,182 74,177
--------------- ----------------
Net earnings $ 165,603 $ 138,691
=============== ================
Weighted average number of common shares
outstanding during the period 113,798 113,376
=============== ================
Net earnings per common share $ 1.46 $ 1.22
=============== ================
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Six Months Ended June 30, 1996 and 1995
(000 omitted)
1996 1995
------------- ---------------
Retained earnings at January 1 $ 1,152,187 $ 1,268,115
Net earnings 165,603 138,691
------------- ---------------
1,317,790 1,406,806
Deduct:
Common stock cash dividends
$ 0.30 per share ($0.26 in 1995) 34,148 29,482
Treasury stock retired 273,902
------------- ---------------
Retained earnings at end of period $ 1,283,642 $ 1,103,422
============= ===============
4
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(000 omitted)
June 30, December 31,
1996 1995
-------------- --------------
Assets:
-------
Current assets:
Cash & cash equivalents $ 108,657 $ 121,698
Marketable securities 31,004 27,054
Receivables, net of allowance for doubtful accounts 684,123 706,889
Inventories 521,264 479,327
Prepaid expenses 52,618 49,391
-------------- --------------
Total current assets 1,397,666 1,384,359
-------------- --------------
Property, plant & equipment (at cost) 1,028,425 975,127
Accumulated depreciation (582,261) (551,187)
-------------- --------------
Net property, plant & equipment 446,164 423,940
-------------- --------------
Intangible assets, net of amortization 834,549 811,182
Other intangible assets 10,258 10,258
Deferred charges & other assets 30,271 36,912
-------------- --------------
$ 2,718,908 $2,666,651
============== ==============
Liabilities:
------------
Current liabilities:
Notes payable $ 384,154 $ 417,478
Current maturities of long-term debt 838 2,502
Accounts payable 172,701 190,850
Accrued compensation & employee benefits 108,936 125,600
Accrued insurance 108,305 106,274
Other accrued expenses 209,513 209,455
Income taxes 26,429 28,888
-------------- --------------
Total current liabilities 1,010,876 1,081,047
Long-term debt 254,582 255,600
Deferred taxes 44,448 46,328
Deferred compensation 53,571 55,970
Stockholders' equity:
---------------------
Preferred stock - -
Common stock (par value $1 per share) 116,803 116,563
Additional paid-in surplus 12,224 6,424
Cumulative translation adjustments (6,911) 2,268
Unrealized holding gains (losses) 4,476 3,994
Retained earnings 1,283,642 1,152,187
-------------- --------------
Subtotal 1,410,234 1,281,436
Less: treasury stock (2,915,686 shares at June 30, 1996) 54,803 53,730
-------------- --------------
1,355,431 1,227,706
-------------- --------------
$ 2,718,908 $2,666,651
============== ==============
5
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Six Months Ended June 30, 1996 and 1995
(000 omitted)
1996 1995
----------- ------------
Cash flows from operating activities:
Net income $ 165,603 $ 138,691
----------- ------------
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation 40,878 32,674
Amortization 19,577 17,002
Net increase (decrease) in deferred taxes (3,709) (2,871)
Net increase (decrease) in LIFO reserves 778 2,334
Increase (decrease) in deferred compensation (3,169) 2,362
Gain on sale of business (2,602) -
Other, net 2,101 5,237
Changes in assets & liabilities (excluding acquisitions):
Decrease (increase) in accounts receivable 22,438 (77,833)
Decrease (increase) in inventories, excluding LIFO reserve (28,327) (45,418)
Decrease (increase) in prepaid expenses (2,921) (2,438)
Increase (decrease) in accounts payable (25,982) 2,321
Increase (decrease) in accrued expenses (16,544) 26,458
Increase (decrease) in federal & other taxes on income (2,515) 11,010
----------- ------------
Total adjustments 3 (29,162)
----------- ------------
Net cash provided by operating activities 165,606 109,529
----------- ------------
Cash flows from (used in) investing activities:
Net sale (purchase) of marketable securities (3,950) (9,097)
Additions to property, plant & equipment (61,846) (47,062)
Acquisitions, net of cash & cash equivalents (58,905) (98,692)
Proceeds from sale of business 17,898 5,000
Purchase of treasury stock (1,074) (9,285)
----------- ------------
Net cash from (used in) investing activities (67,877) (159,136)
----------- ------------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable (34,417) 69,171
Reduction of long-term debt (6,041) (1,142)
Proceeds from exercise of stock options 3,836 1,400
Cash dividends to stockholders (34,148) (29,482)
----------- ------------
Net cash from (used in) financing activities (70,770) 39,947
----------- ------------
Net increase (decrease) in cash & cash equivalents (13,041) (9,660)
Cash & cash equivalents at beginning of period 121,698 90,303
----------- ------------
Cash & cash equivalents at end of period $ 108,657 $ 80,643
=========== ============
6
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles. In the opinion of the Company, all
adjustments, consisting only of normal recurring items necessary for a fair
presentation of the operating results have been made. The results of
operations of any interim period are subject to year-end audit and adjustments,
and are not necessarily indicative of the results of operations for the fiscal
year.
NOTE B - Inventory
Inventories, by components, are summarized as follows:
JUNE 30, DECEMBER 31,
1996 1995
------------ ---------------
Raw materials $164,678 $153,094
Work in progress 238,500 221,371
Finished goods 164,678 150,677
------------ ---------------
Total 567,856 525,142
Less LIFO reserve 46,592 45,815
------------ ---------------
Net amount per balance sheet $521,264 $479,327
============ ===============
NOTE C - Additional Information
For a more detailed understanding of the Company's financial position,
operating results, business properties and other matters, reference is made to
the Company's annual form 10-K which was filed with the Securities and Exchange
Commission in March 1996.
NOTE D - Subsequent Event
On July 1, 1996, the Company sold the assets of its Dieterich Standard
Division and recorded a gain of approximately 40 cents per share. The
operating profits of Dieterich Standard were not significant to the Company.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(1) MATERIAL CHANGES IN CONSOLIDATED FINANCIAL CONDITION:
The Company's liquidity increased during the first half of 1996 as
compared to the position at December 31, 1995.
Working capital increased from $303.3 million at the end of last year to
$386.8 million at June 30, 1996. The $83.5 million increase represents
positive cash flow over and above dividends of $34.1 million and the $66.9
million paid for acquisitions during this six month period.
At June 30, 1996, net debt (defined as long-term debt plus current
maturities on long-term debt plus notes payable less cash and equivalents and
marketable securities) of $500 million represented 27% of total capital. This
compares with 30% at December 31, 1995.
7
(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:
The Company earned $.78 per share in its second quarter ended June 30, an
increase of 13% from the $.69 earned in the second quarter of 1995. Sales rose
8% to $1.02 billion. For the first six months, EPS of $1.46 were 20% ahead of
prior year on a 12% sales gain to $2.02 billion. Four of Dover's five market
segments achieved earnings gains in the second quarter while all five were
ahead of prior year for the first six months.
DOVER TECHNOLOGIES
Second quarter earnings at Dover Technologies were down 4% from last year's
very strong quarter despite an 8% sales gain. A profit decline of
approximately $20 million at Universal Instruments from their all-time record
last year was not quite offset by growth at other DTI companies and by the
profit addition from Imaje and ATT- Frequency Products both of which were
purchased in the second half of 1995. Universal Instruments had an
extraordinarily strong year in 1995, fueled by an electronics industry capital
spending boom which trailed off as the year ended. Current sales and profits
rates at Universal, however, continue to exceed 1994 which was their record
year prior to the 1995 boom. Universal's second quarter book-to-bill ratio was
1.07. Monthly bookings have been steady during the first 6 months, but at a
rate 22% below last year's record first half. Imaje had record second quarter
sales and profits, a 1.11 book-to-bill ratio, and very strong margins. Its
products, while electronic in nature, are sold to different end markets from
Universal's. Demand for Imaje marking equipment has continued to grow,
unaffected by the slump in spending for assembly equipment. Quadrant, the
acquiror of the ATT product line, also had record earnings and strong margins
due to growth of its communications related components and subassemblies.
Second quarter bookings for Dover Technologies as a whole were 6% ahead of
shipments but, on an acquisition adjusted basis, below last year. The
Technologies segment's profits may decline somewhat during the second half from
the $70 million earned in the first half, but the segment should achieve record
earnings in 1996.
DOVER INDUSTRIES
Profits at Dover Industries advanced 4% on an 8% sales gain, primarily due to
excellent operating results at Rotary Lift and DovaTech and the absence of an
environmental charge taken last year. Results were mixed among Industries'
twelve companies with only half achieving profit gains over the prior year.
The market for solid waste equipment (Heil Refuse trucks and Marathon
compactors and balers) softened during the quarter, with orders 27% below prior
year. Conversely, orders for Heil trailers rebounded - more than doubling the
weak prior year quarter and approaching shipping levels for the first time
since the first quarter of 1995. Dover Industries total orders were 10% higher
than prior year, but declined slightly from the first quarter this year and
were 94% of shipments. On July 1, Dover Industries sold its Dieterich Standard
business to Emerson Electric as previously announced. Dover expects to report
a gain on this transaction of approximately $.40 per share in its third
quarter. However, Dieterich's absence and the overall order pattern suggest
that Dover Industries' ongoing operating profit in the second half will be less
than the first half, although possibly above the prior year.
DOVER DIVERSIFIED
Profit at Dover Diversified rose 59% in the quarter to a record level of $34
million. A large gain at Belvac on record shipments and gains of over $2
million each at Hill and A-C Compressor provided most of the profit increase.
Last year's capacity expansions at Belvac facilitated a 45% shipment gain and a
profit record. However, orders remained weak, at only one-third of shipments,
which further reduced Belvac's backlog which is now half of last year's. The
improvement at Hill on sales 15% below prior year, reflects curtailment of
losses on refrigerated case shipments compared to a quarter last year when a
major plant move was begun. Orders trailed prior year substantially and were
only 92% of shipments, but continued manufacturing progress was evident in the
new facility. At A-C Compressor shipments rose sharply, although much of this
business had been taken last year at low margins. The company also had its
best bookings quarter following the more careful quoting strategy that was
implemented last year. Results at Diversified's seven other businesses were
mixed, but ahead in total. Diversified's total bookings were 16% below last
year with a book-to-bill of .83, mostly due to the imbalances at Belvac and
Hill. Dover expects the second quarter will be Diversified's highest earnings
quarter in 1996, but the improvements at A-C Compressor and Hill, if continued,
could result in second half profits similar to the first half.
8
DOVER RESOURCES
Second quarter profits at Dover Resources rose 14% on an 11% sales gain. Most
of these sixteen businesses achieved both sales and earnings increases led by
Blackmer, Midland, Norris and Wittemann. Resources' two largest companies
(De-Sta-Co and OPW Fueling Components) which produce about one-third of the
segment's sales and earnings also had modest gains. Resources' total
book-to-bill slightly exceeded 1.0 in the second quarter after being slightly
below this ratio in the first quarter. The pattern of increasing orders was
mixed, as strong bookings at Wittemann offset some softening at other
businesses. Dover is not anticipating stronger earnings at Resources during
the second half of 1996; although current trends suggest an increase over
results in the second half of 1995.
DOVER ELEVATOR
Dover Elevator profits increased 25% in the quarter, compared to its best first
quarter in 1995, bringing year-to-date profits 60% ahead of last year. Sales
were flat for the quarter and up only 4% for the 6 months, with the sharp
income gain reflecting the benefits from restructuring and cost reduction
programs undertaken last year. Bookings remained strong for hydraulic
elevators. Less aggressive quoting for traction equipment (mid-rise and
high-rise buildings) has reduced factory backlogs and necessitated further
headcount reductions in this area. However, total backlog for new elevator
work, including the field construction component, has risen 10% since the start
of the year and second quarter bookings were 13% higher than prior year.
Elevators' annualized first half operating profit rate of $89 million
represents substantial improvement from the rate of $56 million in the first
half of 1995 and $70 million in the second half of 1996. Further improvement
in operating profit rates are not anticipated for the second half of this year;
however, reported profit comparisons will be enormously favorable due to the
$31 million of costs incurred in last year's second half to implement DEI's
reorganization.
OUTLOOK
Dover management expects overall second half results in 1996 to be similar to
the first half and well-above prior year. Thomas L. Reece, President and CEO,
noted "Markets gave us very mixed signals in the second quarter. We are
confident of a fourth consecutive earnings record in 1996. Barring some
unexpected adverse development, we have a good chance for five-in-a-row in
1997".
PART II. OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
The Annual Meeting of Stockholders was held in Wilmington, Delaware on
April 30,1996. Stockholders representing 99,076,157 shares of common stock, or
approximately 87% of the outstanding stock, were present in person or by proxy.
All of the nominees for director, namely David H. Benson, Magalen O.
Bryant, Jean-Pierre M. Ergas, Roderick J. Fleming, John J. Fort, James J.
Koley, John F. McNiff, Anthony J. Ormsby, Thomas L. Reece, and Gary L. Roubos
were elected directors for a one year term, each receiving at least 98,645,789
votes.
In addition, two other proposals were presented for stockholder approval.
Management's proposal that stockholders ratify and approve the Non-Employee
Directors' Stock Compensation Plan was approved as follows:
For Against Withheld
--- ------- --------
92,159,130 5,139,205 1,777,821
9
Management's proposal that an amendment to the Corporation's Certificate
of Incorporation increasing authorizing common stock from 2000,000,000 to
500,00,000 shares was approved as follows:
For Against Withheld
--- ------- --------
75,159,878 23,120,158 796,120
Item 6. Exhibits and Reports on Form 8-K
No report on Form 8-K was filed during the quarter for which
this report is filed.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DOVER CORPORATION
Date: July 30, 1996 /S/ John F. McNiff
------------------------ --------------------------------
John F. McNiff, Vice President
and Treasurer
Date: July 30, 1996 /S/ Alfred Suesser
------------------------ --------------------------------
Alfred Suesser, Controller and
Assistant Treasurer
10
EXHIBIT INDEX
EXHIBIT No. DESCRIPTION
27 FINANCIAL DATA SCHEDULE
5
1,000
6-MOS
DEC-31-1996
APR-01-1996
JUN-30-1996
108,657
31,004
708,146
24,023
521,264
1,397,666
1,028,425
(582,261)
2,718,908
1,010,876
254,582
0
0
116,803
0
2,718,908
2,022,896
2,022,896
1,338,913
1,750,293
(3,964)
0
22,259
261,785
96,182
0
0
0
0
0
0.78
0.78
