1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Nine months ended September 30, 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 112,504,164.
2
Part. I. FINANCIAL INFORMATION
Item 1. Financial Statements
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended September 30, 1996 and 1995
(000 omitted)
1996 1995
----------- -----------
Net sales $ 1,009,388 $ 934,543
Cost of sales 672,983 644,924
----------- -----------
Gross profit 336,405 289,619
Selling & administrative expenses 198,229 177,110
----------- -----------
Operating profit 138,176 112,509
----------- -----------
Other deductions (income):
Interest expense 9,557 9,559
Interest income (7,840) (5,024)
Foreign exchange 359 (33)
Gain on dispositions (75,065) --
All other, net (297) 4,812
----------- -----------
Total (73,286) 9,314
----------- -----------
Earnings before taxes on income 211,462 103,195
Federal & other taxes on income 67,139 32,047
----------- -----------
Net earnings $ 144,323 $ 71,148
=========== ===========
Weighted average number of common shares
outstanding during the period 113,513 113,399
=========== ===========
Net earnings per common share $ 1.27 $ 0.63
=========== ===========
3
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Nine Months Ended September 30, 1996 and 1995
(000 omitted)
1996 1995
---------- ----------
Net sales $3,032,284 $2,736,836
Cost of sales 2,011,896 1,874,145
---------- ----------
Gross profit 1,020,388 862,691
Selling & administrative expenses 609,609 533,193
---------- ----------
Operating profit 410,779 329,498
---------- ----------
Other deductions (income):
Interest expense 31,816 27,101
Interest income (15,317) (15,093)
Foreign exchange (244) (114)
Gain on dispositions (75,065) --
All other, net (3,658) 1,541
---------- ----------
Total (62,468) 13,435
---------- ----------
Earnings before taxes on income 473,247 316,063
Federal & other taxes on income 163,321 106,224
---------- ----------
Net earnings $ 309,926 $ 209,839
========== ==========
Weighted average number of common shares
outstanding during the period 113,513 113,399
========== ==========
Net earnings per common share $ 2.73 $ 1.85
========== ==========
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Nine Months Ended September 30, 1996 and 1995
(000 omitted)
1996 1995
---------- ----------
Retained earnings at January 1 $1,152,187 $1,268,114
Net earnings 309,926 209,839
---------- ----------
1,462,113 1,477,953
Deduct:
Common stock cash dividends
$ 0.47 per share ($0.41 in 1995) 53,273 46,502
Stock split (2 for 1) 56,793
Treasury stock retired 273,900
---------- ----------
Retained earnings at end of period $1,408,840 $1,100,758
========== ==========
4
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(000 omitted)
September 30, 1996 December 31, 1995
------------------ -----------------
Assets:
------
Current assets:
Cash & cash equivalents $ 126,799 $ 121,698
Marketable securities 30,035 27,054
Receivables, net of allowance for doubtful accounts 690,030 706,889
Inventories at cost (determined principally on the last-in,
first-out basis, which is less than market value) 511,026 479,327
Prepaid expenses 53,044 49,391
------------ -----------
Total current assets 1,410,934 1,384,359
------------ -----------
Property, plant & equipment (at cost) 1,047,892 975,127
Accumulated depreciation (594,104) (551,187)
------------ -----------
Net property, plant & equipment 453,788 423,940
------------ -----------
Intangible assets, net of amortization 822,337 811,182
Other intangible assets 10,258 10,258
Deferred charges & other assets 35,551 36,912
------------ -----------
$ 2,732,868 $ 2,666,651
============ ===========
Liabilities:
-----------
Current liabilities:
Notes payable $ 282,185 $ 417,478
Current maturities of long-term debt 3,882 2,502
Accounts payable 178,230 190,850
Accrued compensation & employee benefits 124,986 125,600
Accrued insurance 103,255 106,274
Other accrued expenses 219,907 209,455
Income taxes 31,986 28,888
------------ -----------
Total current liabilities 944,431 1,081,047
Long-term debt 257,592 255,600
Deferred taxes 58,402 46,328
Deferred compensation 57,562 55,970
Stockholders' equity:
--------------------
Preferred stock -- --
Common stock 116,832 116,563
Additional paid-in surplus 12,964 6,424
Cummulative translation adjustments (10,689) 2,268
Unrealized holding gains (losses) 3,449 3,994
Retained earnings 1,408,840 1,152,187
------------ -----------
Subtotal 1,531,396 1,281,436
Less: treasury stock 116,515 53,730
------------ -----------
1,414,881 1,227,706
------------ -----------
$ 2,732,868 $ 2,666,651
============ ===========
5
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Nine Months Ended September 30, 1996 and 1995
(000 omitted)
1996 1995
---------- --------
Cash flows from operating activities:
Net income $ 309,926 $209,839
---------- --------
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation 63,260 50,928
Amortization 28,992 26,677
Net increase (decrease) in deferred taxes 10,245 3,553
Net increase (decrease) in LIFO reserves 1,047 2,755
Increase (decrease) in deferred compensation 823 6,119
Gain on sale of business (52,236)
Other, net (7,853) 2,672
Changes in assets & liabilities (excluding acquisitions):
Decrease (increase) in accounts receivable 18,717 (74,890)
Decrease (increase) in inventories, excluding LIFO reserve (11,797) (53,520)
Decrease (increase) in prepaid expenses (2,997) (4,298)
Increase (decrease) in accounts payable (21,649) 1,721
Increase (decrease) in accrued expenses 2,956 51,206
Increase (decrease) in federal & other taxes on income (24,828) (12,116)
---------- --------
Total adjustments 4,680 807
---------- --------
Net cash provided by operating activities 314,606 210,646
---------- --------
Cash flows from (used in) investing activities:
Net sale (purchase) of marketable securities (2,981) (12,355)
Additions to property, plant & equipment (86,442) (71,269)
Acquisitions, net of cash & cash equivalents (73,344) (304,569)
Proceeds from sale of business 112,087 5,000
Purchase of treasury stock (62,746) (8,873)
---------- --------
Net cash from (used in) investing activities (113,426) (392,066)
---------- --------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable (137,399) 233,710
Reduction of long-term debt (9,710) (5,037)
Proceeds from exercise of stock options 4,303 2,161
Cash dividends to stockholders (53,273) (46,502)
---------- --------
Net cash from (used in) financing activities (196,079) 184,332
---------- --------
Net increase (decrease) in cash & cash equivalents 5,101 2,912
Cash & cash equivalents at beginning of period 121,698 90,304
---------- --------
Cash & cash equivalents at end of period $ 126,799 $ 93,216
========== ========
6
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 changes in financial position in
conformity with generally accepted accounting principles. In the opinion of the
Company, all adjustments, consisting only of normal recurring items necessary
for a fair presentation of the operating results have been made. The results of
operations of any interim period are subject to year-end audit and adjustments,
and are not necessarily indicative of the results of operations for the fiscal
year.
NOTE B - Inventory
Inventories, by components, are summarized as follows:
September 30, December 31,
1996 1995
------------- ------------
Raw materials $162,491 $153,094
Work in progress 234,957 221,371
Finished goods 159,982 150,677
------------- ------------
Total 557,430 525,142
Less LIFO reserve 46,404 45,815
------------- ------------
Net amount per balance sheet $511,026 $479,327
============= ============
NOTE C - Additional Information
For a more adequate understanding of the Company's financial position,
operating results, business properties and other matters, reference is made to
the Company's Annual Report on Form 10-K which was filed with the Securities and
Exchange Commission in March 1996.
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 nine months 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 $466.5 million at September 30, 1996. The $163.2 million increase (which
includes $112.1 million from the sale of businesses) represents positive cash
flow over and above dividends of $53.3 million and the $90 million paid for
acquisitions during this nine month period.
7
At September 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 $386.8 million represented 21.5% of total capital.
This compares with 30% at December 31, 1995.
(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:
The Company earned $1.27 per share in its third quarter ending
September 30, versus the $.63 earned in the third quarter of 1995. Sales gained
8% to $1.0 billion. Included in this year's quarterly profit results were a gain
of $.44 per share from the sale of two businesses and $.09 per share of
favorable tax and investment income adjustments, as described below.
Two companies were sold in the quarter -- Dieterich Standard (part of
Dover Industries) and Measurement Systems (part of Dover Technologies). Dover
realized a gain on these divestitures of $75.1 million, equivalent to $.44 per
share. Selling good businesses is not something that Dover does often, but in
each case synergy with the new corporate owner and an attractive valuation made
the divestiture advantageous to all parties. Together with the first quarter
sale of leasing company assets, gross proceeds from all three sales have been
$112 million.
The bulk of these proceeds, after providing for tax payments, were used
in the third quarter to repurchase 1.4 million Dover shares at an average price
of $43.70 per share.
Additionally, in the third quarter Dover companies made two "add-on"
acquisitions - KVG (Germany) by Quadrant (part of Dover Technologies) and
Realcold (Texas), by Wittemann (part of Dover Resources). The combined
investment was about $23 million, bringing acquisition investment for the nine
months to $90 million, all for "add-on" transactions. KVG is a maker of high
frequency crystals and oscillators and will expand Quadrant's leading position
in this world-wide market. Realcold makes merchant CO2 and refrigeration systems
and has a particularly strong position in Asia. They have worked previously with
Wittemann on selected projects.
Dover's third quarter effective tax rate of 31.7% was unusually low
because the tax basis of the MSI assets sold was higher than the book basis;
plus two tax reductions worth $6.4 million ($.06 per share) for settlement of a
foreign tax dispute and from the resumption of recognizing US research &
development tax credits. Corporate/net interest expense was also below normal
due to a $5.6 million, or $.03 per share, favorable investment gain in a self
insured portion of Dover's casualty insurance program.
Dover Technologies:
Dover Technologies' sales and profits were 13% ahead of last year.
Strong earnings growth at Imaje - not owned until the end of last year's third
quarter - more than offset continuing unfavorable earnings comparisons at
Universal. Most other DTI companies showed gains, with Quadrant almost doubling
its profits due to the acquisition and successful move of a business purchased
last year. Imaje improved sales in the U.S. and Asia, offsetting weakness in
Europe, and further improved its already strong margins. Universal's shipments
dropped 17% from last year with a larger decline in profits, but were at a level
consistent with this year's earlier results. Book-to-bill ratio at Universal was
0.89 as orders followed their normal seasonal pattern - declining in July and
August and rebounding in September. Orders are expected to
8
improve in the fourth quarter, but no major recovery in this market is
anticipated until late 1997. Technologies' overall book-to-bill in the third
quarter was 0.90 which will make it difficult, though still possible, for this
segment to exceed last year's profits in the fourth quarter.
Dover Industries:
Dover Industries' profits fell 7% in the quarter on a 5% sales gain.
Declines at Heil Trailer, Marathon, Groen, and Davenport, together with the loss
of earnings from Dieterich Standard (sold July 1) were not fully offset by
double-digit profit gains at Rotary Lift, Chief, DovaTech and Randell. These
mixed results left quarterly profits below the rate of the first half, as
anticipated. Bookings were 16% higher than last year, but slightly below
shipments, with the gain over prior year due to recovery in Heil Trailers'
business and strength at Rotary. Present trends suggest that Industries' profits
may fall short of prior year in the fourth quarter of this year, but will show a
gain for the year as a whole.
Dover Diversified:
Dover Diversified reported a slight decline in profits, but last year
included a $9.5 million profit on a contract settlement. Excluding this item,
profits rose 42% on a sales gain of only 4%. The margin improvement was due to
Hill Phoenix and A-C Compressor whose profit improvement programs were
successful in raising combined profit to over $5 million versus breakeven last
year. Strong profit gains continued at Belvac and at Sargent Controls while Mark
Andy continued to struggle with a weak market and the high initial costs of
several new systems and product development programs. Diversified bookings were
slightly higher than prior year with a book-to-bill of 0.90. Backlog at
September 30 was 21% below prior year almost entirely due to Belvac whose orders
remained at a low level. Profit levels at Diversified in the fourth quarter are
expected to continue approximately at third quarter levels, but with the share
represented by Belvac shrinking as its shipments continue to decline.
Dover Resources:
Profits at Dover Resources advanced 18% in the quarter on a 15% sales
gain. Twelve of their 16 individual businesses achieved profit growth with very
large improvement at Blackmer, Stark and Petro Vend - all of whom had weaker
quarters in 1995. Increased activity in oil drilling allowed the three companies
serving this market to improve profits almost 50% on a 22% sales gain. However,
they continued to represent only about 15% of Resource's total operating income.
Bookings trailed sales in the quarter by 4% but were 10% over last year and
consistent with first half trends. Backlog is 6% below the one-year-ago level
despite good increases at Norris Sucker Rod, Wittemann, and Petro Vend. The
previously reported order/shipment imbalance at Midland continued and its
reduced backlog accounts for all of the drops in the Dover Resource's total.
Dover Elevator:
Dover Elevator International had its best quarter results since the
industry recession hit in late 1990. Profits of $25.1 million represented an
11.6% margin, exceeding expectations. Last year's quarter included a $15 million
charge to close a Canadian plant. Adjusting for this, operating profits rose 48%
on a 4% sales increase. Dover Elevator undertook a major management and cost
restructuring in the second half of 1995. This year's higher profits reflect
9
reductions in salaried staff, improved field operating efficiency, more careful
quoting in the mid and high-rise markets, and a renewed focus (manufacturing and
marketing) on the low-rise segment, which is Dover's traditional area of
strength. The low-rise market has shown good growth in the past three years in
contrast to the still severely depressed mid and high-rise segments of the new
elevator business. Elevator bookings were slightly below last year for the
quarter but new elevator backlog has risen 9% this year to a level 5% above
one-year-ago. Dover Elevator does not expect to match its third quarter result
in the fourth quarter but will probably at least equal the $18.5 million
operating result of last year (before the $16.9 million of write-offs included
in last year's fourth quarter).
Outlook:
Dover expects full year results, excluding the third quarter gain on
divestitures, to set a record with an increase in EPS of approximately 20%.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(i) Certificate of Amendment of the Certificate of
Incorporation of the Registrant, dated as of April 30, 1996.
(b) 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: October 30, 1996 /s/ John F. McNiff
---------------------- -------------------------------
John F. McNiff, Vice President
and Treasurer
Date: October 30, 1996 /s/ Alfred Suesser
---------------------- -------------------------------
Alfred Suesser, Controller and
Assistant Treasurer
10
EXHIBIT INDEX
Exhibits
3(i) Certificate of Amendment of the Certificate of
Incorporation of the Registrant, dated as of April 30, 1996.
1
Exhibit 3(I)
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
DOVER CORPORATION
Dover Corporation, a Delaware corporation (hereinafter called
the "corporation"), hereby certifies:
1. At a meeting of the Board of Directors of the corporation
duly held and convened, resolutions were duly adopted setting forth the
following proposed amendment to the Certificate of Incorporation of the
corporation, declaring the amendment advisable, and directing that the
proposed amendment be considered at the next annual meeting of
stockholders:
RESOLVED, that the first sentence of Article Fourth
of the Restated Certificate of Incorporation of the
corporation dated February 13, 1984, as amended on April 25,
1989, be further amended to read as follows:
"FOURTH: The total number of shares of all classes of
stock which the corporation is authorized to issue is
500,100,000; of which 500,000,000 shares, having a par value
of $1 each shall be Common Stock; and 100,000 shares having a
par value of $100 each shall be Preferred Stock, with or
without voting powers, full or limited, and in such series and
with such designations, preferences and relative,
participating, optional or other special rights and
qualifications, limitations or restrictions in respect to each
class of stock or series thereof as hereinafter provided:"
2
2. Thereafter, pursuant to the resolutions of its Board of
Directors, the annual meeting of stockholders of the corporation was
duly called and held on notice in accordance with Section 222 of the
Delaware General corporation Law, at which meeting the necessary number
of stockholders as required by statute voted in favor of the aforesaid
amendment.
3. The aforesaid amendment was duly adopted in accordance
with the provisions of Section 242 of the Delaware General Corporation
Law.
4. The capital of the corporation will not be reduced under
or by reason of the aforesaid amendment.
IN WITNESS WHEREOF, Dover Corporation has caused this Certificate to be
duly executed by a Vice President and attested by the Secretary of the
Corporation thereunto duly authorized as of the 30th day of April,
1996.
DOVER CORPORATION
By /s/ John F. McNiff
-----------------------
Vice President
ATTEST:
/s/ Robert G. Kuhbach
---------------------
Secretary
5
1000
9-MOS
DEC-31-1996
JUL-01-1996
SEP-30-1996
126,799
30,035
713,565
23,535
511,026
1,410,934
1,047,892
(594,104)
2,732,868
944,431
257,592
0
0
116,832
0
2,732,868
3,032,284
3,032,284
2,011,896
2,621,505
(78,967)
0
31,816
473,247
163,321
0
0
0
0
0
1.27
1.27
