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, 1997 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 111,193,879.
2
Part. I. FINANCIAL INFORMATION
Item 1. Financial Statements
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended September 30, 1997 and 1996
(000 omitted)
1997 1996
----------- -----------
Net sales $ 1,163,744 $ 1,009,388
Cost of sales 760,246 672,983
----------- -----------
Gross profit 403,498 336,405
Selling & administrative expenses 234,742 198,229
----------- -----------
Operating profit 168,756 138,176
----------- -----------
Other deductions (income):
Interest expense 11,654 9,557
Interest income (2,300) (7,840)
Foreign exchange 655 360
Gain on dispositions -- (75,065)
All other, net (2,287) (298)
----------- -----------
Total 7,722 (73,286)
----------- -----------
Earnings before taxes on income 161,034 211,462
Federal & other taxes on income 59,278 67,139
----------- -----------
Net earnings $ 101,756 $ 144,323
=========== ===========
Weighted average number of common shares
outstanding during the period 111,702 113,513
=========== ===========
Net earnings per common share $ 0.91 $ 1.27
=========== ===========
3
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Nine Months Ended September 30, 1997 and 1996
(000 omitted)
1997 1996
----------- -----------
Net sales $ 3,326,536 $ 3,032,284
Cost of sales 2,190,096 2,011,896
----------- -----------
Gross profit 1,136,440 1,020,388
Selling & administrative expenses 695,344 609,609
----------- -----------
Operating profit 441,096 410,779
----------- -----------
Other deductions (income):
Interest expense 34,681 31,816
Interest income (8,159) (15,317)
Foreign exchange (6,448) (243)
Gain on dispositions (32,171) (75,065)
All other, net (12,940) (3,659)
----------- -----------
Total (25,037) (62,468)
----------- -----------
Earnings before taxes on income 466,133 473,247
Federal & other taxes on income 160,962 163,321
----------- -----------
Net earnings $ 305,171 $ 309,926
=========== ===========
Weighted average number of common shares
outstanding during the period 111,702 113,513
=========== ===========
Net earnings per common share $ 2.73 $ 2.73
=========== ===========
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Nine Months Ended September 30, 1997 and 1996
(000 omitted)
1997 1996
---------- ----------
Retained earnings at January 1 $1,470,008 $1,152,187
Net earnings 305,171 309,926
---------- ----------
1,775,179 1,462,113
Deduct:
Common stock cash dividends
$0.53 per share ($0.47 in 1996) 59,203 53,273
---------- ----------
Retained earnings at end of period $1,715,976 $1,408,840
========== ==========
4
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(000 omitted)
September 30, December 31,
1997 1996
----------- -----------
Assets:
Current assets:
Cash & cash equivalents $ 155,621 $ 199,955
Marketable securities 21,239 17,839
Receivables, net of allowance for doubtful
accounts 825,990 715,495
Inventories 544,305 499,870
Prepaid expenses 60,695 56,654
----------- -----------
Total current assets 1,607,850 1,489,813
----------- -----------
Property, plant & equipment (at cost) 1,211,835 1,106,981
Accumulated depreciation (670,401) (612,048)
----------- -----------
Net property, plant & equipment 541,434 494,933
----------- -----------
Intangible assets, net of amortization 1,013,381 963,182
Other intangible assets
10,258 10,258
Deferred charges & other assets 71,659 35,193
----------- -----------
$ 3,244,582 $ 2,993,379
=========== ===========
Liabilities:
Current liabilities:
Notes payable $ 520,738 $ 488,651
Current maturities of long-term debt 819 3,754
Accounts payable 222,987 202,763
Accrued compensation & employee benefits 148,711 130,598
Accrued insurance 106,513 104,916
Other accrued expenses 231,762 206,992
Income taxes 20,860 1,430
----------- -----------
Total current liabilities 1,252,390 1,139,104
Long-term debt 257,073 252,955
Deferred taxes 41,379 54,068
Deferred compensation 68,114 57,550
Stockholders' equity:
Preferred stock -- --
Common stock 117,148 116,858
Additional paid-in surplus 22,242 13,818
Cumulative translation adjustments (32,134) 1,900
Unrealized holding gains (losses) 5,104 3,663
Retained earnings 1,715,976 1,470,008
----------- -----------
Subtotal 1,828,336 1,606,247
Less: treasury stock 202,710 116,545
----------- -----------
1,625,626 1,489,702
----------- -----------
$ 3,244,582 $ 2,993,379
=========== ===========
5
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Nine Months Ended September 30, 1997 and 1996
(000 omitted)
1997 1996
--------- ---------
Cash flows from operating activities:
Net income $ 305,171 $ 309,926
--------- ---------
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation 76,721 63,260
Amortization 31,307 28,992
Net increase (decrease) in deferred taxes (16,194) 10,245
Net increase (decrease) in LIFO reserves 1,229 1,047
Increase (decrease) in deferred compensation 10,569 823
Gain on sale of business (32,171) (52,236)
Other, net (2,484) (7,853)
Changes in assets & liabilities (excluding acquisitions):
Decrease (increase) in accounts receivable (100,057) 18,717
Decrease (increase) in inventories,excluding LIFO reserve (16,979) (11,797)
Decrease (increase) in prepaid expenses (3,432) (2,997)
Increase (decrease) in accounts payable 11,619 (21,649)
Increase (decrease) in accrued expenses 32,630 2,956
Increase (decrease) in federal & other taxes on income 1,186 (24,828)
--------- ---------
Total adjustments (6,056) 4,680
--------- ---------
Net cash provided by operating activities 299,115 314,606
--------- ---------
Cash flows from (used in) investing activities:
Net sale (purchase) of marketable securities (3,400) (2,981)
Additions to property, plant & equipment (98,952) (86,442)
Acquisitions, net of cash & cash equivalents (176,123) (73,344)
Proceeds from sale of business 45,638 112,087
Purchase of treasury stock (86,164) (62,746)
--------- ---------
Net cash from (used in) investing activities (319,001) (113,426)
--------- ---------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable 29,248 (137,399)
Reduction of long-term debt 174 (9,710)
Proceeds from exercise of stock options 5,333 4,303
Cash dividends to stockholders (59,203) (53,273)
--------- ---------
Net cash from (used in) financing activities (24,448) (196,079)
--------- ---------
Net increase (decrease) in cash & cash equivalents (44,334) 5,101
Cash & cash equivalents at beginning of period 199,955 121,698
--------- ---------
Cash & cash equivalents at end of period $ 155,621 $ 126,799
========= =========
6
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
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,
1997 1996
-------------- --------------
Raw materials $ 178,873 $ 165,064
Work in progress 238,123 219,729
Finished goods 174,320 160,858
-------------- --------------
Total 591,316 545,651
Less LIFO reserve 47,011 45,781
-------------- --------------
Net amount per balance sheet $ 544,305 $ 499,870
============== ==============
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 1997.
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 1997 as
compared to the position at December 31, 1996.
Working capital increased slightly from $350.7 million at the end of last
year to $356.5 million at September 30, 1997. The $5.8 million increase
represents positive cash flow over and above dividends of ($59.2 million),
Treasury stock purchases ($86.2 million), and the $184.9 million paid for
acquisitions during this nine-month period.
7
At September 30, 1997, 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 $601.8 million represented 27% of total capital.
This compares with 26.2% at December 31, 1996.
(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:
The Company earned $.91 per share in its third quarter ended September 30.
In the prior year third quarter Dover reported $1.27 per share, but this
included $.44 from the sale of two businesses and $.09 from tax and investment
income adjustments as described in last year's third quarter report. Sales for
the quarter of almost $1.2 billion were up 15% from the prior year.
Four of Dover's five market segments had higher earnings than last year
with a combined gain of 23%. The Technologies segment achieved a remarkable
increase of 71% on a 49% sales gain. Although its book-to-bill was only .95 in
the quarter, the summer is normally a soft period for new orders. Bookings were
57% greater than prior year and equal to the 1997 first half average, indicating
continued strong markets.
Dover completed seven "add-on" acquisitions during the quarter
representing an investment of $109 million. This brings the cumulative 1997
investment in purchasing new businesses to $185 million. A-C Compressor added
the Preco and Conmec companies to expand its participation in the aftermarket
for gas compressors and turbines. Everett Charles added ESH, expanding its
testing presence from circuit boards into a portion of the semiconductor
production market. Blackmer acquired Mouvex (France) and the two companies will
coordinate their specialty pump businesses. Blackmer is primarily a U.S.
manufacturer while Mouvex's largest market base is Europe. De-Sta-Co
Manufacturing, OPW Fueling Components, and DovaTech also made small
acquisitions, adding new product lines. Conmec and Preco accounted for more than
half of the $109 million investment made in the third quarter.
Acquisitions made thus far in 1997 have reduced nine month earnings by
$.01 per share due to financing costs and write-off of acquisition premiums.
They are expected to add to 1998 full year results.
Dover Technologies:
Dover Technologies had a record quarter primarily due to strength in its
sales of printed circuit board assembly and test equipment. Universal, DEK,
Soltec, and Everett Charles (acquired in November, 1996) each had strong gains
and combined to produce profits of over $45 million on sales of almost $240
million. The special electronic components businesses also achieved strong
earnings growth with three of the four companies involved in these markets ahead
sharply. The overall earnings gain for these four businesses was almost 30% - to
more than $10 million on sales of about $70 million. Filters, tuners, and timing
devices for communications applications are experiencing strong growth. Imaje,
the world's number two producer of continuous-ink-jet printing machines and
supplies, had flat earnings, compared to last year, of $15 million on sales of
about $45 million. Imaje's results, expressed in its own currency (French
Francs), were up over 20% from last year's third quarter. The three earnings
figures mentioned above do not add to the reported segment total of $64 million
due to rounding and to $9 million of acquisition premium write-offs and
subsidiary expenses. Backlog for the Technologies companies is 8% below the
level at the start of the third quarter, with Universal down 20%. Consequently,
Technology segment earnings in the fourth quarter, while well ahead of prior
year, are not expected to match those of the third quarter.
Dover Industries:
Dover Industries achieved its best quarterly earnings results since the
1996 first quarter with a 24% year-over-year gain to $33.5 million. Sales were
up 6% to a record level. Subsidiary expenses and acquisition premium write-offs
at DII in the third quarter totaled $4 million, indicating an average operating
margin for its 11 companies of 17%. Total orders for DII exceeded third quarter
shipments by 1%, last
8
year's third quarter by 11%, and were slightly above the 1997 first
half-average. Ten companies achieved earnings increases over last year with
particularly strong gains at Texas Hydraulics, Heil Tank Trailer, Randell, and
Groen. In last year's fourth quarter both Heil Refuse and Groen reported losses
totaling $2.7 million. In the most recent quarter they earned $5.7 million.
Consequently, while Industries' year-to-date profits are only 1% ahead of 1996,
very favorable comparisons are expected in the final quarter of the year.
Dover Diversified:
Dover Diversified profits trailed prior year by $4.2 million (15%). As in
the previous four quarters, the source of the decline was the changed market
circumstances at its Belvac company which earned $8.7 million less than in the
third quarter of 1996. This more than offset very strong gains achieved by Hill,
Tranter, Mark Andy, and Waukesha which propelled Diversified's eight other
companies (excluding Belvac) to a profit gain of more than 20%. The average
margin of all nine companies (before subsidiary expenses and acquisition premium
write-offs) was 15%, with Belvac above average and Hill (the largest company
measured by sales) still below its near-term goal of 10%. The new order picture
at Diversified in total, and Belvac in particular, was very positive. DDI orders
were up 39% over last year and 26% above third quarter shipments, with five
companies up over 20% from prior year. Belvac orders were 2.8 times third
quarter shipments and at their highest level since their market "boom" ended in
mid-1995. This gives Belvac a chance of achieving favorable earnings comparisons
beginning in the fourth quarter and continuing into 1998. Dover Diversified
enters the fourth quarter of 1997 with backlog 21% higher than at this time last
year. Very favorable earnings comparison are expected in the final quarter of
1997, but perhaps not to the level needed for Diversified to achieve an "up"
year.
Dover Resources:
Profits at Dover Resources gained 15% on a 14% sales increase to reach a
record level of $29.4 million. The earnings of its seventeen companies provided
a margin on sales of almost 18% (before subsidiary expenses and acquisition
premium write-offs). Bookings trailed shipments by 4%, but were 14% ahead of
prior year. About 1/3 of the gain over last year was due to acquisitions made in
the past 12 months. Very strong earnings gains were achieved by the three
oil-field equipment companies (up 26%), by OPW Fueling Components (also up 26%),
and by Cook, De-Sta-Co Industries, Civacon, PetroVend, and Duncan - all of which
achieved gains of 30% or more. Markets for De-Sta-Co Manufacturing (auto and
refrigeration compressor valves), Ronningen-Petter (filtration systems) and
Wittemann (CO(2) recovery systems) remained soft and profits of these companies
declined by almost $3 million. Dover Resources begins the fourth quarter with a
backlog 7% less than at the start of the third quarter. Resources is hopeful
that its fourth quarter will also show a year-over-year earnings improvement but
a new record quarterly level appears unlikely.
Dover Elevator:
Dover Elevator again earned more than $25 million in a single quarter with
a 3% gain in earnings on a 2% sales increase. The gains from on-going operations
were even higher, Elevator's European operations were included in last year's
third quarter results, but not this year's because these operations were sold
effective at June 30. North American sales rose 9% from last year and earnings
by a higher percentage. Orders for new elevators improved 25%, with gains in
both North America and Asia, pushing manufacturing and construction backlog up
more than 20% from a year ago. The hydraulic elevator market continues to be
strong and should set new volume records this year for the industry and for
Dover. Following the sale of the European companies, service and repair
activities now provide more than half of DEI's profits on less than half of
revenues. Several initiatives are under way in North America to stimulate
after-market growth by providing new and improved services to elevator
operators. Dover Elevator is continuing to relocate work from its Horn Lake,
Mississippi manufacturing facility to two other plants that are being expanded,
and plans to close the Horn Lake plant in 1998. Fourth quarter profits should
continue strong.
9
Outlook:
Dover expects to achieve record earnings in 1997, up more than 10% from
$3.01 last year - excluding gains from the sale of three businesses that added
$.44 per share to 1996 earnings and $.23 to 1997, as well as any special charges
or gains that might arise in this year's fourth quarter. The Company believes
its outlook for 1998 is quite positive.
PART II OTHER INFORMATION
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: October 23, 1997 /s/ John F. McNiff
----------------- --------------------------------
John F. McNiff, Vice President
and Treasurer
Date: October 23, 1997 /s/ Alfred Suesser
----------------- --------------------------------
Alfred Suesser, Controller and
Assistant Treasurer
5
1,000
9-MOS
DEC-31-1997
JUL-01-1997
SEP-30-1997
155,621
21,239
854,309
28,319
544,305
1,607,850
1,211,835
(670,401)
3,244,582
1,252,390
257,073
0
0
117,148
1,508,478
3,244,582
3,326,536
3,326,536
2,190,096
2,885,440
(6,448)
0
34,681
466,133
160,962
0
0
0
0
0
0.91
0.91
