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 three months ended March 31, 1998 Commission File No. 1-4018
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 222,987,323.
2
Part. I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended March 31,
(000 omitted)
UNAUDITED
1998 1997
------------ -----------
Net sales $1,148,584 $1,008,781
Cost of sales 752,450 670,914
------------ -----------
Gross profit 396,134 337,867
Selling & administrative expenses 253,408 222,516
------------ -----------
Operating profit 142,726 115,351
------------ -----------
Other deductions (income):
Interest expense 11,926 10,987
Interest income (5,314) (4,056)
Foreign exchange 1,499 (6,077)
All other, net (1,756) (6,139)
------------ -----------
Total 6,355 (5,285)
------------ -----------
Earnings before taxes on earnings 136,371 120,636
Federal & other taxes on earnings 46,376 42,136
------------ -----------
Net earnings $ 89,995 $ 78,500
============ ===========
Net earnings per common share
- Basic $0.40 $0.35
============ ===========
- Diluted $0.40 $0.35
============ ===========
Weighted average number of common shares
outstanding during the period
- Basic 222,775 225,128
============ ===========
- Diluted 224,822 227,082
============ ===========
CONSOLIDATED STATEMENT OF COMPREHENSIVE EARNINGS
Three Months Ended March 31,
(000 omitted)
UNAUDITED
1998 1997
------------ -----------
Net earnings $ 89,995 $ 78,500
------------ -----------
Other comprehensive earnings, net of tax:
Foreign currency translation adjustments (1,344) (20,127)
Unrealized gains (losses) on securities:
Unrealized holding (losses) gains arising
during period (3,312) (1,535)
Less: reclassification adjustment for gains
included in net earnings 6 2
------------ -----------
Total unrealized gains (losses) on securities
(tax 1,305 in 1998) (3,318) (1,537)
------------ -----------
Other comprehensive earnings (4,662) (21,664)
------------ -----------
Comprehensive earnings $ 85,333 $ 56,836
============ ===========
3
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Three Months Ended March 31,
(000 omitted)
UNAUDITED
1998 1997
------------ -----------
Retained earnings at January 1 $ 1,703,335 $ 1,470,009
Net earnings 89,995 78,500
------------ -----------
1,793,330 1,548,509
Deduct:
Common stock cash dividends
$ 0.095 per share ($0.085 in 1997) 21,175 19,161
============ ===========
Retained earnings at end of period $ 1,772,155 $ 1,529,348
============ ===========
4
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(000 omitted)
UNAUDITED
March 31, December 31,
1998 1997
----------- -----------
Assets:
Current assets:
Cash & cash equivalents $ 106,282 124,780
Marketable securities 24,267 21,929
Receivables, net of allowance for doubtful
accounts 804,726 818,293
Inventories 610,016 562,830
Prepaid expenses 65,293 63,513
----------- -----------
Total current assets 1,610,584 1,591,345
----------- -----------
Property, plant & equipment (at cost) 1,311,111 1,262,288
Accumulated depreciation (724,410) (691,709)
----------- -----------
Net property, plant & equipment 586,701 570,579
----------- -----------
Intangible assets, net of amortization 1,151,726 1,068,310
Other intangible assets 10,368 10,368
Deferred charges & other assets 38,815 36,922
=========== ===========
$ 3,398,194 $ 3,277,524
=========== ===========
Liabilities:
Current liabilities:
Notes payable $ 508,530 $ 435,920
Current maturities of long-term debt 960 897
Accounts payable 223,825 226,936
Accrued compensation & employee benefits 118,249 158,815
Accrued insurance 114,547 107,818
Other accrued expenses 237,108 241,581
Income taxes 45,096 24,606
----------- -----------
Total current liabilities 1,248,315 1,196,573
----------- -----------
Long-term debt 261,647 262,630
Deferred taxes 44,604 40,458
Deferred compensation 69,181 74,279
Stockholders' equity:
Preferred stock -- --
Common stock 234,927 234,507
Additional paid-in surplus 7,972 658
Cumulative translation adjustments (39,239) (37,895)
Unrealized holding gains (losses) 2,472 5,790
----------- -----------
Accumulated other comprehensive earnings (36,767) (32,105)
----------- -----------
Retained earnings 1,772,155 1,703,336
----------- -----------
Subtotal 1,978,287 1,906,396
Less: treasury stock 203,840 202,812
----------- -----------
1,774,447 1,703,584
----------- -----------
$ 3,398,194 $ 3,277,524
=========== ===========
5
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Three Months Ended March 31,
(000 omitted)
UNAUDITED
1998 1997
--------- ---------
Cash flows from operating activities:
Net earnings $ 89,995 $ 78,500
--------- ---------
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 28,386 24,331
Amortization 12,604 10,425
Net increase (decrease) in deferred taxes 4,066 (9,936)
Net increase (decrease) in LIFO reserves 486 276
Increase (decrease) in deferred compensation (5,098) (2,633)
Other, net (6,105) (13,605)
Changes in assets & liabilities (excluding
acquisitions):
Decrease (increase) in accounts receivable 20,275 6,928
Decrease (increase) in inventories,
excluding LIFO reserve (36,228) (11,394)
Decrease (increase) in prepaid expenses (1,425) (2,044)
Increase (decrease) in accounts payable (6,656) (8,515)
Increase (decrease) in accrued expenses (40,939) (29,256)
--------- ---------
Increase (decrease) in federal & other taxes
on income 24,464 38,305
--------- ---------
Total adjustments (6,170) 2,882
--------- ---------
Net cash provided by operating activities 83,825 81,382
--------- ---------
Cash flows from (used in) investing activities:
Net sale (purchase) of marketable securities (2,339) (369)
Additions to property, plant & equipment (33,786) (27,377)
Acquisitions, net of cash & cash equivalents (117,038) (46,563)
Purchase of treasury stock (1,028) (32,607)
--------- ---------
Net cash from (used in) investing activities (154,191) (106,916)
--------- ---------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable 69,943 (44,485)
Reduction of long-term debt (1,062) (1,522)
Proceeds from exercise of stock options 4,161 4,113
Cash dividends to stockholders (21,175) (19,161)
--------- ---------
Net cash from (used in) financing activities 51,867 (61,055)
--------- ---------
Net increase (decrease) in cash & cash equivalents (18,499) (86,589)
Cash & cash equivalents at beginning of period 124,781 199,955
========= =========
Cash & cash equivalents at end of period $ 106,282 $ 113,366
========= =========
6
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
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 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 :
(000 omitted)
-------------------------
UNAUDITED
March 31, December 31,
1998 1997
----------- -----------
Raw materials $ 246,009 $ 228,128
Work in progress 209,879 194,638
Finished goods 201,011 186,462
----------- -----------
Total 656,899 609,228
Less LIFO reserve 46,883 46,398
=========== ===========
Net amount per balance sheet $ 610,016 $ 562,830
=========== ===========
NOTE C - Accumulated other Comprehensive Earnings
In June 1997, the Financial Accounting Standards Board issued Statement
Financial Accounting Standards No. 130, "Reporting Comprehensive Income". This
statement is effective for financial statements issued for periods beginning
after December 15, 1997, including interim periods. This new statement requires
that more detail, on certain balance sheet information (cumulating translation
adjustments and unrealized holding gains), be included in two separate
disclosures. a) Consolidated statement of comprehensive earnings included with
financial statements. b) Accumulated other comprehensive earnings by components
reconciled from beginning of period to the end (see below). More information on
these items can be found in the 1997 Annual Report footnotes 1. A. and J.
Accumulated other comprehensive earnings, by components are summarized as
follows:
UNAUDITED (000 omitted)
----------------------------------------
Accumulated
Other Unrealized
Comprehensive Cumulative Holding
Earnings Translation Gains
(losses) Adjustments (losses)
-------------- ------------ ----------
Beginning balance $ (32,105) $ (37,895) $ 5,790
Current-period change (4,662) (1,344) (3,318)
-------------- ------------ ----------
Ending balance $ (36,767) $ (39,239) $ 2,472
============== ========================
7
NOTE D - 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 on March 30, 1998.
Net earnings as reported was used in computing both basic EPS and diluted
EPS without further adjustment. The Company does not have a complex capital
structure; accordingly, the entire difference between basic weighted average
shares and diluted weighted average shares results from assumed stock option
exercise. The diluted EPS computation was made using the treasury stock method.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(1) MATERIAL CHANGES IN CONSOLIDATED FINANCIAL CONDITION:
The Company's liquidity decreased during the first quarter of 1998 as
compared to the position at December 31, 1997. First quarter acquisitions,
amounting to $120 million, was the principal reason for this decrease.
Working capital decreased from $394.8 million at the end of last year to
$362.3 million at March 31, 1998.
At March 31, 1998, 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 $640.6 million represented 26.5% of total capital.
This compares with 24.5% at December 31, 1997.
(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:
The Company earned $.40 per share in its first quarter ended March 31,
1998, a 14% increase from $.35 per share earned in last year's first quarter.
Both per share figures reflect Dover's 2 for 1 stock split in 1997 and are on a
diluted basis. The 1997 earnings included $9.6 million pre-tax, equal to $.03
per share, from non-recurring currency gains and a license sale, (all in the
Technologies segment) as reported last year.
During the first quarter Dover completed five acquisitions, investing $120
million. Dover is involved in active discussion with other companies and hopes
to conclude additional acquisitions during 1998. On March 18th, Dover filed a
shelf registration with the S.E.C. for $350 million of debt securities. The
Company has not announced specific plans for issuance of these securities.
The largest of the five acquisitions in the first quarter were Quartzdyne
(now a part of the Resources segment) and Wiseco (now part of Diversified).
Quartzdyne (Salt Lake City, Utah) makes highly specialized quartz pressure
transducers whose principal use is in oil/gas drilling. Wiseco (Mentor, Ohio)
designs and manufacturers high performance pistons for racing cars, motorcycles,
power boats, and other such applications where engine power/efficiency are
critical. Three Dover companies...Heil Tank Trailer, Tranter and Dover Elevator
- -- made small acquisitions to expand their product lines and/or geographical
scope. These five acquisitions had no impact on first quarter EPS but should add
to earnings later in the year after high, initial, acquisition premium
write-offs have been absorbed.
The gain in Dover's first quarter earnings was driven by strength in the
Industries, Resources and Diversified segments. Sales of their almost 40
individual "niche-market" businesses are heavily concentrated in North America
and Europe, where strong economies are fueling demand for specialty machinery
and precision components. Each of these segments had a profit gain of more than
20% with a combined increase of 28%. Of the 36 individual niche businesses owned
last year, 24 showed profit gains with 16 up more than 30%.
8
Dover Industries:
In Dover Industries (earnings up 22% on a 14% sales gain), the largest
increases were at Heil Tank Trailer, whose largely U.S. market has strengthened
significantly during the past 6 months raising backlog to more than double a
year ago; and at Heil Environmental, which achieved significant operating margin
leverage as shipments improved more than 15%. Bookings and backlog are strong
here as well, due to better penetration of the independent waste hauler market
and improved spending by large national accounts.
Dover Resources:
At Dover Resources (earnings up 29% on a 13% sales gain), the largest
increase was achieved by OPW Fueling Components, reflecting stronger demand by
gasoline retailers for its vapor recovery, environmental, and safety products as
well as improved margins. All companies involved in fluid transfer (pumps,
valves, loading/unloading equipment and safety devices) had a strong quarter. In
oil/gas related areas, the addition of Quartzdyne offset modest declines at
Norris, Norriseal, and AOT. Duncan continued to benefit from its technological
superiority in electronic parking meters as sales were almost double last year,
bookings were strong, and quarterly earnings set a record.
Dover Diversified:
Diversified's 35% earnings gain on a 31% sales increase reflects both
substantial internal earnings growth and above normal sales growth due to
acquisitions. Both Tranter and Hill Phoenix had good year-over-year sales
growth, which they leveraged into even stronger earnings gains. Other businesses
owned in last year's first quarter had mixed results, yielding an overall 21%
earnings gain on an 11% sales increase for last year's Q1 companies. The
acquisitions of Wiseco, SWF and 4 other "add-on" companies since Q1 of 1997
provided 20 points of the 31% segment sales gain, but added less than $3 million
to earnings due to acquisition premium write-offs.
Dover Elevator:
Dover Elevator contributed a 5% earnings gain on nearly flat sales,
reflecting continued improvement in North America and the sale last year of its
European operations. Their pretax margin of 11.5% is believed by Dover to be the
best of any major elevator company. New elevator bookings in the U.S. and Canada
rose 11% from last year with March very strong. Transfer of manufacturing
activities from the company's oldest plant to new facilities and the
implementation of a new SAP computer system are both proceeding as planned.
Elevator continues to expect a record year in 1998.
Dover Technologies:
Dover Technologies sales increased 15% while its profits either fell 8% or
rose 25%, depending on one's view of the $9.6 million of special gains included
last year's results. The sales gain was driven by Everett Charles' internal
growth and add-on acquisitions, by Soltec's acquisition of Vitronics, and by
market share gains at DEK, whose new equipment has been very well received.
Imaje and the components companies achieved modest sales and earnings gains.
Profits at Universal were ahead of last year (adjusted for last year's $4
million of license income) on a 2% shipment gain, but were well below the levels
achieved in last year's second, third and fourth quarters. Improved March
bookings put Universal's book-to-bill for the quarter at 1.06, but at a level
28% below last year in total dollars. Technologies' overall book-to-bill was
1.04. Spending within the electronics industry for capital equipment continues
to be depressed and Dover does not believe that the seasonally strong March
bookings signal an upturn. Present conditions will not allow this segment to
match last year's $195 million of earnings, but improvement from the first
quarter profit rate is likely as the year progresses.
9
Outlook:
Thomas L. Reece, Dover's President and CEO, said "The first quarter was in
line with what we have been expecting -- substantial earnings rotation in 1998,
with strength switching to our industrial machinery and components companies in
the Industries, Resources and Diversified segments. We continue to hope for
double-digit EPS growth in 1998, but obviously must improve from where we are to
reach this level."
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(27) Financial Data Schedule. (EDGAR filing only)
Includes amended Financial Data Schedules for periods September 30,
1997, June 30, 1997, December 31, 1996, and September 30, 1996 for restatement
of Diluted earning per share. Diluted earnings per share were restated to
reflect implementation of SFAS No. 128. Amended Financial Data Schedules also
reflect the Dover Corporation 2 for 1 stock split dated November 6, 1997 for
Primary (Basic) and Diluted earnings per share amounts.
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: April 29, 1998 /s/ John F. McNiff
------------------ ------------------
John F. McNiff, Vice President
and Treasurer
Date: April 29, 1998 /s/ Alfred Suesser
------------------ ------------------
Alfred Suesser, Controller and
Assistant Treasurer
5
1000
3-MOS
DEC-31-1998
JAN-01-1998
MAR-31-1998
106,282
24,267
832,684
27,958
610,016
1,610,584
1,311,111
(724,410)
3,398,194
1,248,315
261,647
234,927
0
0
1,539,520
3,398,194
1,148,584
1,148,584
752,450
1,005,858
257
0
11,926
136,371
46,376
89,995
0
0
0
89,995
0.40
0.40
5
1000
9-MOS 6-MOS
DEC-31-1997 DEC-31-1997
JUL-01-1997 APR-01-1997
SEP-30-1997 JUN-30-1997
155,621 134,944
21,239 19,527
854,309 860,447
28,319 25,301
544,305 527,056
1,607,850 1,575,543
1,211,835 1,161,948
(607,401) (642,316)
3,244,582 3,125,864
1,252,390 1,216,478
257,073 254,923
117,148 117,140
0 0
0 0
1,508,478 1,433,222
3,244,582 3,125,864
3,326,536 2,162,792
3,326,536 2,162,792
2,190,096 1,429,850
2,885,440 1,890,452
(6,448) (7,103)
0 0
34,681 23,027
466,133 305,099
160,962 101,684
0 0
0 0
0 0
0 0
0 0
1.37 0.91
1.34 0.90
5
1000
YEAR 9-MOS
DEC-31-1996 DEC-31-1996
JAN-01-1996 JUL-01-1996
DEC-31-1996 SEP-30-1996
199,955 126,799
17,839 30,035
740,316 713,565
24,821 23,535
499,870 511,026
1,489,813 1,410,934
1,106,981 1,047,892
612,048 (594,104)
2,993,379 2,732,868
1,137,768 944,431
252,955 257,592
116,858 116,832
0 0
0 0
1,372,845 0
2,993,379 2,732,868
4,076,284 3,032,284
4,076,284 3,032,284
2,709,652 2,011,896
3,537,610 2,621,505
(73,525) (78,967)
0 0
41,977 31,816
588,725 473,247
198,502 163,321
390,223 0
0 0
0 0
0 0
390,223 0
1.72 1.37
1.69 1.34
