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, 1994 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 57,226,818.
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Three months ended September 30, 1994 and 1993
('000 omitted)
1994 1993
---- ----
Net sales $804,459 $642,178
Cost of sales 559,231 442,260
------- -------
Gross profit 245,228 199,918
Selling and administrative expenses 157,149 129,091
------- -------
Operating profit 88,079 70,827
------- -------
Other deductions (income):
Interest expense 9,910 6,040
Interest income (3,164) (4,844)
Foreign exchange 547 105
All other 1,194 357
------ -------
8,487 1,658
------ -------
Earnings before taxes on income 79,592 69,169
Federal and other taxes on income 27,722 26,809
------- -------
Net earnings $ 51,870 $ 42,360
======= =======
Weighted average number of common shares
outstanding during the period 57,205 57,101
======= =======
Net earnings per common share $ 91 $ .74
======= =======
3
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Nine months ended September 30, 1994 and 1993
('000 omitted)
1994 1993
---- ----
Net sales $2,246,411 $1,803,469
Cost of sales 1,552,355 1,258,263
--------- ---------
Gross profit 694,056 545,206
Selling and administrative expenses 450,649 360,646
--------- ---------
Operating profit 243,407 184,560
--------- ---------
Other deductions (income):
Interest expense 25,029 15,416
Interest income (12,857) (14,903)
Foreign exchange 828 306
All other 1,374 (123)
--------- ---------
14,374 696
--------- ---------
Earnings before taxes on income 229,033 183,864
Federal and other taxes on income 82,150 67,981
--------- ---------
Net earnings $ 146,883 $ 115,883
========= =========
Weighted average number of common shares
outstanding during the period 57,205 57,102
========= =========
Net earnings per common share $ 2.57 $ 2.03
========= =========
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Nine Months ended September 30, 1994 and 1993
('000 omitted)
1994 1993
---- ----
Balance at beginning of period $1,121,817 $1,051,949
Net earnings 146,883 115,883
--------- ---------
1,268,700 1,167,832
Deduct:
Common stock cash dividends of
$.72 per share ($.68 in 1993) 41,178 38,259
Distribution; DOVatron - 36,983
--------- ---------
Balance at end of period $1,227,522 $1,092,590
========= =========
4
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
('000 OMITTED)
SEPTEMBER 30 DECEMBER 31
1994 1993
------------ -----------
Assets
------
Current Assets:
Cash and cash equivalents $ 93,991 $ 63,685
Marketable securities 53,163 32,592
Receivables, net of allowance for
doubtful accounts 553,445 475,155
Inventories at cost (determined
principally on the last-in,
first-out basis, which is less
than market value) 355,117 294,319
Prepaid expenses 42,033 37,889
--------- ---------
Total current assets 1,097,749 903,640
--------- ---------
Property, plant & equipment, at cost 796,654 714,637
Accumulated depreciation (465,340) (431,274)
--------- ---------
Net property, plant & equipment 331,314 283,363
--------- ---------
Intangible assets, net of amortization 618,393 535,136
Other intangible assets 10,258 10,258
Deferred charges and other assets 38,139 41,292
--------- ---------
$2,095,853 $1,773,689
========= =========
Liabilities
-----------
Current liabilities:
Notes Payable $ 284,209 $ 174,980
Current maturities of long-term debt 1,127 311
Accounts payable 132,677 117,206
Accrued compensation & employee benefits 78,407 71,084
Accrued insurance 94,428 74,501
Other accrued expenses 150,576 116,916
Income taxes 44,208 40,796
--------- ---------
Total current liabilities 785,632 595,794
Long-term debt 260,015 252,065
Deferred taxes 16,895 20,409
Deferred compensation 42,938 35,419
Minority interest 687 -
Stockholders' Equity:
Preferred stock - -
Common stock 66,364 66,299
Additional paid-in surplus 15,015 12,531
Cumulative translation adjustments (1,117) (12,761)
Unrealized holding gains (losses) (111) -
Retained earnings 1,227,522 1,121,817
--------- ---------
1,307,673 1,187,886
Less: treasury stock 317,987 317,884
--------- ---------
989,686 870,002
--------- ---------
$2,095,853 $1,773,689
========= =========
5
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Nine Months ended September 30, 1994 and 1993
('000 omitted)
1994 1993
---- ----
Cash flows from operating activities:
Net income $ 146,883 $ 115,883
-------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 41,818 37,471
Amortization 27,781 16,967
Net increase (decrease) in deferred taxes (3,514) (4,425)
Net increase (decrease) in LIFO reserves 148 1,226
Increase (decrease) in deferred compensation 7,519 9,984
Other, net 6,573 6,197
Changes in assets and liabilities (excluding
acquisitions):
Decrease (increase) in accounts receivable (39,086) (42,812)
Decrease (increase) in inventories, excluding
LIFO reserve (19,182) (3,976)
Decrease (increase) in prepaid expenses (2,382) (3,934)
Increase (decrease) in accounts payable (6,216) (8,297)
Increase (decrease) in accrued expenses 47,230 19,543
Increase (decrease) in federal and other taxes
on income 3,413 (10,871)
-------- -------
Total adjustments 64,102 17,073
-------- -------
Net cash provided by operating
activities 210,985 132,956
-------- --------
Cash flows from (used in) investing activities:
Additions to property, plant & equipment (55,256) (32,288)
Acquisitions (182,615)* (236,046)**
Purchase of treasury stock (105) (1,079)
Increase in marketable securities (20,571) (1,610)
Net cash from (used in) investing -------- --------
activities (258,547) (271,023)
-------- --------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable 109,229 170,321
Increase of long-term debt 7,950 458
Proceeds from exercise of stock options 1,867 1,091
Cash dividends to stockholders (41,178) (38,259)
Net cash from (used in) investing -------- --------
activities 77,868 133,611
Net increase (decrease) in cash and cash equivalents 30,306 (4,456)
Cash and cash equivalents at beginning of period 63,685 71,632
-------- -------
Cash and cash equivalents at end of period $ 93,991 $ 67,176
======== =======
* Includes long-term debt assumed of $14,745, but excludes cash acquired and
reorganization costs aggregating $15,503.
** Includes long-term debt assumed of $11,587, but excludes cash acquired of
$5,370.
6
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
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
1994 1993
------------ -----------
Raw materials $107,635 $ 92,341
Work in progress 159,459 136,031
Finished goods 131,553 109,329
------- -------
Total 398,647 337,701
Less LIFO reserve 43,530 43,382
------- -------
Net amount per balance
sheet $355,117 $294,319
======= =======
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 1994.
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 slightly during the first nine months of
1994 as compared with its position at December 31, 1993.
Working capital increased from $307.8 million at the end of last year to
$312.1 million at September 30, 1994, despite acquisition expenditures during
this same period of close to $183 million.
As mentioned in the previous 10-Q, Dover Corporation ended the June 30,
1994 quarter with net debt (defined as long-term debt plus current maturities
of long-term debt plus notes payable less cash and equivalents) of $408
million, or 30% of total capital. At September 30, 1994, net debt has
decreased to $398.7 million and represents 28.7% of total capital.
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(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:
The Company earned $.91 per share in the Third Quarter, an increase of 23%
from the $.74 earned in the Third Quarter of 1993. Sales advanced 25% to
$804,460,000 while net income rose 22% to $51,870,000.
Following a First Quarter earnings per share (EPS) gain of 25%, and a
Second Quarter gain of 31%, the results of the quarter just ended put 9 month
EPS 27% ahead of prior year and at a record level. Year-to-date net income of
$146,883,000 and sales of $2,246,411,000 were also records for Dover.
Four of Dover's five market segments achieved earnings gains in the Third
Quarter, while one declined, with the total for the five segments gaining 24%.
Dover's pretax income rose only 15% primarily due to increased interest
expense. The higher gain in net income, 22%, reflected last years abnormally
high tax provision which included a catch-up charge for the retroactive nature
of the 1993 Tax Bill. At its August meeting, Dover's Board of Directors
announced the company's 32nd consecutive increase in annual dividends, raising
the quarterly rate by 13% to $.26 per share. Dover acquired three companies in
the quarter for a combined price of $32.7 million, bringing total acquisition
expenditures for the year to $182.6 million (considering certain debt and cash
acquired).
DOVER RESOURCES
Profits in the Third Quarter at Dover Resources rose 20% on a 12% sales
gain as 11 of 16 individual companies had higher earnings, including OPW
despite now comparing against its very strong second half of 1993. Midland
Manufacturing, acquired earlier this year, contributed 4 points of the sales
gain and a smaller portion of the earnings gain. Internal profit growth over
the prior year at Dover Resources was the highest so far in 1994. De-Sta-Co
improved its already strong earnings gains, helped by the strong U.S. auto and
industrial markets and some improvement in Germany. Profits at three companies
manufacturing oil field production equipment remained at the depressed levels
of the first half but were only 9% below last years Third Quarter. This area
now contributes less than 15% of Dover Resources income. Quarterly bookings
for Dover Resources were again slightly higher than sales.
DOVER INDUSTRIES
Dover Industries profits gained 24% on a 13% sales increase as all but one
company had earnings above last year and half had gains of 25% or more.
Acquisition activity since last year provided only about 3 points of the sales
gain and a smaller portion of the earnings gain, primarily relating to Tipper
Ties acquisition of Technopak earlier this year. Rotary Lift continued its
strong profit growth as volume gains and manufacturing improvements from
investments made at the start of the year improved margins. Heil's bookings
were 22% ahead of last year with continued strength for trailerized tanks,
where backlog is at an all time high. A major expansion of Heil's Athens,
Tennessee, tank trailer plant has now been completed and will add to Fourth
Quarter production. Dover Industries overall orders in the Third Quarter
exceeded shipments by 15%.
8
DOVER ELEVATOR INTERNATIONAL
Dover Elevator International (DEI) reported a decline of 25% in earnings
compared to last years Third Quarter which was 1993's strongest earnings
quarter. After 9 months DEI profits are now slightly ahead of their 1993 pace.
All of the decline in Third Quarter earnings was attributable to a swing at the
General Elevator Company from a 1993 profit to a 1994 loss of about $3 million.
The loss in the current years quarter primarily reflected a more conservative
valuation, undertaken by a new management team installed in June, of General's
working capital assets. A further loss at General is likely in the Fourth
Quarter which will make it difficult, but not impossible, for DEI to achieve
its original 1994 goal--an earnings increase over 1993. Bookings for new
elevators at DEI for the quarter were 2% below last year putting new elevator
backlog 10% lower than one year ago.
In the Third Quarter, DEI began to implement a broad re-organization of its
North American field and factory operations. All General Elevator offices
outside its core operating area of Delaware, Maryland, Washington, DC, and
Virginia are being consolidated with other Dover offices. Conversely, Dover
offices in General's core area are being merged into General. This will avoid
duplication of effort and provide customers with seamless access to all of
Dover's high quality products and services. Also, effective January 1, 1995,
all factory and product engineering functions of Dover Elevator-Canada and
Dover Elevator-U.S. will be combined under a single management, and the field
operations of Elevator-U.S. and Elevator-Canada will both begin to report
directly to the CEO of Dover Elevator International. The objective of this
change is to improve field support while avoiding duplication in North America
and to permit the focus of engineering/manufacturing resources on export
markets, which represent DEI's best growth opportunity. Export shipments of
new elevator components and systems from North America, though still a small
percentage of total sales, have grown over 50% so far this year. Also, in the
international area, a joint venture agreement to build a new Dover Elevator
production facility near Beijing, China, is expected to be finalized before the
end of the year.
DOVER TECHNOLOGIES
Dover Technologies achieved a 37% sales gain and reported a 95% earnings
increase against a year ago quarter that had included a $4.5 million special
charge to settle a lawsuit. Excluding this charge, earnings improved by 37%.
Universal Instruments continued to provide most of the growth as its own sales
grew 46% in the quarter with a 56% growth in earnings to a record quarterly
level. Orders continued strong for Universals new surface mount GSM-1 machine
and further progress was made on improving its gross profit margins, although
these remain well below those achieved on thru-hole products. Universals total
orders were 55% higher than last year but the quarters strong shipments reduced
the quarterly book-to-bill to .93. Dover Technologies book-to-bill was also
.93. This segment begins the Fourth Quarter with a somewhat smaller total
backlog than at the start of the Third Quarter and a higher mix of lower margin
surface mount products within this backlog. It is unlikely that Fourth Quarter
profits will match Third Quarter, although they will be substantially improved
from 1993.
DOVER DIVERSIFIED
Dover Diversified reported a 38% gain in profits and a 155% sales increase
reflecting substantial acquisition activity since the start of last year's
Third Quarter. The acquisition of Belvac, Thermal Equipment and Phoenix last
year plus several additional acquisitions in 1994, including Hill (described
below) in the
9
Third Quarter of this year provided more than three fourths of
the $80 million sales gain. Companies owned throughout the Third Quarter of
both years achieved a modest gain in profits primarily due to a strong
shipments quarter at A-C Compressor. Bookings continued very strong at Belvac
but shipments and profits were softer than hoped after a very strong Second
Quarter this year. Dover Diversified's total bookings for the quarter exceeded
shipments by 11%. Profits are expected to be higher in the Fourth Quarter than
in the Third Quarter.
OTHER MATTERS
Dover acquired three companies in the Third Quarter. Midstate Elevator was
purchased by Dover Elevator Company, expanding its direct presence in the upper
New York State area. Tie-Net, a producer of plastic netting, became part of
Tipper Tie in the Dover Industries segment. Tie-Net has been a supplier of
netting products to Tipper Tie for many years. Hill Refrigeration Company of
Trenton, New Jersey was acquired and its operations merged with Phoenix
Refrigeration to become Hill Phoenix, now part of our Dover Diversified
segment.
The $32.7 million acquisition expenditure in the quarter was primarily for
Hill, which makes both display cases and refrigeration systems for
supermarkets, serving essentially the same market as Phoenix. Hills annual
sales of more than $100 million make it one of four major companies in the
display case business. Its financial record has been weak but improving in
recent years. Hill Phoenix will focus its refrigeration system line at their
very efficient plant in Conyers, Georgia, and build a new plant for low cost
production of display cases. In addition to profit improvement opportunities,
Hill Phoenix foresees market share gain opportunities, especially from
customers who have been unwilling to unbundle their purchase of display cases
and refrigeration units. The Hill acquisition will have no meaningful impact
on Dover's profits during 1994-5, but represents a significant opportunity
beginning in 1996.
OUTLOOK
Dover expects to finish 1994 with a strong Fourth Quarter. Barring an
economic slowdown prospects are good for continued strong growth in 1995.
10
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.
11
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: 10/25/94 /s/ John F. McNiff
------------------------- ------------------------------
John F. McNiff, Vice President
and Treasurer
Date: 10/25/94 /s/ John F. McNiff
------------------------- ------------------------------
Alfred Suesser, Controller and
Assistant Treasurer
12
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
5
1000
9-MOS
DEC-31-1994
JAN-01-1994
SEP-30-1994
93,991
53,163
567,200
13,755
355,117
1,097,749
796,654
465,340
2,095,853
785,632
260,015
66,364
0
0
923,322
2,095,853
2,246,411
2,246,411
1,552,355
2,003,004
(2,202)
0
25,029
229,033
82,150
146,883
0
0
0
146,883
.91
0
Information is immaterial/inapplicable.