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, 1995 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 56,692,396.
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Part. I. FINANCIAL INFORMATION
Item 1. Financial Statements
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(000'S OMITTED)
1995 1994
----------------------
Net sales $ 854,129 $ 680,727
Cost of sales 584,093 469,795
----------------------
Gross profit 270,036 210,932
Selling and administrative expenses 176,002 142,491
----------------------
Operating profit 94,035 68,441
----------------------
Other deductions (income):
Interest expense 8,854 6,580
Interest income (6,216) (6,625)
Foreign exchange 396 (27)
All other (1,019) 522
----------------------
2,015 450
----------------------
Earnings before taxes on income 92,019 67,991
Federal and other taxes on income 32,220 25,418
----------------------
Net earnings $ 59,799 $ 42,573
======================
Weighted average number of common shares outstanding
during the period 56,679 57,176
======================
Net earnings per common share $ 1.06 $ .74
======================
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(000'S OMITTED)
1995 1994
--------------------------
Balance at beginning of period $1,268,114 $1,121,817
Net earnings 59,799 42,573
--------------------------
1,327,913 1,164,390
Deduct common stock cash dividends of
$.26 per share ($.23 in 1994) 14,739 13,152
--------------------------
Balance at end of period $1,313,174 $1,151,238
==========================
3
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(000'S OMITTED)
MARCH 31, DECEMBER 31,
1995 1994
-----------------------------
Assets
Current Assets:
Cash and cash equivalents $ 84,809 $ 90,304
Marketable securities 56,814 54,583
Receivables, net of allowance for doubtful accounts 601,827 576,628
Inventories at cost (determined principally on the last-in,
first-out basis, which is less than market value) 389,303 364,604
Prepaid expenses 53,820 47,020
-----------------------------
Total current assets 1,186,573 1,133,139
-----------------------------
Property, plant & equipment, at cost 842,972 812,175
Accumulated depreciation (484,149) (469,490)
-----------------------------
Net property, plant & Equipment 358,823 342,685
-----------------------------
Intangible assets, net of amortization 574,212 564,420
Other intangible assets 10,258 10,258
Deferred charges and other assets 20,398 20,135
-----------------------------
$ 2,150,264 $ 2,070,637
=============================
Liabilities
Current liabilities:
Notes payable $ 249,350 $ 263,605
Current maturities of long-term debt 388 455
Accounts payable 163,975 155,186
Accrued compensation & employee benefits 72,687 88,235
Accrued insurance 100,701 98,712
Other accrued expenses 161,776 147,585
Income taxes 48,396 18,445
-----------------------------
Total current liabilities 797,273 772,223
Long-term debt 253,345 253,587
Deferred taxes 1,277 2,545
Deferred compensation 46,645 46,423
Stockholders' Equity:
Preferred stock -- --
Common stock 66,480 66,441
Additional paid-in surplus 19,047 17,676
Cumulative translation adjustments 5,689 (8,206)
Unrealized holding gains (losses) (940) (550)
Retained earnings 1,313,174 1,268,114
-----------------------------
1,403,450 1,343,475
Less: treasury stock 351,726 347,616
-----------------------------
1,051,724 995,859
-----------------------------
$ 2,150,264 $ 2,070,637
=============================
4
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(000'S OMITTED)
1995 1994
-----------------------------
Cash flows from operating activities:
Net income $ 59,799 $ 42,573
-----------------------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 16,012 12,914
Amortization 8,386 8,486
Net increase (decrease) in deferred taxes (1,268) 779
Net increase (decrease) in LIFO reserves 291 (19)
Increase (decrease) in deferred compensation 221 (164)
Other, net (7,026) 15,037
Changes in assets and liabilities (excluding acquisitions):
Decrease (increase) in accounts receivable (25,199) (14,671)
Decrease (increase in inventories, excluding
LIFO reserve (24,989) (25,731)
Decrease (increase) in prepaid expenses (6,800) (2,604)
Increase (decrease) in accounts payable 8,789 (1,315)
Increase (decrease) in accrued expenses 15,129 6,393
Increase (decrease) in federal and other
taxes on income 29,951 17,107
-----------------------------
Total adjustments 13,497 16,212
-----------------------------
Net cash provided by operating activities 73,296 58,785
-----------------------------
Cash flows from (used in) investing activities:
Net sale (purchase) of marketable securities (2,231) (18,823)
Additions to property, plant & equipment (28,056) (16,540)
Acquisitions (16,240) (104,358)
Purchase of treasury stock (4,110) (58)
-----------------------------
Net cash from (used in) investing activities (50,637) (139,779)
-----------------------------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable (14,256) 87,166
Reduction of long-term debt (242) (108)
Proceeds from exercise of stock options 1,083 992
Cash dividends to stockholders (14,739) (13,152)
-----------------------------
Net cash from (used in) financing activities (28,154) 74,898
-----------------------------
Net increase (decrease) in cash and cash equivalents (5,495) (6,096)
Cash and cash equivalents at beginning of period 90,304 63,685
-----------------------------
Cash and cash equivalents at end of period $ 84,809 $ 57,589
=============================
5
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
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:
MARCH 31, DECEMBER 31,
1995 1994
---------------------------
Raw materials $124,960 $116,829
Work in progress 176,668 167,251
Finished goods 129,269 121,828
-------------------------
Total 430,897 405,908
Less LIFO reserve 41,594 41,304
-------------------------
Net amount per balance sheet $389,303 $364,604
=========================
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 form 10-K which was filed with the Securities and Exchange
Commission in March 1995.
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 quarter of 1995 as
compared to the position at December 31, 1994.
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Working capital increased from $360.9 million at the end of last year to
$389.3 million at March 31, 1995, an increase of 8%.
Dover completed two acquisitions in the first quarter involving an
expenditure of $16 million. Civacon (Dover Resources) purchased Knappco, Inc. of
Kansas City, a maker of valves and manhole covers for tank trailers (Heil is an
important Knappco customer), which business will expand Civacon's product line.
Hill Phoenix (Dover Diversified) completed the previously announced purchase of
the assets of Margaux, Inc. which is located near Phoenix's Conyers, Georgia,
facility and makes similar products. Dover is actively reviewing other
acquisitions of the "add-on" and "stand alone" types, but completion of
transactions is unpredictable. Internal cash flow funded the $16 million of
acquisitions and $ 4 million of stock repurchases as well as a $12 million
decrease in net debt to $361 million (25% of total debt and equity capital). The
implied "free cash flow" of $32 million, only 4% of first quarter sales, is
below Dover's long-term average, as is expected in a period of rapid internal
growth.
(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:
The Company earned $1.06 per share in its first quarter ended March 31,
an increase of 43% from the $.74 reported last year. This was a Dover earnings
record for any quarter. Sales of $854 million were 25% above the prior year's
quarter and were also a record for any quarter.
The EPS improvement was driven by a 34% gain in the combined profits of
Dover's five Operating Subsidiaries of which four achieved gains. Additionally,
Dover's tax rate was 35% in the quarter compared with 37.4% in the first quarter
of 1994 and 34.1% for 1994 as a whole. Average shares outstanding were about 1%
lower due to repurchases made primarily in late 1994. In the first quarter of
1995, Dover re-purchased 77,000 shares at an average price of $53.
Business conditions in the first quarter were generally strong as total
Dover orders were 37% higher than last year and backlog expanded 14% during the
quarter. March was an unusually strong month with shipments of $319 million that
produced record profits and a quarter that exceeded Dover's expectations.
DOVER RESOURCES
This segment achieved a 27% earnings gain on a 19% sales gain as 11 of 16
businesses had higher earnings than last year. De-Sta-Co, OPW Fueling
Components, Blackmer and Midland had earnings gains of more than 25% and
produced more than half of Resources' profits in the quarter. De-Sta-Co has
improved its position for automotive air conditioning valves in a continuing
strong market and has seen some upturn in its European operations. OPW Fueling
Components and Blackmer continue to grow in gasoline vapor recovery applications
and received final approvals on their Vapor E-Z system. Midland increased
shipments to the rail tank car market. Profits from Resources' three companies
serving the oil/gas production market improved modestly, helped by exports, but
continue to represent less than 20% of total profits in this segment. Most of
Resources' 19% year-over-year sales growth was internally generated with a small
contribution from Tarby (acquired by Blackmer in 1994) and from Knappco
(acquired by Civacon in early 1995). Bookings exceeded shipments in the first
quarter by 7% with all non-oil field companies showing gains over last year.
7
DOVER INDUSTRIES
Dover Industries achieved a 63% earnings gain on a 26% sales increase
and, as expected, became Dover's largest earnings segment. Ten of twelve
companies had higher earnings than last year with 9 of these gains in excess of
20%. The largest increases were at Heil, where profits gained more than 50%, and
at Tipper Tie where profits more than doubled. Heil's shipments of refuse trucks
increased modestly due to stronger national account business while tank trailer
sales jumped 41% to a record level as expanded capacity came on stream. Tipper
Tie was helped by last year's acquisition of Technopack (Germany). Despite the
increased trailer production, backlog has continued to grow as first quarter
orders were almost double shipments. All Dover Industries' companies had higher
first quarter sales than last year and all but one had higher orders. Total
orders gained 34% for the quarter with almost half of the dollar gain at Heil.
Backlogs and order rates are strong for most companies with production capacity
a near-term constraint at Heil Trailers, Davenport, and Texas Hydraulics.
DOVER TECHNOLOGIES
Dover Technologies achieved a 95% earnings gain on a 40% sales increase.
While 6 of the 7 companies in this segment achieved profit gains, most of the
$12.1 million increase in profits was attributable to Universal Instruments
where earnings more than doubled on a 43% shipment gain. All of Universal's
businesses (thru-hole equipment, surface mount equipment, rebuilt machines and
parts/service) showed improved sales and earnings relative to prior year.
Book-to-bill at Universal was a very strong 1.29 despite the shipments gain. New
equipment shipments of each type were more than 50% ahead of last year in the
first quarter with bookings for each greater than shipments, particularly for
surface mount. Universal's product line was well received at the important
Nepcon-West show with the GSM-1 surface mount machine emerging as the new
industry standard for flexible placement machines. Orders were also higher for
DEK's and Soltec's production equipment, but both of these companies are
experiencing margin pressure. All of Technologies' components-related businesses
(about 15% of sales in first quarter) had stronger earnings and bookings than in
the prior year. Dover Technologies' overall book-to-bill in the first quarter
was 1.19. Backlog is in place, especially at Universal, for Technologies to have
an excellent second quarter, but profit gains will be limited in the near term
by Universal's ability to increase production. Their first quarter shipments
were a record (having more than doubled in 2 years) and the strain on people,
facilities and vendors is a challenge.
DOVER DIVERSIFIED
Profits at Dover Diversified improved 33% on a 72% sales increase. The
acquisition of HTT/Reheat (by Tranter) and of Hill (by Phoenix Refrigeration)
subsequent to last year's first quarter, and of Margaux this year, provided 50
points of the sales gain but no earnings. This reflects acquisition write-offs,
a seasonally weak period at Hill, and costs of combining Hill, Phoenix and
Margaux while constructing a new plant for refrigerated case production. Dean
Flatt, previously President of Hill, was named President of the combined Hill
Phoenix/Margaux operations, following the death of Grant Brown in a plane crash
late in 1994. Profits advanced strongly at Belvac, Tranter, and Pathway but
lagged last year at A-C Compressor where costs are under absorbed due to a slow
shipment schedule for the early part of 1995. A-C's bookings in the quarter were
more than double sales and March 31 backlog is 28% ahead of prior year; so,
recovery is expected. Belvac continued its strong shipments/earnings results but
orders were 163% of shipments, pushing backlog to almost triple a year ago. The
Company plans a plant expansion in the second quarter to permit higher
production of necker machines. The
8
Diversified segment recorded $2.1 million of profit on a 1993 contract
settlement between Sargent Controls and Electric Boat as operating milestones
were reached in the first quarter, triggering further cash receipts. An
additional $2.3 million is expected to be collected in the course of 1995.
Diversified's bookings were 126% of shipments in first quarter which raised
backlog 81% above last year (including acquisition impact). Profit should
improve as A-C catches up and Hill Phoenix begins to realize its potential.
DOVER ELEVATOR
Dover Elevator International's profits fell sharply on flat sales that
were below expectation. Despite a strong backlog, actual releases for domestic
manufacture of new elevators were soft in the quarter with an unfavorable
product mix. Additionally, profit declined in Europe and launch costs were
absorbed for the new Dover Accessibility product line. While the elevator
segment had not expected to equal last year's best earnings quarter, the actual
result was disappointing. The market for new elevators continues depressed.
First quarter bookings were 6% higher than last year, leaving backlog at March
31, 4% below a year ago although actually higher than last year for
manufacturing operations due to the slow releases. Lower new elevator
production/construction added to losses in this area, while competitive pricing
prevented profit gains in service. The downsized and re-structured General
Elevator Company performed ahead of its recovery plan but net gains from the
broader North American re-organization are being realized more slowly due to
implementation costs. Dover Elevator expects profits to improve as the year
progresses with favorable year-over-year earnings comparisons in the second
half.
OUTLOOK
Given the strong start to 1995 the Company believes that an earnings
gain of 20% or more for the year is now likely, rather than just possible. If
achieved, this would be Dover's third consecutive year with earnings growth
exceeding 20%.
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.
9
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: 4/21/95 /s/ John F. McNiff
------------------------------
John F. McNiff, Vice President
and Treasurer
Date: 4/21/95 /s/ Alfred Suesser
-----------------------------
Alfred Suesser, Controller
and Assistant Treasurer
10
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
5
1000
3-MOS
DEC-31-1995
JAN-01-1995
MAR-31-1995
84,809
56,814
618,455
16,628
389,303
1,186,573
842,972
484,149
2,150,264
797,273
253,345
66,480
0
0
985,244
2,150,264
854,129
854,129
584,093
760,094
(623)
0
8,854
92,019
32,220
59,799
0
0
0
59,799
1.06
0
Information is not materially different than (EPS-Primary)
