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DOVER CORPORATION
[FIGURE 1]
HEIL
1995
ANNUAL
REPORT
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DOVER'S BUSINESS GOAL IS TO BE THE LEADER IN ALL
THE MARKETS WE SERVE. WE EARN THAT STATUS BY APPLYING A SIMPLE PHILOSOPHY TO THE
MANAGEMENT OF OUR BUSINESSES. THIS REQUIRES US TO:
- Perceive our customers' real needs for products
and support.
- Provide better products and services than the
competition.
- Invest to maintain our competitive edge.
- Ask our customers to pay a fair price for the
extra value we add.
SERVICE TO OUR CUSTOMERS, PRODUCT QUALITY,
INNOVATION AND A LONG-TERM ORIENTATION ARE IMPLICIT IN THIS CREDO. PURSUIT OF
THIS MARKET LEADERSHIP PHILOSOPHY BY ALL OUR BUSINESSES, PLUS... VALUE ORIENTED
ACQUISITIONS OF COMPANIES THAT SHARE THIS PHILOSOPHY, PLUS... A DECENTRALIZED
MANAGEMENT STYLE THAT GIVES THE GREATEST SCOPE TO THE TALENTED PEOPLE WHO MANAGE
THESE COMPANIES... HAVE COMBINED TO PRODUCE RESULTS FEATURING:
- Long-term earnings growth.
- High cash flow.
- Superior returns on stockholders' equity.
TABLE OF CONTENTS
Comparative Highlights ........ 1
To Our Stockholders ........... 2
Dover Resources ............... 6
Dover Industries .............. 9
Dover Diversified ............. 12
Dover Technologies ............ 15
Dover Elevator International .. 18
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1995 COMPARATIVE HIGHLIGHTS
(Dollars in thousands except per share figures)
Increase 1995
1995 1994 1993 versus 1994
- ---------------------------------------------------------------------------------------------------------------------------
Net sales ........................ $3,745,877 $3,085,276 $2,483,928 21%
Earnings before taxes ............ $ 417,111 $ 306,859 $ 245,542 36%
Net Earnings ..................... $ 278,311 $ 202,373 $ 158,254 38%
Per Common Share
Net Earnings ................... $ 2.45 $ 1.77 $ 1.39 38%
Dividends ...................... $ .56 $ .49 $ .45 14%
Book value ..................... $ 10.80 $ 8.78 $ 7.61
Capital expenditures ............. $ 102,668 $ 84,473 $ 47,532
Acquisitions(1) .................. $ 323,292 $ 187,704 $ 321,002
Purchase of treasury stock ....... $ 3,834 $ 29,733 $ 2,329
Cash flow(2) ..................... $ 386,147 $ 298,162 $ 235,223
Return on average equity ......... 25.0% 21.7% 18.9%
Approximate number of stockholders 16,000 10,000 10,000
Number of employees .............. 25,332 22,992 20,445
- ---------------------------------------------------------------------------------------------------------------------------
(1) See Notes to Consolidated Financial Statements, note 2.
(2) Represents net earnings plus depreciation and amortization.
Adjusted, where applicable, to give retroactive effect to the 2 for 1 stock
split in 1995.
EARNINGS PER SHARE GROWTH
(AVERAGE ANNUAL RETURN)
10 YEARS ENDING 12/31 DOVER S&P 500
- --------------------- ----- -------
1986 10% 4%
1987 12 5
1988 13 7
1989 10 4.5
1990 11 3.5
1991 5 0.1
1992 6 4
1993 10 4.5
1994 10 6.5
1995 13 9.5
TOTAL RETURN TO INVESTORS
(AVERAGE ANNUAL GROWTH RATE)
10 YEARS ENDING 12/31 DOVER(1) S&P 500(2)
- --------------------- ----- -------
1986 19.6% 13.8%
1987 22.1 15.3
1988 21.2 16.3
1989 18.9 17.5
1990 12.1 13.9
1991 12.1 17.6
1992 13.9 16.1
1993 17.7 14.9
1994 14.2 14.4
1995 16.4 14.9
(1) Goldman Sachs Investment Research
(2) Standard & Poors Corp.
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Top row, left to right; Rob Kuhbach, Nigel Davis, Lew Burns, Rudy Herrmann, Bob
Tyre,
Front row, left to right; John McNiff, Jerry Yochum, Tom Reece, Fred Suesser,
John Pomeroy
[PHOTO]
TO OUR STOCKHOLDERS
DOVER'S EARNINGS PER SHARE ROSE 38% IN 1995 TO A NEW RECORD OF $2.45 PER SHARE.
THIS IS THE THIRD CONSECUTIVE YEAR IN WHICH DOVER'S EARNINGS PER SHARE HAVE
GROWN BY MORE THAN 20%.
The cumulative gain of 119% since 1992 represents the strongest three-year
period of earnings growth in Dover's history.
For the first half of the decade of the `90s, our compound annual rate of
earnings growth stands at 14%, which is four full percentage points higher than
we achieved during the decade of the `80s. I believe these results indicate that
we are achieving success in the "tilt toward growth" program that we initiated
in 1990, and on which I have commented in previous letters.
The very rapid and above-trend growth of the past three years has been
gratifying. However, our financial policies are aimed at creating wealth for
long-term investors, just as our operational strategies are targeted at
providing consistent high value to long-term, repeat customers. Long-term to us
is certainly not next quarter, or even next year. Perhaps it should be five
years (the SEC asks for some 5-year data in proxy statements), but even this
does not seem "long," given the life of our products and the duration of our
customer and employee relationships.
The chart at the left on the preceding page looks at 10-year periods. It
compares Dover's earnings per share growth with that of the Standard & Poor's
500 Stock Index for each of the last ten 10-year periods. In each period, Dover
grew faster than the S&P 500. The other table on this page compares Dover and
the S&P 500 for total return to stockholders over these same periods. Dover
outperformed the S&P 500 in a majority of these 10-year stretches. Small
differences in annual growth rates add up over time. Over the entire 20-year
period -- 1975-1995 -- a dollar invested in Dover would have grown to $42, while
a dollar invested in the S&P 500 would have grown only to $15.
Sophisticated investors will recognize that these pre-tax, dividend-reinvested
figures, although reflecting the standard measurement practice used by
professional investment managers and mutual funds, do not tell the full story.
Almost all of the return from the Dover investment has come in the form of
capital gains, which are taxed at a lower rate than dividends. Additionally, for
Dover investors, all of the capital gain remains tax-deferred until the shares
are sold. On an after-tax basis, we estimate that an investment in Dover
outperformed the S&P 500 in at least nine of the last ten 10-year periods.
I cannot promise stockholders 20% earnings gains every year. But we do intend to
achieve long-term earnings growth that is consistently well above average and
solidly supported by cash flow. We expect that this will continue to provide
investors with superior returns.
HIGHLIGHTS
In so fine a year as 1995, many events seem to deserve mention. But there are
four that I would especially like to comment on because of their importance to
the longer-term value of your Dover investment.
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First, Universal Instruments' transformation into a "major league" player in the
surface mount portion of the electronic circuit board assembly equipment
business is extremely important -- and even more gratifying than the record
earnings Universal contributed in 1995. The company's "platform" based
technology has been well received by customers needing flexible and highly
accurate component placement. This segment of the world surface mount equipment
market exceeds $1 billion in a total assembly equipment market that is now close
to $3 billion. Most industry watchers predict that this total market will exceed
$5 billion by the year 2000, with growth in all segments. Universal has
opportunities both to improve its share in the "flexible" placement segment and
to expand its competitive range through new offerings that build upon the proven
success of its platform products.
Second, our elevator business significantly changed its organizational structure
to refocus on its key strengths within the North American market. The actions
associated with the $31.9 million in charges taken in the year's second half
should lead to significant growth in Dover Elevator's operating earnings in
1996.
This has been a very difficult period for everyone in our elevator companies. I
am grateful to our managers for their courage in stepping up to the realities of
a depressed market with actions that were as unpleasant as they were necessary.
I also thank our thousands of elevator employees for their support. We hope that
their collective efforts have established the base for a new era of prosperity
for Dover Elevator International.
Third, in a number of ways, Dover became a more international company in 1995.
Imaje became our first large scale acquisition of a non-U.S. manufacturing
business. Our companies opened many new foreign sales offices while expanding
their overseas distributor and representative networks. Dover's companies now
have hundreds of employees in China, Hong Kong, Singapore and Thailand, and
participate in a number of joint ventures in rapidly growing Asian countries.
Excluding our domestic elevator installation and service business -- and looking
only at our manufacturing activities -- we estimate that more than 40% of
Dover's products are either manufactured or sold outside the United States, up
from 30% two years ago. This figure is likely to continue to grow, partly as a
result of higher economic growth rates in some foreign countries, but more
importantly because of the emphasis that the management teams of Dover's
operating companies are placing on these activities.
Finally, we set a new record for acquisition activity, investing $323 million in
two stand-alone and seven add-on acquisitions. Our acquisition activity during
the three years 1993-95 has totaled $832 million, which is more than Dover was
able to invest in this fashion during the preceding 10 years. In part, this
increased level reflects more favorable -- from our point of view -- conditions
in the acquisition marketplace, especially with regard to the activities of
"financial" buyers. While we cannot predict how long these favorable conditions
will prevail, it is significant that almost $250 million of the $832 million
represented strategic add-ons to existing Dover companies. This is a new
dimension for our acquisition growth efforts and one that we think we can
sustain into the future.
ACQUISITIONS
We completed the largest acquisition in Dover's history -- Imaje, S.A., based in
Valence, France -- in October. This company is one of three large, worldwide
players in the manufacture of continuous inkjet printing equipment. Imaje's
technology can electronically deposit specially formulated, fast drying inks
onto a wide variety of products, typically moving at high speed on an assembly
line, and is capable of a unique marking for each item. It is primarily used in
industrial applications for the marking of such items as medicine bottles and
beverage containers.
Our other stand-alone acquisition, Mark Andy of St. Louis, Missouri, serves a
different segment of the commercial/ industrial printing business. Its
flexographic presses are used principally in the printing of self-adhesive
labels. The relatively low cost of flexographic plates and ease of plate
changeovers make flexography the preferred method for high graphic quality, low
to medium volume label production.
Our seven add-on acquisitions, involving investment of $70 million, are
described elsewhere in this report. The largest of these, AT&T Frequency Control
Products, was relocated from AT&T and renamed Vectron Technologies, Inc. This,
together with Vectron Labs, acquired in 1992, and Oscillatek, has given us a
position of world leadership in the precision crystal oscillator market.
It is worth noting that our acquisition program has not been the primary factor
in our EPS growth over the past several years. The acquisitions made in 1995
actually reduced earnings per share by $.03 (because of initial
acquisition-related costs), while the acquisitions made in 1994 added only $.07
(primarily as a result of costs associated with Hill). We expect these acquired
companies to make an important contribution to earnings in 1996. In 1995
non-cash charges for amortization of acquisition premiums amounted to $.36 per
share, up from $.29 per share in 1994 -- numbers that we believe to be of
interest to investors. In 1996 this charge will decline to $.31 per share, in
the unlikely event that Dover makes no further acquisitions.
FINANCIAL
At its August meeting, the board increased Dover's dividend by 14% and split the
common stock two shares for
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one. This was the Company's 35th consecutive increase in the annual dividend
rate. Since Dover became a public company in 1955, its shares have now split
more than 100 for one.
EARNINGS PER SHARE
------------------------
1990 1.28
91 1.07
92 1.12
93 1.39
94 1.77
95 2.45
We also had our first public offering of long-term debt securities, issuing $250
million in 10-year notes, which were rated A+ by Standard & Poors and A-2 by
Moody's Investor Services. Most of our acquisition activity has been financed by
internal cash flow, but the strength of our program over the past three years
has caused our net debt (total debt less cash and marketable securities) to
increase as a percentage of total capital from 13% at the end of 1992 to 30% at
the end of 1995. While our net debt position has increased, the relationship of
net year-end debt to EBITA (earnings before interest, taxes and amortization) is
very low at 1.07 to 1. Dover remains in its usual strong financial position --
fully capable of supporting internal growth, our add-on acquisition program, and
any stand-alone acquisition or share repurchase opportunities that may arise.
DOVER TECHNOLOGIES
Dover Technologies' profits improved 75% on a sales gain of 45%. The sales gain
reflects growth at all companies as well as the acquisitions of Imaje and AT&T
Frequency Control Products. TNI also acquired GFS Manufacturing in November.
Seven of the eight companies achieved earnings gains, with the largest increase,
in percentage and dollars, at Universal Instruments. Universal's profits
benefited from strong growth in its highly profitable thru-hole assembly
equipment business. This older technology, which has been declared "mature"
since the mid-1980s, achieved record sales and profits. Many consumer
electronics products continue to be designed using thru-hole technology because
of its lower cost and greater ease of manufacture. Cyclical growth in this
market and the movement of production to emerging countries caused a surge in
demand which boosted sales. Universal is well positioned to benefit from such
opportunities. The company's surface mount margins improved in 1995 as sales
grew 60%. The company has developed several new products, which will be
introduced in early 1996.
PROFITABILITY MEASURES
OROI ROE
1990 31 20
91 25 16
92 27 16
93 29 19
94 31 22
95 33 25
Imaje's first quarter with Dover Technologies provided strong sales and
operating earnings and added substantially to the international character of
Dover Technologies. In the fourth quarter, approximately 60% of Dover
Technologies' $258 million of sales involved products either made or sold
outside the U.S.
DOVER INDUSTRIES
Profits at Dover Industries improved 45% on a gain of only 15% in sales. Almost
all of these gains represented internal growth and margin improvement. Most of
Dover Industries' businesses achieved earnings gains, led by Heil, Marathon,
Davenport, Texas Hydraulics and Tipper Tie. A small acquisition by Heil
(Trailmaster) in the fourth quarter of 1995 was followed in January, 1996 by
DovaTech's acquisition of PRC, a maker of laser cutting and welding equipment,
and by Davenport's purchase of Light Machine, a manufacturer of benchtop
vertical machining tools.
At year-end, Heil was officially divided into two separate businesses -- Heil
Trailer International (petroleum tankers and dry bulk carriers) and Heil
Environmental (refuse and recycling equipment and dump bodies). Both of these
companies are strong leaders in their respective market segments and both
achieved record sales and earnings in 1995.
Most Dover Industries companies have a high level of marginal profit in their
incremental sales dollar and did an excellent job during 1995 of controlling
costs, thereby leveraging moderate sales gains into very strong profit
increases.
DOVER DIVERSIFIED
Dover Diversified achieved a 38% profit increase on a sales gain of 42%. The
apparent margin contraction reflects acquisition activity in 1994-95. The Hill
and Margeaux acquisitions contributed approximately $100 million in sales in
1995 but no profits because of the costs associated with closing Hill's
manufacturing plant, starting up a new facility in Virginia, and integrating
Hill and Margeaux into the existing Phoenix Refrigeration Co. Mark Andy
contributed approximately $40 million of sales, but only a small profit because
of acquisition write-offs.
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Strong operating gains were achieved by Belvac and Tranter. The growth of
Belvac's can-necking equipment business and of Tranter's European HTT/SWEP
operation has been dramatic, providing us with opportunities to invest in
capacity expansion. Amidst the many positive accomplishments at Dover
Diversified were a few disappointments -- lower margins at A-C Compressor, the
slower-than-planned turnaround of Hill, and a small loss at Thermal Equipment.
These problems led to several changes in management. Substantial earnings
improvements are expected for these companies in 1996.
DOVER RESOURCES
Profits at Dover Resources rose 8% from last year's record level, while sales
also set a new record with an 11% gain. At OPW Fueling Components and Blackmer,
profits remained strong but were down from the record levels of 1994 because of
slowness in the gasoline vapor recovery market and the delayed introduction of
their new VaporEZ(TM) system. De-Sta-Co almost matched its 1994 record earnings,
while Midland, Ronningen-Petter, and Wittemann all set earnings records by
substantial amounts.
Almost all Dover Resources companies see opportunities for further profit gains
in 1996, especially Blackmer, which will benefit from the add-on acquisition of
Hammond Engineering (U.K.), and De-Sta-Co, whose valve capacity was expanded
during the past year and whose Industrial Products business should be stronger.
DOVER ELEVATOR INTERNATIONAL
Dover Elevator earned $63 million in 1995 before the special charges of $32
million. This result was slightly better than the $58 million earned in 1994
(before special costs in that year, as covered in our 1994 Annual Report).
The special charges in 1995 reflect the cost of a broad reorganization of our
North American elevator activities. DEI's objective has been to combine North
American activities into a more unitary business, focused on elevator service
and new elevator installation, especially low-rise, hydraulic elevators.
Specific actions included the appointment of Nigel Davis -- a 12-year employee
and previous president of our Hammond & Champness Company in the United Kingdom
- -- as President of Dover Elevator International. Elevator management closed a
manufacturing plant in Canada, and terminated approximately 300 salaried
employees, including one level of senior managers. Field activities in North
America were divided into seven regions, and factory operations were
consolidated, both functions reporting to Mr. Davis.
This difficult reorganization was implemented professionally and with great
support from our employees. Despite the distractions and uncertainties inherent
in such a program, total sales increased modestly, and the second half of the
year showed significantly improved operating profit ($70 million at an annual
rate), which we hope can not only be maintained but improved upon in the years
ahead.
ORGANIZATION CHANGES
In addition to the important changes in our elevator business, described above,
and the split of Heil into two companies, which made Glenn Chambers and Bob
Foster Dover presidents, we began 1996 with nine new company presidents. Ed
Furnari, a longtime Marathon Equipment employee, became president of that
company. At Ronningen-Petter, Dan Kaiser retired after 26 years with the company
and was succeeded by Pete Scovic, himself a longtime Ronningen-Petter manager.
Jerry Portis, who co-founded Midland Manufacturing, named Don Rodda, a Dover
manager for over 10 years and most recently executive vice president of Midland,
to succeed him as president of the company. Jerry remains active as chairman.
The retirement of Nico Visser at IST (Germany) and Dick Dawson at Stark led to
the appointment of Rainer van Essen and Grif Griffey as the new leaders of those
companies. Wade Wnuk joined Dover as president of Norriseal, while Ralph
Coppola, previously general manager of Hill Phoenix's systems business, became
president of Hill Phoenix. Ken Stevens, a veteran Phoenix Systems manager,
became president of newly-formed Phoenix Diversified Products, a maker of
electrical distribution systems. Also at year-end, Tom Bell, former CFO of Dover
Diversified, became president of A-C Compressor.
In our Independent Subsidiary organizations, Larry Gray, formerly President of
Heil, was appointed Executive Vice President and Chief Operating Officer of
Dover Industries. Vicki Walker was named Vice President and Chief Financial
Officer at Industries while Jack Ditterline assumed the same title at Dover
Diversified.
OUTLOOK
We ended 1995 with an encouraging fourth quarter performance, and Dover's
outlook for 1996 is positive.
The key factors favorably affecting the 1996 outlook are the expected reduction
in special charges; the positive contribution of 1995 acquisitions, particularly
Imaje; strong growth potential at Dover Elevator and Hill Phoenix because of
major changes made in 1995; and the growth expected by most Dover operating
companies. These gains will be somewhat offset by the expected decline at
Universal, as the surge in high-margin thru-hole shipments gives way to
lower-margin surface mount equipment sales. The balance of these factors is
strongly positive. We are anticipating another good year -- one that we hope
will at least sustain our growth rate of the 90s.
/s/ Thomas L. Reece
- -------------------
Thomas L. Reece
President and Chief Executive Officer
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DOVER RESOURCES
OPERATING
EARNING OROI
--------- ----
91 62 28
92 59 26
93 70 32
94 84 36
95 91 32
DOVER RESOURCES
DOVER RESOURCES' PROFITS SET A NEW RECORD IN 1995, RISING 8% FROM PRIOR YEAR ON
A SALES GAIN OF 11%. THE OVERALL RESULTS REFLECTED MIXED PERFORMANCES FROM THE
SEGMENT'S 16 BUSINESSES, WITH NINE ACHIEVING INCREASES IN PROFITS
Three add-on acquisitions were completed during the year by OPW Fueling
Components, Civacon and Blackmer. These acquired companies, with annualized
volume of approximately $20 million, added $14 million to Dover Resources'
reported sales for 1995, but contributed no profit because of acquisition
premium write-offs.
PROFITS DECLINE AT THREE LARGEST COMPANIES
Profits declined modestly at OPW Fueling Components, Blackmer and De-Sta-Co,
which provide more than half of Dover Resources' total earnings, as none of
these companies was able to match its record 1994 results.
OPW and Blackmer experienced a slowdown in the gasoline vapor recovery market
and encountered extra costs and delays in introducing their jointly developed
VaporEZ(TM) product. This offset gains at both companies in other product lines.
OPW purchased Hasstech, a maker of gasoline vapor recovery equipment, during the
year. Blackmer acquired Hammond Engineering, Ltd., broadening its mobile
transfer pump line and adding to its international presence.
At De-Sta-Co, sales hit a new high, but profits fell just short of the 1994
record. A record performance by the Valve Group was offset by reduced margins in
Industrial Products. Increasing manufacturing capacity for the Industrial
Products Group led to higher costs in the short term, but will enhance
De-Sta-Co's growth opportunities in 1996.
Despite their modest profit downturn, which totaled only 6%, these businesses
continued to invest in new product development, international sales expansion,
and capital equipment, setting the stage for solid gains in 1996.
PROFIT RECORDS AT SEVEN COMPANIES
Sales and income advanced to record levels at Ronningen-Petter, which makes
liquid filtration systems; at Midland Manufacturing, which produces rail tank
car valve and safety devices, and at Wittemann, a producer of CO(2) generation
and recovery systems. New sales and earnings records were also set by Stark,
which makes refrigeration tubing,
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De-Sta-Co's precision stamping and proprietary finishing processes allow
production of millions of valves with superb quality and on-time delivery. This
creates unique customer value for this critical part used in refrigeration and
automotive air conditioning compressors.
1 Petro-Vend
Doug Stewart, President
Products: Commercial key/card fuel control systems, retail service station
systems, and tank level monitoring equipment
1 Stark Manufacturing
Grif Griffey
Products: Specialized aluminum tubing and manifold assemblies
1 Norris*
James L. Mitchell, President
Products: Sucker rods, couplings, well servicing equipment, polished rods
I.S.T. Molchtechnik GmbH (Germany)
Rainer van Essen, Managing Director
Products: Industrial pigging systems, manifolds, and blending systems
1 De-Sta-Co*
William D. Rogerson, President
Products: Reed valves for compressors; Toggle clamps and workholding devices;
Robohand grippers
1 OPW Fueling Components*
Robert Conner, President
Products: Gasoline nozzles, fittings, valves, and environmental products
1 Blackmer
Ray Pilch, President
Products: rotary P.D. pumps for delivery of fuel oil, propane and industrial
products, industrial gas compressors; Tarby Progressing cavity pumps; Hammond
Engineering Rotary vane and screw compressors, vacuum pumps, and blowers
1 C. Lee Cook
David Jackson, President
Products: Piston rings, packings for gas compressors and aerospace sealing
applications; Compressor Component compressor rods, pistons, and repair
services: Cook Manley compressor valves
1 Midland Manufacturing
Jerry Portis, Chairman
Donald Rodda, President
Products: Tank car and barge valves, safety valves, and liquid level
measuring devices
From left to right; Bob Leisure, Bill Rogerson, Oscar Parman
[PHOTO]
1 Duncan Parking Systems*
Richard Farrell, President
Products: Parking control products and systems
1 Alberta Oil Tool (Canada)**
James R. Kosh, President
Products: Sucker rods, fittings, valves, and controls
1 Civacon*
James Johnson, President
Products: Kamloks(R), Kamvaloks(R), and transport tank monitoring and control
systems; Knappco manhole/access covers and valves
1 Ronningen-Petter*
Peter Scovic, President
Products: filtration systems; RP Products bag filters and high efficiency
media
1 Norriseal Controls
Wade Wnuk, President
Products: Process valves and instrumentation systems;
Ferguson-Beauregard/Logic Controls oil and gas production systems
1 OPW Engineered Systems
Tom Niehaus, President
Products: Loading arms, swivels, and sight flow indicators
1 Wittemann*
William Geiger, President
Products: CO2 gas generation and recovery systems, and industrial
refrigeration systems
Numbers indicate position in primary market served, generally North America,
except as noted.
*worldwide
**Canada
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and at OPW Engineered Systems, which manufactures loading arms and swivels for
petroleum transfer. Civacon, which produces valves and other products used in
transportation of chemicals and petroleum, purchased Knappco during the year,
thereby expanding its line of products for tank trucks. Alberta Oil Tool, a
Canadian producer of sucker rods and other equipment for oil production, also
reported record earnings, as the Canadian "oil patch" remained strong.
Total profits for these seven companies increased 22%, with the largest gains at
Midland and Ronningen-Petter. Ronningen-Petter's DCF filters have become a
standard within the pulp and paper industry and its bag filter businesses
continued to grow. Midland benefited from heavy production of rail tank cars by
its major customers in response to a strong fleet replacement market.
SALES AND INCOME ADVANCED TO RECORD LEVELS AT RONNINGEN-PETTER, WHICH MAKES
LIQUID FILTRATION SYSTEMS; AT MIDLAND MANUFACTURING, WHICH PRODUCES RAIL TANK
CAR VALVE AND SAFETY DEVICES, AND AT WITTEMANN, A PRODUCER OF CO(2) RECOVERY
SYSTEMS.
RESULTS MIXED AT OTHER COMPANIES
Dover Resources' other six businesses reported mixed results that reflected
their individual circumstances.
Norris had a substantial profit gain on the strength of improved efficiencies
and the company's 1994 departure from the downhole pump business. The domestic
market for sucker rods did not improve but Norris modestly increased its market
share and benefited from strong international activity. Conversely, reduced
demand for Norriseal's equipment, especially valves from its Houston facility,
resulted in a disappointing income drop and the need for cutbacks that in the
short term reduced profits.
Duncan Parking Systems introduced new products for the parking industry and
improved its share of large-scale municipal parking meter orders, leading to
significantly improved profitability.
C. Lee Cook, Petro Vend and IST could not match their 1994 profits. In the
course of the year, Cook undertook an aggressive program of manufacturing
modernization in its Louisville facility, while expanding its Compressor
Components and Manley Valve operations. The substantial capital investment and
process change should lead to an improved profit performance in 1996 and
enhanced service to Cook's customers.
OUTLOOK
Dover Resources' companies occupy strong positions within their respective
market niches, and as a group are highly profitable. There is no one company or
product line which is expected to drive 1996 results, but all the companies see
opportunities for sales and earnings improvement and the outlook for Dover
Resources is positive. A key objective for 1996 is to leverage expected sales
growth into higher profit gains through close control of costs.
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INDUSTRIES
----------
OPERATING
EARNING OROI
------- ----
91 38 27
92 38 34
93 60 34
94 81 35
95 118 38
DOVER INDUSTRIES
DOVER INDUSTRIES TURNED IN RECORD SALES AND EARNINGS IN 1995, ACHIEVING AN
ALL-TIME HIGH IN OPERATING RETURN ON OPERATING INVESTMENT, WHICH DOVER VIEWS AS
THE KEY MEASURE OF EFFECTIVE USE OF STOCKHOLDERS' INVESTMENT.
The reported margin of 14.8% understates the true operating performance of Dover
Industries' "average" company by almost three percentage points because of
acquisition premium amortization and the net effect of unusual items, including
environmental costs. Sales growth was almost entirely internal, with the effect
of 1994 acquisitions, now included for the full year, and of one small add-on
acquisition in 1995 contributing only 2 of the nearly 15 percentage point sales
gain. All of Dover Industries' companies had sales gains, and 10 of the 12 had
profit gains as well.
FIVE LARGEST BUSINESSES GROW
Approximately 65% of Dover Industries' sales and a slightly smaller percentage
of its profit derived from five businesses: Rotary Lift, Tipper Tie, Marathon
and Heil, now considered as two separate businesses -- Heil Environmental and
Heil Trailer International. All improved their profits in 1995 by amounts
ranging from modest, at Rotary Lift, to very large at both Heil companies and at
Marathon.
Heil reorganized itself during the year into two separate businesses, one
focusing on refuse trucks and dump bodies, the other on petroleum tanker and dry
bulk carriers (see picture on Page 10). Larry Gray, formerly president of Heil,
became Executive Vice President of Dover Industries, adding to the management
depth within this Dover subsidiary. He will have primary oversight
responsibility for the two Heil companies, Marathon and Tipper Tie. Both Heil
companies had record sales and earnings. The environmental business benefited
from a stronger, more confident marketplace and from cost
reductions initiated in 1994. Heil Trailer International had large order
increases during 1994 and early 1995 that forced extension of delivery times
despite capacity expansion and high levels of productivity. It ended the year
with a large backlog but a rapidly softening market and will need some order
recovery to achieve further profit gains.
Rotary Lift had a slight profit gain in a slowing market that reflected a drop
in activity by car dealers and mass merchandisers. Rotary continued its emphasis
on new products, factory investments to reduce cost, and aggressive management
of its multiple distribution channels for automotive lifts. With a view to
expanding internationally, Rotary opened a sales office in London and invested
in an Italian assembler and marketer of automotive scissors lifts.
9
12
[PHOTO]
From left to right; Glenn Chambers, Larry Gray, Bob Foster
1 H.E.I.L.
Glenn M. Chambers, President
Products: Refuse collection vehicles and dump bodies
1 Heil Trailer International
Robert A. Foster, President
Products: Trailerized tanks
1 Marathon Equipment
Edward A. Furnari, President
Products: Solid waste compaction, balers, and recycling equipment
1 Tipper Tie/technopack
Charles M. Heard, President
Products: Clip closures, packaging systems, netting, and wire products
1 Rotary Lift
Timothy J. Sandker, President
Products: Automotive lifts and alignment racks
1 Groen
Louise E. O'Sullivan, President
Products: Commercial food service cooking equipment/industrial processing
equipment
1 Texas Hydraulics
Vernon E. Pontes, President
Products: Specialty hydraulic cylinders
2 DovaTech
A. Patrick Cunningham, President
Products: Bernard MIG welding, Weldcraft TIG welding, PlazCraft plasma
cutting, PRC laser equipment
The Heil company set new sales and profit records for both of its major product
groups. It will split into two separate companies in 1996, focusing on Refuse
Trucks and on Tank Trailers.
1 Chief Automotive Systems
James E. Aylward, President
Products: Auto collision measuring and repair systems
1 Davenport
Donald L. Firm, President
Products: Multi-spindle screw machines, benchtop machine tools, and spare
parts and attachments
1 Dieterich Standard
Eugene M. Shanahan, President
Products: Annubar(R) flow sensors
2 Randell
Lynn L. Bay, President
Products:Commercial refrigeration; Food service preparation and holding
equipment
Numbers indicate position in primary market served, generally North America
10
13
Marathon also set sales and income records, benefiting from the same market
strength that lifted Heil Environmental. Ed Furnari, a longtime Marathon
marketing executive, became president and has focused the company on sales of
its traditional compactors and on widening its range of balers and other
recycling products.
Tipper Tie's association with technopak, acquired in 1994, continued to benefit
both companies, which set substantial earnings records in markets that were up
only modestly. Both have gained from each other's technology, introducing new
packaging products in Europe and the U.S.
GAINS AT FIVE OTHER COMPANIES
Texas Hydraulics' focus on value-creating product engineering solutions and
effective cost control resulted in record profits. In the past three years, the
company has more than doubled sales and almost tripled income. In 1996, it will
focus on capacity expansion and on investment to reduce manufacturing costs.
APPROXIMATELY 65% OF DOVER INDUSTRIES' SALES AND A SLIGHTLY SMALLER PERCENTAGE
OF ITS PROFIT DERIVED FROM FIVE BUSINESSES: ROTARY LIFT, TIPPER TIE, MARATHON
AND HEIL, NOW CONSIDERED AS TWO SEPARATE BUSINESSES -- HEIL ENVIRONMENTAL AND
HEIL TRAILER INTERNATIONAL.
Groen refocused its efforts on cooking equipment, selling its AMW coffee-brewing
equipment line during the year. Improved manufacturing performance, especially
at the Jackson, Mississippi facility, enabled Groen to leverage a small sales
gain to record profits.
Davenport saw strong activity, both in new multiple spindle screw machine sales
(the highest level of units shipped in over a decade) and in spare parts sales,
which reflected increased machine usage. Davenport assumed responsibility for
B&S, a manufacturer/marketer of spare parts for Brown & Sharpe screw machines.
This, plus the acquisition of Light Machine in January, 1996 and the
introduction of new products, should push Davenport to new records in 1996.
DovaTech, formerly Bernard, also leveraged a modest sales gain into record
profits. The January, 1996 acquisition of PRC, a maker of laser welding and
cutting equipment, should fuel further gains in 1996.
Dieterich Standard, Dover Industries, manufacturer of flow measurement devices,
again achieved record earnings, with modest growth in a relatively flat market.
PROFIT DECLINES IN TWO BUSINESSES
Randell and Chief Automotive were unable to translate small sales gains into
higher profits because of unfavorable sales mix, new product costs, and very
competitive markets. Both businesses were solidly profitable and maintained
their market positions. New products and manufacturing cost improvements are
expected to yield sales and earnings gains in 1996.
OUTLOOK
All 12 Dover Industries companies have planned for profit increases in 1996,
with the best opportunities seen at Marathon and Heil Environmental, as well as
at Davenport, as it integrates B&S into its management structure and makes more
effective use of B&S's new plant facilities in the U.K.
After making only one small add-on acquisition in 1995, Dover Industries hopes
to step up its acquisition activity in 1996. A good start was made with two
"add-ons" in January. Barring an economic downturn, strong growth is expected in
1996, although at a lower rate than in 1995.
11
14
DIVERSIFIED
-----------
OPERATING
EARNING OROI
-------- ----
91 36 32
92 37 45
93 39 47
94 67 36
95 93 35
DOVER DIVERSIFIED
DOVER DIVERSIFIED'S PROFITS ROSE 38% IN 1995, ACHIEVING A NEW
RECORD BY A SUBSTANTIAL AMOUNT ON THE STRENGTH OF EXCELLENT PERFORMANCES BY
BELVAC AND TRANTER. PROFITS ALSO BENEFITED FROM A ONE-SHOT GAIN ON CONTRACT
SETTLEMENTS AT SARGENT CONTROLS.
The segment's reported margin of 13.8% does not reflect the profitability of
most Dover Diversified businesses. Diversified derived 25% of its sales from A-C
Compressor, which had unusually low margins in 1995, and from Hill Phoenix's
refrigerated display case business which operated at a loss. In addition,
although Mark Andy contributed approximately $40 million in sales and had strong
operating profits, it added little to reported earnings because of acquisition
premium write-offs. Dover Diversified's operating return on operating investment
remained strong at 34% after taxes.
TWO COMPANIES ARE STAR PERFORMERS
Belvac increased its sales 41%, setting a new record for the fifteenth
consecutive year. Customer service and delivery time remained a challenge,
despite aggressive capital spending and facility expansion. As the preferred
producer of high-speed equipment to reduce the top diameter of aluminum beverage
cans -- by "necking" the diameter down through a series of progressive dies --
Belvac has enjoyed extraordinarily strong demand in recent years. This has been
driven by can producers' desire to reduce aluminum content, which is by far
their largest cost element. Belvac introduced a new, modular necker (pictured on
page 13), as well as new versions of its trimming machines and new "reformer"
and "reprofiler" machines that alter the shape of can bottoms, permitting
further aluminum content reduction. Demand for Belvac's products is expected to
stay strong throughout 1996.
Tranter increased its sales almost 50%, reflecting a full year's results from
its 1994 acquisitions, HTT/SWEP and ReHeat, as well as strong growth in the U.S.
and Europe. The combination of bolted and brazed plate and frame heat transfer
technology within one company is proving helpful to both product lines. Tranter
expanded its European manufacturing capacity.
MIXED RESULTS AT OTHER BUSINESSES
Waukesha Bearings set sales and profit records by narrow margins. The company's
focus on specially engineered bearing "solutions" enabled it to maintain its
leadership position in this industry.
Pathway Bellows recovered from a disappointing profit performance in 1994 to
achieve a new earnings record on a small sales gain through better control of
costs. Several poorly priced jobs and cost overruns adversely affected results
in 1994.
12
15
2 Waukesha Bearings
Donald A. Fancher, President
Products: Fluid film bearings;
Sweeney torquing tools;
CRL manipulators and isolators
1 Pathway Bellows
Keith Cole, President
Products: Metal and fabric expansion joints
1 Sargent Controls & Aerospace**
Donald C. Tarquin, President;
Products: Submarine fluid controls; aircraft hydraulic controls;
self-lubricating bearings
1 Mark Andy*
John Eulich, President
Products: Flexographic presses
Phoenix Diversified Products
Ken Stevens, President
Products: Electrical distribution systems
1 Thermal Equipment
Todd L. Taricco, President
Products:Autoclaves;
industrial cleaning equipment; medical
waste treatment
[PHOTO]
From left to right; Wendell Bates, Charlie Price, Jim Schneiders, Jim Marshall
1 Belvac*
Jim Schneiders, President
Products: Can necking and trimming
equipment
1 Tranter
Kenneth L. Kaltz, President
Products: Plate/frame and compact brazed heat exchangers; transformer
radiators
2 A-C Compressor
Thomas Bell, President
Products: Centrifugal, oil-free-screw, and rotary compressors
2 Hill Phoenix
Ralph Coppola, President
Products: Commercial refrigeration
systems; refrigerated display cases
Belvac's new, model 595K modular necker is expandable to 16 turret stations,
allowing die necking to 202 diameter tops plus bottom profiling, reforming,
flanging, and inspection -reducing aluminum usage and expensive can handling.
Numbers indicate position in primary market served, generally North America,
except as noted.
*Worldwide
**Position for submarine fluid controls
13
16
Besides an earnings gain from its contract settlements, Sargent Controls
improved its sales and operating margins, while further consolidating operations
in a single facility. At year-end, it won a new contract for valves on the third
Seawolf class submarine, improving the outlook for 1996-97.
Profit progress at Thermal Equipment proved elusive, as the aerospace market for
autoclaves remained depressed and price-competitive. The management team was
strengthened and new products will be introduced in 1996.
Dover Diversified's two major disappointments occurred at A-C Compressor and the
Refrigerated Display Case division of Hill Phoenix. New operating management was
appointed at both companies in the fourth quarter. A loss had been anticipated
at the Hill case business, acquired in August, 1994, because of the expected
costs associated with moving production facilities and introducing a new product
line, but the move from Trenton, New Jersey to Richmond, Virginia was more
disruptive and costly than expected. The refrigeration systems portion of Hill
Phoenix partially offset this disappointment with an outstanding year. The
Phoenix Refrigeration Company (acquired in 1993) and Margeaux (acquired in 1995)
combined for record sales and earnings. The outlook for Hill Phoenix in 1996 is
positive with improvement expected in the display case business.
AS THE PREFERRED PRODUCER OF HIGH-SPEED EQUIPMENT TO REDUCE THE TOP DIAMETER OF
ALUMINUM BEVERAGE CANS -- BY "NECKING" THE DIAMETER DOWN THROUGH A SERIES OF
PROGRESSIVE DIES -- BELVAC HAS ENJOYED EXTRAORDINARILY STRONG DEMAND IN RECENT
YEARS.
At A-C Compressor, several large compressor jobs outside of the company's
traditional technology niche, taken at very competitive prices, plus a delivery
schedule that overloaded manufacturing capacities in the second half, led to a
sharp drop in margins from historic levels. A-C expects to work through the
difficult portion of its order book in the first half of 1996 and has refocused
its efforts under a newly appointed president.
ACQUISITION
The Mark Andy company, acquired in May, 1995, achieved record sales and
(pre-acquisition cost) earnings and further solidified its leadership position
in the manufacture of flexographic presses. Flexography is the most effective
method for high quality, low-to-medium volume printing of self-adhesive labels,
a rapidly growing segment of the huge, worldwide printing industry. In 1996,
Mark Andy will expand its product offerings while investing in manufacturing and
process improvements to reduce costs.
OUTLOOK
The outlook is positive for all of Dover Diversified's businesses with
"turnaround" opportunities in several areas. As a result, earnings at Dover
Diversified are expected to grow strongly again in 1996.
14
17
TECHNOLOGIES
Operating After-Tax
Earnings Operating Return
($ millions) on Investment (%)
91 27 15
92 30 16
93 42 18
94 76 30
95 134 45
DOVER TECHNOLOGIES. ON A SALES GAIN OF 45%, DOVER TECHNOLOGIES' PROFITS SURGED
75% IN 1995. THE PROFIT INCREASE WAS NEARLY $70 MILLION, MEASURED BEFORE
ACQUISITION PREMIUM WRITE-OFFS, CORPORATE EXPENSES AND OTHER ADJUSTMENTS.
Of this, the largest share was provided by Universal Instruments, with the
balance from the fourth-quarter inclusion of Imaje and the growth of other Dover
Technologies companies', notably DEK and Quadrant. The segment's companies also
made good strategic progress toward their goals of becoming significant players
in surface mount equipment and of building leadership roles in other focused
market niches.
A RECORD YEAR FOR UNIVERSAL
Universal set a profit record in 1995 by a wide margin on record sales of more
than $500 million. The profit gain derived partly from improved sales and
margins in surface mount assembly equipment, but more from a surge in demand for
Universal's highly profitable thru-hole equipment. Thru-hole orders rose
sharply, beginning in the latter part of 1994 and continuing through the first
half of 1995, because of the development of new consumer electronic products
designed for thru-hole components (such as direct TV) and the movement of
manufacturing to low-cost environments, notably China, Malaysia and Mexico.
Bookings of thru-hole product dropped sharply in the second half of 1995.
Sales of surface mount products exceeded those of thru-hole equipment and made a
solid contribution to Universal's profits. Universal's share of the $3 billion
worldwide market for all types of surface mount equipment is less than 10%.
However, in the flexible/fine pitch segment, which accounts for about one-third
of the total market, Universal's share is well into double digits and the
company may be the sales leader in North America. Universal developed several
new options for its GSM-1 machine during 1995 and will begin shipping its new
GSM-2 early in 1996 (see picture, p. 16). The overall market for surface mount
assembly equipment is expected to reach $5 billion by the year 2000. Universal
hopes to grow faster than the market by expanding the application range of
"flexible" machines and achieving deeper penetration of that market.
GAINS AT MOST COMPANIES
DEK also set sales and profit records, although margins were below desired
levels because of new product development
15
18
1 Universal Instruments Corporation
Gerhard D. Meese, President
Products: Automated assembly equipment
for printed circuit boards
2 Imaje, S.A.
Albert Journo, President
Products: Continuous Ink Jet printers,
consumables
1 DEK Printing Machines Ltd (U.K.)
John B. Knowles, Managing Director
Products: Screen printers for surface mount printed circuit boards; BSL
flying probe testers
1 Quadrant Technologies
Terence W. Ede, President
Company/Products:
Vectron Technologies, Inc.:
SAW devices, oscillators
Vectron Laboratories, Inc.:
Crystal oscillators
Oscillatek, Inc.:
Crystal oscillators
Dielectric Laboratories, Inc.:
High frequency capacitors
Communication Techniques, Inc.:
Microwave synthesizers
Measurement Systems, Inc.:
Manual positioning controls
[PHOTO]
From left to right; Koen Gieskes, Mark Ragard, Gerhard Meese. Back row; John
Yurger, Gene Heiser
Universal Instruments is introducing the GSM-2 Surface Mount Placement Machine,
adding to its range of products for the accurate, flexible placement market
segment.
1 K&L Microwave, Inc.
Charles J. Schaub, President
Products: Microwave/R.F. filters, Dow-Key coaxial switches
2 TNI, Inc.
James M. Strathmeyer, President
Products: Ferrite transformers,
GFS transformers
Novacap, Inc.
Dr. Andre P. Galliath, President
Products: Multilayer ceramic capacitors
2 Soltec International, B.V. (Netherlands)
Michiel J. van Schaik, Managing Director
Products: Automated soldering equipment for printed circuit boards
Numbers indicate position in primary market served, generally North America
16
19
costs and a need for better manufacturing performance on its basic Model 265
product line. In early 1996, DEK began shipping two new models that are expected
to add greater value for customers and lead to further sales gains.
Quadrant Technologies achieved strong gains, primarily from its acquisition of
AT&T Frequency Control Products (renamed Vectron Technologies, Inc.) at
mid-year. The movement of this business from AT&T to a new, focused
manufacturing site will be completed in the first quarter. Quadrant's Vectron
Technologies, Vectron Labs and Oscillatek companies now occupy a leadership
position in the oscillator market, with product offerings covering a wide range
of technologies and annual sales of $100 million.
THE OVERALL MARKET FOR SURFACE MOUNT ASSEMBLY EQUIPMENT IS EXPECTED TO REACH $5
BILLION BY THE YEAR 2000. UNIVERSAL HOPES TO GROW FASTER THAN THE MARKET BY
EXPANDING THE APPLICATION RANGE OF "FLEXIBLE" MACHINES AND ACHIEVING DEEPER
PENETRATION OF THAT MARKET
K&L Microwave and Novacap improved sales and profits, helped by strong niche
markets and new products. TNI and Soltec reported flat profits, but their
outlook for 1996 is positive, as Soltec is introducing two new soldering
machines (Delta Wave(TM) and Prisma(TM)), while TNI will benefit from the fourth
quarter add-on acquisition of GFS Manufacturing.
ACQUISITION OF IMAJE
In purchasing Imaje for approximately $200 million, Dover made its largest
acquisition. Imaje, based in Valence, France, is one of three major producers
worldwide of continuous inkjet printers. These machines electronically "throw"
specially formulated, proprietary, fast-drying inks onto products moving along
the customer's assembly lines. High speeds, low operating cost and the ability
to change markings on the fly make this the preferred technology for industrial
product-marking applications. For the full year 1995 Imaje set a
(pre-acquisition cost) profit record with sales in excess of $160 million,
gaining share in a growing market. This was Imaje's fourth year of improvement
since a management team led by Albert Journo took over direction of the company.
This management team will continue to direct and expand the business with access
to Dover Technologies' financial resources.
OUTLOOK
Earnings will decline at Universal in 1996, as surface mount sales and profits
are unlikely to grow fast enough to offset the expected decline in thru-hole
assembly equipment shipments. The inclusion of Imaje for a full year and a
reduced rate of acquisition premium write-off should more than make up for
Universal's decline. In addition, two add-on acquisitions were completed in
January, 1996 -- BSL by DEK, and Dow-Key Microwave by K&L. With all other Dover
Technologies companies seeing profit opportunities, especially DEK with its new
products and Quadrant with the AT&T product line, the outlook is for another
record year.
17
20
DOVER ELEVATOR INTERNATIONAL
Operating After-Tax
Earnings Operating Return on
($ millions) Investment (%)
91 58 26
92 59 26
93 56 25
94 46 58 21 25
95 32 63 25 28
Reported Excluding Excluding
Special Special
Items Items
DOVER ELEVATOR INTERNATIONAL, INC. ALTHOUGH NON-RECURRING CHARGES OF $11.5
MILLION IN 1994 AND $31.9 MILLION IN 1995 DISTORT THE TREND OF SEGMENT
REPORTING, THE $63 MILLION DOVER ELEVATOR INTERNATIONAL EARNED IN 1995 BEFORE
THESE CHARGES WAS ITS BEST RESULT SINCE 1990.
During this five-year period, sales were flat at $800 million, plus or minus 3%.
The North American market, where most Dover Elevator activity is concentrated,
has been in a major recession since the 1990-91 real estate crash.
REORGANIZATION
The continuing flat performance, with no indication of a near-term upturn in
markets, created the need for a structural reorganization of Dover Elevator
International. In 1994, General Elevator, which was an independent service
company with a national network of offices, was integrated into Dover Elevator
operations. Responsibility for all elevator manufacturing management was also
concentrated around Horn Lake, Mississippi, as the Canadian company was divided
into separate factory and field operations.
In 1995, North America was restructured as a "wholly unitary" business. Field
operations (sales, service and construction) were divided into seven regions --
five covering areas east of the Rockies and one each for the Pacific Coast
region and Canada. Dover Elevator also closed its manufacturing operations in
Canada and consolidated production in the Horn Lake area. Additionally, it shut
down its separate companies for accessibility products and for elevator
components in Germany. The restructuring reduced Dover Elevator International's
salaried employment by approximately 300 people -- 12% -- between January, 1994
and December, 1995, with the largest cuts coming in the fourth quarter of 1995.
SPECIAL CHARGE
The special charges of $43 million reported over the past two years were largely
non-cash in nature. The largest elements were the write-down of facilities to
estimated market value, the write-off of fixed assets and inventories, and
severance pay. In addition, Dover Elevator adopted a new method of measuring the
percentage of completion in its new elevator operations that spreads revenue
more evenly over the project cycle. This resulted in a $7 million cost
adjustment in the fourth quarter of 1995, which was included in the special
charge for the year. This measurement change will even out somewhat the peaks
and valleys in reported income caused by changes in the level of activity in the
elevator business.
18
21
[PHOTO]
From left to right; Gary Bailey, Bill Wilkinson, Nigel Davis, Steve Bailey,
Buzz Dana, Marc Beckers
Dover Elevator International
Nigel Davis, President
Gary Bailey, Steve Bailey, VPs, Eastern
Marketing Group
Buzz Dana, VP, Pacific/Canadian
Marketing Group
Bill Wilkinson, VP, International Operations
Paul Nickel, VP, Finance
Hammond & Champness LTD UK
Marc Beckers, Managing Director
Dover is North America's largest new elevator company, and second in total
sales, including service.
[FIGURE OF AN ARROW POINTING TOWARDS GROUP PHOTO]
The senior management group is placing emphasis on cost control, hydraulic
elevator sales, and exports - especially to the booming China market.
19
22
NEW MANAGEMENT TEAM
Nigel Davis is president of the new unitary Dover Elevator International. He has
been a Dover manager for 12 years, the last nine as president of Hammond &
Champness, Dover Elevator's European elevator company. The five Eastern field
regions are directed by Gary and Steve Bailey, who have directed various Dover
elevator companies for many years. Buzz Dana, formerly president of Dover's
Sound Elevator (Seattle), now has responsibility for the Pacific region and for
Canada. International operations are headed by Bill Wilkinson, previously
president of Dover Elevator Canada. He will direct export activities, as well as
H & C's U.K. and German operations, and Dover Elevator's Chinese joint ventures.
In addition, Paul Nickel, a former Dover senior financial executive who rejoined
the company two years ago as controller, will direct Dover Elevator's financial
affairs.
DOVER ELEVATOR MANAGEMENT'S FOCUS WILL BE ON INCREASING THE EFFICIENCY OF
OPERATIONS, ON IMPROVING VALUE-ADDED SERVICES TO CUSTOMERS, ON STRENGTHENING
SALES IN THE HYDRAULIC ELEVATOR MARKET, AND ON EXPANDING EXPORTS, ESPECIALLY TO
CHINA.
MARKETS
The overall market for new elevators in North America and the U.K. remained very
flat and price competitive. Service and modernization activities have seen some
recovery, but also remain very competitive. Dover Elevator's operating pattern
of previous years continued: little sales growth, large losses in new elevators
(the combined process of manufacturing elevators and installing them in
buildings), offset by continued good profitability in service and modernization.
These "aftermarket" businesses, while no longer growing at the double-digit
rates they enjoyed for a number of years, now account for more than half of
overall sales. The near-extinction of the high-rise (gearless) elevator market
in North America since 1990 has led to increased competitive pressure on Dover's
mid-rise (geared) and low-rise (hydraulic) elevator segments. Dover continues as
the largest manufacturer/ installer of new elevators in North America, although
Otis has larger total sales because of its much bigger installed base for
service. Exports from our U.S. elevator factories continued to grow, especially
to China, which is the largest world market where actual building construction
exceeds local elevator component manufacturing capacity.
OUTLOOK AND MISSION
Dover Elevator's reorganization should increase operating profits in 1996 to a
level at or above the annualized rate of $70 million that the company achieved
in the second half of 1995. Dover Elevator management's focus will be on
increasing the efficiency of operations, on improving value-added services to
customers, on strengthening sales in the hydraulic elevator market, and on
expanding exports, especially to China.
Although Dover Elevator now represents a much smaller portion of Dover
Corporation's income stream than it did in the 1980s, the company's financial
performance has been good relative to other large elevator companies. It
represents a valuable franchise and will continue to play an important role in
creating long-term value for Dover stockholders.
20
23
FINANCIAL REVIEW
TABLE OF CONTENTS
Market Segment Information...................................... 22
Consolidated Statements of Earnings............................. 23
Consolidated Statements of Retained Earnings.................... 23
Consolidated Balance Sheets..................................... 24
Consolidated Statements of Cash Flows........................... 25
Notes to Consolidated Financial Statements...................... 26
Independent Accountants' Report................................. 34
Quarterly Data.................................................. 35
Common Stock Cash Dividends and Market Prices................... 35
Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 36
11-Year Consolidated Summary of Selected Financial Data......... 38
Directors and Officers.......................................... 40
Stockholder Information......................................... 40
21
24
SALES AND OPERATING PROFIT BY MARKET SEGMENT
DOVER CORPORATION AND SUBSIDIARIES
(IN THOUSANDS)
For the Years Ended December 31, 1995 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers:
Dover Technologies $ 873,505 $ 603,068 $ 488,248 $ 458,603 $ 421,943 $ 424,704
Dover Industries 798,173 691,342 501,364 357,054 339,255 324,967
Dover Diversified 672,503 472,706 244,597 225,771 196,464 209,961
Dover Resources 583,727 525,971 472,643 439,389 447,079 420,163
Dover Elevator International 822,833 793,559 777,720 791,099 791,400 830,589
Intramarket sales (4,864) (1,370) (644) (336) (355) (39)
----------------------------------------------------------------------------------------
Consolidated total $3,745,877 $3,085,276 $2,483,928 $2,271,580 $2,195,786 $2,210,345
----------------------------------------------------------------------------------------
Operating profit:
Dover Technologies $ 133,641 $ 76,205 $ 41,797 $ 29,793 $ 27,439 $ 27,737
Dover Industries 117,841 81,028 59,942 37,837 37,812 49,637
Dover Diversified 92,948 67,220 39,360 37,373 35,955 36,142
Dover Resources 90,745 83,979 70,290 58,594 62,323 66,268
Dover Elevator International 31,550 46,123 56,404 59,198 57,947 95,936
Interest income, interest
expense and general
corporate expenses, net (49,614) (47,696) (22,251) (22,460) (17,388) (31,602)
----------------------------------------------------------------------------------------
Consolidated income before
income taxes $ 417,111 $ 306,859 $ 245,542 $ 200,335 $ 204,088 $ 244,118
----------------------------------------------------------------------------------------
Profit margin (pretax):
Dover Technologies 15.3% 12.6% 8.6% 6.5% 6.5% 6.5%
Dover Industries 14.8 11.7 12.0 10.6 11.1 15.3
Dover Diversified 13.8 14.2 16.1 16.6 18.3 17.2
Dover Resources 15.5 16.0 14.9 13.3 13.9 15.8
Dover Elevator International 3.8 5.8 7.3 7.5 7.3 11.6
----------------------------------------------------------------------------------------
Consolidated profit margin 11.1% 9.9% 9.9% 8.8% 9.3% 11.0%
----------------------------------------------------------------------------------------
Identifiable assets at December 31:
Dover Technologies $ 721,831 $ 330,661 $ 278,871 $ 285,749 $ 247,562 $ 271,959
Dover Industries 591,228 541,109 485,419 302,821 314,037 257,645
Dover Diversified 570,269 452,074 340,072 183,262 116,432 148,108
Dover Resources 326,047 291,480 218,473 219,216 228,152 221,900
Dover Elevator International 380,889 362,924 381,587 376,508 378,385 377,059
Corporate (principally cash
and equivalents, and
marketable securities) 76,387 92,389 69,267 58,568 72,052 191,695
----------------------------------------------------------------------------------------
Consolidated total $2,666,651 $2,070,637 $1,773,689 $1,426,124 $1,356,620 $1,468,366
----------------------------------------------------------------------------------------
Depreciation and amortization:
Dover Technologies $ 19,750 $ 13,904 $ 13,401 $ 19,755 $ 20,144 $ 23,628
Dover Industries 26,783 25,453 20,520 17,840 26,112 17,050
Dover Diversified 27,141 21,948 14,837 10,756 9,623 10,008
Dover Resources 17,816 19,089 13,300 13,602 14,689 13,930
Dover Elevator International 14,953 13,744 13,319 13,683 14,366 12,692
Corporate 1,393 1,651 1,592 1,821 432 222
----------------------------------------------------------------------------------------
Consolidated total $ 107,836 $ 95,789 $ 76,969 $ 77,457 $ 85,366 $ 77,530
----------------------------------------------------------------------------------------
Capital expenditures:
Dover Technologies $ 18,546 $ 13,425 $ 11,769 $ 11,665 $ 12,373 $ 9,380
Dover Industries 20,675 23,299 11,146 8,225 5,675 5,584
Dover Diversified 31,299 19,419 4,802 5,767 6,243 5,943
Dover Resources 21,127 16,340 11,515 11,560 12,307 11,859
Dover Elevator International 10,949 11,764 8,112 5,137 9,947 12,049
Corporate 72 226 188 87 73 165
----------------------------------------------------------------------------------------
Consolidated total $ 102,668 $ 84,473 $ 47,532 $ 42,441 $ 46,618 $ 44,980
- -----------------------------------------------------------------------------------------------------------------------------
22
25
CONSOLIDATED STATEMENTS OF EARNINGS*
DOVER CORPORATION AND SUBSIDIARIES
(IN THOUSANDS EXCEPT PER SHARE FIGURES)*
Years ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------------------
Net sales $3,745,877 $3,085,276 $2,483,928
Cost of sales 2,564,344 2,137,477 1,733,256
------------------------------------------
Gross profit 1,181,533 947,799 750,672
Selling and administrative expenses 743,133 622,434 496,799
------------------------------------------
Operating profit 438,400 325,365 253,873
------------------------------------------
Other deductions (income):
Interest expense 40,113 36,461 22,338
Interest income (20,060) (18,619) (19,601)
All other, net 1,236 664 5,594
------------------------------------------
Total 21,289 18,506 8,331
------------------------------------------
Earnings before taxes on income 417,111 306,859 245,542
Federal and other taxes on income 138,800 104,486 87,288
------------------------------------------
Net earnings (per common share
1995 $2.45; 1994 $1.77; 1993 $1.39) $ 278,311 $ 202,373 $ 158,254
- --------------------------------------------------------------------------------------------
Earnings per share computed on the basis of the weighted average number of
common shares outstanding during the year (113,453 in 1995, 114,370 in 1994 and
114,220 in 1993).*
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS*
DOVER CORPORATION AND SUBSIDIARIES
(IN THOUSANDS EXCEPT PER SHARE FIGURES)
Years ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------------------
Balance at beginning of year $1,268,114 $1,121,817 $1,051,949
Net earnings 278,311 202,373 158,254
------------------------------------------
1,546,425 1,324,190 1,210,203
Deductions:
Distribution of contract electronics
manufacturing business - - 36,982
Stock split 56,793 - -
Treasury stock retired 273,900 - -
Common stock cash dividends of $.56 per
share ($.49 in 1994; $.45 in 1993) 63,545 56,076 51,404
------------------------------------------
Balance at end of year $1,152,187 $1,268,114 $1,121,817
- --------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
23
26
CONSOLIDATED BALANCE SHEETS
DOVER CORPORATION AND SUBSIDIARIES
(IN THOUSANDS EXCEPT PER SHARE FIGURES)
December 31, 1995 1994 1993
- --------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 121,698 $ 90,304 $ 63,685
Marketable securities, at market (1993
at cost, which approximates market) 27,054 54,583 32,592
Receivables (less allowance for doubtful
accounts of $22,325 in 1995, $14,326 in
1994 and $10,198 in 1993) 706,889 576,628 475,155
Inventories 479,327 364,604 294,319
Prepaid expenses and other current assets 49,391 47,020 37,889
------------------------------------------
Total current assets 1,384,359 1,133,139 903,640
------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land 26,565 26,546 24,134
Buildings 223,227 185,545 160,294
Machinery and equipment 725,335 600,084 530,209
------------------------------------------
975,127 812,175 714,637
Less accumulated depreciation (551,187) (469,490) (431,274)
------------------------------------------
Net property, plant and equipment 423,940 342,685 283,363
------------------------------------------
INTANGIBLE ASSETS, NET OF AMORTIZATION 811,182 564,420 535,136
OTHER INTANGIBLE ASSETS 10,258 10,258 10,258
OTHER ASSETS AND DEFERRED CHARGES 36,912 20,135 41,292
------------------------------------------
$2,666,651 $2,070,637 $1,773,689
------------------------------------------
- --------------------------------------------------------------------------------------------
LIABILITIES
CURRENT LIABILITIES:
Notes payable $ 417,478 $ 263,605 $ 174,980
Current maturities of long-term debt 2,502 455 312
Accounts payable 190,850 155,186 117,206
Accrued compensation and employee benefits 125,600 88,235 71,084
Accrued insurance 106,274 98,712 74,501
Other accrued expenses 209,455 147,585 116,915
Federal and other taxes on income 28,888 18,445 40,796
------------------------------------------
Total current liabilities 1,081,047 772,223 595,794
------------------------------------------
LONG-TERM DEBT 255,600 253,587 252,065
DEFERRED INCOME TAXES 46,328 2,545 20,409
OTHER DEFERRALS (PRINCIPALLY COMPENSATION) 55,970 46,423 35,419
COMMITMENTS AND CONTINGENCIES (NOTES 11 AND 12)
STOCKHOLDERS' EQUITY
CAPITAL STOCK:
Preferred, $100 par value per share.
Authorized 100,000 shares; issued none - - -
Common, $1 par value per share.
Authorized 200,000,000 shares; issued
116,562,662 shares (66,440,674 shares
in 1994 and 66,298,575 in 1993) 116,563 66,441 66,298
ADDITIONAL PAID-IN CAPITAL 6,424 17,676 12,531
CUMULATIVE TRANSLATION ADJUSTMENTS 2,268 (8,206) (12,761)
UNREALIZED HOLDING GAINS (LOSSES) 3,994 (550) -
RETAINED EARNINGS 1,152,187 1,268,114 1,121,817
------------------------------------------
1,281,436 1,343,475 1,187,885
Less common stock in treasury, at cost,
2,892,592 shares(9,710,570 shares in
1994 and 9,135,689 in 1993) 53,730 347,616 317,883
------------------------------------------
Net stockholders' equity 1,227,706 995,859 870,002
------------------------------------------
$2,666,651 $2,070,637 $1,773,689
- --------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
24
27
CONSOLIDATED STATEMENTS OF CASH FLOWS*
DOVER CORPORATION AND SUBSIDIARIES
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (IN THOUSANDS)*
Years Ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 278,311 $ 202,373 $ 158,254
------------------------------------------
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 107,836 95,789 76,969
Provision for losses on accounts receivable 9,616 898 5,546
Net increase (decrease) in LIFO reserve 4,647 (2,079) (7,714)
Deferred income taxes (13,688) (18,958) 505
Loss (gain) on sale of property and equipment (219) (3,510) 2,435
Decrease (increase) in deferred compensation 7,538 11,431 (367)
Acquisition inventory write-off 11,656 7,254 9,108
Gain on sale of business (1,900)
Other, net (18,026) (5,780) (3,064)
Changes in assets and liabilities (excluding
effects of acquisitions and dispositions):
Decrease (increase) in accounts receivable (84,212) (56,834) (52,913)
Decrease (increase) in inventories
excluding LIFO reserve (69,454) (29,763) 5,164
Decrease (increase) in prepaid expenses 54 (6,989) (2,150)
Decrease (increase) in other assets (13,150) 21,161 5,460
Increase in accounts payable 25,939 19,595 6,739
Increase in accrued expenses 53,845 57,118 35,915
Increase (decrease) in federal and other
taxes on income 4,779 16,680 (13,583)
------------------------------------------
Total adjustments 25,261 106,013 68,050
------------------------------------------
Net cash provided by operating
activities 303,572 308,386 226,304
------------------------------------------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Net sale (purchase) of marketable securities 31,524 (21,991) (3,012)
Proceeds from sale of property and equipment 16,556 6,733 4,108
Additions to property, plant and equipment
(includes rental equipment: $1,149 in 1995,
$455 in 1994 and $1,217 in 1993) (103,817) (84,928) (48,749)
Acquisitions (net of cash and cash equivalents:
$32,840 in 1995, $5,682 in 1994 and $2,034
in 1993) (297,427) (180,754) (318,968)
Proceeds from sale of businesses 5,000 - 1,557
Purchase of treasury stock (249 shares
in 1995, 1,150 shares in 1994 and 90 shares
in 1993) (7,601) (29,733) (2,329)
------------------------------------------
Net cash used in investing activities (355,765) (310,673) (367,393)
------------------------------------------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Increase (decrease) in notes payable 153,853 88,594 (45,741)
Reduction of long-term debt (266,447) (7,603) (15,700)
Proceeds from long-term debt 250,211 - 250,000
Proceeds from exercise of stock options 9,944 5,288 3,145
Proceeds from sale (repurchases) of
lease receivables 750 1,863 (6,450)
Cash dividends to stockholders (63,545) (56,075) (51,404)
------------------------------------------
Net cash from financing activities 84,766 32,067 133,850
------------------------------------------
Effect of exchange rates on cash (1,179) (3,161) (708)
------------------------------------------
Net increase (decrease) in cash and
cash equivalents 31,394 26,619 (7,947)
Cash and cash equivalents at beginning
of year 90,304 63,685 71,632
------------------------------------------
Cash and cash equivalents at end of year $ 121,698 $ 90,304 $ 63,685
------------------------------------------
SUPPLEMENTAL INFORMATION, CASH PAID DURING
THE PERIOD FOR:
Income taxes $ 147,439 $ 106,717 $ 101,574
Interest 32,669 40,076 17,057
- ---------------------------------------------------------------------------------------------
1994 & 1993 reclassified to conform to 1995 presentation.
See Notes to Consolidated Financial Statements.
25
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company is a multinational, diversified manufacturing corporation comprised
of over 50 different operating companies which manufacture a broad range of
specialized industrial products and sophisticated manufacturing equipment. The
Company groups its products and services by industry into five segments as set
forth in the tables shown on page 22. A description of the products manufactured
and services performed by each of the five segments is given on pages 10 through
20.
The accounting policies that affect the more significant elements of the
Company's financial statements are described briefly below:
A. CONSOLIDATION: The consolidated financial statements include the accounts of
the Company and its subsidiaries after elimination of all significant
intercompany accounts and transactions, and include the results of operations of
purchased businesses from the dates of acquisition.
In conformity with the Financial Accounting Standards Board Statement No. 52,
"Foreign Currency Translation," the accounts of foreign subsidiaries have been
translated into U.S. dollars as follows: assets and liabilities have been
translated at year-end rates, profit and loss accounts have been translated at
average rates for the year, and the difference has been reflected in the equity
section of the balance sheet as cumulative translation adjustments. An analysis
of the changes during 1995, 1994 and 1993 in the cumulative translation
adjustments shown on the balance sheets follows:
(in thousands) 1995 1994 1993
- ----------------------------------------------------------
Balance at beginning
of year $(8,206) $(12,761) $ (7,142)
Aggregate adjustment
for year $10,474 4,555 (5,619)
- ----------------------------------------------------------
Balance at end of year $ 2,268 $ (8,206) $(12,761)
- ----------------------------------------------------------
B. PERVASIVENESS OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
C. INVENTORIES: Approximately 48% of net inventory is stated at cost, determined
on the last-in, first-out (LIFO) basis, which is less than market value.
Inventory of foreign subsidiaries and inventory of some recently acquired
domestic companies is stated at the lower of cost, determined on the first-in,
first-out (FIFO) basis or market.
The remaining inventory principally represents the sum of actual production and
erection costs incurred to date on uncompleted elevator installation contracts
plus a percentage of estimated profit (where applicable) reduced by progress
billings. The net amounts so reflected in the balance sheets are not considered
material.
D. PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION: Property, plant and equipment
includes the cost of land, buildings, equipment and significant improvements of
existing plant and equipment. Expenditures for maintenance, repairs and minor
renewals are expensed as incurred.
When property or equipment is sold or otherwise disposed of, the related cost
and accumulated depreciation are removed from the respective accounts and gain
or loss realized on disposition is reflected in earnings.
Plant and equipment is generally depreciated based upon accelerated methods,
utilizing estimated useful property lives, for both accounting and tax purposes.
Depreciation expense in 1995 was $70,125,000 compared with $57,774,000 in 1994
and $50,907,000 in 1993.
E. INTANGIBLE ASSETS: Intangible assets subject to amortization include goodwill
purchased after 1970, and the cost of certain patents, drawings, trademarks,
work force, customer lists, service contracts and covenants not to compete.
Goodwill is being amortized on a straight-line basis over a period, generally,
of 40 years; the remaining amortization is based on estimated useful lives which
range from 6 to 20 years. The Company evaluates its amortization policies
regularly to determine whether later events and circumstances warrant revised
estimates of useful lives. The Company periodically evaluates the recoverability
of goodwill and makes adjustments when warranted.
Other intangible assets represent principally goodwill attributable to
businesses purchased prior to 1970. These intangibles are also regularly
evaluated and in the opinion of management have not diminished in value, and
accordingly have not been amortized.
Goodwill, net of amortization, aggregated $591,543,000 at December 31, 1995,
$465,518,000 at December 31, 1994, and $446,961,000 at December 31, 1993.
F. RECOGNITION OF INCOME AND EXPENSE ON ELEVATOR INSTALLATION CONTRACTS:
Substantially all of the Company's income from elevator installation contracts
is recorded on the percentage of completion method. Under the percentage of
completion method, contract revenue is recognized as costs are incurred using
estimated gross profit percentages.
G. INCOME TAXES: The provision for income taxes includes Federal, state, local
and foreign taxes.
Tax credits, primarily for research and experimentation, are recognized as a
reduction of the provision for income taxes in the year in which they are
available for tax purposes, and aggregated $1,215,000 from January 1 to June 30,
1995, (when the credit expired), $4,982,000 in 1994, and $1,514,000 in 1993.
Research and experimentation expenditures charged to earnings amounted to
$94,372,000 in 1995, $96,855,000 in 1994 and $60,430,000 in 1993.
Generally, no provision is made for U.S. income taxes on unremitted earnings of
foreign subsidiaries since any U.S. taxes payable would be offset by foreign tax
credits.
26
29
H. CASH FLOWS: For purposes of the statement of cash flows, the Company
considers all highly liquid investments, including highly liquid debt
instruments purchased with an original maturity of three months or less, to be
cash equivalents.
I. SELF INSURANCE: The Company is generally self-insured for losses and
liabilities related primarily to workers' compensation, and health and welfare
claims resulting from certain events and comprehensive general, product and
vehicle liability. Losses are accrued based upon the Company's estimates of the
aggregate liability for claims incurred using certain actuarial assumptions
followed in the insurance industry and based on Company experience.
J. CHANGES IN ACCOUNTING PRINCIPLES: Effective January 1, 1994, the Company
adopted the Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." As applicable here the
statement requires that investments in such securities be designated either as
trading, or available-for-sale. Trading securities are reported at fair value
with unrealized gains and losses recognized in earnings. Available-for-sale
securities are also reported at fair value but unrealized gains and losses are
shown in the caption "unrealized holding gains (losses)" included in
stockholders' equity.
The Company did not hold any trading securities at December 31, 1995. The net
realized gains for the years ended December 31, 1995, 1994 and 1993 were
$2,140,000, $4,047,000, and $1,523,000 respectively. As of December 31, 1995,
available-for-sale securities totaled $27,054,000 with a related gross
unrealized gain of $3,994,000 and consisted of investments in certain mutual
funds which invest primarily in equity securities.
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," which is effective for the fiscal years beginning after
December 15, 1995. The Company believes that SFAS No. 121 will not have a
material impact on the Company's financial position or results of operations.
During October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The disclosure requirements under this Standard will affect the
Company beginning in 1996 for all of its stock options granted after December
15, 1994. The Statement allows alternative accounting methods and the Company
has chosen to account for stock options as in the past under Accounting
Principles Board Opinion No. 25. In addition, the Company will disclose certain
pro forma information required by the Statement beginning with the Company's
next annual report.
2. ACQUISITIONS AND DISPOSITIONS:
1993 -- On May 21 the Company spun-off its contract electronics manufacturing
business to its stockholders in a tax free distribution of stock of DOVatron
International, Inc., formerly Dover Electronics Manufacturing. The Company's
stockholders received one share of DOVatron for every ten shares of Company
stock owned on the record date, also May 21. No gain or loss was recognized from
the distribution and the net assets of DOVatron were eliminated from the
Company's retained earnings.
Effective January 1 the Company acquired all of the capital stock of Lift
Service and Montage, GmbH, a regional elevator company headquartered in
Saarbrucken, Germany. On April 1 the Company acquired certain assets of Atlanta
Elevator Company, a regional elevator service and repair company. On April 14
the Company acquired from Brown & Sharpe Manufacturing Company (U.S.) and Brown
& Sharpe Ltd. (U.K.), all assets relating to their screw machine repair
business. Also on April 14 the Company acquired the assets of Plymslade Screw
Machine Services, Ltd., a U.K. manufacturer and distributor of Brown & Sharpe
repair parts.
On July 1 the Company acquired all of the capital stock of The Heil Co., the
United States' largest manufacturer of refuse trucks, trailerized tanks and
construction dump bodies. On August 23 the Company acquired 100% of the capital
stock of BTD Holdings, Inc. (Belvac). Belvac is a leading manufacturer of
quality machinery used in the production of two piece beverage cans, principally
can trimming and necking machines. On August 31 the Company acquired the assets
of Richland, Inc., a regional steel supplier as well as a provider of custom
steel fabrication and plant maintenance service. Effective September 1 the
Company acquired the assets of Viking Elevator Company, Inc., of Los Angeles
County, a regional elevator service and repair company. On September 1 the
Company acquired the assets of J&L Tank, Inc., a tank trailer manufacturer. On
October 12 the Company acquired certain assets of Dynapert (a subsidiary of
Emhart Industries, Inc.) and its subsidiaries; these assets relate to
through-hole mounting for use in assembling electronic circuit boards. As of
October 22 the Company acquired the stock of Thermal Equipment Corporation, and
related corporations. Thermal is the leading designer and producer of autoclaves
used in curing composite and bonded materials in high-stress, demanding
applications. On November 3 the Company acquired the stock of Phoenix
Refrigeration Systems, Inc., a producer of commercial refrigeration systems for
retail grocery stores and food markets, and its affiliate, Electrical
Distribution Systems, Inc., a designer and manufacturer of commercial electrical
distribution systems. On November 16 the Company acquired the oscillator product
line of the E G & G Frequency Products Division for the Company's Oscillatek
Division. On December 3 the Company acquired certain assets of Global Equipment
Co.
The aggregate cost of these 1993 acquisitions, including all direct costs was
approximately $321,002,000 cash, of which $171,047,000 represents goodwill and
is being amortized over a forty-year period.
1994 -- On January 3 the Company acquired the assets of Midland Manufacturing
Corp., the leading manufacturer of valves, gauges, fittings and other fluid
handling and control devices for the rail tank car industry. Effective March 1
the Company acquired the assets of Rantom, Inc., a Michigan based manufacturer
of hydraulic and pneumatic cylinders and nitrogen air springs. On March 24 the
Company acquired the stock of HTT Heat Transfer Technologies S.A., a European
based designer and manufacturer of brazed plate heat exchangers and plate and
frame gasketed heat exchangers. On March 30 the Company acquired the assets of
Technopack Ewald Hagenorn GmbH & Co., KG (Technopack) located near Hamburg,
Germany. Technopack, a former licensee of the Company's U.S. subsidiary, Tipper
Tie, is a manufacturer of clipping equipment and clip closures operating
primarily in the European market. On May 9 the Company acquired
27
30
the stock of Reheat AB, a Swedish manufacturer of heat transfer plates for plate
heat exchangers. On May 24 the Company acquired the assets of Koolrad Design &
Manufacturing Company of Ontario, Canada. Koolrad is a major manufacturer of
plate-type radiators for Canadian transformer manufacturers. On June 10 the
Company acquired the stock of Tarby, Inc., a progressing cavity pump
manufacturer. On June 29 the Company acquired the assets of Transmission
Networks International (TNI), of Knightdale, North Carolina. TNI is a leading
manufacturer of specialty transformers, primarily with ferrite cores. On July 29
the Company acquired certain assets of Midstate Elevator Company, a New York
regional elevator and escalator installation, service and repair company. On
August 5 the Company acquired the assets of Hill Refrigeration, Inc., a
manufacturer of refrigeration cases and refrigeration systems for commercial
use. On September 6 a subsidiary of the Company purchased certain assets of its
long time supplier, Tie Net International. Tie Net manufactures specialty
netting products used primarily in the meat sector of the food industry.
The aggregate cost of these 1994 acquisitions, including all direct costs was
approximately $186,436,000 of which $91,087,000 represents goodwill and is being
amortized over a forty-year period. The $186,436,000 purchase price accounting
cost can be reconciled to the $187,704,000 "economic cost" amount shown
elsewhere in this report by considering long-term debt acquired, cash acquired
on date of acquisition and reorganization costs assumed.
1995 -- On January 2 the Company acquired all of the capital stock of Knappco
Corporation. Knappco located in Kansas City, Missouri, manufactures
manhole/access covers and valves for petroleum, dry-bulk and chemical
transportation and storage. On March 6 the Company acquired certain assets of
Margaux Inc. Margaux, based in Conyers, Georgia, is a manufacturer of commercial
refrigeration systems for supermarkets. On April 11 the Company acquired all of
the capital stock of Hasstech, Inc. Hasstech, located in San Diego, California,
is a manufacturer of Stage II vapor recovery systems used at service stations.
On May 22 the Company acquired all of the capital stock of Mark Andy, Inc. Mark
Andy, located in St. Louis, Missouri, designs and manufactures printing presses
utilizing narrow web flexographic covering technology for the small container
market. On June 9 the Company sold 100% of the capital stock of its American
Metal Ware subsidiary. On June 30 the Company acquired certain assets of the
Frequency Control Products ("FCP") Division of AT&T, North Andover,
Massachusetts. FCP manufactures several high tech, high volume oscillators
utilizing unique technology. On September 29 the Company acquired 88% of the
capital stock of Imaje, S.A. ("Imaje") and has since then increased this
ownership to almost 100%. Imaje, based in Valance, France, is one of the world's
three largest manufacturers of industrial continuous ink jet printers and
specialized inks used for coding and marking products and consumables. On
October 3 the Company acquired all of the stock of Trailmaster Corporation,
located in Ft. Worth, Texas. Trailmaster manufactures aluminum and stainless
steel tank trailers, aircraft refuelers and hydraulic head disking machines. On
October 4 the Company acquired all of the stock of Hammond Engineering, Limited.
Hammond, located in Enfield, U.K., manufactures rotary vane and screw
compressors and hydraulic control units for the trucking industry. On November 8
the Company acquired all of the stock of GFS Manufacturing Co., Inc. GFS,
located in Dover New Hampshire, manufactures custom transformers for the
industrial control and computer control industries.
The aggregate cost of these 1995 acquisitions, including all direct costs was
approximately $330,267,000 of which $224,414,000 represents goodwill and certain
other long lived intangible assets which are primarily being amortized over a
forty-year period. The $330,267,000 purchase price accounting cost can be
reconciled to the $323,292,000 "economic cost" amount shown elsewhere in this
report by considering long-term debt acquired and cash acquired on date of
acquisition.
All of the above acquisitions have been accounted for by the purchase method of
accounting. Accordingly, the accounts of the acquired companies, after
adjustment to reflect fair market values assigned to assets and liabilities have
been included in the consolidated financial statements from their respective
dates of acquisition.
The following table summarizes, on a pro-forma (unaudited) basis, the estimated
results of operations as if the 1995 acquisition of Imaje (a material business
combination) had taken place at the beginning of 1994, with appropriate
adjustments for interest, depreciation, inventory charges, amortization and
income taxes (in thousands except for per share figures).
(in thousands) 1995 1994
- ------------------------------------------------------------
Net sales $3,870,572 $3,245,848
Net earnings 286,003 194,034
Net earnings per common $ 2.52 $ 1.70
------------------------
3. ACCOUNTS RECEIVABLE:
Accounts receivable include retainage which has been billed, but which is not
due pursuant to retainage provisions in construction contracts until completion
of performance and acceptance by the customer. This retainage aggregated
$33,894,000 at December 31, 1995, $38,254,000 at December 31, 1994, and
$41,969,000 at December 31, 1993. Substantially all retained balances are
collectible within one year.
4. INVENTORIES:
Inventories, by components, are summarized as follows:
- ------------------------------------------------------------------------------------------
(in thousands) at December 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------
Raw materials $153,094 $116,829 $ 92,341
Work in process 221,371 167,251 136,031
Finished goods 150,677 121,828 109,329
-----------------------------------------------
Total 525,142 405,908 337,701
Less LIFO reserve 45,815 41,304 43,382
-----------------------------------------------
$479,327 $364,604 $294,319
- ------------------------------------------------------------------------------------------
During each of the years in the three year period ended December 31, 1995, some
inventory quantities were reduced. This reduction resulted in a liquidation of
certain LIFO inventory quantities carried at lower costs prevailing in prior
years as compared with costs at December 31 of each year. The effect of these
liquidation's increased net earnings by 1 cent per share in 1995 and 1994, and
by 1.5 cents per share in 1993.
28
31
5. BANK LINES OF CREDIT:
The Company has open bank lines of credit and other bank credit agreements
totaling $504,000,000 which support its commercial paper. These lines are in
amounts requested by the Company and not the maximum that could be obtained.
Under the borrowing arrangements, the Company has generally agreed to either
maintain average collected bank compensating balances or pay fees, the total of
which is not material.
6. DEBT:
A summary of long-term debt follows:
(in thousands) 1995 1994 1993
- --------------------------------------------------------------------------
Commercial paper - $250,000 $250,000
6.45% Notes due Nov. 15, 2005
(less unamortized discount
of $508) with an effective
interest rate of 6.51% $249,492 - -
Canadian mortgage
note bearing interest at
11.25%, matured in 1993 - - 672
Other 8,610 4,042 1,705
--------------------------------------
Total long-term debt 258,102 254,042 252,377
Less current installments 2,502 455 312
--------------------------------------
Long-term debt excluding
current installments $255,600 $253,587 $252,065
- --------------------------------------------------------------------------
Annual repayments of long-term debt in the four years following 1996 are
scheduled as follows: 1997-$4,412,000, 1998-$323,000, 1999-$210,000, and
2000-$203,000.
On December 10, 1993 the Company signed a three year $250 million credit
agreement with a group of 19 banks. Given the Company's ability and intent to
maintain, on a long-term basis, $250 million principal amount of its commercial
paper borrowings, that amount had been classified as long-term debt in the
consolidated financial statements at December 31, 1993 and 1994. The credit
facility remained unused and was terminated in November 1995.
The notes payable shown on the balance sheets for 1995, 1994 and 1993 represent
principally commercial paper. The weighted average interest rate at December 31,
1995 was 5.8%.
7. CAPITAL STOCK, ADDITIONAL PAID-IN CAPITAL AND TREASURY STOCK:
The Board of Directors has been authorized to issue preferred stock, in one or
more series up to 100,000 shares, with such designations, preferences and
relative rights and limitations as may be stated in the resolution relating to
each issue.
On September 15, 1995 the Company effected a 2 for 1 common stock split in the
form of a stock dividend, resulting in the issuance of 58,058,000 additional
shares of common stock and the transfer of $1,546,000 from additional paid-in
capital and $56,793,000 from retained earnings. All references to per share
amounts throughout this report have been restated to reflect this stock split.
Prior to the stock split, 8,389,000 treasury shares were retired resulting in a
charge to paid-in capital of $19,197,000 and a charge to retained earnings of
$273,900,000.
Changes in common stock, additional paid-in capital and treasury stock are
summarized below:
Common Stock Additional Treasury Stock
(in thousands) $1 Par Value Paid-in Capital Shares Amount
- -------------------------------------------------------------------------------------------------
Balance at
January 1, 1993 $ 66,176 $ 9,508 9,091 $ 315,554
Stock options exercised 122 3,023 20* 1,087
Treasury stock purchased - - 25 1,242
---------------------------------------------------------------
Balance at
December 31, 1993 $ 66,298 $ 12,531 9,136 $ 317,883
Stock options exercised 143 5,145 2* 133
Treasury stock purchased - - 573 29,600
---------------------------------------------------------------
Balance at
December 31, 1994 $ 66,441 $ 17,676 9,711 $ 347,616
Stock options exercised 453 9,491 104* 3,768
Treasury stock purchased - - 145 3,833
---------------------------------------------------------------
Treasury stock retired (8,389) (19,197) (8,389) (301,487)
---------------------------------------------------------------
Stock split 58,058 (1,546) 1,322 -
---------------------------------------------------------------
Balance at
December 31, 1995 $116,563 $ 6,424 2,893 $ 53,730
- -------------------------------------------------------------------------------------------------
*Shares received as consideration for exercise price.*
During 1987 the Board of Directors adopted a Stockholders' Rights Plan that is
designed to protect stockholders from attempts to acquire control of the Company
at an inadequate price. In accordance with the Board's resolution, a dividend
distribution of one Preferred Stock Purchase Right for each outstanding share of
common stock was made on November 23, 1987. Under certain circumstances,
including the acquisition of 20 percent of the Company's stock, all rights
holders except the acquiror may purchase the Company's common stock at a 50
percent discount. If the Company is acquired in a merger after the acquisition
of 20 percent of the Company's common stock, rights holders may purchase the
acquiror's shares at a similar discount.
8. STOCK OPTION AND PERFORMANCE INCENTIVE PROGRAM (ADJUSTED FOR 2 FOR 1 STOCK
SPLIT):
On April 24, 1984, the stockholders approved an incentive stock option plan and
cash performance program under which a maximum aggregate of 4,800,000
(unadjusted) shares was reserved for grant to key personnel until January 30,
1994. This plan expired on January 30, 1995, but certain previous grants remain
outstanding at December 31, 1995. On April 28, 1987, the stockholders approved
an amendment to permit the grant or exercise of nonqualified stock options under
this plan. The stockholders also approved a cash bonus covering a portion of the
option holder's income tax liability to compensate any optionee who amends his
option changing its exercise from qualified to nonqualified. A nonqualified
exercise reduces the Company's after tax cost of the program. During 1995, cash
bonuses in connection with nonqualified exercises aggregated $620,000 ($302,000
in 1994 and $1,562,000 in 1993).
29
32
On April 25, 1995, the stockholders approved an incentive stock option plan and
a cash performance program to replace the expired 1984 plan and program. Under
the new plan a maximum aggregate of 10 million shares was reserved for grant to
key personnel until January 30, 2005.
The option price may not be less than the fair market value of the stock at the
time the options are granted. The period during which these options are
exercisable is fixed by the Company's Compensation Committee at the time of
grant but is not to exceed ten years.
Transactions in stock options under this plan are summarized as follows:
Shares Under Option Price Range
- -----------------------------------------------------------------------
Outstanding at Jan. 1, 1993 2,372,620 $ 7.50-$19.36
Granted 493,940 $ 22.85
Exercised (244,938) $ 7.50-$17.36
Spin-off adjustment 67,196 -
Canceled (141,440) $ 7.50-$22.85
---------------------------------
Outstanding at Dec. 31, 1993 2,547,378 $ 8.29-$22.85
---------------------------------
Exercisable at Dec. 31, 1993
through Feb. 28, 2000 1,345,316 $ 8.29-$22.85
---------------------------------
Outstanding at Jan. 1, 1994 2,547,378 $ 8.29-$22.85
Granted 391,610 $ 29.75
Exercised (284,200) $ 8.29-$19.36
Canceled (96,458) $13.19-$29.75
---------------------------------
Outstanding at Dec. 31, 1994 2,558,330 $ 9.14-$29.75
---------------------------------
Exercisable at Dec. 31, 1994
through Feb. 28, 2001 1,444,578 $ 9.14-$22.85
---------------------------------
Outstanding at Jan. 1, 1995 2,558,330 $ 9.14-$29.75
Granted 638,672 $ 28.44
Exercised (453,066) $ 9.56-$19.36
Canceled (63,687) $ 9.56-$29.75
---------------------------------
Outstanding at Dec. 31, 1995 2,680,249 $ 9.56-$29.75
- -----------------------------------------------------------------------
Exercisable at December 31, 1995
through:
January 30, 1996 26,989 shares @ $ 9.56-$22.85
February 28, 1997 99,702 shares @ $13.19-$22.85
March 3, 1998 181,635 shares @ $15.23-$22.85
March 28, 1999 212,275 shares @ $14.87-$22.85
February 28, 2000 244,333 shares @ $17.36-$22.85
February 28, 2001 271,874 shares @ $19.25-$22.85
March 6, 2002 344,528 shares @ $19.36-$22.85*
- -----------------------------------------------------------------------
9. EMPLOYEE BENEFIT PLANS:
The Company has many defined benefit and defined contribution pension plans
covering substantially all employees of the Company and its domestic and foreign
subsidiaries. Plan benefits are generally based on years of service and employee
compensation. The Company's funding policy is consistent with the funding
requirements of ERISA and applicable foreign law.
The financial statements and related disclosures reflect Statement of Financial
Accounting Standard No. 87 "Employers' Accounting for Pensions", for U.S.
defined benefit pension plans; foreign defined benefit pension plans are not
considered material. Pension cost and related disclosures for U.S. funded
defined benefit plans for 1995, 1994 and 1993 include the following components:
(in thousands) 1995 1994 1993
- -------------------------------------------------------------------------
Actual return on plan assets $ 55,107 $ 5,098 $ 26,898
Less deferred (gain) loss (34,860) 14,866 (7,914)
------------------------------------
Net return 20,247 19,964 18,984
Net amortization 69 1,612 1,387
Deduct:
Benefits earned during year (7,920) (7,872) (6,251)
Interest accrued on
projected benefit obligation (12,847) (12,302) (11,978)
------------------------------------
Net pension (expense) credit $ (451) $ 1,402 $ 2,142
- -------------------------------------------------------------------------
The funded status and resulting prepaid pension cost of U.S. defined benefit
plans for the three years ended December 31, 1995, were as follows:
- ---------------------------------------------------------------------------------------
Funded Plans
- ---------------------------------------------------------------------------------------
(in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------
Plan assets at fair value $248,822 $203,549 $214,542
------------------------------------
Actuarial present value of benefit obligation:
Vested 160,938 146,322 137,643
Nonvested 10,166 8,590 15,791
------------------------------------
Accumulated benefit obligation 171,104 154,912 153,434
Effect of projected future salary increases 27,422 30,104 28,239
------------------------------------
Projected benefit obligation 198,526 185,016 181,673
------------------------------------
Plan assets in excess of projected benefit
obligation 50,296 18,533 32,869
Unrecognized net (gain) loss (12,861) 20,489 4,199
Unrecognized FAS 87 transition (gain) (17,986) (19,665) (21,345)
Unrecognized prior service cost 4,695 3,749 5,298
------------------------------------
Prepaid pension cost at December 31 $ 24,144 $ 23,106 $ 21,021
- ---------------------------------------------------------------------------------------
The assumptions used in determining the above were as follows: a weighted
average discount rate of 7% (7% for 1994 and 7.1% for 1993), an average wage
increase of 5% and an expected long-term rate of return on plan assets of 10%.
Approximately 69% (68% in 1994 and 72% in 1993) of defined benefit plan assets
were invested in equity securities with the remainder in fixed income and short
term investments.
30
33
The Company also provides, through nonqualified plans, supplemental pension
payments in excess of qualified plan limits imposed by Federal tax law. These
plans cover officers and certain key employees and serve to restore the combined
pension amount to original benefit levels. The plans are unfunded apart from the
general assets of the Company. The pension benefit obligation and pension
expense under these plans follow:
(in thousands) 1995 1994 1993
- -----------------------------------------------------------------------
Pension benefit obligation $12,143 $13,902 $11,986
Pension expense 2,404 3,599 1,679
- -----------------------------------------------------------------------
For measurement purposes a discount rate of 7% was used together with an average
wage increase of 5%.
Pension cost for all plans was $36,719,000 for 1995, $33,474,000 for 1994 and
$25,546,000 for 1993.
In addition to the pension plans described above, certain of the Company's
subsidiaries sponsor twelve separate health care plans for retirees which
provide medical coverage and/or life insurance. None of these plans are funded.
The financial statements and related disclosures reflect Statement of Financial
Accounting Standards No. 106 "Employers Accounting for Postretirement Benefits
Other Than Pensions," for these plans.
The following table details the amounts recognized in the Company's Consolidated
Balance Sheet at December 31 of each year:
(in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $16,055 $16,637 $17,942
Fully eligible active plan participants 11,068 9,990 10,822
Unamortized gain (loss) 957 1,133 (1,513)
---------------------------------
Accrued postretirement benefit cost included in
accrued liabilities $28,080 $27,760 $27,251
- ---------------------------------------------------------------------------------------
Net period postretirement benefit cost for 1995, 1994 and 1993 included the
following components:
(in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------
Service cost $ 483 $ 504 $ 426
Interest cost 1,773 1,907 1,545
Gain on settlement - (410) (285)
Amortization gain (253) (72) (35)
---------------------------------
Net periodic postretirement benefit cost $ 2,003 $1,929 $ 1,651
- ---------------------------------------------------------------------------------------
For measurement purposes a discount rate of 7% was used for the plan liability
and rates from 2% to 15% annual rate of increase in the per capita cost covered
benefit (i.e., health care cost trend rates) was assumed for 1996; the rates
were assumed to decrease gradually to 5% by the year 2004 and remain at that
level thereafter. The health care cost trend rate assumption has a significant
effect on the amount reported. For example, increasing the assumed health care
cost trend rates by one percentage point in each year would increase the
accumulated postretirement benefit obligation as of December 31, 1995 by
$1,989,000 and the net periodic postretirement benefit cost for 1995 by
approximately $528,000.
10. TAXES ON INCOME:
Total income taxes for the years ended December 31, 1995, 1994 and 1993 were
allocated as follows:
(in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------
Income from continuing
operations $138,800 $104,486 $87,288
Stockholders' equity, for
compensation expense for
tax purposes in excess of
amounts recognized for
financial reporting purposes (3,285) (1,491) (1,849)
----------------------------------
$135,515 $102,995 $85,439
- ---------------------------------------------------------------------------------------
Income taxes have been based on the following components of earnings before
taxes on income.
(in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------
Domestic $374,911 $267,427 $220,968
Foreign 42,200 39,432 24,574
----------------------------------
$417,111 $306,859 $245,542*
- ---------------------------------------------------------------------------------------
Income tax expense (benefit) is made up of the following components:
(in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------
Current:
U.S. Federal $117,911 $ 98,895 $74,651
State and local 10,331 7,259 4,400
Foreign 24,246 17,290 7,732
----------------------------------
Total current 152,488 123,444 86,783
----------------------------------
Deferred:
U.S. Federal (1,609) (15,922) (1,643)
State and local (2,671) (182) 1,700
Foreign (9,408) (2,854) 448
----------------------------------
Total deferred (13,688) (18,958) 505
----------------------------------
Total expense $138,800 $104,486 $87,288
----------------------------------
Effective rate 33.3% 34.1% 35.5%
- ---------------------------------------------------------------------------------------
31
34
The reasons for the difference between the effective rate and the U.S. Federal
income statutory rate of 35% follow:
(in thousands) 1995 1994 1993
- ----------------------------------------------------------------
U.S. Federal income tax rate 35.0% 35.0% 35.0%
State and local taxes, net of
Federal income tax benefit 1.2 1.5 1.6
R&E tax credits (.3) (1.6) (.6)
FSC benefit (3.4) (2.0) (1.9)
Foreign tax credit (.4) - -
Non tax deductible items 2.4 1.2 2.9
Miscellaneous items (1.2) - (1.5)
----------------------------
33.3% 34.1% 35.5%*
- ----------------------------------------------------------------
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31 of each
year are:
(in thousands) 1995 1994 1993
- -----------------------------------------------------------------------------
DEFERRED TAX ASSETS:
Accrued insurance $ 27,636 $ 25,248 $ 17,994
Accrued compensation, principally
postretirement benefits,
and compensated absences 23,487 21,226 17,768
Accrued expenses, principally
for disposition of businesses,
interest and warranty 17,958 16,519 13,087
Inventories, principally due to
reserves for financial reporting
purposes and capitalization
for tax purposes 9,310 6,365 5,505
Accounts receivable, principally
due to allowance for
doubtful accounts 6,563 4,609 3,439
Other 2,234 2,072 6,505
------------------------------------
Total deferred tax assets 87,188 76,039 64,298
------------------------------------
DEFERRED TAX LIABILITIES:
Accounts receivable, principally due
to retainage and accrual
acceptance on elevator contracts (42,813) (40,330) (39,520)
Plant and equipment, principally due
to differences in depreciation (19,638) (18,823) (14,554)
Intangible assets, principally due
to different tax and financial
reporting bases (48,433) (2,720) (25,040)
Prepaid expenses, principally due
to overfunded pension plans (6,542) (5,936) (7,103)
Other (6,480) (4,288) (5,217)
------------------------------------
Total gross deferred liabilities (123,906) (72,097) (91,434)
------------------------------------
Net deferred tax (liability) asset (36,718) 3,942 (27,136)
------------------------------------
Net current deferred
(liability) asset 9,610 6,487 (6,727)
------------------------------------
Net non-current deferred
tax liability $(46,328) $ (2,545) $(20,409)
- -----------------------------------------------------------------------------
11. RENTAL AND LEASE INFORMATION:
The Company leases certain facilities and equipment under operating leases, many
of which contain renewal options. Total rental expense, net of insignificant
sublease rental income, on all operating leases was $27,353,000, $25,916,000 and
$24,923,000 for 1995, 1994 and 1993, respectively. Contingent rentals under the
operating leases were not significant.
Minimum future rental commitments under operating leases having noncancelable
lease terms in excess of one year aggregate $82 million as of December 31, 1995
and are payable as follows (in millions): 1996 - $22.4; 1997 - $17.4; 1998 -
$11.2; 1999 - $8.1; 2000 - $5.7; and after 2000 - $17.2.
12. CONTINGENCIES:
Several of the Company's subsidiaries are involved in legal proceedings relating
to the cleanup of waste disposal sites identified under Federal and State
statutes which provide for the allocation of such costs among "potentially
responsible parties." In each instance the extent of the Company's liability
appears to be small in relation to the total projected expenditures and the
number of other "potentially responsible parties" involved and is anticipated to
be immaterial to the Company. In addition, several of the Company's subsidiaries
are involved in ongoing remedial activities at certain plant sites, in
cooperation with regulatory agencies, and appropriate reserves have been
established.
As previously reported, the Internal Revenue Service (IRS) proposed significant
additional taxes plus interest as a result of its examination of the Company's
Federal income tax returns for the eight years ended December 31, 1989. The
underlying issues related primarily to allocations of purchase price of
acquisitions made during those years, plus acquisitions made in 1990 and 1991.
On January 13, 1995, the Company reached agreement with the Appeals Office of
IRS settling substantially all issues relating to such acquisitions. Under this
agreement, allocations to tangible assets have been accepted while allocations
to intangibles have been adjusted in accordance with the Intangible Settlement
Initiative introduced by the IRS National Office in March 1994. The Settlement
was recorded as of December 31, 1994, as a result of which excess tax reserves
in the amount of $26 million were released with a corresponding reduction in
goodwill.
During 1994, the IRS completed its examination of the Company's 1990 and 1991
Federal income tax returns and has proposed additional taxes aggregating $36.2
million plus interest which action is being vigorously contested by the Company.
If ultimately the Company must pay certain of these additional taxes, such taxes
will be recovered in future years.
During 1995, the IRS began its examination of the Company's 1992 and 1993
Federal income tax returns.
The Company and certain of its subsidiaries are also parties to a number of
other legal proceedings incidental to their businesses. Management and legal
counsel periodically review the probable outcome of such proceedings, the costs
and expenses reasonably expected to be incurred, the availability and extent of
insurance coverage and established reserves. While it is not possible at this
time to predict the outcome of these legal actions, in
32
35
the opinion of management, based on these reviews, the disposition of the
lawsuits and the other matters mentioned above will not have a material effect
on financial position.
Certain lease receivables entered into by the Company's finance divisions were
sold to a third party during 1993, 1994 and 1995, with limited recourse. The
leases cover machinery and equipment manufactured by the Company and involve
thousands of customers. There is no significant concentration of credit risk.
Generally, the lease period does not exceed five years. The leases are
collateralized by security deposits and Uniform Commercial Code filings;
equipment is subject to repossession in the event of lease default. The
outstanding balance on such receivables at December 31, 1995 was $42 million
($41 million in 1994 and $39 million in 1993) of which the Company has a
contingent liability of $7.6 million should all of the receivables become
uncollectible.
13. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, requires all entities to
disclose the fair value of certain financial instruments in their financial
statements. Accordingly, the Company reports that the carrying amount of cash
and cash equivalents, trade receivables, accounts payable, notes payable and
accrued expenses approximates fair value due to the short maturity of these
instruments, and that the carrying amount of marketable securities is stated at
fair value. In addition, the Company believes the recently issued long-term debt
approximates fair value.
14. OPERATING RETURN ON OPERATING INVESTMENT (UNAUDITED):
When companies are acquired, Dover's purchase price generally exceeds the book
value of the acquired company. Increases in the book value of the assets,
including goodwill, arising in such instances, are assigned to the business
segments in which acquired companies are included. Similarly, the amortization
of these increased asset values is charged against the income of that business
segment.
These asset values and charges to income are also reflected in the computation
of Dover's net income and return on equity. However, to monitor the progress of
business operations on a continuous basis and in relation to industry norms,
Dover does not include these asset values or cost in the calculation of
"Operating Return on Investment" as shown in the unaudited charts on pages 4, 6,
9, 12, 15, and 18. Additionally, the "Investment" figure reflected in these
charts is reduced by applicable current liabilities for accounts payable and
accrued expenses and for certain deferred taxes.
15. INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT GEOGRAPHIC AREAS
(in thousands) For the Years Ended December 31, 1995 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers:
United States $3,010,667 $2,559,897 $2,093,354 $1,884,051 $1,805,133 $1,812,612
Foreign 735,211 525,379 390,574 387,529 390,653 397,733
Transfers between geographic areas:
United States 199,818 129,690 82,772 75,226 85,514 98,929
Foreign 50,197 26,603 20,983 19,147 10,448 14,258
Eliminations (250,016) (156,293) (103,755) (94,373) (95,962) (113,187)
--------------------------------------------------------------------------------
Consolidated sales $3,745,877 $3,085,276 $2,483,928 $2,271,580 $2,195,786 $2,210,345
--------------------------------------------------------------------------------
Operating profit:
United States $ 412,366 $ 306,881 $ 237,847 $ 187,118 $ 170,265 $ 223,350
Foreign 54,359 47,674 29,946 35,677 51,211 52,370
--------------------------------------------------------------------------------
Consolidated total
(excluding corporate) $ 466,725 $ 354,555 $ 267,793 $ 222,795 $ 221,476 $ 275,720
--------------------------------------------------------------------------------
Identifiable assets at December 31:
United States $1,884,644 $1,603,191 $1,454,198 $1,111,017 $1,017,003 $1,033,969
Foreign 705,621 375,057 265,260 256,539 267,565 242,702
--------------------------------------------------------------------------------
Consolidated total
(excluding corporate) $2,590,265 $1,987,248 $1,719,458 $1,367,556 $1,284,568 $1,276,671
--------------------------------------------------------------------------------
Export sales as a percentage
of United States sales 26% 22% 20% 22% 22% 20%
- ----------------------------------------------------------------------------------------------------------------------------------
33
36
To the Board of Directors and Stockholders of Dover Corporation:
We have audited the accompanying consolidated balance sheet of Dover Corporation
and subsidiaries as of December 31, 1995 and the related consolidated statements
of earnings, retained earnings and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on those financial statements based on
our audit. The consolidated financial statements of Dover Corporation and
subsidiaries as of December 31, 1994 and 1993 were audited by other auditors
whose report dated February 22, 1995 expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the 1995 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Dover
Corporation and subsidiaries at December 31, 1995, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
1301 Avenue of the Americas /s/ COOPERS & LYBRAND L.L.P.
New York, N.Y. 10019-6013 ----------------------------
February 20, 1996 COOPERS & LYBRAND L.L.P.
34
37
QUARTERLY DATA*
DOVER CORPORATION AND SUBSIDIARIES
(UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE FIGURES)
Quarter Net Sales Gross Profit Net Earnings Per Share
- -------------------------------------------------------------------------------------------------------
1995 FIRST $ 854,129 $270,036 $ 59,799 $ .53
SECOND 948,164 303,036 78,892 .69
THIRD 934,543 289,619 71,148 .63
FOURTH 1,009,041 318,842 68,472 .60
-----------------------------------------------------------------------
$3,745,877 $1,181,533 $278,311 $2.45
- -------------------------------------------------------------------------------------------------------
1994 First $ 680,727 $ 210,932 $ 42,573 $ .37
Second 761,224 237,896 52,440 .46
Third 804,460 245,228 51,870 .45
Fourth 838,865 253,743 55,490 .49
-----------------------------------------------------------------------
$3,085,276 $ 947,799 $202,373 $1.77
- -------------------------------------------------------------------------------------------------------
COMMON STOCK CASH DIVIDENDS AND MARKET PRICES*
DOVER CORPORATION AND SUBSIDIARIES
Market Prices*
------------------ Dividends
Quarter High Low Per Share
- ---------------------------------------------------------------------------------------
1995 FIRST $32.82 $25.82 $.13
SECOND 36.57 31.50 .13
THIRD 41.69 36.00 .15
FOURTH 40.75 35.13 .15
----------------------------------------
$.56
- ---------------------------------------------------------------------------------------
1994 First $33.44 $28.82 $.11-1/2
Second 31.44 25.44 .11-1/2
Third 30.32 27.32 .13
Fourth 28.69 24.88 .13
----------------------------------------
$.49
- ---------------------------------------------------------------------------------------
* As reported in the Wall Street Journal.
Adjusted to give retroactive effect to the 2 for 1 stock split in 1995.
35
38
LIQUIDITY AND CAPITAL RESOURCES:
The Company continues to be in excellent financial condition. However, the
record amount spent during 1995 on our acquisition program, $323 million,
resulted in decreased liquidity measures.
The Company's current ratio (current assets divided by current liabilities)
decreased to 1.28 at December 31, 1995, compared with 1.47 at December 31, 1994,
and 1.52 at December 31, 1993. The quick ratio (current assets net of
inventories, divided by current liabilities) also decreased, to .84 at December
31, 1995, compared with 1.00 at December 31, 1994, and 1.02 at December 31,
1993. Year-end working capital for the last three years expressed as a
percentage of sales shows a similar decline in each year: 8.1% in 1995, 11.7%
1994 and 12.4% in 1993.
At December 31, 1995, the Company had bank lines of $504 million, all of which
were unused. Additional bank lines of credit are available at the Company's
request. The Company's commercial paper is rated A-1 by Standard & Poors and F-1
by Fitch Investor services.
The Company issued $250 million long-term notes during 1995, its first public
debt offering. These 10 year securities have been rated A-2 by Moody's Investor
Services and A+ by Standard & Poors.
With respect to debt percentages, the substantial amounts spent in recent years
for acquisitions has caused these percentages to increase. The net debt (notes
payable plus long-term debt and current maturities of long-term debt less cash
and equivalents and marketable securities) to total capital ratio increased to
30.0% at December 31, 1995 compared with 27.2% at December 31, 1994 and 27.6% at
December 31, 1993. The Company's net debt (total debt less cash, cash
equivalents and marketable securities) increased by $154 million, during 1995,
and the debt to equity ratio increased from 37% at December 31, 1994 to 43% at
year-end, 1995. Long-term debt maturities for the four years 1996 to 1999
aggregate $7.5 million. Management is not aware of any potential impairment to
the Company's liquidity, other than contingent liabilities as discussed in Note
12 to the Consolidated Financial Statements.
Historically, capital expenditures have been financed with internally generated
funds. During 1995 the entire capital expenditure program was financed
internally. Internal financing is also expected to provide all of the funds for
capital expenditures in 1996, which the Company believes will aggregate
approximately $125 million. The Company plans to continue its acquisition
program, combining external financing, if necessary, with internally generated
cash.
RESULTS OF OPERATIONS 1995:
Results of operations are explained in detail in the stockholders' letter and
operations review, pages 2 through 20.
1994 COMPARED WITH 1993:
Dover set a new earnings per share record in 1994, at $1.77, a gain of 28% over
the prior year's $1.39 per share. This was an even stronger increase than the
24% gain achieved in 1993.
Sales rose 24% to almost $3.1 billion, an increase of $601 million, reflecting
both internal growth at most Dover companies and the effect of our vigorous
acquisition activity in 1993 and 1994.
Companies acquired in 1993 added $155 million to Dover's 1993 sales. The
internal growth of these businesses, and their inclusion for a full year, led to
a further sales contribution in 1994 of approximately $260 million, representing
about 10 percentage points of the 24% year-to-year sales gain. Additionally, the
companies acquired during 1994 added $151 million to our 1994 sales, accounting
for 6 percentage points of the sales gain. The 1994 sales growth of businesses
Dover owned at the start of 1993 averaged approximately 10% (adjusted for the
effect of the spin-off of DOVatron in mid-1993).
While these acquisitions provided the bulk of our sales growth, the major
portion of our earnings gain came from the internal growth of our existing
companies. Companies acquired in 1994 made no contributions to earnings per
share because of acquisition-related costs and interest income foregone.
Companies acquired in 1993 contributed about $.35 cents per share to our overall
reported gain, with a portion of this reflecting their internal growth after
acquisition.
A discussion of operations by industry segments follows:
DOVER RESOURCES:
Profits at Dover Resources improved 19% on an 11% sales gain. Some of the sales
and earnings gains resulted from the acquisition of Midland Manufacturing at the
start of the year, but the largest portion came from internal growth.
De-Sta-Co reported record sales and earnings as a result of strength in its
domestic valve and clamp businesses and the beginning of recovery in its German
operation. De-Sta- Co undertook capacity additions at each of its three valve
plants to support continuing growth.
Contrary to our expectations at the beginning of 1994, OPW Fueling Components
surpassed its excellent earnings level of 1993 with new earnings and sales
records again in 1994. The market for OPW's vapor recovery products remained
stronger than anticipated and the demand for its other gasoline station product
lines was solid as well. As the year ended, final regulatory approvals were
being secured for OPW's VaporEz(TM) product.
36
39
DOVER INDUSTRIES:
Dover Industries achieved record sales of $691 million, up 38% from prior year,
and operating income of $81 million, up 35%, also a record level. These results
reflect both acquisitions and strong internal growth. Each of Dover Industries'
12 businesses achieved an earnings improvement in 1994 with particularly
impressive percentage increases at Rotary Lift, Texas Hydraulics, Tipper Tie and
Bernard.
Rotary Lift achieved its gain through successful implementation of an internal
growth strategy involving substantial manufacturing investment for cost
reduction, lower product selling prices, and, increased market share and
business volume. Margins improved at Rotary despite these lower selling prices.
Tipper Tie's growth primarily reflected the acquisition of Technopack and the
successful integration of this company with Tipper Tie's European business.
The Heil Company, which was acquired in mid-1993 and is Dover Industries'
largest company, achieved record sales and profits in its first full year of
Dover ownership. Heil's tank trailer business was particularly strong, and the
company expanded its capacity through the J&L acquisition in late 1993 and a
major addition to the Athens, Tennessee plant in the course of 1994.
DOVER TECHNOLOGIES:
Dover Technologies also had a record year, with an earnings gain of 82% on a
sales gain of 24%. Most of the gains in this segment were attributable to a
record performance by Universal Instruments. Strong sales gains and record
earnings were also achieved by DEK Printing Machines.
Universal benefited from the continuing upswing in demand for capital equipment
within the electronics industry, as well as from market share gains by its very
profitable thru-hole technology business and the success of new product
offerings in the surface mount technology sector.
The combined results of Dover Technologies companies serving the communications
and components markets were essentially flat. Improved earnings at K&L
Microwave, as well as the net gain provided by TNI, acquired at mid-year, were
offset by modest declines at other companies resulting from continuing defense
cutbacks and very competitive commercial markets.
Incoming orders for the capital equipment companies were strong throughout 1994
and ended the year on a high note, pushing Dover Technologies' year-end backlog
35% higher than at the end of 1993.
DOVER DIVERSIFIED:
Profits at Dover Diversified also set a record, rising 71% on a sales gain of
$228 million, or more than 90%. Acquisitions made during 1994 provided $93
million of this sales gain, but made no contribution to earnings, as
acquisition-related write-offs and the expected low operating margins at the
Hill Refrigeration company offset good profit results at Tranter's newly
acquired European companies. A further portion of the sales gain --
approximately $110 million -- resulted from having several 1993 acquisitions,
most notably Belvac and Phoenix Refrigeration, for a full year, and from growth
at those companies. Most Dover Diversified companies showed sales and earnings
growth in 1994, with particular strength at Belvac because of the widespread
acceptance of its die-necking technology within the can-making industry. This
industry's rapid conversion to soft drink and beer cans with smaller top
diameters, in order to save aluminum costs, accelerated Belvac to record sales,
earnings and bookings.
Consolidation continued in defense/aerospace markets. Sargent Technologies'
ball-screw product line was sold and the remaining business was combined with
Sargent Controls as a single company in one facility.
DOVER ELEVATOR INTERNATIONAL:
Profits at Dover Elevator International fell a disappointing 18% on flat sales.
All of the decline was attributable to poor results at General Elevator, which
has been primarily a service and modernization company serving the U.S. elevator
aftermarket for non-Dover equipment. A modest operating loss here was
exacerbated by approximately $11.5 million in write-offs and unusual expense
incurred during the year. A change in management and an action program to reduce
costs and improve margins (along with the impact of the reorganization of Dover
Elevator International's North American Operations discussed below) are expected
to return General to profitability. This creates the opportunity for a
substantial earnings improvement at Dover Elevator International as a whole.
The problem at General Elevator obscured meaningful progress in the North
American market, as profits from our other businesses serving this market
improved. Worldwide new elevator manufacturing and product engineering has been
unified under one management group -- Dover Elevator Systems, North American
field activities, consisting of new elevator construction, service and
modernization, are organized geographically into seven field companies: Miami,
General, Sound, Lagerquist, Security, Dover Elevator Company and Dover
Elevator-Canada. This structure will allow Dover Elevator International to
service its customers better while eliminating cost duplication, and provides a
structure for profit growth in North America.
37
40
11-YEAR CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA
DOVER CORPORATION AND SUBSIDIARIES
(DOLLARS IN THOUSANDS EXCEPT PER SHARE FIGURES)
1995 1994 1993 1992 1991 1990
=========================================================================================================================
Summary of Operations
Net sales $3,745,877 3,085,276 2,483,928 2,271,580 2,195,786 2,210,345
Cost of sales 2,564,344 2,137,477 1,733,256 1,601,596 1,580,051 1,516,753
Selling and administrative expenses 743,133 622,434 496,798 466,777 452,394 440,313
Interest expense 40,113 36,461 22,339 20,059 23,161 30,658
Other income, net 18,824 17,955 14,007 17,187 63,908 21,497
Earnings before taxes 417,111 306,859 245,542 200,335 204,088 244,118
Income taxes 138,800 104,486 87,288 71,192 75,880 88,439
- -------------------------------------------------------------------------------------------------------------------------
Net earnings $ 278,311 202,373 158,254 129,707* 128,208 155,679
% of sales 7.4% 6.6% 6.4% 5.7% 5.8% 7.0*
Return on average equity 25.0% 21.7% 18.9% 15.9% 15.9% 20.3*
Net earnings per common share $ 2.45 1.77 1.39 1.12* 1.07 1.27
Dividends per common share $ .56 .49 .45 .43 .41 .38
- -------------------------------------------------------------------------------------------------------------------------
Book value per common share $ 10.80 8.78 7.61 7.05 7.03 6.57
Depreciation and amortization $ 107,836 95,789 76,969 77,457 85,366 77,530
Capital expenditures $ 102,668 84,473 47,532 42,441 46,618 44,980
Acquisitions $ 323,292 187,704 321,002 111,243 13,192 102,834
Cash flow** $ 386,147 298,162 235,223 207,164 213,575 233,210
Weighted average number of common
shares outstanding (`000s) 113,453 114,370 114,220 115,976 119,500 122,338
Number of employees 25,332 22,992 20,445 18,827 18,898 20,461
- -------------------------------------------------------------------------------------------------------------------------
Financial Position at December 31
Working capital $ 303,312 360,916 307,846 201,641 280,902 206,748
Net property, plant and equipment $ 423,940 342,685 283,363 251,270 251,145 268,386
Total assets $2,666,651 2,070,637 1,773,689 1,426,124 1,356,620 1,468,366
Long-term debt $ 255,600 253,587 252,065 1,230 6,317 20,955
Common stockholders' equity $1,227,706 995,859 870,002 804,937 828,374 787,660
Common shares outstanding (`000s) 113,670 113,460 114,326 114,170 117,956 119,942
=========================================================================================================================
[GRAPH] [GRAPH]
38
41
1989 1988 1987 1986 1985
=========================================================================================================
Summary of Operations
Net sales 2,120,434 1,953,754 1,588,224 1,440,745 1,439,548
Cost of sales 1,480,880 1,363,852 1,096,612 1,028,394 1,028,530
Selling and administrative expenses 404,043 360,122 306,792 270,432 250,176
Interest expense 29,644 21,324 15,044 16,475 12,677
Other income, net 21,112 16,304 11,083 9,022 11,923
Earnings before taxes 226,979 224,760 180,859 134,466 160,088
Income taxes 82,999 78,988 69,158 50,637 60,060
- ---------------------------------------------------------------------------------------------------------
Net earnings 143,980 145,772 111,701 83,829 100,028
% of sales 6.8% 7.5% 7.0% 5.8% 6.9%
Return on average equity 19.4% 20.6% 17.2% 13.4% 16.9%
Net earnings per common share 1.14 1.11 .83 .61 .71
Dividends per common share .35 .31 .26 .23 .22
- ---------------------------------------------------------------------------------------------------------
Book value per common share 6.00 5.69 5.07 4.63 4.44
Depreciation and amortization 78,813 73,797 63,505 57,008 53,096
Capital expenditures 62,504 56,779 40,397 44,416 35,196
Acquisitions -- 205,765 57,718 76,142 29,244
Cash flow** 222,793 219,569 175,205 140,836 153,124
Weighted average number of common
shares outstanding (`000s) 126,500 131,452 135,104 138,580 141,604
Number of employees 20,049 20,412 17,592 16,539 16,071
- ---------------------------------------------------------------------------------------------------------
Financial Position at December 31
Working capital 245,755 198,038 316,116 295,370 368,998
Net property, plant and equipment 272,158 268,139 219,031 210,908 186,114
Total assets 1,406,376 1,365,630 1,155,226 1,036,846 1,017,019
Long-term debt 26,691 27,773 35,134 41,711 73,523
Common stockholders' equity 746,809 741,142 671,950 627,674 625,541
Common shares outstanding (`000s) 124,486 130,416 132,504 135,624 140,952
=========================================================================================================
* Net earnings and net earnings per common share include $565 and .5 cent per
share, respectively, applicable to the cumulative effects of changes in
accounting principles for FAS 109, "Accounting for Income Taxes" and FAS 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions."
** Represents net earnings plus depreciation and amortization.
Adjusted to give retroactive effect to the 2 for 1 stock split, in 1988 and
1995.
[GRAPH] [GRAPH]
39
42
DIRECTORS AND OFFICERS*
DOVER CORPORATION AND SUBSIDIARIES
BOARD OF DIRECTORS
David H. Benson+
Non-Executive Director,
Kleinwort-Benson Group, Plc.
Magalen O. Bryant*#
Director of various corporations
Jean-Pierre M. Ergas#
Senior Adviser to President/CEO
Alcan Aluminum Ltd.
Roderick J. Fleming+
Director, Robert Fleming Holdings, Limited
John F. Fort*#
Director of Tyco Laboratories, Inc.
James L. Koley+*
Chairman, Koley, Jessen, Daubman
& Rupiper, P.C.
John F. McNiff (Nominee)
Anthony J. Ormsby*+
Director of various corporations
Thomas L. Reece*
Gary L. Roubos*
* Members of Executive Committee
+ Members of Audit Committee
# Members of Compensation Committee
Design: Robert Webster Inc.
Copy: Holcomb Associates
Photographer: Enrico Ferorelli
Printed on recycled paper.
OFFICERS
HEADQUARTERS:
Gary L. Roubos
Chairman
Thomas L. Reece
President and Chief Executive Officer
John F. McNiff
Vice President--Finance
Robert G. Kuhbach
Vice President, General Counsel
and Secretary
Robert A. Tyre
Vice President--Corporate Development
Alfred Suesser
Controller
Dover Resources, Inc:
Rudolf J. Herrmann
President and Chief Executive Officer
Dover Industries, Inc:
Lewis E. Burns
President and Chief Executive Officer
Dover Technologies International, Inc:
John E. Pomeroy
President and Chief Executive Officer
Dover Diversified, Inc:
Jerry W. Yochum
President and Chief Executive Officer
Dover Elevator International, Inc:
Nigel P. Davis
President
STOCKHOLDER INFORMATION
TRANSFER AGENT/REGISTRAR:
Harris Trust & Savings Bank
Chicago, Illinois
Requests concerning stockholder records, issuance of stock certificates, and
distribution of our dividends and the IRS Form 1099 are most efficiently
answered by corresponding directly with Harris Trust at the following address:
Harris Trust & Savings Bank
311 West Monroe Street
Post Office Box 755
Chicago, Illinois 60690
(312) 461-6832 (tel.)
(312) 461-1530 (fax)
Dover common stock is listed on the New York Stock Exchange with symbol DOV. The
common stock is also listed on The London Stock Exchange.
INDEPENDENT ACCOUNTANTS:
Coopers & Lybrand L.L.P.
New York, New York
EXECUTIVE OFFICES:
Dover Corporation
280 Park Avenue,
New York, New York 10017-1292
(212) 922-1640
40
43
EXHIBIT 13
The electronic filing includes the following numeric tables which replace
graphical charts contained within the 1995 Annual Report for the Dover
Corporation.
Page 1: Dover Corporation's earnings per share growth for years 1986-1995.
Dover Corporation's total return to investors for the years 1986-1995.
Page 4: Dover Corporation's earnings per share for years 1990-1995.
Dover Corporation's after tax return on investment and stockholder's
equity for the years 1990-1995.
Page 6: Dover Resources' operating earnings for the years 1991-1995.
Dover Resources' after-tax operating return on investment for the
years 1991-1995.
Page 9: Dover Industries' operating earnings for the years 1991-1995.
Dover Industries' after-tax operating return on investment for the
years 1991-1995.
Page 12: Dover Diversified's operating earnings for the years 1991-1995.
Dover Diversified's after-tax operating return on investment for the
years 1991-1995.
Page 15: Dover Technologies' operating earnings for the years 1991-1995.
Dover Technologies' after-tax operating return on investment for the
years 1991-1995.
Page 18: Dover Elevator International Inc.'s operating earnings for the years
1991-1995.
Dover Elevator International Inc.'s after-tax operating return on
investment for the years 1991-1995.
Page 38: Dover Corporation's long term investment for years 1985-1995.
Dover Corporation's return on average equity for the years ended
1985-1995.
Page 39: Dover Corporation's cash flow for years 1985-1995.
Dover Corporation's free cash flow as a percentage of sales for the
years 1985-1995.
Pages 2, 7, 10, 13, 16, and 19 of the Annual Report contain photographs that
are not included in the Edgar filing. The captions, relating to these
photographs, have been retained in the filing and provide sufficient
descriptive detail.
