1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For three months ended March 31, 1996 Commission File No. 1-4018
DOVER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 53-0257888
(State of Incorporation) (I.R.S. Employer Identification No.)
280 Park Avenue, New York, NY 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 922-1640
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the Registrant's common stock as of the
close of the period covered by this report was 113,804,882.
2
Part. I. FINANCIAL INFORMATION
Item 1. Financial Statements
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(000'S OMITTED)
1996 1995
------------------- --------------------
Net sales $ 999,473 $ 854,129
Cost of sales 664,276 584,093
------------------- --------------------
Gross profit 335,197 270,036
Selling and administrative expenses 206,745 176,001
------------------- --------------------
Operating profit 128,452 94,035
------------------- --------------------
Other deductions (income):
Interest expense 11,526 8,854
Interest income (5,632) (6,216)
Foreign exchange (310) 396
All other, net (1,187) (1,019)
------------------- --------------------
Total 4,397 2,015
------------------- --------------------
Earnings before taxes on income 124,055 92,020
Federal and other taxes on income 46,310 32,221
------------------- --------------------
Net earnings $ 77,745 $ 59,799
=================== ====================
Weighted average number of common shares outstanding
during the period 113,746 113,358
=================== ====================
Net earnings per common share $ 0.68 $ 0.53
=================== ====================
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(000'S OMITTED)
1996 1995
------------------- --------------------
Balance at beginning of period $1,152,187 $1,268,115
Net earnings 77,745 59,799
------------------- --------------------
1,229,932 1,327,914
Deduct common stock cash dividends of
$.15 per share ($.13 in 1995) 17,069 14,740
------------------- --------------------
Balance at end of period $1,212,863 $1,313,174
=================== ====================
3
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(000'S OMITTED)
MARCH 31, DECEMBER 31,
1996 1995
--------------------- ---------------------
Assets
Current Assets:
Cash and cash equivalents $ 106,774 $ 121,698
Marketable securities 28,607 27,054
Receivables, net of allowance for doubtful accounts 685,155 706,889
Inventories at cost 523,315 479,327
Prepaid expenses 51,843 49,391
--------------------- ---------------------
Total current assets 1,395,694 1,384,359
--------------------- ---------------------
Property, plant & equipment, at cost 1,011,161 975,127
Accumulated depreciation (568,245) (551,187)
--------------------- ---------------------
Net property, plant & equipment 442,916 423,940
--------------------- ---------------------
Intangible assets, net of amortization 844,813 811,182
Other intangible assets 10,258 10,258
Deferred charges and other assets 30,014 36,912
--------------------- ---------------------
$2,723,695 $2,666,651
===================== =====================
Liabilities
Current liabilities:
Notes payable $ 412,361 $ 417,478
Current maturities of long-term debt 2,166 2,502
Accounts payable 196,779 190,850
Accrued compensation & employee benefits 92,285 125,600
Accrued insurance 109,805 106,274
Other accrued expenses 212,997 209,455
Income taxes 62,586 28,888
--------------------- ---------------------
Total current liabilities 1,088,979 1,081,047
Long-term debt 255,015 255,600
Deferred taxes 43,926 46,328
Deferred compensation 50,871 55,970
Stockholders' Equity:
Preferred stock - -
Common stock 116,719 116,563
Additional paid-in surplus 10,072 6,424
Cumulative translation adjustments (2,748) 2,268
Unrealized holding gains (losses) 2,733 3,994
Retained earnings 1,212,863 1,152,187
--------------------- ---------------------
1,339,639 1,281,436
Less: treasury stock 54,735 53,730
--------------------- ---------------------
Net stockholders' equity 1,284,904 1,227,706
--------------------- ---------------------
$2,723,695 $2,666,651
===================== =====================
4
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(000'S OMITTED)
1996 1995
---------------- ------------------
Cash flows from operating activities:
Net income $ 77,745 $ 59,799
---------------- ------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 20,543 16,012
Amortization 9,713 8,386
Net increase (decrease) in deferred taxes (4,230) (1,268)
Net increase (decrease) in LIFO reserves 393 291
Increase (decrease) in deferred compensation (5,868) 221
Other, net 6,230 (7,026)
Changes in assets and liabilities (excluding acquisitions):
Decrease (increase) in accounts receivable 33,138 (25,199)
Decrease (increase) in inventories, excluding
LIFO reserve (29,993) (24,989)
Decrease (increase) in prepaid expenses (2,147) (6,800)
Increase (decrease) in accounts payable (2,504) 8,789
Increase (decrease) in accrued expenses (28,076) 15,129
Increase (decrease) in federal and other
taxes on income 33,642 29,951
---------------- ------------------
Total adjustments 30,841 13,497
---------------- ------------------
Net cash provided by operating activities 108,586 73,296
---------------- ------------------
Cash flows from (used in) investing activities:
Net sale (purchase) of marketable securities (1,553) (2,231)
Additions to property, plant & equipment (35,685) (28,056)
Acquisitions, net of cash and cash equivalents (58,849) (16,240)
Purchase of treasury stock (1,005) (4,110)
---------------- ------------------
Net cash from (used in) investing activities (97,092) (50,637)
---------------- ------------------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable (6,211) (14,256)
Reduction of long-term debt (5,608) (242)
Proceeds from exercise of stock options 2,469 1,083
Cash dividends to stockholders (17,068) (14,739)
---------------- ------------------
Net cash from (used in) financing activities (26,418) (28,154)
---------------- ------------------
Net increase (decrease) in cash and cash equivalents (14,924) (5,495)
Cash and cash equivalents at beginning of period 121,698 90,304
---------------- ------------------
Cash and cash equivalents at end of period $ 106,774 $ 84,809
================ ==================
5
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and changes in financial position in
conformity with generally accepted accounting principles. In the opinion of the
Company, all adjustments, consisting only of normal recurring items necessary
for a fair presentation of the operating results have been made. The results of
operations of any interim period are subject to year-end audit and adjustments,
and are not necessarily indicative of the results of operations for the fiscal
year.
NOTE B - Inventory
Inventories, by components, are summarized as follows:
MARCH 31, DECEMBER 31,
1996 1995
------------------ ---------------------
Raw materials $165,162 $153,094
Work in progress 239,199 221,371
Finished goods 165,162 150,677
------------------ ---------------------
Total 569,523 525,142
Less LIFO reserve 46,208 45,815
------------------ ---------------------
Net amount per balance sheet $523,315 $479,327
================== =====================
NOTE C - Additional Information
For a more adequate understanding of the Company's financial position,
operating results, business properties and other matters, reference is made to
the Company's annual form 10-K which was filed with the Securities and Exchange
Commission in March 1996.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(1) MATERIAL CHANGES IN CONSOLIDATED FINANCIAL CONDITION:
The Company's liquidity remained almost flat during the first quarter of
1996 as compared to the position at December 31, 1995, despite an investment of
$67 million for acquisitions during this three month period.
Working capital increased from $303.3 million at the end of last year to
$306.7 million at March 31, 1996.
Six acquisitions were completed during this quarter which will add
approximately $75 million to the Company's annual sales in 1996. Due to
amortization of acquisition-related costs they negatively impacted first quarter
earnings by a small amount but should be neutral to slightly positive in their
impact for the full year.
6
(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:
The Company earned $.68 per share in its first quarter ended March
31st, up 28% from $.53 earned in the first quarter of 1995. Sales gained 17% to
$999 million. Pretax profits rose 35% to $124 million, but a higher than normal
tax rate of 37.3% (versus 35% last year) reduced net income growth to 30%. All
of the Company's market segments achieved sales and profit growth.
DOVER TECHNOLOGIES:
Profits at Dover Technologies advanced 30% on a sales gain of 36%. Most
of the eight companies in this segment had higher earnings than last year, but
almost all of the overall sales and earnings gains reflect the addition of
companies acquired during 1995, notably Imaje. Universal Instruments continued
to produce more than half of DTI's operating income. Universal's book-to-bill
was .99 (.98 for DTI as a whole) with mix continuing to change in favor of
surface mount assembly machines. New products shown by Universal at the
important NEPCON show in February were well received, as were those of DEK and
Soltec, but the market for electronic capital goods is not as robust as it was
last year. Universal's backlog is 46% lower than one year ago. Consequently,
Universal is expected to have negative quarterly earnings comparisons for at
least the next two quarters. Growth in other DTI companies and the favorable
impact of 1995 acquisitions are expected to result in a full-year earnings gain
for DTI following their 75% gain in earnings in 1995. The strength of DTI's
surface mount assembly products, which serve a large market with strong
long-term growth potential, is very encouraging for DTI's performance beyond the
current year.
DOVER INDUSTRIES:
Dover Industries' profits improved 22% on a 10% sales gain. The first
quarter results includes a $2.6 million gain on the sale of a leasing business,
without which profits would have increased 13%. Eight of Industries' 12
companies had earnings gains with Heil Environmental and Heil Tank Trailer (the
two largest businesses) both ahead more than 40%. Bookings for refuse trucks
continue strong at Heil Environmental adding to backlog. The tank trailer
business continued to recover from its fall-off in 1994-95. Other strong
earnings gains were achieved by Dieterich Standard, Rotary Lift, Texas
Hydraulics, and DovaTech. The food equipment market and screw machine market,
especially automotive, were weaker affecting Groen, Randell and Davenport. March
sales and earnings showed their normal seasonal upturn at DII and fears of a
U.S. recession are receding. Both factors bode well for Industries' goal of
achieving a significant earnings gain for all of 1996.
DOVER DIVERSIFIED:
Dover Diversified's profits rose 35% from last year's first quarter but
were below levels achieved during the second half of 1995. It's Hill Phoenix
company recorded a $3.4 million cost of sales adjustment which resulted in a
loss for the quarter. Manufacturing performance at Hill's case operation showed
considerable improvement following its disruptive plant move last year, and the
company has aggressive plans to improve customer satisfaction and operating
margins during the balance of 1996. Both Belvac and Tranter continued their
rapid growth as each had sales and earnings gains exceeding 25%. Together these
two companies produced most of
7
Diversified's income on less than half its sales. Tranter's market for heat
exchange products continued strong with orders exceeding shipments by 9%.
Belvac's shipments continue to exceed bookings by a wide margin following an
influx of orders in 1994-1995 for its can-necking machines, but backlog and
current order rates should sustain good profitability throughout 1996. Shipments
and margins improved at A-C Compressor but bookings have remained soft since
this company adopted a more selective marketing approach in the second half of
1995. Dover Diversified believes it has the potential for market growth and
internal margin improvement to reach its goal of a significant gain over 1995's
record profits.
DOVER RESOURCES:
Dover Resources' earnings gained 8% on a similar sales increase with
half of its 16 businesses achieving profit gains. Profits were strong, but
continued slightly below prior year, at De-Sta-Co, OPW-Fueling Components, and
Blackmer, due to the previously reported slowness in the vapor recovery market
and lower operating margins in the De-Sta-Co industrial product group. Strong
sales and earnings gains were provided by Midland (rail tank car valves), AOT
(Canadian oil production equipment), Ronningen-Petter (filtration systems) and
Stark (special tubing assemblies). Orders were 2% below shipments for Dover
Resources as a whole as the mixed performance among its many product areas
continued. Overall margin of 16.6% was in line with expectations, but below
prior peak performances, representing an additional opportunity for Resources to
achieve its goal of a moderate earnings increase in 1996.
DOVER ELEVATOR:
Following an extensive business restructuring in 1995, Dover Elevator
International had its best quarter since the 1991 real-estate recession. Profits
of almost $22 million were more than double those of a weak quarter last year.
Operating margins exceeded 10% for the first time since 1990. Sales of $209
million were up 8% from last year's first quarter but only slightly above the
1995 average when full year operating profits were only $63 million. The margin
improvement primarily reflects cost reduction from the business restructuring
implemented in the third and fourth quarters of last year which involved $32
million of cost. Production has begun from DEI's "focused" hydraulic elevator
factory which is expected to reduce manufacturing costs on this important
product line. The U.S. hydraulic elevator market (low-rise construction) has
shown improvement and DEI's bookings for this area were strong in the quarter.
Total new elevator bookings exceeded shipments and were 7% above last year.
DEI's first quarter profits exceeded expectation, reinforcing Dover's belief
that profits for the year are likely to exceed $70 million, as suggested in
Dover's recently published Annual Report.
OUTLOOK
The company earned a record $2.45 per share in 1995 surpassing by 38%
the earnings record it had set in 1994. In its Annual Report Dover said it
anticipated a good year in 1996, with EPS growth at or above the 14% annual
growth rate of 1990-1995. Although future quarters in 1996 represent more
difficult comparisons, especially at Universal Investments, the strong start to
the year is encouraging.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No report on Form 8-K was filed during the quarter for
which this report is filed.
8
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DOVER CORPORATION
Date: 4/26/96 /s/ John F. McNiff
---------------- ------------------------------
John F. McNiff, Vice President
and Treasurer
Date: 4/26/96 /s/ Alfred Suesser
---------------- ------------------------------
Alfred Suesser, Controller and
Assistant Treasurer
9
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
EX-27 Financial Data Schedule
5
1000
3-MOS
DEC-31-1996
JAN-1-1996
MAR-31-1996
106,774
28,607
708,313
23,158
523,315
1,395,694
1,011,161
(568,245)
2,723,695
1,088,979
255,015
0
0
116,719
0
2,723,695
999,473
999,473
664,276
871,021
(1,497)
0
11,526
124,055
46,310
0
0
0
0
0
0.68
0.68
