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, 1997 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 112,184,966.
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
THREE MONTHS ENDED MARCH 31,
(000 OMITTED)
1997 1996
---- ----
Net Sales $1,008,781 $999,473
Cost of sales 670,914 664,276
---------- --------
Gross profit 337,867 335,197
Selling & administrative expenses 222,516 206,745
---------- --------
Operating Profit 115,351 128,452
========== ========
Other deductions (Income):
Interest expense 10,987 11,526
Interest income (4,056) (5,632)
Foreign exchange (6,077) (310)
All other, net (6,139) (1,187)
---------- --------
Total (5,285) 4,397
========== ========
Earnings before taxes on income 120,636 124,055
Federal & other taxes on income 42,136 46,310
---------- --------
Net earnings $ 78,500 $ 77,745
========== ========
Weighted average number of common shares
outstanding during the period 112,564 113,746
========== ========
Net earnings per common share $0.70 $0.68
========== ========
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
THREE MONTHS ENDED MARCH 31,
(000 OMITTED)
1997 1996
---- ----
Retained earnings at January 1 $1,470,008 $1,152,187
Net earnings 78,500 77,745
---------- ----------
$1,548,508 $1,229,932
Deduct:
Common stock cash dividends
$0.17 per share ($0.15 in 1996) 19,160 17,069
---------- ----------
Retained earnings at end of period $1,529,348 $1,212,863
========== ==========
3
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(000 OMITTED)
March 31, 1997 December 31, 1996
-------------- -----------------
Assets:
------
Current assets:
Cash & cash equivalents $ 113,366 $ 199,955
Marketable securities 18,208 17,839
Receivables, net of allowance for doubtful accounts 717,594 715,495
Inventories 523,726 499,870
Prepaid expenses 59,152 56,654
---------- ----------
Total current assets 1,432,046 1,489,813
---------- ----------
Property, plant & equipment (at cost) 1,139,641 1,106,981
Accumulated depreciation (630,420) (612,048)
---------- ----------
Net property, plant & equipment 509,121 494,933
---------- ----------
Intangible assets, net of amortization 971,185 963,182
Other intangible assets 10,258 10,258
Deferred charges & other assets 37,018 35,193
---------- ----------
$2,959,628 $2,993,379
========== ==========
Liabilities:
-----------
Current liabilities:
Notes payable $ 445,589 $ 488,651
Current maturities of long-term debt 793 3,754
Accounts payable 198,128 202,763
Accrued compensation & employee benefits 101,905 130,598
Accrued insurance 108,335 104,916
Other accrued expenses 207,115 206,992
Income taxes 42,210 1,430
---------- ----------
Total current liabilities 1,104,075 1,139,104
Long-term debt 255,135 252,955
Deferred taxes 44,213 54,068
Deferred Compensation 54,912 57,550
Stockholders' equity:
--------------------
Preferred stock -- --
Common stock 117,079 116,858
Additional paid-in surplus 20,111 13,818
Cumulative translation adjustments (18,227) 1,900
Unrealized holding gains (losses) 2,126 3,663
Retained earnings 1,529,348 1,470,008
---------- ----------
Subtotal 1,650,437 1,606,247
Less: treasury stock 149,144 116,545
---------- ----------
1,501,293 1,489,702
---------- ----------
$2,959,628 $2,993,379
========== ==========
4
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
THREE MONTHS ENDED MARCH 31,
(000 OMITTED)
1997 1996
---- ----
Cash flows from operating activities:
Net income $ 78,500 $ 77,745
--------- ---------
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation 24,331 20,543
Amortization 10,425 9,713
Net increase (decrease) in deferred taxes (9,936) (4,230)
Net increase (decrease) in LIFO reserves 276 395
Increase (decrease) in deferred compensation (2,633) (5,860)
Other, net (13,605) 6,230
Changes in assets & liabilities (excluding acquisitions):
Decrease (increase) in accounts receivable 6,928 33,138
Decrease (increase) in inventories, excluding LIFO reserve (11,394) (29,993)
Decrease (increase) in prepaid expenses (2,044) (2,147)
Increase (decrease) in accounts payable (8,515) (2,504)
Increase (decrease) in accrued expenses (29,256) (28,076)
Increase (decrease) in federal & other taxes on income 38,305 33,642
--------- ---------
Total adjustments 2,882 30,841
--------- ---------
Net cash provided by operating activities 81,382 108,586
========= =========
Cash flows from (used in) investing activities:
Net sale (purchase) of marketable securities (369) (1,553)
Additions to property, plant & equipment (27,377) (35,685)
Acquisitions, net of cash & cash equivalents (46,563) (58,849)
Purchase of treasury stock (32,607) (1,005)
--------- ---------
Net cash from (used in) investing activities (106,916) (97,092)
--------- ---------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable (44,485) (6,211)
Reduction of long-term debt (1,522) (5,608)
Proceeds from exercise of stock options 4,113 2,469
Cash dividends to stockholders (19,161) (17,068)
--------- ---------
Net cash from (used in) financing activities (61,055) (26,418)
--------- ---------
Net increase (decrease) in cash & cash equivalents (86,589) (14,924)
Cash & cash equivalents at beginning of period 199,955 121,698
--------- ---------
Cash & cash equivalents at end of period $ 113,366 $ 106,774
========= =========
5
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
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,
1997 1996
--------------------------
Raw materials $172,359 $165,064
Work in progress 229,452 219,729
Finished goods 167,972 160,858
--------------------------
Total 569,783 545,651
Less LIFO reserve 46,057 45,781
==========================
Net amount per balance sheet $523,726 $499,870
==========================
NOTE C - Additional Information
For a more adequate understanding of the Company's financial position,
operating results, business properties and other matters, reference is made to
the Company's annual report Form 10-K which was filed with the Securities and
Exchange Commission in March 1997.
In February, 1997 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share".
This statement in effective for financial statements issued for periods
ending after December 15, 1997 including interim periods. The new Statement
requires two separate disclosures: a) Basic Earnings per Share and b) Diluted
Earnings per Share. The Company has a simple capital structure and has
determined that the effect of this Statement will not be material.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(1) MATERIAL CHANGES IN CONSOLIDATED FINANCIAL CONDITION:
The Company's liquidity decreased during the first quarter of 1997 as
compared to the position at December 31, 1996. Acquisitions and repurchases of
common stock, as mentioned below, more than accounts for this decrease.
Working capital decreased from $352.0 million at the end of last year to
$329.2 million at March 31, 1997.
At March 31, 1997, net debt (defined as long-term debt plus current
maturities on long-term debt plus notes payable less cash and equivalents and
marketable securities) of $569.9 million represented 27.5% of total capital.
This compares with 26.2% at December 31, 1996.
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(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:
The Company earned $.70 per share in its first quarter ended March 31,
1997, compared to $.68 per share in last year's first quarter. Sales and net
income both increased 1%. Dover completed one stand-alone and three add-on
acquisitions in the quarter at a cost of $52 million and repurchased $33 million
of its own common stock (616,000 shares at $53/share).
Earnings in the first quarter of 1997 included $9.6 million ($.06 per
share) of non-recurring items (exchange gains and license fees in the
Technologies segment). Earnings in the prior year's quarter included a $2.6
million ($.02 per share) gain from the sale of a leasing business (Industries
segment). Shipments and recurring operating profits were somewhat below Dover's
expectations, but bookings were very positive (especially in Technologies).
Backlog improved during the quarter in each of Dover's five business segments,
and by 19% for the Company as a whole, and orders exceeded shipments for most
companies.
DOVER TECHNOLOGIES:
Dover Technologies' profits improved by 13% to $36.6 million as sales rose
5% to $259 million. However, without the previously mentioned paid-up-license
sale and foreign currency gain, profits would have declined 17%. Sales
comparisons were helped by acquisitions in the second half of 1996 (principally
Everett Charles Technologies) and by two small add-on acquisitions (Telefilter
and Quarzkeramik by Quadrant) in the current quarter. Also, Everett Charles
acquired a German maker of bare-board testing equipment (Luther & Maelzer) in
March. These companies added about $30 million to the quarter's sales but only
modestly to income due to acquisition related costs. Most companies in the
segment achieved higher earnings than prior year with the notable exception of
Universal Instruments, whose recurring profits dropped sharply. Universal began
the quarter with a lower backlog than at the start of 1996 and which contained a
less favorable product mix. Production in March also fell short of targets due
to part shortages. Image, Everett Charles, Quadrant and K&L -the next four
largest Technologies companies--all had higher operating profits than in 1996.
Bookings at Dover Technologies were very strong with a book-to-bill ratio
of 1.3. Universal had record quarterly bookings that were 1.5 times shipments.
The level of bookings at DTI exceeded expectations and is not forecasted to be
maintained, although second quarter bookings are likely to exceed prior year.
Improved backlogs should lead to higher shipments and operating profits in the
second quarter with favorable year-over-year comparisons.
DOVER INDUSTRIES:
Dover Industries' profits were in line with expectations but down 21% from
last year. The major factors in this decline were operating profit drops at Heil
Trailer, Heil Refuse and Marathon ($6 million from last year's strong results),
the sale of Dieterich Standard in mid-1996 and last year's $2.6 million
non-recurring gain from the sale of a leasing business. Strengthened sales and
earnings at Groen and Randell (food service equipment) and continued growth at
Texas Hydraulics and Rotary Lift were partial offsets. Heil Refuse and Marathon
provide equipment to the solid waste hauling industry, where a decline in
customer capital spending last year diminished backlog. Order recovery has not
yet reached expected levels. The book-to-bill for these two companies in the
quarter was 1.1, but the level of orders and of March 31 backlog were below last
year. At Heil Trailer, first quarter orders exceeded last year by more than 50%
and bookings exceeded billings by 12%. Backlog remains below prior year, but has
been improving since the middle of last year's fourth quarter. Dover Industries
total bookings (adjusted for Dieterich Standard) were up slightly from last
year. A better earnings comparison at Industries is expected in the second
quarter with strong year-over-year gains possible in the second half.
DOVER DIVERSIFIED:
Profits in the Diversified segment dropped 5% from last year as the
expected decline at Belvac ($7 million) offset much stronger performances at
several other companies. Belvac's unfavorable
7
comparison, which will be larger in the second quarter, reflects the reduced
needs of the aluminum can industry for "necking" equipment after three years
during which Belvac struggled to expand production to the levels demanded by its
customers. Belvac's shipments began a sharp decline in the third quarter of last
year, but are expected to "bottom out" during 1997--as suggested by the first
quarter book-to-bill of .98, the best such quarterly comparison in almost two
years. Large earnings gains were achieved by the now merged Pathway/TEC
operations, by Mark Andy and by Hill-Phoenix. A-C Compressor earnings were flat
due to a strike (now settled) that interrupted production in March. These four
companies are still operating at margins that are below desired levels and their
continued 1997 improvement remains essential within the Diversified segment to
offset the large earnings decline that is occurring at Belvac. Orders for
Diversified exceeded shipments, but backlog is more than 20% below last year
(primarily Belvac). Earnings comparisons will be strongly unfavorable in the
second quarter (Belvac's and Diversified's best quarter in 1996) but should
improve in the second half.
DOVER RESOURCES:
Dover Resources' profits slipped 4% from last year's first quarter despite
a sales gain of 9%. Most of the sales increase reflects the 1996 acquisitions of
Robohand (by De-Sta-Co Industrial Products) and of Tulsa Winch, as well as the
1997 acquisition of Hydro Systems of Cincinnati, Ohio. Hydro Systems is a maker
of dispensing equipment--primarily for the professional cleaning industry. Their
impact on Resources' profits was slightly positive, due to acquisition related
costs, but should increase as the year progresses. Earnings declined
substantially at Midland, as expected, due to the end of the boom in rail tank
car production that had helped Midland to record profits in 1996. Profit results
of other Resources' companies were mixed, but even with prior year in total. New
orders exceeded shipments by 8%, with particular strength at Duncan Parking
Systems which won large orders from New York City and Los Angeles for its Eagle
2000 electronic meter. A majority of Resources' companies, including Midland,
had first quarter book-to-bill ratios in excess of 1.0. A modest year-over-year
profit gain appears possible for the second quarter and for the second half.
DOVER ELEVATOR:
Profits at Dover Elevator advanced 10% on a 4% sales gain as margins
reached 11%--for the best margin level-since before the 1991 real estate crash.
A more favorable product mix of somewhat better priced new elevator work,
improved field labor efficiency, selective correction of low margin service
business, and tight expense control are responsible for the margin gain. The
elevator industry in North America is continuing to see growth in the low-rise
(hydraulic) market and in mid-rise (traction) equipment in some geographic
areas. Bookings for new elevator work were strong in North America, up over 20%
from last year. This was augmented by an even larger gain in International where
the UK and Far East were stronger. The earnings outlook remains positive for the
second quarter and full year, but significant gains from the first quarter
profit level will be difficult to achieve.
OUTLOOK:
Commenting on first quarter results, Thomas L. Reece, Dover's President
and CEO said, "We have been advising investors since mid-1996 that the market
dynamics at the two Heil companies, and at Belvac, Midland and Marathon would
make early-1997 earnings comparisons difficult for Dover. These five companies
did, in fact earn $15 million less in the first quarter of 1997 than in the
comparable 1996 period, but all are fine, well-run, profitable businesses. Some
slowness in shipments at Universal was more than offset by a favorable bookings
surprise for Technologies in general and Universal in particular. We are off to
a good start in our pursuit of a strong earnings year".
8
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.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DOVER CORPORATION
Date: April 23, 1997 /s/ John F. McNiff
-------------- ------------------------
John F. McNiff, Vice
President
and Treasurer
Date: April 23, 1997 /s/ Alfred Suesser
-------------- ------------------------
Alfred Suesser,
Controller and
Assistant
Treasurer
5
1,000
3-MOS
DEC-31-1997
JAN-1-1997
MAR-31-1997
113,366
18,208
742,573
24,979
523,726
1,432,046
1,139,541
(630,420)
2,959,628
1,104,075
255,435
0
0
117,079
1,384,214
2,959,628
1,008,781
1,008,781
670,914
895,468
(6,077)
0
10,987
120,636
42,436
0
0
0
0
0
0.70
0.70
