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 six months ended June 30, 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 111,186,351.
2
Part. I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended June 30,
(000 omitted)
1997 1996
----------------- -----------------
Net sales $1,154,011 $1,023,423
Cost of sales 758,936 674,637
----------------- -----------------
Gross profit 395,075 348,786
Selling & administrative expenses 238,086 204,635
----------------- -----------------
Operating profit 156,989 144,151
----------------- -----------------
Other deductions (income):
Interest expense 12,040 10,733
Interest income (1,803) (1,845)
Foreign exchange (1,026) (293)
Gain on dispositions (32,171) -
All other, net (4,514) (2,174)
----------------- -----------------
Total (27,474) 6,421
----------------- -----------------
Earnings before taxes on income 184,463 137,730
Federal & other taxes on income 59,548 49,872
================= =================
Net earnings $ 124,915 $ 87,858
================= =================
Weighted average number of common shares
outstanding during the period 111,961 113,798
================= =================
Net earnings per common share $1.12 $0.78
================= =================
3
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Six Months Ended June 30,
(000 omitted)
1997 1996
----------------- -----------------
Net sales $2,162,792 $ 2,022,896
Cost of sales 1,429,850 1,338,913
----------------- -----------------
Gross profit 732,942 683,983
Selling & administrative expenses 460,602 411,380
----------------- -----------------
Operating profit 272,340 272,603
----------------- -----------------
Other deductions (income):
Interest expense 23,027 22,259
Interest income (5,859) (7,477)
Foreign exchange (7,103) (603)
Gain on dispositions (32,171) -
All other, net (10,653) (3,361)
----------------- -----------------
Total (32,759) 10,818
----------------- -----------------
Earnings before taxes on income 305,099 261,785
Federal & other taxes on income 101,684 96,182
================= =================
Net earnings $ 203,415 $ 165,603
================= =================
Weighted average number of common shares
outstanding during the period 111,961 113,798
================= =================
Net earnings per common share $1.82 $1.46
================= =================
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Six Months Ended June 30,
(000 omitted)
1997 1996
----------------- -----------------
Retained earnings at January 1 $ 1,470,008 $ 1,152,187
Net earnings 203,415 165,603
----------------- -----------------
1,673,423 1,317,790
Deduct:
Common stock cash dividends
$ 0.34 per share ($0.30 in 1996) 38,057 34,148
================= =================
Retained earnings at end of period $ 1,635,366 $ 1,283,642
================= =================
4
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000 omitted)
June 30, Dec 31,
1997 1996
----------------- ----------------
Assets:
Current assets:
Cash & cash equivalents $ 134,944 $ 199,955
Marketable securities 19,527 17,839
Receivables, net of allowance for doubtful accounts 835,146 715,495
Inventories 527,056 499,870
Prepaid expenses 58,870 56,654
----------------- ----------------
Total current assets 1,575,543 1,489,813
----------------- ----------------
Property, plant & equipment (at cost) 1,161,948 1,106,981
Accumulated depreciation (642,316) (612,048)
----------------- ----------------
Net property, plant & equipment 519,632 494,933
----------------- ----------------
Intangible assets, net of amortization 965,564 963,182
Other intangible assets 10,258 10,258
Deferred charges & other assets 54,867 35,193
================= ================
$ 3,125,864 $ 2,993,379
================= ================
Liabilities:
Current liabilities:
Notes payable $ 533,444 $ 488,651
Current maturities of long-term debt 786 3,754
Accounts payable 226,011 202,763
Accrued compensation & employee benefits 126,742 130,598
Accrued insurance 103,287 104,916
Other accrued expenses 203,377 206,992
Income taxes 22,831 1,430
----------------- ----------------
Total current liabilities 1,216,478 1,139,104
Long-term debt 254,923 252,955
Deferred taxes 43,549 54,068
Deferred compensation 60,552 57,550
Stockholders' equity:
Preferred stock - -
Common stock 117,140 116,858
Additional paid-in surplus 22,007 13,818
Cummulative translation adjustments (24,475) 1,900
Unrealized holding gains (losses) 3,420 3,663
Retained earnings 1,635,366 1,470,008
----------------- ----------------
Subtotal 1,753,458 1,606,247
Less: treasury stock 203,096 116,545
----------------- ----------------
1,550,362 1,489,702
----------------- ----------------
$ 3,125,864 $ 2,993,379
================= ================
5
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Six Months Ended June 30,
(000 omitted)
1997 1996
----------------- -----------------
Cash flows from operating activities:
Net income $ 203,415 $ 165,603
----------------- -----------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 49,599 40,878
Amortization 20,825 19,577
Net increase (decrease) in deferred taxes (10,577) (3,709)
Net increase (decrease) in LIFO reserves 820 778
Increase (decrease) in deferred compensation 3,005 (3,169)
Gain on sale of business (32,171) (2,602)
Other, net (23,966) 2,101
Changes in assets & liabilities (excluding acquisitions):
Decrease (increase) in accounts receivable (59,786) 22,438
Decrease (increase) in inventories, excluding LIFO reserve (8,451) (28,327)
Decrease (increase) in prepaid expenses (2,455) (2,921)
Increase (decrease) in accounts payable 16,975 (25,982)
Increase (decrease) in accrued expenses (25,839) (16,544)
Increase (decrease) in federal & other taxes on income 764 (2,515)
----------------- -----------------
Total adjustments (71,257) 3
----------------- -----------------
Net cash provided by operating activities 132,158 165,606
----------------- -----------------
Cash flows from (used in) investing activities:
Net sale (purchase) of marketable securities (1,688) (3,950)
Additions to property, plant & equipment (62,027) (61,846)
Acquisitions, net of cash & cash equivalents (75,267) (58,905)
Proceeds from sale of business 20,103 17,898
Purchase of treasury stock (86,848) (1,074)
----------------- -----------------
Net cash from (used in) investing activities (205,727) (107,877)
----------------- -----------------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable 43,369 (34,417)
Reduction of long-term debt (1,918) (6,041)
Proceeds from exercise of stock options 5,164 3,836
Cash dividends to stockholders (38,057) (34,148)
----------------- -----------------
Net cash from (used in) financing activities 8,558 (70,770)
----------------- -----------------
Net increase (decrease) in cash & cash equivalents (65,011) (13,041)
Cash & cash equivalents at beginning of period 199,955 121,698
----------------- -----------------
Cash & cash equivalents at end of period $ 134,944 $ 108,657
================== =================
6
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 cash flows 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:
June 30, 1997 Dec 31, 1996
------------------ ------------------
Raw materials $173,531 $165,064
Work in progress 231,012 219,729
Finished goods 169,114 160,858
------------------ ------------------
Total 573,657 545,651
Less LIFO reserve 46,601 45,781
================== ==================
Net amount per balance sheet $527,056 $499,870
================== ==================
NOTE C - Additional Information
For a more detailed 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 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(1) Material Changes In Consolidated Financial Condition:
The Company's liquidity increased modestly during the first half of
1997 as compared to the position at December 31, 1996.
Working capital increased from $350.7 million at the end of last year
to $359.1 million at June 30, 1997. The $8.4 million increase represents
positive cash flow over and above dividends of $38.1 million, $75.3 million paid
for acquisitions, and $86.5 million treasury stock purchases during this six
month period.
At June 30, 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 $634.7 million represented 29.0% of total capital.
This compares with 26.2% at December 31, 1996.
(2) Material Changes In Results Of Operations:
The Company earned $1.12 per share in the quarter ended June 30, including a net
special gain of $.23 per share, described below. Excluding this special item,
earnings per share were $.89, an increase of 14% from the $.78 earned in the
second quarter of the prior year. Sales of $1,154 million set a quarterly record
and were 13% above prior year second quarter.
7
The special item of $.23 per share represents a gain from the sale by Dover
Elevator of its U.K. and German operations. Dover Elevator management determined
that its operations in Europe, while successful, were too small in relation to
the large and mature European elevator market to represent a strategic platform
for growth. Consequently, they have been sold to Thyssen Industries. Dover
believes that reinvestment of the cash proceeds, net of taxes, will offset the
reduction of operating earnings resulting from the sale. The special item was
$32.2 million pretax, and is shown separately in Dover's market segment income
statement to maintain comparability of segment earnings.
During the second quarter Dover invested $53 million to repurchase 1 million
shares of its common stock. This brought repurchases in 1997 to $86 million for
1.6 million shares (1.4% of shares outstanding at the start of the year) at an
average price of $53 per share. Dover also invested $23 million in two "add-on"
acquisitions in addition to the $53 million spent on acquisitions in the first
quarter. Tranter purchased the Austrian distributor of one of its product lines
and Pathway Bellows acquired Langbein & Engelbracht (Germany), a producer of air
pollution control systems, including incinerators for volatile organic compounds
(voc's).
Four of Dover's five segments had higher earnings than last year. The sole
decline, at Dover Diversified, reflected the previously forecast adverse
comparison at its Belvac company. Earnings from Diversified's other eight
businesses together increased more than 40%.
Dover Technologies:
Dover Technologies achieved record profits with a gain of 38% over prior year on
quarterly sales that topped $300 million for the first time. Universal
Instruments' shipments were 40% above prior year and its profits were even
further ahead. The company was able to increase its production levels more than
40% above this year's first quarter rate, maintaining good customer service
despite the surprisingly strong orders received during the first quarter. Second
quarter orders did decline from the first quarter of 1997, but were still strong
at 98% of shipments and 29% ahead of prior year. Everett Charles, acquired late
in 1996, also made a strong contribution to Dover Technologies' profit
comparisons due to higher than planned operating profits and reduced acquisition
write-offs. DEK also had a strong quarter, with an earnings improvement of more
than $3 million from last year. Profits were down slightly in electronic
components/subsystems as K&L's successful penetration of the mobile telecom
market almost offset Quadrant's decline from their record result last year.
Profits at Imaje (continuous ink jet printing) also declined against last year's
record quarter, with the decline magnified in Dover's U.S.$ reporting by the
fall in value of the French Franc. Technologies' overall bookings matched the
first quarter level, were 1% above shipments, and 32% above prior year.
Dover Industries:
Dover Industries achieved a 5% gain in profit despite the absence of Dieterich
Standard which was sold in the third quarter of last year. Most Industries'
companies had improved sales and earnings including Heil Trailer, which now
appears to have moved beyond the cyclical downswing in its industry during mid
'95 to late '96. Four companies Groen, Randell, Davenport, and Texas Hydraulics,
had earnings gains of more than 30%, reflecting higher shipments and strong
incremental margins that raised profitability. The only significant profit
decline was at Heil Refuse, where bookings and shipments remain depressed due to
capital spending cut-backs in the waste hauling industry. All Dover Industries'
companies achieved double-digit margins in the quarter with almost half in
excess of 20%. While book-to-bill in this segment is not a strong indicator of
future results, Industries did book above shipment levels and 12% more than last
year (adjusted for Dieterich).
8
Dover Diversified:
As noted above, the 20% ($6.8 million) profit decline at Dover Diversified was
caused by a $12 million decline at Belvac which had record financial results in
the prior year's quarter when shipments of its "necking" machines peaked. Belvac
has introduced new products and aggressively reduced costs to remain a solidly
profitable, though smaller, company. Their second quarter bookings were 29%
above last year but backlog is still well below this time last year...Five of
Diversified's companies had earnings gains above 20% Tranter, due to higher
volume and improved margins in its domestic operations; Sargent Controls, due to
gains in its aerospace bearing and hydraulic control products; Waukesha, due to
strength in its specially engineered industrial bearings; and A-C Compressor and
Mark Andy, where improved margins offset small shipment declines. Hill continued
to struggle toward achieving better profitability. June's encouraging margins on
strong production/shipments, and orders that are 17% above shipments year to
date, should result in higher earnings during the second half of 1997.
Diversified's orders were very strong during the second quarter; 12% above
shipments and 34% above prior year.
Dover Resources:
Dover Resources' profits rose 13% on a 17% sales increase to a record level.
Midland, comparing to a boom period last year, and De-Sta-Co Manufacturing,
facing a much more difficult automotive market, had significant declines (in
percentage terms) that totaled $2.5 million. Most of Resources' other businesses
were ahead of last year in profits, and together up 25%, with especially strong
gains at Cook, Norris, and AOT which are seeing sales gains related to higher
demand for gas and oil production equipment. Duncan, Petro Vend and De-Sta-Co
Industries had substantial gains due to new products, better costs, and higher
market penetration. Recently acquired Tulsa Winch and Hydro Systems continued to
perform above operating expectations, and reduced acquisition costs permitted
their first substantial contribution to Resources' reported earnings. Bookings
at Resources were 7% below shipments in the quarter with most of the shortfall
in June.
Dover Elevator:
Dover Elevator International earned over $25 million in a single quarter for the
first time since the final quarter of 1990. Their profit gain of 13% on an 8%
revenue increase was achieved in their North American operations where Dover
Elevator International has focused its attention since its 1995 restructuring.
Improved margins of 11.4% over-all, and higher in North America, reflect
continued efforts at reducing field labor and factory costs, as well as a
stronger market for hydraulic elevators. Bookings for new elevator work exceeded
sales and were ahead of last year's second quarter by more than 15%. Backlogs
are up similarly compared to last year and to the beginning of 1997.
Outlook:
Dover's earnings in the second quarter exceeded management's expectations, as
did the level of bookings in the Technologies segment. Excluding the $.23 per
share special gain, earnings were 9% ahead of the first half of last year. Dover
believes its 1997 full-year percentage earnings gain could reach double digits
(based on $3.01 per share earned last year after excluding last year's special
gain of $.44.)
9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
The Annual Meeting of Stockholders was held in Wilmington, Delaware on
April 22,1997. Stockholders representing 97,825,777 shares of common stock, or
approximately 87% of the outstanding stock, were present in person or by proxy.
All of the nominees for director, namely David H. Benson, Magalen O.
Bryant, Jean-Pierre M. Ergas, Roderick J. Fleming, John J. Fort, James J. Koley,
John F. McNiff, Anthony J. Ormsby, Thomas L. Reece, and Gary L. Roubos were
elected directors for a one year term, each receiving at least 97,114,793 votes.
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: July 29, 1997 S/S John F. McNiff
---------------------------- -----------------------
John F. McNiff, Vice President
and Treasurer
Date: July 29, 1997 S/S Alfred Suesser
---------------------------- -----------------------
Alfred Suesser, Controller and
Assistant Treasurer
5
1,000
6-MOS
DEC-31-1997
APR-01-1997
JUN-30-1997
134,944
19,527
860,447
25,301
527,056
1,575,543
1,161,948
(642,316)
3,125,864
1,216,478
254,923
117,140
0
0
1,433,222
3,125,864
2,162,792
2,162,792
1,429,850
1,890,452
(7,103)
0
23,027
305,099
101,684
0
0
0
0
0
1.12
1.12
