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, 1999 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 208,410,002.
2
Part. I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended June 30,
(000 omitted)
UNAUDITED
1999 1998
----------- -----------
Net sales $ 1,077,850 $ 1,009,772
Cost of sales 687,705 650,857
----------- -----------
Gross profit 390,145 358,915
Selling & administrative expenses 241,615 224,508
----------- -----------
Operating profit 148,530 134,407
----------- -----------
Other deductions (income):
Interest expense 12,329 13,925
Interest income (4,097) (6,806)
Foreign exchange (700) 637
All other, net (1,827) (1,549)
----------- -----------
Total 5,705 6,207
----------- -----------
Earnings before taxes on income 142,825 128,200
Federal & other taxes on income 49,515 43,492
----------- -----------
Net earnings from continuing operations 93,310 84,708
Earnings from discontinued operations, net of tax 15,346
=========== ===========
Net earnings $ 93,310 $ 100,054
=========== ===========
Weighted average number of common shares
outstanding during the period
- Basic 213,796 222,901
=========== ===========
- Diluted 215,248 224,692
=========== ===========
Net earnings per share:
Basic - Continuing $ 0.44 $ 0.38
Discontinued -- 0.07
=========== ===========
Net earnings $ 0.44 $ 0.45
=========== ===========
Diluted - Continuing $ 0.44 $ 0.38
Discontinued -- 0.07
=========== ===========
Net earnings $ 0.44 $ 0.45
=========== ===========
See Notes to Consolidated Financial Statements.
3
CONSOLIDATED STATEMENT OF COMPREHENSIVE EARNINGS
Three Months Ended June 30,
(000 omitted)
UNAUDITED
1999 1998
--------- ---------
Net earnings $ 93,310 $ 100,054
--------- ---------
Other comprehensive earnings, net of tax:
Foreign currency translation adjustments (15,289) 126
Less: reclassification adjustment for adjustments
included in net earnings -- (486)
--------- ---------
Total foreign currency translation adjustments (15,289) 612
--------- ---------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period (5) 3,285
Less: reclassification adjustment for gains (losses)
included in net earnings -- 5,707
--------- ---------
Total unrealized gains on securities (tax $0 in 1999, -$1,278 in 1998) (5) (2,422)
--------- ---------
Other comprehensive earnings (15,294) (1,810)
========= =========
Comprehensive earnings $ 78,016 $ 98,244
========= =========
See Notes to Consolidated Financial Statements.
4
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Six Months Ended June 30,
(000 omitted)
UNAUDITED
1999 1998
----------- -----------
Net sales $ 2,047,605 $ 1,940,268
Cost of sales 1,314,587 1,249,229
----------- -----------
Gross profit 733,018 691,039
Selling & administrative expenses 475,334 439,011
----------- -----------
Operating profit 257,684 252,028
----------- -----------
Other deductions (income):
Interest expense 25,952 25,764
Interest income (13,301) (11,986)
Foreign exchange (423) 1,716
All other, net (2,133) (2,894)
----------- -----------
Total 10,095 12,600
----------- -----------
Earnings before taxes on earnings 247,589 239,428
Federal & other taxes on earnings 85,059 80,877
----------- -----------
Net earnings from continuing operations 162,530 158,551
Discontinued operations 523,938 31,498
----------- -----------
Net earnings $ 686,468 $ 190,049
=========== ===========
Weighted average number of common shares
outstanding during the period
- Basic 213,796 222,901
=========== ===========
- Diluted 215,248 224,692
=========== ===========
Net earnings per share:
Basic - Continuing $ 0.76 $ 0.71
Discontinued -- 0.14
Gain on sale 2.45 --
----------- -----------
Net earnings $ 3.21 $ 0.85
=========== ===========
Diluted - Continuing $ 0.76 $ 0.71
Discontinued -- 0.14
Gain on sale 2.43 --
----------- -----------
Net earnings $ 3.19 $ 0.85
=========== ===========
See Notes to Consolidated Financial Statements.
5
CONSOLIDATED STATEMENT OF COMPREHENSIVE EARNINGS
Six Months Ended June 30,
(000 omitted)
UNAUDITED
1999 1998
--------- ---------
Net earnings $ 686,468 $ 190,049
--------- ---------
Other comprehensive earnings, net of tax:
Foreign currency translation adjustments (40,379) (1,218)
Less: reclassification adjustment for adjustments
included in net earnings -- (486)
--------- ---------
Total foreign currency translation adjustments (40,379) (732)
--------- ---------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period (5) (27)
Less: reclassification adjustment for gains (losses)
included in net earnings -- 5,713
--------- ---------
Total unrealized gains on securities (tax $0 in 1999, $27 in 1998) (5) (5,740)
--------- ---------
Other comprehensive earnings (40,384) (6,472)
--------- ---------
Comprehensive earnings $ 646,084 $ 183,577
========= =========
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Six Months Ended June 30,
(000 omitted)
UNAUDITED
1999 1998
---------- ----------
Retained earnings at January 1 $1,992,991 $1,703,335
Net earnings 686,468 190,049
---------- ----------
2,679,459 1,893,384
Deduct:
Common stock cash dividends
$ 0.21 per share ($0.19 in 1998) 44,805 42,364
========== ==========
Retained earnings at end of period $2,634,654 $1,851,020
========== ==========
See Notes to Consolidated Financial Statements.
6
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(000 omitted)
UNAUDITED
June 30, 1999 December 31, 1998
------------- -----------------
Assets:
Current assets:
Cash & cash equivalents $ 230,706 $ 96,774
Marketable securities -- --
Receivables, net of allowance for doubtful accounts 669,500 575,630
Inventories 607,179 559,267
Prepaid expenses 80,314 72,853
----------- -----------
Total current assets 1,587,699 1,304,524
----------- -----------
Property, plant & equipment (at cost) 1,364,509 1,282,436
Accumulated depreciation (775,882) (710,473)
----------- -----------
Net property, plant & equipment 588,627 571,963
----------- -----------
Intangible assets, net of amortization 1,639,779 1,438,793
Other intangible assets 7,358 7,358
Deferred charges & other assets 32,840 59,755
Net assets of discontinued operations 244,883
=========== ===========
$ 3,856,303 $ 3,627,276
=========== ===========
Liabilities:
Current liabilities:
Notes payable $ 103,487 $ 427,529
Current maturities of long-term debt 897 6,060
Accounts payable 202,993 187,738
Accrued compensation & employee benefits 140,815 149,855
Accrued insurance 50,446 43,246
Other accrued expenses 196,770 175,036
Income taxes 347,375 283
----------- -----------
Total current liabilities 1,042,783 989,747
----------- -----------
Long-term debt 606,742 610,090
Deferred taxes 54,815 50,196
Other deferrals (principally compensation) 65,597 66,359
Stockholders' equity:
Preferred stock -- --
Common stock 236,108 235,571
Additional paid-in surplus 29,745 18,630
Cumulative translation adjustments (67,622) (27,243)
Unrealized holding gains (losses) 46 51
----------- -----------
Accumulated other comprehensive earnings (67,576) (27,192)
----------- -----------
Retained earnings 2,634,654 1,992,991
----------- -----------
Subtotal 2,832,931 2,220,000
Less: treasury stock 746,565 309,116
----------- -----------
2,086,366 1,910,884
----------- -----------
$ 3,856,303 $ 3,627,276
=========== ===========
See Notes to Consolidated Financial Statements.
7
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Six Months Ended June 30,
(000 omitted)
UNAUDITED
1999 1998
----------- -----------
Cash flows from operating activities:
Net earnings $ 686,468 $ 190,049
----------- -----------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Income from discontinued operations -- (31,498)
Gain on sale of discontinued business (523,938)
Depreciation 60,286 54,163
Amortization 29,628 24,583
Net increase (decrease) in deferred taxes 239 330
Net increase (decrease) in LIFO reserves 928 921
Increase (decrease) in deferred compensation (3,175) 1,152
Other, net (10,364) (7,454)
Changes in assets & liabilities (excluding acquisitions):
Decrease (increase) in accounts receivable (60,296) 830
Decrease (increase) in inventories, excluding LIFO reserve 4,723 (37,992)
Decrease (increase) in prepaid expenses (6,468) (4,985)
Increase (decrease) in accounts payable (681) (5,852)
Increase (decrease) in accrued expenses (21,314) (17,090)
Increase (decrease) in federal & other taxes on income (28,243) (19,878)
----------- -----------
Total adjustments (558,675) (42,770)
----------- -----------
Net cash provided by operating activities 127,793 147,279
----------- -----------
Cash flows from (used in) investing activities:
Net sale (purchase) of marketable securities -- 21,928
Additions to property, plant & equipment (53,825) (57,634)
Acquisitions, net of cash & cash equivalents (304,304) (522,120)
Proceeds from sale of business 1,169,599 --
Purchase of treasury stock (437,448) (1,128)
----------- -----------
Net cash from (used in) investing activities 374,022 (558,954)
----------- -----------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable (325,560) 82,200
Increase (decrease) in long-term debt (3,429) 347,816
Proceeds from exercise of stock options 5,911 5,484
Cash dividends to stockholders (44,805) (42,364)
----------- -----------
Net cash from (used in) financing activities (367,883) 393,136
----------- -----------
----------- -----------
Cash from discontinued operations -- (13,581)
----------- -----------
Net increase (decrease) in cash & cash equivalents 133,932 (32,120)
Cash & cash equivalents at beginning of period 96,774 103,111
=========== ===========
Cash & cash equivalents at end of period $ 230,706 $ 70,991
=========== ===========
See Notes to Consolidated Financial Statements.
8
DOVER CORPORATION CONSOLIDATED
MARKET SEGMENT RESULTS
(unaudited)
EARNINGS SALES
Second quarter ended June 30,: 1999 1998 * 1999 1998 *
-------------- -------------- -------------- --------------
Dover Industries $ 48,709,000 $ 37,354,000 $ 293,826,000 $ 252,065,000
Dover Technologies 47,904,000 40,925,000 334,883,000 317,033,000
Dover Diversified 34,808,000 38,658,000 260,715,000 248,832,000
Dover Resources 24,895,000 30,344,000 189,554,000 192,875,000
-------------- -------------- ============== ==============
Subtotal (after intramarket eliminations) 156,316,000 147,281,000 $1,077,850,000 $1,009,772,000
============== ==============
Corporate expense & interest net (13,491,000) (19,081,000)
-------------- --------------
Earnings before taxes on income 142,825,000 128,200,000
Taxes on income 49,515,000 43,492,000
-------------- --------------
Net earnings - Continuing Operations 93,310,000 84,708,000
Earnings from discontinued operations * -- 15,346,000
============== ==============
Net earnings $ 93,310,000 $ 100,054,000
============== ==============
Net earnings per share:
Basic - Continuing $ 0.44 $ 0.38
Discontinued -- 0.07
============== ==============
Net earnings $ 0.44 $ 0.45
============== ==============
Diluted - Continuing $ 0.44 $ 0.38
Discontinued -- 0.07
============== ==============
Net earnings $ 0.44 $ 0.45
============== ==============
EARNINGS SALES
Six months ended June 30,: 1999 1998 * 1999 1998 *
-------------- -------------- -------------- --------------
Dover Industries $ 85,993,000 $ 71,368,000 $ 552,532,000 $ 481,559,000
Dover Technologies 72,518,000 74,624,000 623,003,000 614,690,000
Dover Diversified 59,714,000 67,295,000 491,295,000 459,107,000
Dover Resources 51,828,000 62,390,000 383,311,000 387,176,000
-------------- -------------- -------------- --------------
Subtotal (after intramarket eliminations) 270,053,000 275,677,000 $2,047,605,000 $1,940,268,000
============== ==============
Corporate expense & interest net (22,464,000) (36,249,000)
-------------- --------------
Earnings before taxes on income 247,589,000 239,428,000
Taxes on Income 85,059,000 80,877,000
-------------- --------------
Net earnings - Continuing Operations 162,530,000 158,551,000
Earnings from discontinued operations * 31,498,000
Gain on sale of discontinued operations * 523,938,000
-------------- --------------
Net earnings $ 686,468,000 $ 190,049,000
============== ==============
Net earnings per share:
Basic - Continuing $ 0.76 $ 0.71
Discontinued -- 0.14
Gain on sale 2.45 --
============== ==============
Net earnings $ 3.21 $ 0.85
============== ==============
Diluted - Continuing $ 0.76 $ 0.71
Discontinued -- 0.14
Gain on sale 2.43 --
============== ==============
Net earnings $ 3.19 $ 0.85
============== ==============
Average number of shares outstanding - Basic 213,796,000 222,901,000
Average number of shares outstanding - Diluted 215,248,000 224,692,000
* On January 5, 1999, Dover completed the sale of its elevator business to
Thyssen Industrie AG for $1.17 billion. Results for 1998 have been restated to
classify the elevator business as discontinued.
9
DOVER CORPORATION CONSOLIDATED
MARKET SEGMENT IDENTIFIABLE ASSETS
(000 OMITTED)
UNAUDITED
June 30, December 31,
1999 1998
---------- ----------
Dover Industries $ 840,730 $ 732,136
Dover Technologies 1,120,486 1,000,209
Dover Diversified 768,015 802,872
Dover Resources 942,601 781,933
Corporate (1) 184,471 65,243
---------- ----------
Total Continuing 3,856,303 3,382,393
Net assets of discontinued operations -- 244,883
---------- ----------
Consolidated Total $3,856,303 $3,627,276
========== ==========
(1) - Principally cash and equivalents
10
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
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.
On January 5, 1999 the company sold the Dover Elevator International
segment. The results of prior year second quarter and six months have been
restated to show the segment as discontinued operations.
NOTE B - Inventory
Inventories, by components, are summarized as follows:
(000 omitted)
-----------------------------
UNAUDITED
June 30, December 31,
1999 1998
-------- --------
Raw materials $238,406 $220,467
Work in progress 189,376 175,117
Finished goods 220,765 204,123
-------- --------
Total 648,547 599,707
Less LIFO reserve 41,368 40,440
======== ========
Net amount per balance sheet $607,179 $559,267
======== ========
NOTE C - Accumulated other comprehensive earnings
Accumulated other comprehensive earnings, by components
are summarized as follows:
UNAUDITED (000 omitted)
----------------------------------------------------
Accumulated
Other Unrealized
Comprehensive Cumulative Holding
Earnings Translation Gains
(losses) Adjustments (losses)
-------- -------- --------
Beginning balance $(27,192) $(27,243) $ 51
Current-period change (40,384) (40,379) (5)
-------- -------- --------
Ending balance $(67,576) $(67,622) $ 46
======== ======== ========
11
NOTE D - 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 on Form 10-K which was filed with the Securities and
Exchange Commission on March 30, 1999.
On January 5, 1999, Dover completed the sale of it's Elevator business to
Thyssen Industrie AG for $1.17 billion. Results for second quarter and six
months 1998 have been restated to classify the elevator business as
discontinued.
Net earnings as reported was used in computing both basic EPS and diluted
EPS without further adjustment. The Company does not have a complex capital
structure; accordingly, the entire difference between basic weighted average
shares and diluted weighted average shares results from assumed stock option
exercise. The diluted EPS computation was made using the treasury stock method.
In June 1998, the FASB issued statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities",
effective for all fiscal quarters of all fiscal years beginning after June 15,
2000. The Company does not expect the statement to have a significant effect on
its current financial reporting and disclosure requirements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(1) MATERIAL CHANGES IN CONSOLIDATED FINANCIAL CONDITION:
The Company's liquidity increased during the first half of 1999 as
compared to the position at December 31, 1998. The proceeds from sale of
elevator business ($1.17 billion), net of amounts invested in treasury stock
($437 million) and acquisitions ($306 million) is the principle reason for the
increase in liquidity.
Working capital increased from $314,777 million at the end of last year to
$544,916 million at June 30, 1999.
The Company earned $.44 per diluted share from continuing operations in
the Quarter ended June 30, up 16% from $.38 cents in the prior year.
Discontinued operations (Elevator Segment) increased last year's total second
quarter earnings per share to $.45. Sales of almost $1.1 billion in the second
quarter were up 7%, segment earnings were up 6%, and net earnings improved 10%.
These income gains translated into higher earnings per share gains due to
Dover's share repurchase program.
The Company repurchased 5.1 million shares in the second quarter at an
average price of $ 37 1/4. Since announcing the sale of the Elevator business in
November, 1998, Dover has repurchased 14.7 million shares for $511 million,
reducing actual shares outstanding by about 7%.
The Company also invested $140 million in the second quarter by purchasing
three companies. Richards Industries was acquired by OPW-Fueling Components to
expand their product range. J. E. Piston, a maker of high-performance engine
pistons primarily for automotive racing, was acquired by Wiseco which makes
similar products primarily for motorcycle and boat racing. Somero, the leading
manufacturer of laser guided "screeds" for leveling concrete during construction
joins Dover Industries. Somero holds numerous patents for its laser technology,
which provides precision, speed, and cost reduction to the construction
industry.
This brings the Company's total acquisition investment in the first six
months of 1999 to $306 million. Further acquisitions are likely during the
second half of the year.
At June 30, 1999, 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 $480.4 million represented 18.7% of total capital.
This compares with 33.1% at December 31, 1998.
12
(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:
The Company earned $.44 per diluted share in its second quarter ending
June 30, compared to $.45 per share in the second quarter of 1998.
Continuing operations earned $.44 per share in the second quarter,
compared to $.38 per share in the prior year.
Two of the Company's market segments achieved earnings gains in the second
quarter (Industries and Technologies) while two had declines (Diversified and
Resources).
DOVER INDUSTRIES:
Industries' 30% earnings gain came from strong growth in most of its
businesses as nine of its thirteen companies achieved increases ranging from 12%
to over 50%. Declines were small, amounting to only $1.3 million in total.
Somero added modestly to segment earnings. The largest gains, totaling over $6
million, were in Heil Enviornmental's refuse truck business, Marathon's waste
compacting equipment, Rotary's automotive lifts and Texas Hydraulics' specialty
cylinders. Most companies had book-to-bill ratios of 1.0 or greater and total
bookings were up 12% from last year (8% adjusted for acquisitions). Heil
Trailer's market has cooled from the strong pace of early 1998 as bookings were
down by 15% and 21% on a year-to-date and second quarter basis, respectively.
Backlog remains adequate for this business, but the market is probably not
strong enough to allow Trailer to match the shipment level of last year's second
half. Industries' total orders were 98% of shipments and June 30 backlog is
close to last year's level. Second quarter earnings will probably be Industries'
highest quarter this year, but business conditions remain strong for most of its
companies.
DOVER TECHNOLOGIES:
Technologies' profits in the second quarter advanced 17% on a 6% sales
gain, with the Circuit Board Assembly/Test companies (CBAT) up 15% on a 4%
revenue gain. On a sequential basis, profits were up 95% from the first quarter
of 1999 with CBAT up 89%. Orders at Technologies were 26% above the second
quarter of last year, 22% above the first quarter of 1999, and 11% higher than
shipments. For CBAT, these comparisons were 30%, 26%, and 12%, respectively.
June was an unexpectedly strong order month, but the CBAT companies were still
below the peak levels achieved during the first 10 months of 1997, before the
electronics industry's slump began.
All but one of Technologies' companies had earnings gains in the second
quarter with ink jet marking, CBAT, and specialty electronic components all
showing gains. Profits from Alphasem, acquired at the beginning of this year,
allowed Universal Instruments, the largest company in the CBAT portion of
Technologies' business, to improve its earnings only modestly. Universal's
earnings rate in the second quarter was higher than the average of last year's
third and fourth quarters, while backlog at June 30 is up 42% from last year and
has increased 58% from the beginning of 1999 (figures include Alphasem). These
results exceeded management's expectations, but are consistent with the
Company's beginning of the year forecast that the CBAT business would strengthen
as the year progresses.
DOVER DIVERSIFIED:
Profits at Diversified fell by $3.8 million, (equal to 10%,) from a strong
result last year. As previously reported Belvac and A-C Compressor had low
orders in 1998 and were expected, therefore, to earn less in 1999. Together they
earned $3.1 million in this year's second quarter, a decline of $8 million from
last year - all due to lower shipments. However, Belvac had strong orders in the
quarter with a book-to-bill of 1.6 and A-C again booked more than shipments,
raising their June 30 backlog to within 8% of last year. Most of Diversified's
nine other companies had strong gains led by Pathway, Waukesha, and Wiseco. Hill
Phoenix, which is Diversified's largest company measured by sales volume,
achieved an 18% sales gain on their highly competitive supermarket display
case/refrigeration business while maintaining good margins. Hill Phoenix's
bookings were strong at 1.4x sales and their June 30 backlog is 31% ahead of
prior year. Diversified's overall book-to-bill was 1.14 in the quarter which put
backlog 10% ahead of prior year. Diversified had record profits in the second
half of 1998 of $76 million. This will be difficult to match in 1999 unless
orders for short lead-time products improve from current levels.
13
DOVER RESOURCES:
The Resources' segment experienced a $5.4 million (equal to 18%) decline
in second quarter profits, reflecting a broad decline in energy and chemicals
end-markets. Only 2 of 14 companies achieved gains -- Wilden Pump, which
improved margins on slightly lower sales; and Hydro Systems whose equipment is
used in industrial and commercial cleaning applications. Wilden was acquired at
the end of last year's second quarter, and in the current quarter accounted for
about 10% of Resources' sales and 11% of profits (after acquisition premium
amortization). The largest profit declines (together $3.2 million) were at
OPW-Fueling Components and at OPW-Fluid Transfer, the former due to reduced
demand for EPA mandated in-ground petroleum storage equipment and the latter as
a result of the lower demand for equipment to move hazardous chemicals and
gasoline. Bookings for these two companies were 3% less than shipments and their
second quarter earnings rate was about 35% below the average of last year's
second half. Resources companies that directly supply equipment related to oil
and gas drilling also had very unfavorable earnings comparisons to last year,
but markets here are improving in response to higher oil prices, and second
quarter earnings were 25% above the rate of last year's second half. During the
balance of 1999, Dover Resources is unlikely to match the $62 million earned in
the last half of 1998. Operational margins, however, were almost 16% in the
second quarter and profits will respond sharply to any upturn in end markets.
OUTLOOK:
The Company continues to believe that a 15% gain in earnings per share
from continuing operations is a reasonable "guesstimate" for 1999. However, this
requires further strengthening in the second half, which depends on continued
recovery in the electronics industry.
YEAR 2000:
The Company has taken action to assess the nature and extent of the work
required to make its systems, products, factories and infrastructure Year 2000
ready. The Company is approaching resolution of Year 2000 problems along two
separate tracks: (1) Corporate and Subsidiary Offices and Dover-wide information
systems. (2) Company-by-Company for each of the Company's 47 separate
businesses. Corrective action has been ongoing for several years. Additionally,
the Company is evaluating Year 2000 readiness of suppliers and where critical
suppliers are not Year 2000 ready, the Company will monitor their progress and
take appropriate actions.
At the corporate/subsidiary level, appropriate remediation has been completed
for telecommunications equipment, and computer equipment and critical systems
and the Company believes they are Year 2000 compliant.
At the operating company level, each business has taken responsibility for its
own Year 2000 compliance and has assembled working groups to deal with critical
plant and office equipment; products, including " fixes " for any previous
product generations that are Year 2000 sensitive; software; and the ability of
critical suppliers to maintain deliveries. Progress of the working groups is
monitored by each company President and reported to Subsidiary and Corporate
management.
As of June 30, 1999 each of the 47 companies has gone through a process to take
an inventory of critical systems, to make an assessment of Year 2000 readiness
of those systems, to perform necessary remediation including replacing or
updating existing systems as needed, and to perform appropriate Year 2000
testing. Thirty-five of the Company's 47 companies have completed these
procedures and all important issues have been fixed. All others have identified
specific problems remaining and have action plans to solve them by October,
1999. Further, the Company believes products of all of these companies are
either Year 2000 compliant or can be made so by customers, using "fixes"
already developed. Based on current progress and future plans, the Company
believes that the Year 2000 date change will not significantly affect the
Company's ability to deliver products and services to its customers on a timely
basis.
During 1997, 1998 and the first six months of 1999 the Company and its companies
spent approximately $22 million, $27 million and $14 million, respectively, on
computer equipment, software, and non-employee consultants. Most of these
expenditures were for new systems and improved functionality, but an
undetermined amount also served to meet Year 2000 compliance needs. The Company
and its companies do not separately track the internal cost incurred for the Y2K
project.
14
While no amount of preparation and testing can guarantee Year 2000 compliance,
the Company intends to complete its Year 2000 readiness during 1999, and does
not anticipate that expenditures to reach this goal will be material. Moreover,
due to the decentralized nature of the Company and the lack of reliance on
shared or "centralized" systems by its operating companies, the Company believes
that any Year 2000 problems that might become evident after 1999 will not be
material to the Company. Appropriate contingency plans will be developed in
critical areas if deemed necessary. However, given the uncertain consequences of
failure to resolve significant Year 2000 issues, there can be no assurance that
any one or more such failures would not have a material adverse effect on the
actual outcomes and results could be affected by future factors including, but
not limited to, the continued availability of skilled personnel, cost control,
the ability to locate and remediate software code problems, critical suppliers
and subcontractors meeting their commitments to be Year 2000 ready, and timely
actions by customers.
The above statement and similar statements, including estimated future costs,
timetables, contingency plans and remediation plans, and statements containing
the words "believes," "intends," "anticipates" and "expects" and words of
similar import, constitute "forward-looking" statements within the meaning of
the Private Securities Litigation Reform Act of 1995 and Section 21E of the
Securities Exchange Act of 1934.
This "Year 2000 Plan" constitutes a "Year 2000 Readiness Disclosure" within the
meaning of the "Year 2000 Information and Readiness Disclosure Act."
EUROPEAN MONETARY UNION - EURO:
On January 1, 1999, several member countries of the European Union established
fixed conversion rates between their existing sovereign currencies, and adopted
the Euro as their new common legal currency. The Euro conversion may affect
cross-border competition by creating cross-border price transparency. The
Company's businesses are assessing their pricing/marketing strategy in order to
ensure that it remains competitive in a broader European market. The Company is
also assessing its information technology systems to allow for transactions to
take place in both the legacy currencies and the Euro and the eventual
elimination of the legacy currencies, and reviewing whether certain existing
contracts will need to be modified. Final accounting, tax and governmental legal
and regulatory guidance generally has not been provided in final form. The
Company will continue to evaluate issues involving the introduction of the Euro.
Based on current information and the Company's current assessment, it does not
expect that the Euro conversion will have a material adverse effect on its
business, results of operations, cash flows or financial condition.
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 27, 1999. Stockholders representing 173,708,788 shares of common stock, or
approximately 80% of the outstanding stock, were present in person or by proxy.
All of the nominees for director, namely David H. Benson, Kristiane C.
Graham, Jean-Pierre M. Ergas, Roderick J. Fleming, James J. Koley, John F.
McNiff, John Pomeroy, Thomas L. Reece, and Gary L. Roubos were elected directors
for a one year term, each receiving at least 171,515,783 votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule. (EDGAR filing only)
(b) No reports on Form 8-K were filed this quarter.
15
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, 1999 /s/ John F. McNiff
------------------ -----------------------------
John F. McNiff, Chief
Financial Officer, Vice
President and Treasurer
Date: July 29, 1999 /s/ George F. Meserole
------------------ -----------------------------
George F. Meserole, Chief
Accounting Officer, Vice
President and Controller
5
1,000
6-MOS
DEC-31-1999
APR-01-1999
JUN-30-1999
230,708
0
693,076
23,576
607,179
1,587,699
1,364,509
(775,882)
3,856,303
1,042,783
608,742
236,108
0
0
1,850,258
3,856,303
2,047,605
2,047,605
1,314,587
1,789,921
(2,556)
0
25,952
247,589
85,059
162,530
532,938
0
0
686,468
3.21
3.19
