<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
/X/ Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993
Transaction Report Pursuant to Section 13 or 15(d) of the
/ / Securities Act of 1934
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 (Zip Code)
offices)
Registrant's telephone number, including area code
(212) 922-1640
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $1. New York Stock Exchange
Indicate by check mark 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 with the Commission and (2) has been
subject to such filing requirements for the past ninety days. Yes X No .
--- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. X
---
<PAGE> 2
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of February 28, 1994 was $3,236,712,089.
The number of outstanding shares of the Registrant's common stock as of
February 28, 1994 was 57,179,870.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II, and IV - Certain portions of the Annual Report to
Stockholders for Fiscal Year Ended December 31,
1993 (the "1993 Annual Report").
Part III - Certain portions of the Proxy Statement for Annual
Meeting to be held on April 26, 1994 (the "1994
Proxy Statement").
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<PAGE> 3
PART I
Item 1. BUSINESS
General
Dover Corporation ("Dover" or the "Company") was originally
incorporated in 1947 in the State of Delaware and commenced operations as a
public company in 1954 with four operating divisions, engaged primarily in the
manufacture of metal fabricated industrial products. Primarily through
acquisitions, the Company has grown to encompass over 60 different businesses
which fabricate, install and service elevators, and manufacture a broad range
of specialized industrial products and electronic components and sophisticated
manufacturing equipment. The primary criteria for Dover operating companies is
that they strive to be the market leader in their respective market, meeting
customer needs with superior products and services with appropriate increased
compensation, while achieving long-term earnings growth, high cash flow and
superior return on stockholders' equity.
The Company's businesses are divided into five business segments.
Dover Elevator manufacturers, sells, installs and services elevators primarily
in North America. Dover Resources manufactures products primarily to serve the
automotive, fuel handling and service and petroleum industries. Dover
Industries makes products for use in the waste handling, bulk transport,
automotive service, commercial food service and machine tool industries. Dover
Technologies builds primarily sophisticated automated electronic assembly
equipment and to a lesser degree specialized electronic components. Dover
Diversified builds heat transfer equipment, larger power generation,
sophisticated assembly and production machines, as well as sophisticated
products and control systems for use in the defense, aerospace and commercial
building industries. Dover sells its products and services both directly and
through various distributors, sales and commission agents and manufacturers
representatives, in all cases consistent generally with the custom of the
industry and market being served. For more information on these segments and
their products, sales, markets served, earnings before tax and total assets for
the six years ended December 31, 1993, see pages 6 through 16 of the 1993
Annual Report, which are hereby incorporated by reference.
During the past five years, Dover has spent approximately $550 million
on acquisitions of which $321 million was expended in 1993. For more detail
regarding acquisitions, see pages 1 through 5 of the 1993 Annual Report as well
as Note 2 to the Consolidated Financial Statements on pages 21-22 of the 1993
Annual Report, which are hereby incorporated by reference.
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<PAGE> 4
Raw Materials
Dover's operating companies use a wide variety of raw materials,
primarily metals, semi-processed or finished components, which are generally
available from a number of sources. Temporary shortages may occur
occasionally, but have not resulted in business interruptions or major
problems, nor are any such problems anticipated.
Research and Development
Dover's operating companies are encouraged to develop new products as
well as upgrade and improve existing products to satisfy customer needs, expand
sales opportunities and improve product reliability and reduce production
costs. During 1993, approximately $60 million was spent on research and
development, compared with $68 million and $62 million in 1992 and 1991,
respectively.
Dover holds or is licensed to use a substantial number of U.S. patents
covering a number of its product lines, and to a far lesser degree patents in
certain foreign countries where it conducts business. Dover licenses some of
its patents to other companies for which it collects royalties which are not
significant. These patents have been obtained over a number of years and
expire at various times. Although patents in the aggregate are important to
Dover, the loss or expiration of any one patent or group of patents would not
materially affect Dover or any of its segments. Where patents have expired,
Dover believes that its commitment to leadership in continuous engineering
improvements, manufacturing techniques, and other sales, service and marketing
efforts are significant to maintaining its general market leadership position.
Trademarks and Tradenames
Several of the Company's products are sold under various trademarks and
tradenames owned or licensed by the Company. Among the most significant are:
Dover, Heil, Norris, Universal, DEK, Brown & Sharpe, Marathon, OPW, Duncan,
Blackmer, Rotary Lift, Groen, Annubar, Sargent, A-C Compressor and Tipper Tie.
Seasonality
Dover's operations are generally not seasonal.
Customers
Dover's businesses serve thousands of customers, no one of which
accounted for more than 10% of sales. Within each of the five segments, no
customer accounted for more than 10% of segment sales.
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<PAGE> 5
Backlog
Backlog generally is not considered a significant factor in Dover's
businesses, as most products have relatively short delivery periods. The only
exceptions are in those businesses which produce larger and more sophisticated
machines, or have long-term government contractor subcontracts, particularly in
the Diversified Group (Belvac, A-C Compressor, Sargent Controls and Sargent
Technologies) and the Technologies Group (Universal).
Total Company backlog as of December 31, 1993 and 1992 was $710,977,000
and $606,681,000 respectively.
Competition
Dover's competitive environment is complex because of the wide
diversity of products manufactured and markets served. In general, Dover
companies are market leaders which compete with only a few companies. In
addition, since most of Dover's manufacturing operation are in the United
States, Dover usually is a more significant competitor domestically than in
foreign markets. There are some exceptions.
In the Elevator segment, Dover competes for the manufacture and
installation of elevators with a few generally large multinational competitors
and maintains a strong domestic position. For service work, there are numerous
local, regional and national competitors.
In the Technologies segment, Dover competes globally against a few very
large companies, primarily based in Japan or Europe. Within the other three
segments, there are a few companies whose markets and competition are
international, particularly Wittemann, AOT, Tipper Tie and Belvac.
International
For foreign sales and assets, see Note 3 to the Consolidated Financial
Statements on page 22 of the 1993 Annual Report and information about the
Company's Operations in Different Geographic Areas on page 27 of the 1993
Annual Report, which are incorporated herein by reference. Export sales of
domestic operations were $392 million in 1993 and $432 million in 1992.
Although international operations are subject to certain risks, such as
price and exchange rate fluctuations and other foreign governmental
restrictions, Dover intends to increase its expansion into foreign markets,
particularly with respect to its elevator business, as domestic markets mature.
The countries where most of Dover's foreign subsidiaries and affiliates
are based are Canada, Great Britain and Germany.
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<PAGE> 6
Environmental Matters
Dover believes its operations generally are in substantial compliance
with applicable regulations. In some instances, particular plants and
businesses have been the subject of administrative and legal proceedings with
governmental agencies relating to the discharge or potential discharge of
materials. Where necessary, these matters have been addressed with specific
consent orders to achieve compliance. Dover believes that continued compliance
will not have any material impact on the Company's financial position going
forward and will not require significant capital expenditures beyond normal
requirements.
Employees
The Company had approximately 20,500 employees as of December 31, 1993.
Item 2. DESCRIPTION OF PROPERTY
The number, type, location and size of the Company's properties are shown on
the following charts, by segment.
<TABLE>
<CAPTION>
Number and Nature of
Facilities Square Footage
------------------------ (000's)
Ware- Sales/ ----------------
Segment Mfg. house Service Owned Leased
- ------- --- ----- ------- ----- ------
<S> <C> <C> <C> <C> <C>
Elevator 7 9 194 393 1,941
Resources 40 23 17 1,741 410
Diversified 17 2 20 1,186 265
Industries 31 7 20 2,757 208
Technologies 18 - 11 679 431
</TABLE>
<TABLE>
<CAPTION>
Locations
---------------------------
North
American Europe Other
-------- ------ -----
<S> <C> <C> <C>
Elevator 174 36 -
Resources 68 10 2
Diversified 38 1 -
Industries 44 14 -
Technologies 18 6 5
</TABLE>
The facilities are generally well maintained and suitable for the
operations conducted and their productive capacity is adequate for current
needs.
Item 3. LEGAL PROCEEDINGS
Dover is party to a number of legal proceedings arising out of the
normal course of its businesses. In general, most claims arise in connection
with activities of its Elevator segment
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<PAGE> 7
operations and certain of its other businesses which make products used by the
public. In recent years, Dover has also been involved with the Internal
Revenue Service regarding tax assessments for the eight years ended December
31, 1989 and certain patent litigation. In addition, matters have arisen under
various environmental laws, as well as under local regulatory compliance
agencies. For a further description of such matters, see Note 13 to the
Consolidated Financial Statements on page 26 of the 1993 Annual Report, which
is incorporated herein by reference.
Based on insurance availability, established reserves and periodic
reviews of those matters, management is of the opinion that the ultimate
resolution of current pending claims and known contingencies should not have a
material adverse effect on Dover's financial position taken as a whole.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
All officers are elected annually at the first meeting of the Board of
Directors following the annual meeting of stockholders and are subject to
removal at any time by the Board of Directors. The executive officers of Dover
as of March 11, 1994, and their positions with the Company for the past five
years are as follows:
<TABLE>
<CAPTION>
Present Position
Name Age & Responsibility
- ---- --- ----------------
<S> <C> <C>
Gary L. Roubos 57 Chairman (since August 1989) and Chief Executive Officer and Director;
previously President (through May 1993).
Thomas L. Reece 51 President and Director (since May 1993); previously President of Dover
Resources, Inc.
Edward J. Kata 51 Vice President-Development
John F. McNiff 51 Vice President-Finance and Treasurer
Robert G. Kuhbach 46 Vice President, General Counsel and Secretary (since May 1993); prior to
joining Dover, Mr. Kuhbach was Senior Vice President (later Executive Vice
President and a Director), Secretary and General Counsel
</TABLE>
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<PAGE> 8
<TABLE>
<S> <C>
(through February 1992) of Sudbury, Inc., a Cleveland, Ohio industrial
products company.
Alfred Suesser 61 Controller
John B. Apple 59 Vice President and President of Dover Elevator International, Inc.
Lewis E. Burns 55 Vice President, Director and President of Dover Industries, Inc.
Rudolf J. Herrmann 43 Vice President (since November 1993) and President of Dover Resources, Inc.
(since May 1993); prior thereto, Mr. Herrmann was President of Rotary Lift
division of Dover Industries, Inc.
John E. Pomeroy 52 Vice President (since November, 1993) and President of Dover Technology
International, Inc.
Jerry W. Yochum 55 Vice President and President of Dover Diversified, Inc.
</TABLE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
The principal market in which the Company's Common Stock is traded is
the New York Stock Exchange. Information on the high and low prices of such
stock and the frequency and the amount of dividends paid during the last two
years, is set forth on Page 32 of the 1993 Annual Report and incorporated
herein by reference.
The number of holders of record of the Registrant's Common Stock as of
February 28, 1994 is approximately 3,100.
Item 6. SELECTED FINANCIAL DATA
The information for the years 1983 through 1993 is set forth in the
Annual Report on pages 30 and 31 and is incorporated herein by reference.
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<PAGE> 9
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information set forth in the Annual Report on pages 28 and 29 is
incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth in the Annual Report on pages 17 through 27
is incorporated herein by reference.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to the directors of the Company required
to be included pursuant to this Item 10 is included under the caption "Election
of Directors" in the 1994 Proxy Statement relating to the 1994 Annual Meeting
of Stockholders to be filed with the Securities and Exchange Commission (the
"Commission") pursuant to Rule 14a-6 under the Securities Exchange Act of 1934,
as amended, and is incorporated in this Item 10 by reference. The information
with respect to the executive officers of the Company required to be included
pursuant to this Item 10 is included under the caption "Executive Officers of
the Company" in Part I of this Annual Report on Form 10-K.
Item 11. EXECUTIVE COMPENSATION
The information with respect to executive compensation required to be
included pursuant to this Item 11 is included under the caption "Compensation"
in the 1994 Proxy Statement and is incorporated in this Item 11 by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information regarding security ownership of certain beneficial
owners and management that is required to be included pursuant to this Item 12
is included under the captions "General" and "Security Ownership" in the 1994
Proxy Statement and is incorporated in this Item 12 by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information with respect to any reportable transaction, business
relationship or indebtedness between the Company and the beneficial owners of
more than 5% of the Common Stock, the directors or nominees for director of the
Company, the
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<PAGE> 10
executive officers of the Company or the members of the immediate families of
such individuals that is required to be included pursuant to this Item 13 is
included under the caption "Election of Directors" in the 1994 Proxy Statement
and is incorporated in this Item 13 by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a)(1). Financial Statements
The following consolidated financial statements of Dover Corporation
and its subsidiaries are set forth in the 1993 Annual Report, which financial
statements are incorporated herein by reference:
(A) Independent Auditors' Report.
(B) Consolidated balance sheets as of December 31, 1993, 1992
and 1991.
(C) Consolidated statements of earnings for the years ended
December 31, 1993, 1992 and 1991.
(D) Consolidated statements of retained earnings for the years
ended December 31, 1993, 1992 and 1991.
(E) Consolidated statements of cash flows for the years ended
December 31, 1993, 1992 and 1991.
(F) Notes to consolidated financial statements.
(2) Financial Statement Schedules
The following financial statement schedules are included in Part IV of
this report:
Independent Auditors' Report on Schedules and Consent
II - Amounts Receivable from Related
Parties and Underwriters, Promoters and
Employees Other than Related Parties
VIII - Valuation and Qualifying Accounts
IX - Short-term Borrowings
X - Supplementary Income Statement
Information
All other schedules are not required and have been omitted.
(b) No reports on Form 8-K have been filed during the fourth quarter
of the fiscal year ended December 31, 1993.
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<PAGE> 11
(c) Exhibits:
(13) Dover's Annual Report to Stockholders for its fiscal
year ended December 31, 1993.
(21) Subsidiaries of Dover.
(23) Independent Auditors' consent. (See Independent
Auditors' Report on Schedules and Consent)
(24) Powers of Attorney.
SIGNATURES
Pursuant to the requirements of Section 13 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
Gary L. Roubos
By: ------------------------
Gary L. Roubos
Chairman
Date: March 29, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Gary L. Roubos
- ---------------------
Gary L. Roubos Chairman, Chief Executive
Officer and Director
(Principal Executive
Officer) March 29, 1994
John F. McNiff
- ----------------------
John F. McNiff Treasurer
(Principal Financial
Officer) March 29, 1994
</TABLE>
- 11 -
<PAGE> 12
<TABLE>
<S> <C> <C>
Alfred Suesser
- ----------------------
Alfred Suesser Controller March 29, 1994
(Principal Accounting
Officer)
Thomas L. Reece
- ---------------------
Thomas L. Reece President, Chief
Operating Officer and
Director March 29, 1994
Magalen O. Bryant
- ---------------------
Magalen O. Bryant Director* March 29, 1994
Lewis E. Burns
- ---------------------
Lewis E. Burns Director* March 29, 1994
Michael C. Devas
- ---------------------
Michael C. Devas Director* March 29, 1994
John F. Fort
- ---------------------
John F. Fort Director* March 29, 1994
James L. Koley
- ---------------------
James L. Koley Director* March 29, 1994
George L. Ohrstrom
- ---------------------
George L. Ohrstrom Director* March 29, 1994
Anthony J. Ormsby
- ---------------------
Anthony J. Ormsby Director* March 29, 1994
David G. Thomas
- ---------------------
David G. Thomas Director* March 29, 1994
</TABLE>
Robert G. Kuhbach
* By -------------------------
Robert G. Kuhbach
Attorney-in-Fact
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<PAGE> 13
INDEPENDENT AUDITORS' REPORT ON SCHEDULES AND CONSENT
The Board of Directors and Shareholders
Dover Corporation:
Under date of February 22, 1994, we reported on the consolidated balance sheets
of Dover Corporation and subsidiaries as of December 31, 1993, 1992 and 1991
and the related consolidated statements of earnings, retained earnings, and
cash flows of the years then ended, as contained in the 1993 annual
report to stockholders. These consolidated financial statements and our
report thereon are incorporated by reference in the annual report on Form
10-K for the year 1993. In connection with our audits of the aforementioned
consolidated financial statements, we also have audited the related financial
statement schedules listed in answer to Part IV, item 14(A)2 of Form 10-K.
These financial statement schedules are the responsibility of the Company's
management. Our responsibility is the express an opinion on these financial
statement schedules based on our audits.
In our opinion, such financial statement schedules when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
In addition, we consent to the incorporation by reference of our above-
mentioned report dated February 22, 1984 in the Registration Statement
(No. 2-58037) on Form S-8 (1974 Incentive Stock Option Plan) in the
Registration Statement (No. 33-11229) on Form S-8 the Prospectus dated
January 28, 1987 (1984 Incentive Stock Option Plan) and in the Registration
Statement (No. 2-91561) on Form S-8 dated July 1, 1984 to the Dover Corporation
Employee Savings and Investment Plan. We also consent to the reference to our
firm under the heading "Financial Statements and Experts" in the Prospectuses.
KPMG Peat Marwick
New York, New York
March 29, 1994
<PAGE> 14
SCHEDULE II
DOVER CORPORATION AND SUBSIDIARIES
Amounts Receivable from Related Parties
and Underwriters, Promoters, and
Employees Other Than Related Parties
Years ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
Balance at Balance
beginning at close
of year Additions Deductions of year
------- --------- ---------- -------
(000's omitted)
<S> <C> <C> <C> <C>
Year ended December 31, 1993:
Lawrence F. Gray, Sr. (1) $ -- 117 -- $ 117
Year ended December 31, 1992:
John R. Ditterline (2) $ 195 -- $ 100 $ 95
Year ended December 31, 1991:
John R. Ditterline (2) $ 195 -- -- $ 195
</TABLE>
Notes:
(1) Unsecured loan to employee, payable on demand, bearing interest at
4.16%.
(2) Loan to employee for purchase of residence, payable on demand, bearing
interest at 8.75%, secured by residence.
<PAGE> 15
SCHEDULE VIII
DOVER CORPORATION AND SUBSIDIARIES
Valuations and Qualifying Accounts
Years ended December 31, 1992 and 1991
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance
beginning cost and at close
of year expense Deductions of year
------- ------- ---------- -------
(000's omitted)
<S> <C> <C> <C> <C>
Year ended December 31, 1993:
Allowance for doubtful accounts 9,753 5,546 5,100(1) 10,199
===== ===== ===== ======
Year ended December 31, 1992:
Allowance for doubtful accounts $9,746 5,316 5,309(1) 9,753
===== ===== ===== =====
Year ended December 31, 1991:
Allowance for doubtful accounts 8,250 7,214 5,718(1) 9,746
===== ===== ===== =====
</TABLE>
Notes:
(1) Represents uncollectible accounts written off and reductions of prior
years over provision less recoveries of accounts previously written
off, net of additions and deductions relating to acquired and
divested companies.
<PAGE> 16
SCHEDULE IX
DOVER CORPORATION AND SUBSIDIARIES
Short-Term Borrowings
Years ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
Maximum Average Weighted
Weighted amount amount average
Balance average outstanding outstanding interest rate
Catagory of aggregate at end interest during the during the during the
short-term borrowings of period rate period (1) period (2) period (3)
- --------------------- --------- ---- ---------- ---------- ----------
(000's omitted)
<S> <C> <C> <C> <C> <C>
Year ended 12/31/93:
Payable to holders
of commercial paper $ 424,825(4) 3.34% $ 424,825 $ 304,179 3.32%
Year ended 12/31/92:
Payable to holders
of commercial paper $ 220,000 3.69% $ 234,000 $ 194,888 3.84%
Year ended 12/31/91:
Payable to holders
of commercial paper $ 126,000 4.81% $ 275,000 $ 185,592 6.21%
</TABLE>
Notes:
(1) Represents maximum amount outstanding at any month-end.
(2) Average of 13 month-end balances (including December of previous year).
(3) Weighted average of interest rates on all commercial paper outstanding
at month-end.
(4) Includes $250,000 classified as long-term debt.
<PAGE> 17
SCHEDULE X
DOVER CORPORATION AND SUBSIDIARIES
Supplementary Income Statement Information
Years ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
Charged to costs and expenses
-----------------------------
1993 1992 1991
---- ---- ----
(000's omitted)
<S> <C> <C> <C>
Maintenance and repairs * * *
Amortization of tangible assets $ 26,062 $ 23,749 $ 29,810
Taxes, other than income taxes and payroll taxes * * *
Royalties * * *
Advertising costs * * *
</TABLE>
Notes:
* Amounts not shown are not in excess of 1% of total sales.
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
(3)(a) Restated Certificate of Incorporation
and Amendments thereto filed as an
Exhibit 3(a) to Form 10-K for year ended
December 31, 1989 is incorporated by
reference.
(b) By-laws, as amended, filed as an Exhibit
to Quarterly Report on Form 10-Q for period
ended September 30, 1993 is incorporated
by reference.
(10) (a) 1984 Incentive Stock Option and
Cash Performance Program filed as an
Exhibit 10(a) to Annual Report on Form 10-K
for year ended December 31, 1984 is
incorporated by reference.
(b) Employee Savings and Investment Plan
filed as an Exhibit 4.1 to Form S-8 filed
under Securities Act of 1933 (Reg. 2-91561) is
incorporated by reference.
(13) Dover's Annual Report to Stockholders for its
fiscal year ended December 31, 1993.
(21) Subsidiaries of Dover.
(23) Independent Auditors' Consent. (See Independent
Auditors' Report on Schedules and Consent)
(24) Powers of Attorney
</TABLE>
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<PAGE> 1
TO OUR STOCKHOLDERS
THE HOPE WE EXPRESSED IN LAST YEAR'S ANNUAL REPORT REGARDING EARNINGS WAS
FULFILLED IN 1993, AS EARNINGS PER SHARE SET A NEW RECORD OF $2.77, AN INCREASE
OF 24% OVER 1992. SALES ROSE 8%, FROM $2.272 BILLION TO $2.484 BILLION.
In last year's report, we noted that earnings were burdened with $.09 per share
of unusual costs. This year's results include an unusual gain of $.07 per
share, the net of a contract claim settlement of $.12 per share and a cost of
$.05 per share to settle a lawsuit. Absent these unusual items in both years,
Dover's earnings per share gain was only 16%. Either way, 1993 represented a
strengthening of our earnings recovery from the 1991 recession.
In an especially successful year for our acquisition program, we were
able to invest $321 million on behalf of our stockholders in 13 separate
transactions. The companies we purchased in 1993 had full calendar year sales
of about $393 million. Because of the timing of the transactions during the
year, they added only $155 million to Dover's reported 1993 sales. The new
companies' impact on reported earnings was only $.05 per share, as a result of
heavy first-year write-offs of acquisition premiums and interest income
foregone. However, they will make a strong contribution in 1994.
ACQUISITION ACCOUNTING
IMPACT
In a company such as Dover, where acquisition activity has been an important
element of growth, the accounting treatment of acquisitions can take on special
significance. All of Dover's acquisitions in recent years have been recorded
under purchase accounting rules. The premium we pay in excess of the acquired
company's book value--typically substantial, because our strategy is to buy
good companies, which, like Dover, are worth substantially more than book
value--is written off over time as a charge against earnings.
These charges in 1993 reached $.56 per share, up from $.48 per share
in 1992, and primarily appear in our financial statements as amortization of
intangible assets. We have decided to begin identifying these charges to our
stockholders because of their size, relative to total earnings, and because of
differing points of view among investment professionals as to their relevance
in valuing securities. Despite their non-cash nature,
<TABLE>
<CAPTION>
COMPARATIVE HIGHLIGHTS
Increase 1993
1993 1992 1991 versus 1992
==================================================================================================================================
<S> <C> <C> <C> <C>
Net Sales $ 2,483,927,815 $ 2,271,580,401 $ 2,195,786,425 9%
Earnings before taxes $ 245,541,961 $ 200,334,827 $ 204,088,388 23%
Net earnings* $ 158,253,961 $ 129,707,137 $ 128,208,388 22%
Per Common share
Net earnings* $ 2.77 $ 2.24 $ 2.15 24%
Dividends $ .90 $ .86 $ .82 5%
Book value $ 15.22 $ 14.10 $ 14.05
Capital expenditures $ 47,531,523 $ 42,440,948 $ 46,617,590
Acquisitions $ 321,002,139 $ 111,243,000 $ 13,192,000
Purchase of treasury stock $ 1,242,634 $ 84,269,062 $ 39,283,444
Cash flow** $ 235,222,895 $ 207,163,829 $ 213,574,688
Return on average equity 18.9% 15.9% 15.9%
Approximate number of stockholders 10,000 10,000 10,000
Number of employees 20,445 18,827 18,898
==================================================================================================================================
</TABLE>
* 1992 net earnings per common share include $565,000 and 1 cent per share,
respectively, applicable to the next cumulative effects of changes in
accounting principles for the adoption of SFAS 109, "Accounting for Income
Taxes" and SFAS 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions."
** Represents net earnings plus depreciation and amortization.
1
<PAGE> 2
[PHOTO -- SEE EDGAR APPENDIX]
Thomas L. Reece (left) became President and Chief Operating Officer of Dover in
May, 1993. He has spent 28 years with Dover as President of three operating
companies and as CEO of Dover Resources. Gary L. Roubos (right) remains Dover's
Chairman and Chief Executive Officer. The picture in the background is of
Thomas C. Sutton, Dover's previous Chairman.
the charges are required by Generally Accepted Accounting Principles (GAAP) for
United States companies.
Our 1993 acquisition program, the companies we acquired, and their
financial impact on Dover, are discussed on Page 5. Acquisition activity
continues to look promising, at least for the first part of 1994. In January,
1994, our Dover Resources subsidiary purchased Midland Manufacturing, the
leading U.S. producer of valves for railroad tank cars and marine barges.
OTHER FINANCIAL EVENTS
In June, 1993, we made a tax-free distribution to shareholders of 100% of the
the shares of DOVatron International, the former Dover Electronics. Dover
stockholders received one DOVatron share for each 10 Dover shares. The spinoff
was motivated by conflicts between the business operations of DOVatron and
those of Universal Instruments, DEK and Soltec--all part of our Dover
Technologies subsidiary.
DOVatron had performed well under our ownership and has continued to
do so as an independent public company, with its share price reaching a high of
about $30 in 1993, in effect adding up to $3 per share to the market value gain
achieved by Dover stockholders during the year. Understandably, there has been
a substantial rearrangement of shareholdings in DOVatron subsequent to the
spinoff, as this company's business and investment profile are quite different
from those of Dover Corporation. Accordingly, we do not intend to report
further on DOVatron's progress.
FINANCIAL PICTURE STRONG
For the first time in a number of years, the climate in the acquisition
marketplace allowed us to invest an amount greater than our internal cash flow.
As a result, we suspended our stock repurchase program temporarily and used a
portion of our excellent borrowing capacity to help fund our acquisition
efforts. Dover ended the year with $331 million of net debt (total debt less
cash and securities). This represents approximately 30% of our total capital,
which is a conservative level for a company like ours.
DOVER RESOURCES
Dover Resources became our largest independent subsidiary in 1993, from an
earnings point of view, as its profits expanded 20% on an 8% increase in sales.
These results reflect internal growth, as Dover Resources did not complete any
acquisitions in 1993.
Growth was unevenly spread among Dover Resources' companies, as many
of these busi-
2
<PAGE> 3
nesses continued to face difficult markets during the year. Successful new
products for the gasoline vapor recovery market helped Blackmer and OPW Fueling
Components to achieve record earnings. Strong earnings increases at Norris,
Norriseal and Alberta Oil Tool resulted primarily from a restructuring late in
1992, market share gains and expanded export activities.
Some other companies also achieved gains during the year, including
De-Sta-Co, as a result of outstanding domestic performance in its clamp and
valve products, and Petro Vend, which benefited from new products and a
stronger gasoline retailing market. Several companies whose sales are dependent
on the long lead-time capital expenditure programs of their customers had
reduced earnings, notably Ronningen-Petter and Wittemann.
Most Dover Resources company presidents perceive a generally improving
market outlook in 1994 and most expect to show a profit gain. This will be
necessary if Dover Resources is to stay our largest earning subsidiary in 1994,
as we expect there will be vigorous competition for that honor.
DOVER INDUSTRIES
Dover Industries achieved record sales, up 40%, as well as record profits, up
58% from a prior year that had been burdened with a $9 million environmental
charge. The acquisition of The Heil Co. and of B&S Services contributed
substantially to the sales gain and modestly to the earnings gain. Heil, which
is the nation's leading manufacturer of refuse trucks and trailerized tanks,
became the largest company in Dover Industries and third largest in Dover
Corporation, as its own operations advanced strongly in 1993. Heil had record
sales exceeding $200 million, and record earnings as well.
In addition, eight of Dover Industries' 10 other companies achieved
earnings gains, with impressive improvements at Tipper Tie, Groen and Chief
Automotive. In each of these three companies, the gains were primarily fueled
by management actions involving cost reduction, capital investment and product
line expansion, rather than by particularly vibrant market conditions. Profit
increases, always welcome at Dover, are especially so when they reflect the
skill, energy and initiative of our own people.
DOVER ELEVATOR
Dover Elevator International continued to grapple with extremely weak
new-construction markets in North America, as its sales declined by 2% from
prior year and profits slipped by 5%. This was a disappointment, as we had
begun the year hoping that profits would continue the recovery trend that began
in 1992. Service revenue did continue to grow, but at rates below historical
norms because of highly competitive market conditions and the reduced volume of
new elevators available for conversion to service contracts.
Most of this segment's profit decline came from Canada and, to a
lesser extent, the United Kingdom and related to reduced volumes and
profitability of new elevator work, along with the cost of downsizing these
activities during the year.
In the U.S., profits improved modestly, as some companies, notably
Miami Elevator and Dover Elevator Systems, achieved gains. The market for new
elevator work remained depressed, as it has been since the real estate
contraction began in early 1991. As a result, new elevator bookings have been
flat across this three-year period.
We believe that within the markets we have traditionally served, our
profit performance is considerably better than our competitors'. Cost and
performance improvements are in progress to insure that this continues to be
the case. However, we do not expect market conditions in North America and the
U.K. to improve meaningfully for several years, and our elevator management is
therefore focusing on new areas for potential profit growth. A key objective is
to add profitable manufacturing volume to our U.S. and Canadian factories
without exacerbating the already intense competition for new elevator work that
exists in North America. Several new initiatives are discussed in the Elevator
section of this report.
DOVER TECHNOLOGIES
Dover Technologies' income advanced 40%, despite the mid-year spinoff of
DOVatron, which was this segment's second largest profit producer in 1992. All
Dover Technologies companies showed improvement over the prior year, with
particularly strong gains at DEK, Universal Instruments and Quadrant
Technologies. At DEK, which specializes in printing equipment used in the
assembly of surface mount printed circuit boards, a 40% gain in revenues and a
substantially larger gain in profits were fueled by the continued success of
its state-of-the-art Model 265 printer.
EARNINGS PER SHARE
<TABLE>
<S> <C>
1988 $2.22
1989 2.28
1990 2.55
1991 2.15
1992 2.24
1993 2.77
</TABLE>
PROFITABILITY MEASURES (%)
<TABLE>
<CAPTION>
After-Tax Operating
Return on Investment Return on
(Definition in Note 15) Stockholders' Equity
------------------------ --------------------
<S> <C> <C>
1988 31 21
1989 30 19
1990 31 20
1991 25 16
1992 27 16
1993 29 19
</TABLE>
3
<PAGE> 4
Universal's gains primarily reflected strong bookings and shipments
for thru-hole assembly machines, stemming from a cyclical recovery in this
segment of the industry and increases in Universal's market share. Universal's
GSM-1 surface mount machine for flexible assembly received a positive
acceptance from the marketplace. Universal is now embarked on a program to
increase GSM-1 production substantially and reduce production costs, in
anticipation of significant new orders in 1994. Despite this product's current
poor profitability, its technical success and business potential open up
exciting possibilities for Universal in the large and rapidly growing surface
mount assembly field.
Quadrant Technologies, K&L Microwave and Novacap all enjoyed solid
profit improvement, with higher margins and considerable further progress in
shifting the focus of their businesses from military to commercial
applications. The growth in wireless and digital communications is creating new
market possibilities for these companies.
It was an exciting year for Dover Technologies, whose financial
results are now beginning to exhibit the potential which we believe is inherent
in the technical skills, management capabilities and market potential of this
segment of our business.
DOVER DIVERSIFIED
Profits at Dover Diversified advanced 5%, primarily because of the favorable
settlement of a contract dispute involving Sargent Controls' work on the
Seawolf submarine during 1990-93. The settlement added $11 million to 1993
profits and will add $5 million to revenues in 1994 and 1995 as this program is
brought to completion. The settlement reflects customer delays in finalizing
designs and shipment schedules, which seriously impacted Sargent Controls'
production and cost structure.
Most of the companies in this segment faced difficult conditions in
1993. Tranter, A-C Compressor and Waukesha Bearings had profit declines.
However, Pathway Bellows and Central Research Laboratories achieved record
profits. Despite its profit decline, A-C Compressor was nonetheless a bright
spot, generating record orders for its long lead-time centrifugal compressors,
which should result in record profits in 1994.
Two important programs completed during 1993 have had the effect of
significantly improving Dover Diversified's business outlook for the years
ahead. Beginning in 1992, the defense and aerospace operations of Sargent
Controls and Sargent Technologies were consolidated in new facilities in
Tucson, Arizona. The resulting decrease in cost structure and a sharpened focus
on highest value-added products will allow these companies to compete
profitably in the depressed defense and aerospace market.
During the second half of 1993, Dover Diversified completed three
acquisitions: Belvac, Phoenix Refrigeration, and Thermal Equipment Co. They
will be quite important in 1994, and will help to shift the balance away from
defense/aerospace activities, which will now account for only 15% of Dover
Diversified's business.
ORGANIZATIONAL CHANGES
Thomas L. Reece was elected President and Chief Operating Officer of Dover
Corporation in May, after serving for eight years as President of Dover
Resources and for 20 years with Dover, including the presidency of three Dover
operating companies. Rudolf J. Herrmann was promoted from President of Rotary
Lift to follow Tom as CEO of Dover Resources, and Civacon President Tim Sandker
succeeded Rudy at Rotary Lift. James Johnson was recruited as the new President
of Civacon. Paul Steffen also joined the Dover organization as President of A-C
Compressor, and Dave Davidson rejoined us as President of Sargent Technologies.
The planned retirement of Joe Gruber from Wittemann, which he built
into a world leader during his 33 years with this company, resulted in the
appointment of Bill Geiger as President. Michel Buchenau became Managing
Director of De-Sta-Co GmbH following Wilfried Ponik's retirement after 30 years
of service.
Cloyd Laporte, Jr. also retired after serving as Dover's legal counsel
for 26 years. Robert G. Kuhbach was elected Vice President, General Counsel
and Secretary.
OUTLOOK
The recovery from the 1991 recession grew stronger in 1993 and should continue
in 1994. With few exceptions, our company presidents indicated in our year-end
planning discussions that they saw the potential for earnings gains in 1994. In
addition, the companies acquired in 1993 will add more than 30 cents per share
to Dover's earnings as a result of being under Dover's ownership for a full
year, assuming they only match their 1993 operating profit performance. The
growth these companies expect would increase this contribution.
We are confident that 1994 will see a new earnings record for Dover by
a substantial margin, although the percentage gain probably will be less than
the very strong 1993 result.
/s/ GARY L. ROUBOS
- ------------------------
Gary L. Roubos
Chairman and
Chief Executive Officer
/s/ THOMAS L. REECE
- ------------------------
Thomas L. Reece
President and
Chief Operating Officer
4
<PAGE> 5
ACQUISITIONS
IN 1993, DOVER COMPLETED 13 ACQUISITIONS INVOLVING THE INVESTMENT OF
APPROXIMATELY $321 MILLION--A RECORD LEVEL OF ACTIVITY BY A WIDE MARGIN.
DOVER'S ACQUISITIONS FALL BROADLY INTO TWO CATEGORIES:
STAND ALONE ACQUISITIONS...OF COMPANIES THAT WILL MAINTAIN THEIR OWN
UNIQUE IDENTITY AND METHOD OF OPERATION, STANDING ALONE WITHIN ONE OF DOVER'S
FIVE INDEPENDENT SUBSIDIARIES; AND
ADD-ON ACQUISITIONS...OF BUSINESS OR PRODUCT LINES THAT WILL BE
ADDITIVE TO THE ACTIVITIES OF AN EXISTING DOVER COMPANY, SOMETIMES BEING FULLY
INTEGRATED INTO THE DOVER COMPANY.
STAND-ALONE ACQUISITIONS TYPICALLY REPRESENT THE LARGEST PORTION OF
OUR INVESTMENT--ABOUT $275 MILLION IN 1993--BUT "ADD-ONS" CAN REPRESENT
ESPECIALLY REWARDING OPPORTUNITIES BECAUSE OF THE "2+2 MAKES MORE THAN 4"
POTENTIAL INHERENT IN SUCH SITUATIONS.
WITH RESPECT TO STAND-ALONE ACQUISITIONS, DOVER SEEKS HIGH QUALITY
COMPANIES THAT MATCH THE FOUR KEY CHARACTERISTICS OF DOVER'S EXISTING
COMPANIES--INDUSTRIAL MANUFACTURER, NICHE MARKET LEADER, FINANCIALLY
SUCCESSFUL, AND WELL MANAGED BY A TEAM THAT SHARES DOVER'S CUSTOMER-ORIENTED
PHILOSOPHY AND THAT WANTS TO CONTINUE TO OPERATE THE BUSINESS POST-ACQUISITION.
THESE FOUR CRITERIA ARE FAR MORE IMPORTANT IN OUR VIEW THAN THE PARTICULAR
PRODUCTS INVOLVED.
BECAUSE DOVER VIEWS THE ACQUISITION PROCESS AS ONE OF INVESTING OUR
STOCKHOLDERS' MONEY (ALBEIT BEFORE IT PASSES THROUGH ANOTHER LAYER OF TAXATION
AS A DIVIDEND), PRICING IS AN IMPORTANT CONSIDERATION. EVEN SO, DOVER TYPICALLY
PAYS A SUBSTANTIAL PREMIUM ABOVE BOOK VALUE. UNDER GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES FOR U.S. COMPANIES, THIS PREMIUM IS ASSIGNED TO ASSETS
AND, OVER TIME, IS CHARGED AS EXPENSE IN CALCULATING DOVER'S EARNINGS.
IN 1993, WE CHARGED EARNINGS APPROXIMATELY $.56 PER SHARE RELATING TO
THESE PREMIUMS IN CALCULATING OUR EPSOF $2.77. DURING 1994 THIS IS SCHEDULED TO
DECLINE TO $.48 PER SHARE FOR ALL ACQUISITIONS COMPLETED PRIOR TO JANUARY 1,
1994.
THE COMPANIES ACQUIRED IN 1993, AS A GROUP, HAD PRO FORMA CALENDAR
YEAR 1993 SALES OF OVER $393 MILLION WITH OPERATING INCOME OF ABOUT $60
MILLION. DOVER'S LESS-THAN FULL YEAR OWNERSHIP, THE COST OF FINANCING, AND THE
WRITE-OFF OF ACQUISITION PREMIUMS RESULTED IN A NET CONTRIBUTION TO DOVER'S EPS
OF ONLY $.05 IN 1993. ACHIEVEMENT BY THESE COMPANIES IN 1994 OF THEIR 1993
LEVEL OF OPERATING INCOME WOULD RESULT IN A FURTHER EPS CONTRIBUTION OF
APPROXIMATELY $.30 PER SHARE.
- -------------------------------------------------------------------------------
STAND ALONE ACQUISITIONS
HEIL
Leading U.S. manufacturer of refuse collection trucks and trailerized tanks.
BELVAC
World's leading manufacturer of certain types of can-making machinery.
PHOENIX REFRIGERATION
#2 U.S. factor in refrigeration equipment for supermarkets.
THERMAL EQUIPMENT
Leading U.S. manufacturer of large autoclaves and participant in industrial
cleaning equipment market.
B&S
World's leading manufacturer of Brown & Sharpe screw machine parts.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
ADD-ON ACQUISITIONS
DYNAPERT
Thru-hole assembly equipment businesses acquired by Universal Instruments.
J&L TANK
Additive to Heil's trailerized tank business.
LIFT SERVICE AND MONTAGE
ATLANTA ELEVATOR/
VIKING ELEVATOR
Regional service companies additive to several DEI elevator businesses.
RICHLAND MANUFACTURING
Metal fabricator additive to PathwayBellows.
EG&G FREQUENCY PRODUCTS
Oscillator product line additive to Quadrant Technologies'
Oscillatek business.
GLOBAL EQUIPMENT
Manufacturer of compactors and balers additive to Marathon Equipment.
- ------------------------------------------------------------------------------
WE WELCOME THE EMPLOYEES OF THESE COMPANIES, PLEASED THAT THEIR LEADERS HAVE
CHOSEN TO JOIN THE DOVER FAMILY AND CONFIDENT THAT THIS ASSOCIATION WILL PROVE
REWARDING TO THEM AND TO DOVER'S STOCKHOLDERS.
5
<PAGE> 6
DOVER RESOURCES
DOVER RESOURCES ACHIEVED A 20% GROWTH IN EARNINGS IN 1993, AS BOTH PROFITS AND
SALES ROSE TO RECORD LEVELS. LAST YEAR'S ANNUAL REPORT NOTED THAT TO EARN
RECORD PROFITS IN 1993 WOULD REQUIRE THAT MOST THINGS GO RIGHT, WITH NO
"SURPRISES." THE ONLY BIG SURPRISE WAS THE STRENGTH OF THE VACUUM-ASSISTED
GASOLINE VAPOR RECOVERY MARKET AND THE TREMENDOUS SUCCESS OF OPW FUELING
COMPONENTS AND BLACKMER PUMP IN PENETRATING THIS NEW MARKET SUCCESSFULLY. THIS
PROVIDED THE LARGEST PORTION OF DOVER RESOURCES' PROFIT GAIN.
The second largest factor in the strong earnings rebound was an improvement in
three companies that manufacture equipment for oilfield production. Alberta
Oil Tool, Norris, and Norriseal all had significant
OPERATING EARNINGS (MILLIONS)
<TABLE>
<S> <C>
1989 57
1990 66
1991 62
1992 59
1993 70
</TABLE>
After-Tax Operating
Return on Investment
(Definition in Note 15)
<TABLE>
<CAPTION>
%
-
<S> <C>
1989 32
1990 34
1991 28
1992 26
1993 32
</TABLE>
profit improvements driven by cost reductions, by restructuring and by export
success, as the domestic market for their products showed only modest gains.
Dover Resources' other 10 companies were evenly divided between profit
advances and declines, reflecting the crosscurrents of forces affecting the
U.S. economy.
SUCCESS IN THE ASSISTED
VAPOR RECOVERY MARKET
New products introduced by Blackmer Pump and OPW Fueling Components in 1992 and
1993 won market-leading positions during the year as gasoline retailers and
dispenser manufacturers shifted their emphasis to assisted vapor recovery
gasoline dispensing. This consumer-friendly technology has become the most
popular choice where meeting federal clean air standards requires reducing the
vapors emitted in auto refueling. Both Blackmer and OPW Fueling Components
achieved record sales of their pump and nozzle products and set new earnings
records. Strong vapor recovery sales at OPW also helped to pull other products
through the distribution pipeline, leading to an overall 30% sales gain.
RESTRUCTURING A SUCCESS
IN OILFIELD
The movement of Norris's butterfly valve product line to Houston-based
Norriseal and the restructuring of Norris's involvement in the downhole pump
market, described in last year's annual report, helped both of these companies
achieve large earnings gains in 1993. Norris was also successful in improving
its leading domestic market share of sucker rods. AOT's experience with
cold-weather oil production conditions helped to improve its exports to Russia,
resulting in a strong earnings gain at that company.
[PHOTO -- SEE EDGAR APPENDIX]
6
<PAGE> 7
The market for oilfield production equipment remained very
competitive in 1993, causing several sucker rod manufacturers to eliminate or
reduce their factory operations. Although the recent drop in the price of oil
represents a serious challenge to these three businesses in 1994, it could
also have the positive effect of accelerating the withdrawal of excess
capacity from the industry.
OTHER COMPANIES SHOW
GAINS
De-Sta-Co reversed a two-year decline with an earnings gain to near-record
levels, reflecting the strength of its domestic clamp and compressor valve
businesses. The company improved its position in the domestic clamp market,
particularly for automotive power clamps, and benefited from an increase in
demand for air conditioning compressors, of which its market-leading valves are
a key component. These positive forces overcame the continued slowness of
De-Sta-Co GmbH in Germany, amid the ongoing European recession.
Petro Vend enjoyed a substantial sales and profit recovery after a
disappointing year in 1992. New keycard products and improved market demand
fueled the gains.
Duncan Parking Systems improved its operating profits by maintaining
its market-leading position in mechanical meters in North America and
continuing its focus on cost reduction. Its re-introduced all-
- -------------------------------
Bob Connor (left), President of
OPW Fueling Components, and
Tom Spangrud (center), President
of Blackmer, display new vapor
assist nozzles and pumps as Rudy
Herrmann, CEO of Dover Resources,
looks on. Both companies secured
leading market shares for these
products.
electronic meter functioned well and is meeting with growing customer
acceptance. This technology and other new, parking-related products developed
by Duncan could propel the company to profit records in 1994 and 1995.
C. Lee Cook and Stark Manufacturing maintained their earnings levels
on slight sales gains. Both companies improved cost structures, introduced new
products and implemented successful marketing efforts that could lead to larger
gains in 1994.
DECLINES AT FOUR COMPANIES
Four companies that had record or near-record earnings in 1992 fell short of
those marks in 1993. At Wittemann, a sluggish market for its CO2 recovery
systems and intense price competition from European companies reduced sales and
profits compared to its record-setting prior year's results. Similarly, a
softer-than-expected domestic market impacted both Civacon and OPW Engineered
Systems, both of which had set earnings records in 1992.
At Ronningen-Petter, earnings remained weak by historical standards
because of continuing excess capacity in the paper industry, which is a major
market for the company's filtration equipment, and because of the absence of
large orders for its refinery equipment, which had fueled its strong 1992
results.
ACQUISITION COMPLETED
Dover Resources did not complete an acquisition in 1993, but became the first
of Dover's five independent subsidiaries to complete an acquisition in 1994.
Midland Manufacturing, acquired January 3, 1994, is the leading U.S.
manufacturer of valves used on railway tank cars and marine barges. It will
continue to operate under the direction of its previous owner/managers, with
Jerry Portis as President.
OUTLOOK
Most Dover Resources companies foresee profit gains in 1994. However, at
Blackmer and OPW Fueling Components, increased competition and fewer new
mandated vapor recovery programs are likely to forestall further earnings
records. The oilfield equipment companies may also be impacted by the current
low price of oil. The addition of Midland should increase Dover Resources'
reported earnings, despite normal acquisition-related write-offs. A further
gain in segment earnings seems achievable, although probably not of the
magnitude achieved in 1993.
DOVER RESOURCES' COMPANIES
1 DE-STA-CO
William D. Rogerson, President
Products: Reed valves for
compressors; Toggle clamps;
Workholding devices
DE-STA-CO, GMBH (GERMANY)
Michel Buchenau,
Managing Director
DE-STA-CO (ASIA)
Alan Drake, Managing Director
1 RONNINGEN-PETTER
Danny K. Kaiser, President
Products: Liquid filtration
systems
R-P PRODUCTS
Barry Bowen, General Manager
1 STARK MANUFACTURING
Richard Dawson, President
Products: Specialized aluminum
and copper tubing and
manifold assemblies
1 DUNCAN PARKING SYSTEMS
Richard Farrell, President
Products: Parking meters
1 BLACKMER
Thomas S. Spangrud, President
Products: Rotary P.D. pumps
for delivery of fuel oil, propane,
and industrial products
1 C. LEE COOK
David Jackson, President
Products: Piston rings,
packings and valves for natural
gas compressors; Repair
services
COMPRESSOR COMPONENTS
Wayne E. Elder,
Vice President and
General Manager
Cook Manley
Gerald W. Sanderlin,
Vice President and
General Manager
1 WITTEMANN
William Geiger, President
Products: CO2 recovery
systems
1 ALBERTA OIL TOOL (CANADA)
James R. Kosh, President
Products: Sucker rods,
fittings, valves, controls
1 NORRIS
James L. Mitchell, President
Products: Sucker rods,
couplings, subsurface oil
pumps; Valves and fittings
1 NORRISEAL CONTROLS
Larry J. Renaud, President
Products: Norriseal valves;
Well controllers;
Piston Lift Systems
FERGUSON-BEAUREGARD/
LOGIC CONTROLS
Pat Quinn, President
1 OPW FUELING COMPONENTS
Robert Conner, President
Products: Gasoline nozzles,
fittings and valves
INDUSTRIAL DIVISION (CANADA)
Robert W. Pearson, President
1 OPW ENGINEERED SYSTEMS
Tom Niehaus, President
Products: Loading arms,
swivels, sight flow indicators
1 CIVACON
James Johnson, President
Products: Kam-Loks,
Kamvaloks and transport tank
monitoring and control
systems
1 PETRO VEND
Doug Stewart, President
Products: Key/card control
systems, tank monitors
I.S.T. GMBH (GERMANY)
Nico Visser,
Managing Director
Products: Pigging Systems
Numbers indicate market position
7
<PAGE> 8
DOVER INDUSTRIES
PROFITS AT DOVER INDUSTRIES ADVANCED 58% TO A RECORD LEVEL, HELPED BY
CONTINUING STRONG INTERNAL GROWTH, BY THE ABSENCE OF AN ENVIRONMENTAL CHARGE
THAT REDUCED 1992 PROFITS, AND BY THE ACQUISITION OF THE HEIL CO. AND B&S
SERVICES.
Most of the 12 individual Dover Industries companies achieved earnings growth
during the year, with Heil, Tipper Tie and Texas Hydraulics setting new
records.
The 10 companies that have been part of the Dover Industries segment
throughout the 1991-93 period enjoyed
OPERATING EARNINGS (MILLIONS)
(Excluding 1992 Environmental Charge)
<TABLE>
<S> <C>
1989 48
1990 50
1991 38
1992 47
1993 60
</TABLE>
After-Tax Operating
Return on Investment
(Excluding 1992 Environmental Charge)
(Definition in Note 15)
<TABLE>
<CAPTION>
%
-
<S> <C>
1989 33
1990 34
1991 27
1992 34
1993 34
</TABLE>
their second year of recovery from the 1991 recession, with earnings advancing
12% in 1992 and 14% in 1993. Six of these companies have now exceeded their
pre-recession 1990 earnings levels.
FOOD EQUIPMENT COMPANIES
GROW STRONGER
Groen, Tipper Tie and Randell, which serve the food service equipment and
packaging markets, all performed well in 1993, with Groen and Tipper Tie
achieving major earnings gains and Randell falling short of its outstanding
year of 1992. Combined profits of the three companies advanced more than 25%.
Their presidents, together with Dover Industries CEO Lew Burns, are pictured
here with new products made by Groen at its expanded Jackson, Mississippi
plant.
Randell and Groen both expanded manufacturing capacity, with Groen's new
fabrication center, shown here, an especially innovative investment.
PROFIT GAINS AT OTHER
COMPANIES
Chief Automotive substantially improved its earnings despite continuing
weakness in the market for its top-of-the-line EZ Liner product. A new emphasis
on measuring equipment, on international markets, and on other types of
frame-straightening equipment --augmented by products acquired from Continental
Manufacturing in 1992--were the key factors in Chief's success. A
reorganization of Chief's marketing program has added to the company's channels
of distribution and reduced its dependence on a rental/lease program.
Texas Hydraulics' focus on value-adding, specially engineered hydraulic
cylinders and its continued reduction of non-value-added production costs
resulted in record earnings on higher sales. At Rotary Lift, sales advanced
modestly while profits were flat, as the company reduced manufacturing costs
and maintained its market-leading position in the automotive service lift
business. This market grew increasingly price-competitive during 1993, with new
entrants and cheaper products gaining some market share. Rotary Lift plans to
respond to these problems in 1994 with more value-added products, further cost
reductions and a tougher competitive posture in the marketplace.
Marathon continued its profit recovery, as new products and stronger
marketing efforts increased sales by more than 15%. Far and away the leading
producer of rolloff-compactors, Marathon also increased its penetration of the
vertical and horizontal baler markets. Capital spending in the solid waste
industry has been sluggish for several years and Marathon's gains reflect its
aggressive engineering and marketing programs.
Bernard's profits rebounded to near-record levels, aided by some
improvement in industry-wide demand for welding products, and by the sucess of
new additions to both the Weldcraft and Bernard product lines.
At Davenport, profit recovery continued as a result of the strengthening
of the housing and automotive markets, where demand for new Davenport screw
machines improved and increased machine usage led to increased orders for
replacement parts. Davenport reorganized internally into separate new machine
and replacement parts business units in order to sharpen the company's focus
and reduce costs.
TWO COMPANIES DECLINE
After substantial profit increases in 1992, both Randell and Dieterich Standard
fell back in 1993 to lower levels. Both businesses performed extremely well and
continued their programs to reduce costs on existing products and to expand
their product and customer bases. Each company forecasts improved profits in
1994.
NEW ACQUISITIONS
PERFORM WELL
Heil, acquired in mid-1993, achieved important growth in sales and operating
profits. Sales improved for solid waste disposal products and particularly for
trailerized tanks. Strong market demand for petroleum and dry-bulk tankers,
along with market share improvement, set the stage for two expansion moves
subsequent to Dover's acquisition of the company--the purchase of J & L Tank in
August, and the expansion of Heil's Athens, Tennessee facility, which began in
November.
8
<PAGE> 9
[PHOTO -- SEE EDGAR APPENDIX]
Lew Burns (left), CEO of Dover Industries with the Presidents of Dover
Industries' three food-related companies--Louise O'Sullivan (Groen), Chuck
Heard (Tipper Tie) and Lynn Bay (Randell). A new automated fabrication center,
background, produces parts for Groen's HyPerSteam TM, a highly successful new
product.
- ------------------------------------------------------------------------------
Heil expects continuing growth in 1994. Its sales of more than $200 million
make it Dover Industries' largest company by a substantial margin.
Dover Industries' smallest company, newly acquired B&S, also had a
successful first year in 1993. This company was created by the combination of
the former Brown & Sharpe screw machine replacement parts business with
Plymslade Services, Ltd., whose management assumed overall direction of the
enterprise. The company has established itself as the leading and most
reliable supplier of replacement parts for the widely used Brown & Sharpe
machines.
These companies added over $100 million to Dover Industries' sales in 1993
and almost $6 million to segment income after acquisition costs. Assuming
identical operating performance in 1994, they will add a further $100 million
in sales and $13 million in earnings to 1994 segment results.
OUTLOOK
The addition of Heil and B&S for a full year in 1994, and the internal growth
expected at many Dover Industries companies, should combine for a substantial
profit increase in 1994, possibly positioning Dover Industries as the largest
profit producer among Dover's five market segments.
DOVER INDUSTRIES' COMPANIES
1 HEIL CO.
Lawrence F. Gray, Sr.,
President
Products: Refuse collecting
vehicles; trailerized tanks,
dump bodies
1 MARATHON EQUIPMENT
Grant Fenner, President
Products: Solid waste
compaction, transporting,
and recycling equipment
1 TIPPER TIE
Charles M. Heard, President
Products: Clip closures,
packaging systems and wire
products
1 ROTARY LIFT
Tim Sandker, President
Products: Automotive lifts and
alignment racks
1 GROEN
Louise E. O'Sullivan, President
Products: Commercial food
service cooking equipment/
industrial processing equipment
AMERICAN METAL WARE
Gerrid Reice, President
Products: Coffee brewing
equipment
1 CHIEF AUTOMOTIVE SYSTEMS
James Aylward, President
Products: Auto collision
measuring and repair systems
2 RANDELL
Lynn Bay, President
Products:Commercial
refrigeration; Food service
preparation and holding
equipment; Conveyorized
pizza ovens
2 BERNARD/WELDCRAFT
A. Patrick Cunningham,
President
Products: MIG and TIG
welding torches, water
circulators, and plasma
cutting products
1 DIETERICH STANDARD
Eugene M. Shanahan,
President
Products: Annubar(R) flow
sensors
1 TEXAS HYDRAULICS
Nick Petelski, President
Products: Specialty hydraulic
cylinders
1 DAVENPORT
Charles F. Reed, President
Products: Multi-spindle screw
machines and attachments
1 B&S LTD (U.K.)
Jonathan D. Catterall,
President
Products: Screw machine
repair parts
Numbers indicate market position
9
<PAGE> 10
DOVER ELEVATOR
INTERNATIONAL, INC.
CONTRARY TO THE EXPECTATION EXPRESSED IN LAST YEAR'S ANNUAL REPORT, PROFITS AT
DOVER ELEVATOR INTERNATIONAL FELL MODESTLY, RATHER THAN INCREASING. PROFITS DID
RISE IN THE U.S., AS HIGHER SERVICE REVENUES AND COST REDUCTIONS MORE THAN
OFFSET THE EFFECTS OF CONTINUED WEAKNESS IN THE NEW ELEVATOR MARKET AND SOME
CONSTRUCTION OVERRUNS.
However, we misjudged the extent of the new elevator downturn in international
markets--especially in Canada, where Dover has historically been the market
leader in new construction. Profits in the U.K. and Canada declined by more
than $4 million.
OPERATING EARNINGS
<TABLE>
<CAPTION>
(Millions)
----------
<S> <C>
1989 89
1990 96
1991 58
1992 59
1993 56
</TABLE>
After-Tax Operating
Return on Investment
(Definition in Note 15)
<TABLE>
<CAPTION>
%
-
<S> <C>
1989 43
1990 43
1991 26
1992 26
1993 25
</TABLE>
DOMESTIC COMPANIES
SHOW GAINS
Domestic profits improved as our two largest companies, Dover Elevator (U.S.)
and Miami Elevator, achieved profit gains for the second year in a row.
Lagerquist also showed a gain, with Sound Elevator, General Elevator and
Security Elevator coming close to their prior-year performances. New elevator
volume declined for all domestic companies and profits were negatively impacted
by cost overruns on several projects, notably in Los Angeles and New York.
Management and/or program changes in these cities should lead to better results
in 1994, although the potential for job cost overruns remains high as a result
of tight, competitive pricing.
Service revenues and profits continued to advance but at a slower rate than
anticipated. Price competition for renewal business intensified and an
increasing number of customers elected not to sign service contracts, or to do
so for only a portion of their equipment, as real estate operators continued to
be strapped for cash. Cost reduction and efficiency improvement were therefore
particularly important in 1993 to enable DEI to maintain profit margins.
PROFITS DECLINE FURTHER IN
CANADA AND THE U.K.
At Hammond & Champness, Ltd., profits again declined, as a result of costs
incurred to downsize further its new elevator activities, and because of price
pressure on modernization/major repair activities, as new construction-oriented
competitors increased their activities in this segment of the market. H & C
continued to be the U.K.'s most successful national service company. Increasing
volume in this area, continued expansion of its German operations and the
reduction of new elevator activities are expected to reverse H & C's profit
decline in 1994.
In Canada, the weakness in the new elevator market and
higher-than-anticipated costs impacted profits severely. We believe that the
new elevator side of the business in this market has now bottomed, which should
allow the continued service growth we expect in 1994 to create a modest profit
recovery. Dover Canada achieved record profits during the building boom of
1988-90 as a result of strong participation in the high rise office market, but
profits now have retreated by more than two-thirds.
Factory and field construction capabilities in Canada currently are
substantially under-utilized. This is a problem inherent in cyclical markets
and Dover Canada is working hard to reduce costs while improving volume,
including exports and two new joint ventures described below.
NEW INITIATIVES
Traditionally, Dover Elevator International has primarily based its business on
the new elevator markets in Canada and the U.S., and the service markets in
those two countries and in the U.K. The poor outlook for new elevator
construction in all three of these countries has led to an acceleration of the
development of initiatives to expand DEI's strategic horizons. These include:
* EXPORTS FROM NORTH AMERICAN FACTORIES.
Increased emphasis on international sales has improved export bookings by more
than 20% in each of the last three years. The small geared traction machine
pictured here, a broadened distributor organization, and increased marketing
support should continue this growth.
* JOINT VENTURES.
Dover Canada has negotiated joint venture agreements with a Prague-based
service company and with an Asian company for distribution in China. Dover
Elevator (U.S.) is working to develop a joint venture production agreement
within China.
* ACQUISITIONS.
Purchase of regional service companies continued with the acquisition of Lift
Service und Montage in Germany, and Viking Elevator and Atlanta Elevator in the
U.S.
* NEW PRODUCTS.
In addition to developing products for export markets, Dover Elevator (U.S.)
plans to launch new elevator products in 1994 for home and accessibility
applications.
These initiatives are designed to improve manufacturing vol-
- -----------------------------------------------------------------------------
John Apple (left), CEO of Dover Elevator International, with the three company
Presidents most involved in DEI's international expansion--Hap Hamilton (Dover
Elevator Systems), Nigel Davis (Hammond & Champness) and Bill Wilkinson (Dover
Elevator, Canada). The pictured SG elevator with VVVF drive system was
developed for applications in Europe, Latin America, the Middle East and Asia.
10
<PAGE> 11
ume without putting further pressure on construction prices in Dover's
traditional markets. In addition, factory cost reduction, operating expense
control and field efficiency improvement continue to be emphasized within
Dover's traditional businesses.
OUTLOOK
There are few signs of renewed elevator growth in the construction markets of
North America and the U.K. However, these markets do appear to have bottomed,
and we believe our exposure to cost overruns has been reduced through efforts
in 1993 to curtail overly aggressive pricing. Service revenues should increase
further in 1994, despite the competitive market conditions. At least some of
the new initiatives will also begin to add to revenue and profit growth in
1994. The most likely outlook is for a modest improvement in profits next year,
with a rather low probability of a major swing in either direction.
DOVER ELEVATOR INTERNATIONAL, INC. COMPANIES
1 DOVER ELEVATOR SYSTEMS
L.E. Hamilton, President
Products: Design and
manufacture of hydraulic
and traction elevators
DOVER ELEVATOR SERVICE
OF PUERTO RICO INC.
Carlos R. Arias,
Managing Director
Products: Elevator service,
repair and modernization
DOVER ELEVATOR COMPANY
L.E. Hamilton, President
Products: Elevator sales,
installation, service, repair
and modernization
GENERAL ELEVATOR COMPANY
Michael T. McInnis, President
Products: Elevator sales,
installation, service, repair
and modernization
MIAMI ELEVATOR COMPANIES
Gary S. Bailey;
Stephen M. Bailey, Presidents
Products: Elevator sales,
installation, service, repair
and modernization
LAGERQUIST CORPORATION
ARIZONA ELEVATOR
SOUND ELEVATOR COMPANY
Donald C. Dana, President
Products: Elevator sales,
installation, service, repair
and modernization
SECURITY ELEVATOR COMPANY
Paul T. Beisser, Jr., President
Products: Elevator sales,
installation, service, repair
and modernization
1 DOVER ELEVATOR DIVISION
(CANADA)
William N. Wilkinson,
President
Products: Design and
manufacture of elevators;
Sales, installation, service,
repair and modernization
3 HAMMOND & CHAMPNESS,
LTD (U.K.)
Nigel P. Davis,
Managing Director
Products: Design and
manufacture of elevators;
Sales, installation, service,
repair and modernization
AAW GMBH (GERMANY)
J. Arndt, I. Preuss,
Geschaftsfuhrers
Products: Elevator service,
repair and modernization
CHRISTIAN HEIN, GMBH
(GERMANY)
Christian Hein,
Geschaftsfuhrer
Products: Design and
manufacture of elevators;
Sales, installation, service,
repair and modernization
LIFTSERVICE UND MONTAGE
GMBH (GERMANY)
Manfred Bredel, Armin
Bournon, Waldemar
Philipp,Geschaftsfuhrers
Products: Design and
manufacture of elevators;
Sales, installation, service,
repair and modernization
Numbers indicate market position
[PHOTO -- SEE EDGAR APPENDIX]
11
<PAGE> 12
DOVER TECHNOLOGIES
DOVER TECHNOLOGIES ACHIEVED A 40% GROWTH IN PROFITS IN 1993, AS ALL OF ITS
COMPANIES SHOWED IMPROVEMENTS IN OPERATING INCOME. VECTRON, ACQUIRED IN
MID-1992, CONTRIBUTED TO EARNINGS FOR A FULL YEAR, WITH SMALLER WRITE-OFFS OF
ACQUISITION PREMIUMS, DRAMATICALLY IMPROVING THE PROFIT CONTRIBUTION FROM
QUADRANT TECHNOLOGIES. THIS HELPED TO OFFSET THE LOSS OF INCOME RESULTING FROM
THE SPINOFF OF DOVATRON, FORMERLY DOVER ELECTRONICS, AND A $4.5 MILLION COST TO
SETTLE A LAWSUIT.
Operating income at ongoing Dover Technologies companies improved by more than
60%, with the largest dollar gains achieved at Universal Instruments and DEK.
Both of those companies benefited from increased capital spending for
OPERATING EARNINGS (MILLIONS)
<TABLE>
<S> <C>
1989 30
1990 28
1991 27
1992 30
1993 42
</TABLE>
After-Tax Operating
Return on Investment
(Definition in Note 15)
<TABLE>
<CAPTION>
%
-
<S> <C>
1989 14
1990 15
1991 15
1992 16
1993 18
</TABLE>
electronic production equipment, and from the introduction of important new
products for the assembly of surface mount technology circuit boards.
Dover Technologies' 1993 sales advanced only 6% compared with 1992, but
excluding DOVatron revenues for both years, the increase would have been 29%.
On a similar basis, bookings showed a 32% increase.
PROGRESS IN COMMUNICATIONS
AND COMPONENT COMPANIES
Quadrant Technologies, K&L Microwave and Novacap each showed solid income
improvement on a sales gain of 40% to a total over $100 million. Approximately
two-thirds of this sales gain resulted from the inclusion of Vectron in
Quadrant Technologies for a full year. Higher volumes, effective cost control
and introduction of new products led to improved margins at each of the
companies. Both K&L Microwave and Quadrant Technologies continued to increase
their penetration of commercial markets and to reduce the importance of defense
programs.
Novacap had its best profit performance in five years, as a result of the
strong market for ceramic capacitors, the company's focus on difficult-to-make,
high-value products, and initial sales from newly developed tape technology.
UNIVERSAL SHOWS STRENGTH
Universal's sales grew over 20%, fueling a 50% rise in operating income.
Bookings showed even greater progress, growing more than 30%. The increase
reflected Universal's best year since 1988 for orders for thru-hole technology
equipment, along with sharply improved performance in the newer surface mount
technology area.
The strong thru-hole performance derived from three factors: a more vigorous
market, gains in market share generated by Universal's development of enhanced
capabilities for this mature product line,
[PHOTO -- SEE EDGAR APPENDIX]
12
<PAGE> 13
and the acquisition late in the year of Dynapert.
Universal's 1993 thru-hole business proved to be significantly stronger than
had been expected at the start of the year. After a third quarter dip, fourth
quarter orders for these products rebounded, which is encouraging. While the
Dynapert acquisition will be helpful in 1994, this market has been extremely
difficult to predict and the prospects for an equally rewarding 1994 are
uncertain.
In the surface mount area, Universal's new GSM-1 machine for fine-pitch
placement and flexible assembly achieved significant market success. Repeat
orders from major customers and strong-than-anticipated indications of 1994
interest are putting pressure on Universal to accelerate production schedules.
From a performance and customer value perspective, the GSM-1 machine is
Universal's first internally developed major success in the surface mount
market. Together with high speed machines produced by an OEM partner and DEK's
screen printing machine, Dover Technologies can now offer a formidable
combination of equipment for surface mount production lines--a field still
dominated by Japanese producers. As is frequently the case with new machines,
margins on the GSM-1 are low
- -----------------------------------------------------------------------------
John Pomery (center), CEO of Dover Technologies, with John Knowles (left),
President of DEK, and Gerhard Meese (right), President of Universal
Instruments, stand proudly before two world-class surface mount assembly
products--DEK's Model 265 Screen Printer and Universal's GSM-1 assembly
machine.
and Universal faces an important challenge in 1994 to reduce costs and make
this product a commercial, as well as a marketing and engineering, success. The
increase in production volumes should be helpful in this regard.
DEK MAKES IMPRESSIVE
GAINS
After suffering a loss in 1991 as a result of declining sales in a recessionary
environment, coupled with the high cost of developing a major new product, DEK
rebounded to profitability in 1992 and more than doubled its profits in 1993,
as sales advanced to twice their level of only two years ago.
DEK's gamble in the new product arena has resulted in screen printing
machines whose high accuracy, reliability and through-put have made DEK's
machines world leaders. Substantial reorganization of internal operations, with
a focus on just-in-time and cellular production methods, has also improved
DEK's costs and reduced its customer lead time, with both of these factors
contributing to improved margins. DEK expects to launch further enhancements of
its product line during 1994.
Soltec has thus far had less dramatic success in its soldering machine
specialty, but cost rationalizations have allowed the company to remain
profitable, even as it has invested heavily in new technology. The company's
new line of reflow soldering machines should result in increased business in
1994, adding to its market-leading position in wave soldering.
OUTLOOK
Dover Technologies is confident of a further gain in profits in 1994, based
upon the expectation that capital spending within the electronic industry will
remain strong. A critical factor in the size of the profit improvement will be
Universal's ability to increase production of its GSM-1 machines while
simultaneously improving margins. The difficulty of accurately projecting the
size of the thru-hole equipment market adds an element of uncertainty to what
is, on balance, a very promising outlook.
DOVER TECHNOLOGIES' COMPANIES
1 UNIVERSAL INSTRUMENTS
CORPORATION
Gerhard Meese, President
Products: Automated assembly
equipment for printed circuit
boards
3 SOLTEC, B.V. (NETHERLANDS)
Michiel van Schaik,
Managing Director
Products: Automated soldering
and board handling equipment
1 DEK PRINTING MACHINES LTD
(U.K.)
John B. Knowles,
Managing Director
Products: Screen printers for
hybrid and printed circuits
1 K&L MICROWAVE
Charles Schaub, President
Products: Microwave/
R.F. filters
1 QUADRANT TECHNOLOGIES
Terence W. Ede, President
COMMUNICATION TECHNIQUES
Ian Crossley,
General Manager
Products: Microwave
frequency sources
OSCILLATEK
Ronald Stephens, President
Products: Crystal oscillators
MEASUREMENT SYSTEMS
Sal Lucci, General Manager
Products: Manual tracking
positioning controls
DIELECTRIC LABORATORIES
Bruce Semans,
General Manager
Products: High frequency
capacitors; Substrates
VECTRON
Terence W. Ede, President
Products: Crystal oscillators
3 NOVACAP
Dr. Andre P. Galliath,
President
Products: Multi-layer ceramic
capacitors
Numbers indicate market position
13
<PAGE> 14
DOVER DIVERSIFIED
DOVER DIVERSIFIED MANAGED TO ACHIEVE RECORD REPORTED EARNINGS DESPITE OPERATING
PROFIT DECLINES AT SEVERAL MAJOR BUSINESSES. ACQUISITIONS AND IMPROVED BOOKINGS
FOR LONG LEAD-TIME EQUIPMENT CREATED THE OPPORTUNITY FOR A SIGNIFICANT FURTHER
INCREASE IN REPORTED EARNINGS FOR 1994.
SARGENT CONTROLS RESOLVES
CONTRACT DISPUTE
The key factor in this year's profit increase was Sargent Controls' successful
settlement of a contract claim involving delays in its work for the SSN21/22
Seawolf submarines. Design and procure-
OPERATING EARNINGS (MILLIONS)
<TABLE>
<S> <C>
1989 31
1990 36
1991 36
1992 37
1993 39
</TABLE>
After-Tax Operating
Return on Investment
(Definition in Note 15)
<TABLE>
<CAPTION>
%
-
<S> <C>
1989 34
1990 34
1991 32
1992 45
1993 47
</TABLE>
ment timing changes imposed by the customer led to substantial extra costs at
Sargent Controls during the 1991-93 period. The matter was resolved in late
1993 with a $16.2 million settlement, of which $11.4 million was reflected in
1993 income. The $4.8 million balance will be included in 1994 and 1995 income
as valve shipments for the two submarines are completed.
Sargent Controls has contributed significantly to the U.S. Navy's submarine
program over the years with its specially designed and highly reliable silent
valves, which are incorporated in most nuclear submarine hydraulic systems.
While the settlement only partially redressed the historical cost situation, it
should lead to profitable operation in 1994 and 1995. Sargent Controls is
continuing to seek alternative products because of the longer-term
uncertainties about the Navy's submarine building program.
The consolidation of Sargent Aerospace and Precision Kinetics/Kahr Bearing
into new facilities in Tucson was completed successfully, and the newly created
company--Sargent Technologies--became profitable during the second half of the
year. The establishment of lower cost manufacturing will make Sargent
Technologies and Sargent Controls more competitive in the defense/aerospace
market, which is especially important, since this area is expected to remain
depressed for at least the next several years.
PROFITS LOWER AT SEVERAL
KEY COMPANIES
Profits declined at Tranter, A-C Compressor and Waukesha Bearings, which had
been Dover Diversified's three largest profit producers in 1992. The drop at
Waukesha and Tranter reflected sales declines in weaker markets. A-C Compressor
had less after-market business than expected, and lower shipments of its long
lead new compressors because of reduced 1992 bookings. However, A-C
Compressor's improved international sales effort and better penetration of the
gas processing market led to a significant increase in new bookings during the
year. This could lead to record sales and earnings in 1994.
Waukesha also anticipates improvement in 1994, while Tranter, whose 1993
profit decline interrupted nine consecutive years of earnings gains, will focus
on costs, market share and international opportunities, as it expects the
domestic market for its heat transfer equipment to remain soft.
PATHWAY BELLOWS AND CRL
SET RECORDS
Pathway Bellows and Central Research Laboratories achieved solid earnings gains
in 1993, with both companies setting profit records. Pathway maintained its
leadership position in the metal bellows market and continued to compete
successfully for international projects and for on-site service work. A new
product, developed quickly to respond to a customer problem, led to more than
$4 million in sales in 1993 and earned Pathway's management group the photo
opportunity on the next page.
At CRL, strong shipments of remote manipulators for nuclear applications,
new products for the leather tanning industry and reduced costs were the keys
to success. While Pathway expects further profit gains in 1994, CRL
anticipates a temporary dip in nuclear manipulator project opportunities, which
will probably reduce profits next year.
THREE MAJOR ACQUISITIONS
Dover Diversified's acquisition of Belvac Machinery, Phoenix Refrigeration and
Thermal Equipment Company added significantly to the size of Dover Diversified
and to its future earnings potential. As a result of acquisition completion
dates late in the year and the write-off of acquisition-related costs,
businesses acquired in 1993, including Pathway's add-on acquisition of
Richland, added only $36 million to segment sales and $3.8 million to segment
earn-
- -----------------------------------------------------------------------------
Jerry Yochum (right), CEO of Dover Diversified, and Keith Cole (center),
President of Pathway Bellows, with Bob Town, Business Unit Manager for
Pathway's fabric expansion joint products. Bob's group developed the pictured
gas turbine exhaust system for the GE Frame 7-F Turbine, leading to $4 million
of new business for Pathway in 1993.
14
<PAGE> 15
ings. Assuming these companies operate in 1994 at the same levels as in 1993,
they will contribute about $100 million more to sales and $20 million more to
segment earnings. Belvac, Thermal Equipment and Phoenix Refrigeration are
leaders in their product markets, and will continue with the same management
teams that have already made them successful.
OUTLOOK
Dover Diversified is targeting a substantial increase in segment profits in
1994, primarily because of its acquisitions. Management expects internal
growth to offset most of the absence in 1994 of the contract settlement gains
that helped 1993. In sales terms, Dover Diversified will remain the smallest of
Dover segments, but its high operating profit margins could make it Dover's
third largest profit producer.
DOVER DIVERSIFIED COMPANIES
1 BELVAC
Geoffrey R. Bowlin, President
Products: Can necking and
trimming equipment
1 TRANTER
Kenneth L. Kaltz, President
Products: Plate/frame heat
exchangers; Transformer
radiators
2 PHOENIX
Grant M. Brown, President
Products: Commercial
refrigeration systems;
Electrical distribution systems
2 A-C COMPRESSOR
Paul W. Steffen, President
Products: Centrifugal, oil-
free-screw, and rotary
compressors
1 THERMAL EQUIPMENT
Todd L. Taricco, President
Products:Autoclaves;
Industrial cleaning equipment
1 PATHWAY BELLOWS
J. Keith Cole, President
Products: Metal and fabric
expansion joints
3 WAUKESHA BEARINGS
Donald A. Fancher, President
Products: Fluid film bearings;
Sweeney torquing tools
1 CENTRAL RESEARCH LABS
Rudolph O. Marohl, President
Products: Master-slave remote
manipulators; Glove boxes;
Hide slickers
1 SARGENT CONTROLS
Donald C. Tarquin, President
Products: Submarine fluid
controls; aircraft hydraulic
controls
3 SARGENT TECHNOLOGIES
George H. Davidson,
President
Products: Spherical, self-
lubricating bearings; Ballscrew
actuation systems
Numbers indicate market position
[PHOTO -- SEE EDGAR APPENDIX]
15
<PAGE> 16
Dover Corporation and Subsidiaries
MARKET SEGMENT INFORMATION
(in thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31, 1993 1992 1991 1990 1989 1988
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers:
Dover Elevator International $ 777,720 $ 791,099 $ 791,400 $ 830,589 $ 765,698 $ 713,739
Dover Resources 472,643 439,389 447,079 420,163 375,421 328,730
Dover Diversified 244,597 225,771 196,464 209,961 206,997 193,298
Dover Industries 501,364 357,054 339,255 324,967 325,678 291,546
Dover Technologies 488,248 458,603 421,943 424,704 448,668 428,350
Intramarket sales (644) (336) (355) (39) (2,028) (1,909)
Consolidated total $ 2,483,928 $ 2,271,580 $ 2,195,786 $ 2,210,345 $ 2,120,434 $ 1,953,754
Operating profit:
Dover Elevator International $ 56,404 $ 59,198 $ 57,947 $ 95,936 $ 88,772 $ 79,733
Dover Resources 70,290 58,594 62,323 66,268 57,144 50,043
Dover Diversified 39,360 37,373 35,955 36,142 31,369 23,677
Dover Industries 59,942 37,837 37,812 49,637 48,591 40,331
Dover Technologies 41,797 29,793 27,439 27,737 29,684 46,424
Interest income, interest
expense and general
corporate expenses, net (22,251) (22,460) (17,388) (31,602) (28,581) (15,448)
Consolidated income
before income taxes $ 245,542 $ 200,335 $ 204,088 $ 244,118 $ 226,979 $ 224,760
Profit margin (pretax):
Dover Elevator International 7.3% 7.5% 7.3% 11.6% 11.6% 11.2%
Dover Resources 14.9 13.3 13.9 15.8 15.2 15.2
Dover Diversified 16.1 16.6 18.3 17.2 15.2 12.2
Dover Industries 12.0 10.6 11.1 15.3 14.9 13.8
Dover Technologies 8.6 6.5 6.5 6.5 6.6 10.8
Consolidated profit margin 9.9% 8.8% 9.3% 11.0% 10.7% 11.5%
Identifiable assets at December 31:
Dover Elevator
International $ 381,587 $ 376,508 $ 378,385 $ 377,059 $ 331,101 $ 313,028
Dover Resources 218,473 219,216 228,152 221,900 196,824 195,552
Dover Diversified 340,072 183,262 116,432 148,108 158,923 157,089
Dover Industries 485,419 302,821 314,037 257,645 270,896 328,031
Dover Technologies 278,871 285,749 247,562 271,959 302,450 323,172
Corporate (principally cash
and equivalents) 69,267 58,568 72,052 191,695 146,182 48,758
Consolidated total $ 1,773,689 $ 1,426,124 $ 1,356,620 $ 1,468,366 $ 1,406,376 $ 1,365,630
Depreciation and amortization:
Dover Elevator
International $ 13,319 $ 13,683 $ 14,366 $ 12,692 $ 13,860 $ 14,007
Dover Resources 13,300 13,602 14,689 13,930 12,516 10,639
Dover Diversified 14,837 10,756 9,623 10,008 11,153 10,057
Dover Industries 20,520 17,840 26,112 17,050 18,356 16,125
Dover Technologies 13,401 19,755 20,144 23,628 22,781 22,647
Corporate 1,592 1,821 432 222 148 322
Consolidated total $ 76,969 $ 77,457 $ 85,366 $ 77,530 $ 78,814 $ 73,797
Capital expenditures:
Dover Elevator
International $ 8,112 $ 5,137 $ 9,947 $ 12,049 $ 25,668 $ 12,744
Dover Resources 11,515 11,560 12,307 11,859 10,928 8,794
Dover Diversified 4,802 5,767 6,243 5,943 5,148 7,383
Dover Industries 11,146 8,225 5,675 5,584 7,884 11,202
Dover Technologies 11,769 11,665 12,373 9,380 12,172 16,506
Corporate 188 87 73 165 703 150
Consolidated total $ 47,532 $ 42,441 $ 46,618 $ 44,980 $ 62,503 $ 56,779
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
Dover Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Years ended December 31, 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 2,483,927,815 $ 2,271,580,401 $ 2,195,786,425
Cost of sales 1,733,256,246 1,601,595,511 1,580,050,574
Gross profit 750,671,569 669,984,890 615,735,851
Selling and administrative expenses 496,798,177 466,776,948 452,393,713
Operating profit 253,873,392 203,207,942 163,342,138
Other deductions (income):
Interest expense 22,338,587 20,059,296 23,161,547
Interest income (19,601,515) (19,376,040) (16,230,454)
Loss on sale of property, plant and equipment, net 2,435,076 1,366,200 680,679
Foreign exchange loss (gain) 883,242 130,565 (644,957)
All other, net 2,276,041 693,094 (47,713,065)
Total 8,331,431 2,873,115 (40,746,250)
Earnings before taxes on income and cumulative effects
of changes in accounting principles 245,541,961 200,334,827 204,088,388
Federal and other taxes on income 87,288,000 71,192,000 75,880,000
Earnings before cumulative effects of changes in accounting
principles (per common share 1993 $2.77; 1992 $2.23;
1991 $2.15) $ 158,253,961 $ 129,142,827 $ 128,208,388
Cumulative effects at January 1, 1992, of changes in
accounting for:
Income Taxes - 12,951,259 -
Postretirement benefits other than pension
(net of income tax benefits, $7,159,000) - (12,386,949) -
Net earnings (per common share 1993 $2.77;
1992 $2.24; 1991 $2.15) $ 158,253,961 $ 129,707,137 $ 128,208,388
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Earnings per share computed on the basis of the weighted average number of
common shares outstanding during the year (57,110,131 in 1993, 57,988,259 in
1992 and 59,749,889 in 1991).
Dover Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Years ended December 31, 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 1,051,949,367 $ 972,032,983 $ 892,788,560
Net earnings 158,253,961 129,707,137 128,208,388
1,210,203,328 1,101,740,120 1,020,996,948
Distribution of contract electronics manufacturing business 36,982,528 - -
Common stock cash dividends of $.90 per share
($.86 in 1992; $.82 in 1991) 51,403,783 49,790,753 48,963,965
Balance at end of year $ 1,121,817,017 $ 1,051,949,367 $ 972,032,983
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
17
<PAGE> 18
Dover Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 63,684,816 $ 71,632,294 $ 81,772,713
Marketable securities (at cost, which approximates market) 32,592,481 29,580,397 45,590,131
Receivables (less allowance for doubtful accounts
of $10,198,581 in 1993, $9,753,173 in 1992 and
$9,746,200 in 1991) 475,155,105 389,273,145 367,956,222
Inventories 294,318,876 250,155,921 227,326,567
Prepaid expenses 37,888,841 33,349,109 33,721,966
Total current assets 903,640,119 773,990,866 756,367,599
Property, plant and equipment, at cost:
Land 24,134,150 20,222,087 19,912,048
Buildings 160,293,914 142,021,248 137,155,412
Machinery and equipment 530,209,359 515,904,401 491,989,772
714,637,423 678,147,736 649,057,232
Less accumulated depreciation (431,274,502) (426,877,590) (397,912,559)
Net property, plant and equipment 283,362,921 251,270,146 251,144,673
Intangible assets, net of amortization 535,136,361 348,680,078 289,794,480
Other intangible assets 10,258,375 10,258,375 10,258,375
Other assets and deferred charges 41,291,610 41,924,677 49,055,328
$ 1,773,689,386 $ 1,426,124,142 $ 1,356,620,455
Liabilities
Current liabilities:
Notes payable $ 174,980,223 $ 220,780,421 $ 125,989,374
Current maturities of long-term debt 311,664 3,945,948 8,762,156
Accounts payable 117,206,514 97,533,480 93,003,891
Accrued compensation and employee benefits 71,083,633 54,621,143 60,089,675
Accrued insurance expense 74,500,740 65,511,669 63,595,644
Other accrued expenses 116,915,606 82,484,983 78,753,016
Federal and other taxes on income 40,795,652 47,472,120 45,271,375
Total current liabilities 595,794,032 572,349,764 475,465,131
Long-term debt 252,064,951 1,230,315 6,316,715
Deferred income taxes 20,408,919 21,499,977 35,513,062
Deferred compensation 35,419,471 26,106,931 10,951,952
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 66,298,575 shares
(66,176,106 shares in 1992 and 65,997,786 in 1991) 66,298,575 66,176,106 65,997,786
Additional paid-in capital 12,530,873 9,508,138 6,034,347
Cumulative translation adjustments (12,760,958) (7,142,315) 14,405,275
Retained earnings 1,121,817,017 1,051,949,367 972,032,983
1,187,885,507 1,120,491,296 1,058,470,391
Less common stock in treasury, at cost, 9,135,689 shares
(9,090,889 shares in 1992 and 7,020,122 shares in 1991) 317,883,494 315,554,141 230,096,796
Total stockholders' equity 870,002,013 804,937,155 828,373,595
$ 1,773,689,386 $ 1,426,124,142 $ 1,356,620,455
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
18
<PAGE> 19
Dover Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Years ended December 31, 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 158,253,961 $ 129,707,137 $ 128,208,388
Cumulative effect of accounting changes - (564,310) -
Net earnings before changes 158,253,961 129,142,827 128,208,388
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 76,968,934 77,456,692 85,366,300
Asset disposition reserves - - 15,178,000
Provision for losses on accounts receivable 5,546,120 5,315,936 7,214,077
Net increase (decrease) in LIFO reserve (7,713,591) (2,931,485) 1,573,622
Deferred income taxes 504,696 (3,540,148) (1,805,000)
Loss on sale of property and equipment 2,435,076 1,366,200 680,679
Gain on sale of Dover Japan and related businesses - - (53,537,478)
Decrease in deferred compensation (426,305) (4,401,313) (3,271,170)
Translation adjustments (5,086,714) (19,977,304) (868,241)
Other, net (3,221,951) (1,732,527) (3,060,964)
Changes in assets and liabilities
(excluding effects of acquisitions and dispositions):
Decrease (increase) in accounts receivable (45,621,111) (13,145,103) 28,631,908
Decrease (increase) in inventories excluding LIFO
reserve 16,907,358 5,311,056 20,643,910
Decrease (increase) in prepaid expenses (2,727,961) 884,950 (7,043,555)
Decrease (increase) in other assets 6,069,241 10,799,223 1,003,541
Increase (decrease) in accounts payable 2,652,307 626,790 (1,122,094)
Increase (decrease) in accrued expenses 34,495,049 (12,465,259) 37,373,834
Increase (decrease) in federal and other taxes
on income (cash payments: $101,574,000 in 1993,
$65,402,000 in 1992 and $106,384,000 in 1991) (14,009,282) (802,181) (29,262,064)
Total adjustments 66,771,866 42,765,527 97,695,305
Net cash provided by operating activities 225,025,827 171,908,354 225,903,693
Cash flows from (used in) investing activities:
Net sale (purchase) of marketable securities (3,012,084) 16,009,734 (2,079,840)
Proceeds from sale of property and equipment 4,736,417 10,477,373 2,137,550
Additions to property, plant and equipment (includes rental
equipment: $1,217,000 in 1993, $5,384,000 in 1992
and $3,798,000 in 1991) (48,748,643) (47,824,957) (50,415,564)
Acquisitions (net of cash and cash equivalents: $2,034,000
in 1993, $2,370,000 in 1992 and $89,000 in 1991) (318,968,113) (108,873,375) (13,103,163)
Proceeds from sale of businesses 1,557,375 500,000 85,859,134
Purchase of treasury stock (24,697 shares in 1993, 2,375,368 shares
in 1992 and 1,055,100 shares in 1991) (1,242,634) (84,269,062) (39,283,444)
Net cash from (used in) investing activities (365,677,682) (213,980,287) (16,885,327)
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable (total interest cash payments:
$17,057,000 in 1993, $14,964,000 in 1992
and $18,413,000 in 1991) (45,800,198) 94,711,047 (155,439,682)
Reduction of long-term debt (15,700,127) (9,902,608) (11,207,108)
Proceeds from long-term debt 250,000,000 - -
Proceeds from exercise of stock options 2,058,485 2,463,828 1,516,391
Proceeds from sale (repurchases) of lease receivables (6,450,000) (5,550,000) (10,000,000)
Cash dividends to stockholders (51,403,783) (49,790,753) (60,997,670)
Net cash from (used in) financing activities 132,704,377 31,931,514 (236,128,069)
Net increase (decrease) in cash and cash equivalents (7,947,478) (10,140,419) (27,109,703)
Cash and cash equivalents at beginning of year 71,632,294 81,772,713 108,882,416
Cash and cash equivalents at end of year $ 63,684,816 $ 71,632,294 $ 81,772,713
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
19
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992 and 1991
NOTE 1. ACCOUNTING POLICIES:
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 of its domestic and foreign 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 F.A.S.B. Statement No. 52, 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 1993, 1992 and 1991 in the
cumulative translation adjustments shown on the balance sheets follows:
<TABLE>
<CAPTION>
1993 1992 1991
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning
of year $ (7,142,315) $ 14,405,275 $15,168,731
Aggregate adjustment
for year (5,618,643) (21,547,590) (763,456)
Balance at end of year $(12,760,958) $ (7,142,315) $14,405,275
</TABLE>
B. INVENTORIES: The major portion of 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, first-in, first-out (FIFO)
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.
C. 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 acquired through December 31, 1980, is generally
depreciated based upon accelerated methods, utilizing estimated useful property
lives, for both accounting and tax purposes.
Plant and equipment acquired after December 31, 1980, is depreciated for
accounting purposes in the manner described above. However, for U.S. income tax
purposes the cost of these assets is deducted in accordance with certain
provisions of the Accelerated Cost Recovery System and the Modified Accelerated
Cost Recovery System under the Internal Revenue Code.
Depreciation expense in 1993 was $50,907,000 compared with $53,708,000 in
1992 and $55,556,000 in 1991.
D. 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 not
in excess of 40 years; the remaining amortization is based on estimated useful
lives which range from 6 to 17 years. The company evaluates its amortization
policies regularly to determine whether later events and circumstances warrant
revised estimates of useful lives.
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 $446,961,000 at December 31, 1993,
$278,218,000 at December 31, 1992, and $217,260,000 at December 31, 1991.
E. 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.
F. INCOME TAXES: The provision for income taxes includes Federal, state, local
and foreign taxes.
Tax credits, primarily for research and development are recognized as a
reduction of the provision for income taxes in the year in which they are
available for tax purposes, and aggregated $1,514,000 in 1993, $1,625,000 in
1992, and $1,630,000 in 1991. Research and development expenditures charged to
earnings amounted to $60,430,000 in 1993, $67,822,000 in 1992 and $62,458,000
in 1991.
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.
G. 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.
20
<PAGE> 21
H. CHANGES IN ACCOUNTING PRINCIPLES--1992: In February 1992, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes. Statement 109 requires a change from the
deferred method of accounting for income taxes of APB Opinion 11 to the asset
and liability method of accounting for income taxes. Under the asset and
liability method of Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Effective January 1, 1992, the Company adopted Statement 109 and it has
reported the cumulative effect of that change in the method of accounting for
income taxes in the 1992 consolidated statement of income.
Pursuant to the deferred method under APB Opinion 11, which was applied in
1991 and prior years, deferred income taxes are recognized for income and
expense items that are reported in different years for financial reporting
purposes and income tax purposes using the tax rate applicable in the year of
the calculation. Under the deferred method, deferred taxes are not adjusted for
subsequent changes in tax rates.
Postretirement Plans--Certain of the Company's subsidiaries sponsor defined
benefit health care and life insurance plans for retirees. Effective January
1, 1992, the Company adopted Statement of Financial Accounting Standards No.
106 "Employers' Accounting for Postretirement Benefits Other than Pensions,"
which establishes new accounting standards for the costs of retiree health care
and other postretirement benefits (also see note 10). Prior to 1992, the
Company recognized these benefits on the pay-as-you-go method (i.e., cash
basis). The cumulative after tax effect of the change in accounting for
postretirement benefits other than pensions is reported in the 1992
consolidated statement of income.
NOTE 2. ACQUISITIONS AND DISPOSITIONS:
During 1991 the Company sold its world marine seal business. This business
consisted of Dover's 50.1% interest in Dover Japan, a publicly traded Japanese
manufacturer, Dover's 50% interest in Waukesha Lips, a European distributor and
service company and certain product lines of Dover's Waukesha Bearings
Corporation. The Company also sold four other businessess as well as the
Stillman real estate. As a result of these divestitures, the Company received
approximately $85,859,000 in cash and recorded a pretax gain of $53,537,000
($34,200,00 after tax). Offsetting this gain were asset disposition reserves
of $15.2 million. The net pretax gain has been included in other income. Also
during 1991 the Company acquired certain assets of five small elevator service
companies in the United States, the stock of a small West Berlin elevator
company, certain assets of an Irish corporation for the Technologies Segment
and a product line acquisition for its Dover Diversified Segment. The
aggregate cost of these 1991 acquisitions was approximately $13,192,000 of
which $2,672,000 represents goodwill, including going concern value, and is
being amortized over a forty year period.
On March 27, 1992, the Company acquired all of the capital stock of A-C
Compressor Corporation. A-C Compressor, located in Elm Grove and Appleton,
Wisconsin, manufactures and sells single-stage centrifugal oil-free screw and
rotary vane compressors as well as multi-stage centrifugal compressors. On July
30, 1992, the Company acquired the operating assets of Vectron Laboratories,
Inc. Vectron, located in Norwalk, Connecticut, manufactures and sells precision
crystal oscillators (frequency sources, or clocks) used in computers,
instrumentation, telecommunication systems, radio communications and space
applications. On August 31, 1992, the Company acquired all of the capital stock
of Christian Hein GmbH, a regional elevator company located in Hanover,
Germany. On September 1, 1992, the Company acquired certain assets of
Continental Manufacturing, Inc., for the Company's subsidiary, Chief Automotive
Systems. On October 1, 1992, the Company acquired the elevator service business
of Deya Elevator Service, Inc., located in San Juan, Puerto Rico. The aggregate
cost of these 1992 acquisitions, including all direct costs was approximately
$111,243,000 cash, of which $68,115,000 represents goodwill, including going
concern value, and is being amortized over a forty-year period.
On May 21, 1993, 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, 1993. No gain or loss was
recognized from the distribution and the book value of DOVatron, plus
capitalized costs, were eliminated from the Company's retained earnings.
Effective January 1, 1993, 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, 1993, the Company acquired certain assets of
Atlanta Elevator Company, a regional elevator service and repair company. On
April 14, 1993 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, 1993, the Company acquired the
assets of Plyslade Screw Machine Services, Ltd., a U.K. manufacturer and
distributor of Brown & Sharpe repair parts. On July 1, 1993, the Company
acquired all of the capital stock of The Heil Co., the United State's largest
manufacturer of refuse trucks, trailerized tanks and construction dump bodies.
On August 23, 1993, 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, 1993, 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, 1993, the
Company acquired the assets of Viking Elevator Company. Inc., of Los Angeles
County, a regional elevator service and repair company. On September 1, 1993,
the Company acquired the assets of J&L Tank, Inc., a tank trailer manufacturer.
On October 12, 1993, the Company acquired certain assets of Dynapert (a
subsidiary of Emhart Industries, Inc.) and its subsidiaries; these assets were
21
<PAGE> 22
purchased for the Company's Universal Instruments subsidiary and relate to
through-hole mounting for use in assembling electronic circuit boards. As of
October 22, 1993, 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, 1993, 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, 1993, the
Company acquired the oscillator product line of the E G & G Frequency Products
Division for the Company's Oscillatek Division. On December 3, 1993, the
Company acquired certain assets of Global Equipment Co. for the Company's
subsidiary, Marathon Equipment Company.
The aggregate cost of these 1993 acquisitions, including all direct costs
was approximately $321,002,000 cash, of which $171,047,000 represents goodwill,
including going concern value, and is being amortized over a forty-year period.
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 1993 acquisitions had taken place at
the beginning of 1992, with appropriate adjustment for interest, depreciation,
inventory charges, amortization and income taxes (in thousands except for per
share figures).
<TABLE>
<CAPTION>
1993 1992
- ----------------------------------------------------------------------------
<S> <C> <C>
Net sales $2,721,806 $2,608,375
Net earnings 173,114 135,878
Net earnings per common share 3.03 2.38
</TABLE>
NOTE 3. FOREIGN OPERATIONS:
The consolidated financial statements include the following assets,
liabilities, net sales and net earnings of foreign subsidiaries, all of which
are wholly owned:
<TABLE>
<CAPTION>
December 31, (in thousands) 1993 1992 1991
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Assets $265,260 $256,539 $267,565
Liabilities 77,708 66,388 82,412
Net assets $187,552 $190,151 $185,153
Net sales $390,574 $387,529 $390,653
Net earnings $ 28,244 $ 17,778 $ 23,147
</TABLE>
NOTE 4. ACCOUNTS RECEIVABLE:
Accounts receivable include retainage which has been billed, but which is not
due pursuant to retainage provisions in elevator construction contracts until
completion of performance and acceptance by the customer. This retainage
aggregated $41,969,000 at December 31, 1993, $33,837,000 at December 31, 1992,
and $26,120,000 at December 31, 1991. Substantially all retained balances are
collectible within one year.
NOTE 5. INVENTORIES:
The major portion of inventories is stated at cost determined on the LIFO
basis. Inventories, by components, are summarized as follows:
<TABLE>
<CAPTION>
December 31, (in thousands) 1993 1992 1991
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Raw materials $ 92,341 $ 89,776 $ 82,455
Work in process 136,031 108,190 97,056
Finished goods 109,329 101,152 99,710
Total 337,701 299,118 279,221
Less LIFO reserve 43,382 48,962 51,894
$294,319 $250,156 $227,327
</TABLE>
During each of the years in the three year period ended December 31, 1993, 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
liquidations increased net earnings by 3 cents per share in 1993, by 4 cents
per share in 1992, and by 1 cent per share in 1991.
NOTE 6. BANK LINES OF CREDIT:
The Company has open bank lines of credit and other bank credit agreements
totaling $419,100,000 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.
NOTE 7. LONG TERM DEBT:
A summary of long-term debt follows:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Debt liquidated prior to
December 31, 1992 - - $ 7,588
Commercial paper $250,000 - -
Canadian mortgage note bearing
interest at 11.25%, matured
in 1993. 672 $ 3,686 4,111
Other 1,705 1,490 3,380
Total long-term debt 252,377 5,176 15,079
Less current installments 312 3,946 8,762
Long-term debt excluding
current installments $252,065 $ 1,230 $ 6,317
</TABLE>
On December 10, 1993, the Company signed a three year $250 million credit
agreement with a group of 19 banks; this facility remains unused. The Company
has the intent to maintain, on a long-term basis, $250 million principal amount
of its commercial paper borrowings. Given this ability and intent, $250 million
of the Company's outstanding commercial paper has been classified as long-term
debt in the consolidated financial statements.
Annual repayments of long-term debt in the four years following 1994
(excluding the $250 million credit agreement mentioned above, which matures in
1996) are scheduled as follows: 1995-$220,000, 1996-$155,000, 1997-$165,000,
1998-$178,000.
22
<PAGE> 23
NOTE 8. 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. Changes in common stock, additional paid-in capital and treasury
stock are summarized below:
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
$1 Par Value Paid-in Capital Shares Amount
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 1991 $65,932,302 $ 4,412,990 5,960,928 $190,642,902
Stock options exercised 65,484 1,621,357 4,094* 170,450
Treasury stock purchased - - 1,055,100 39,283,444
Balance at December 31, 1991 $65,997,786 $ 6,034,347 7,020,122 $230,096,796
Stock options exercised 178,320 3,473,791 27,311* 1,188,283
Treasury stock purchased - - 2,043,456 84,269,062
Balance at December 31, 1992 $66,176,106 $ 9,508,138 9,090,889 $315,554,141
Stock options exercised 122,469 3,022,735 20,103* 1,086,719
Treasury stock purchased - - 24,697 1,242,634
Balance at December 31, 1993 $66,298,575 $12,530,873 9,135,689 $317,883,494
</TABLE>
* Shares given 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 paid 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.
- -------------------------------------------------------------------------------
NOTE 9. STOCK OPTION AND PERFORMANCE INCENTIVE PROGRAM:
On April 30, 1974, the stockholders approved a non-qualified stock option plan
and performance incentive program, pursuant to which a maximum aggregate of
4,800,000 shares had been reserved for grant to key personnel. On January 24,
1982, the plan was amended so as to become an incentive stock option plan as
well as a performance incentive program. This plan expired by its terms on
February 15, 1984, but certain previous grants remain outstanding at December
31, 1993.
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
shares has been reserved for grant to key personnel until January 30, 1994. At
December 31, 1993, there were 3,063,898 shares available for future grant under
this stock option program.
Under both plans 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 plus one month with respect to
nonqualified options under the 1984 plan.
On April 28, 1987, the stockholders approved an amendment to permit the
grant or exercise of nonqualified stock options under each of these plans. 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 1993, cash bonuses
in connection with nonqualified exercises aggregated $1,562,000 ($2,064,000 in
1992 and $647,000 in 1991).
Transactions in stock options under these plans are summarized
as follows:
<TABLE>
<CAPTION>
Shares Under Option Price Range
- ----------------------------------------------------------------------------
<S> <C> <C>
Outstanding at Jan. 1, 1991 1,051,734 $14.00-$35.63
Granted 211,080 $39.50
Exercised (65,484) $14.00-$31.25
Cancelled (51,810) $14.00-$39.50
Outstanding at Dec. 31, 1991 1,145,520 $14.00-$39.50
Exercisable at Dec. 31, 1991
through March 3, 1998 547,240 $14.00-$31.25
Outstanding at Jan. 1, 1992 1,145,520 $14.00-$39.50
Granted 221,460 $39.75
Exercised (178,320) $14.00-$30.50
Cancelled (2,350) $19.63-$39.75
Outstanding at Dec. 31, 1992 1,186,310 $15.00-$39.75
Exercisable at Dec. 31, 1992
through March 28, 1999 557,850 $15.00-$31.25
Outstanding at Jan. 1, 1993 1,186,310 $15.00-$38.72
Granted 246,970 $45.65
Exercised (122,469) $15.00-$34.71
Spin off adjustment 33,598 -
Cancelled (70,720) $15.00-$45.65
Outstanding at Dec. 31, 1993 1,273,689
</TABLE>
Exercisable at Dec. 31, 1993 through:
January 30, 1994 3,448 shares @ $16.57
January 20, 1995 19,990 shares @ $18.27 & 4,833 shares @ $45.65
January 30, 1996 30,910 shares @ $19.13 & 4,833 shares @ $45.65
February 28, 1997 111,729 shares @ $26.38 & 4,351 shares @ $45.65
March 3, 1998 132,951 shares @ $30.46 & 4,638 shares @ $45.65
March 28, 1999 162,967 shares @ $29.73 & 5,193 shares @ $45.65
February 28, 2000 181,981 shares @ $34.72 & 4,834 shares @ $45.65
23
<PAGE> 24
NOTE 10. PENSION PLANS:
The Company has many non-contributory 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 1993, 1992 and 1991 include the following components:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Actual return on plan assets $26,898 $14,108 $27,255
Add deferred loss (gain) (7,914) 561 (13,389)
Net return 18,984 14,669 13,866
Net amortization 1,387 1,741 1,468
Deduct:
Benefits earned during year (6,251) (5,560) (5,060)
Interest accrued on projected
benefit obligation (11,978) (8,832) (8,689)
Net pension credit $ 2,142 $ 2,018 $ 1,585
</TABLE>
The funded status and resulting prepaid pension cost of U.S. defined
benefit plans for the three years ended December 31, 1993, were as follows:
<TABLE>
<CAPTION>
Funded Plans
(in thousands) 1993 1992 1991
- ----------------------------------------------------------------------------
<S> <C> <C>
Plan assets at fair value $214,542 $164,394 $157,470
Actuarial present value of
benefit obligation:
Vested 137,643 87,278 73,545
Nonvested 15,791 12,089 9,114
Accumulated benefit obligation 153,434 99,367 82,659
Effect of projected future
salary increases 28,239 20,278 23,072
Projected benefit obligation 181,673 119,645 105,731
Plan assets in excess of projected
benefit obligation 32,869 44,749 51,739
Unrecognized net (gain) loss 4,199 (6,141) (14,550)
Unrecognized FAS 87
transition gain (21,345) (25,066) (26,923)
Unrecognized prior service cost 5,298 5,092 5,555
Prepaid pension cost at
December 31 $ 21,021 $ 18,634 $ 15,821
</TABLE>
The assumptions used in determining the above were as follows: a weighted
average discount rate of 7.1% (8% for 1992 and 9% for 1991), an average wage
increase of 5% (5% for 1992 and 6% for 1991) and an expected long-term rate of
return on plan assets of 10%.
Approximately 72% (71% in 1992 and 68% in 1991) of defined benefit plan
assets were invested in equity securities with the remainder in fixed income
and short term investments.
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:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Pension Benefit Obligation $11,986 $7,927 $4,074
Pension expense 1,679 1,086 634
</TABLE>
For measurement purposes a discount rate of 7% was used for the vast
majority of the plan liability, 8% for the balance, and an average wage
increase of 5%.
Pension cost for all plans was $25,546,000 for 1993, $26,350,000 for 1992
and $26,066,000 for 1991.
In addition to the pension plans described above, certain of the Company's
subsidiaries sponsor twelve separate defined benefit health care plans for
retirees which provide medical coverage and/or life insurance. None of these
plans are funded.
The Company adopted Statement of Financial Accounting Standards No. 106
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," as of January 1, 1992. The cumulative effect of such adoption at
January 1, 1992 was a charge of $19,546,000 before taxes ($12,387,000 after
taxes). The net periodic postretirement benefit cost before taxes for 1992 was
increased $1,069,000. Prior year costs were recorded on a cash basis.
The following table details the amounts recognized in the Company's
Consolidated Balance Sheet at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
- ----------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $17,942 $ 9,895
Fully eligible active plans participants 10,822 10,720
Unamortized loss (1,513) -
Accrued postretirement benefit cost
included in accrued liabilities $27,251 $20,615
</TABLE>
Net period postretirement benefit cost for 1993 and 1992
included the following components:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
- ----------------------------------------------------------------------------
<S> <C> <C>
Service cost $ 426 $ 475
Interest cost 1,545 1,521
Gain on settlement (285) -
Amortization gain (35) -
Net periodic postretirement benefit costs $1,651 $1,996
</TABLE>
24
<PAGE> 25
For measurement purposes a discount rate of 7% was used for the vast
majority of the plan liability (8% for the balance) and rates of from 3% to 17%
annual rate of increase in the per capita cost covered benefit (i.e., health
care cost trend rates) was assumed for 1994; the rates were assumed to decrease
gradually to 5% by the year 2012 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 percent point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1993 by $2,237,000 and the aggregate of
the service and interest cost components of net periodic postretirement benefit
cost for 1993 by approximately $225,000.
NOTE 11. TAXES ON INCOME:
As discussed in note 1H, the Company adopted Statement 109 as of January 1,
1992. The cumulative effect of this change of accounting has been reported
separately in the consolidated statement of earnings for the year ended
December 31, 1992; prior years' financial statements have not been restated.
The cumulative effect of this accounting change was $12,951,000 as of January
1, 1992, and pretax income for the year ended December 31, 1992, was decreased
$3,297,000 due to effects of adjustments for prior purchase business
combinations.
Total income taxes for the years ended December 31, 1993 and 1992 were
allocated as follows:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
- ----------------------------------------------------------------------------
<S> <C> <C>
Income from continuing operations $87,288 $71,192
Change in accounting principles - (7,159)
Stockholders' equity, for compensation
expense for tax purposes in excess of amounts
recognized for financial reporting purposes (1,849) (1,431)
$85,439 $62,602
</TABLE>
Income taxes have been based on the following components of earnings before
taxes on income.
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $220,968 $167,911 $157,869
Foreign 24,574 32,424 46,219
$245,542 $200,335 $204,088
</TABLE>
Income tax expense is made up of the following components:
<TABLE>
<CAPTION>
1993 1992 1991
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
U.S. Federal $74,651 $55,989 $52,277
State and local 4,400 6,115 5,039
Foreign 7,732 12,628 20,369
Total current 86,783 74,732 77,685
Deferred:
U.S. Federal (1,643) (3,810) (1,625)
State and local 1,700 (94) (236)
Foreign 448 364 56
Total deferred 505 (3,540) (1,805)
Total expense 87,288 $71,192 $75,880
Effective rate 35.5% 35.5% 37.2%
</TABLE>
Deferred income tax expense for 1991 arises as a result of timing differences
principally due to deferred compensation and accelerated cost recovery systems.
The reasons for the difference between the effective rate and the U.S.
Federal income statutory rate of 35% (34% for 1992 & 1991) follow:
<TABLE>
<CAPTION>
1993 1992 1991
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal income tax rate 35.0% 34.0% 34.0%
State and local taxes, net of
Federal income tax benefit 1.6 2.0 1.6
Foreign tax differential - 1.0 2.3
R & D tax credits (.6) (.8) (.8)
FSC benefit (1.9) (2.4) (2.3)
Non tax deductible items 2.5 2.2 1.6
Miscellaneous items (1.1) (.5) .8
35.5% 35.5% 37.2%
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1993 and 1992 are presented below:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
- ----------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Accrued insurance principally due to
accrual for financial reporting purposes $ 17,994 $ 20,556
Accrued compensation principally due to
accrual of post retirement benefits,
compensated absences 17,768 14,576
Accrued expenses principally due to accrual for
disposition of business, interest and warranty
for financial reporting purposes 13,087 9,610
Inventories, principally due to reserves
for financial reporting purposes and
capitalization for tax purposes 5,505 3,400
Accounts receivable principally due to
allowance for doubtful accounts 3,439 2,976
Other 6,505 1,700
Total deferred tax assets 64,298 52,818
- ----------------------------------------------------------------------------
Deferred tax liabilities:
Accounts receivable principally due to retainage
and accrual acceptance on elevator
contracts (39,520) (29,727)
Plant and equipment, principally due to
differences in depreciation (14,554) (16,917)
Intangible assets principally due to
different tax and financial reporting basis (25,040) (15,058)
Prepaid expenses principally due to
overfunded pensions plans (7,103) (5,332)
Other (5,217) (5,250)
Total gross deferred liabilities (91,434) (72,284)
Net deferred tax liability (27,136) (19,466)
Net current deferred liability (asset) 6,727 2,034
Net non-current deferred tax liability $(20,409) $(21,500)
- ----------------------------------------------------------------------------
</TABLE>
There were no valuation allowances at January 1, 1992, December 31, 1992 or
December 31, 1993.
25
<PAGE> 26
NOTE 12. 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 $24,923,000,
$25,671,000, and $26,018,000 for 1993, 1992 and 1991, 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 $64 million as of
December 31, 1993 and are payable as follows (in millions): 1994 $15.7; 1995
$11.9; 1996 $8.5; 1997 $6.9; 1998 $5.0; and after 1998, $15.8.
NOTE 13. 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. In
addition, several of the Company's subsidiaries are involved in ongoing
remedial activities at certain plant sites, in cooperation with regulatory
agencies.
In December 1991 a chromium leak was discovered in the vicinity of Texas
Hydraulics' Waco, Texas plant. Texas Hydraulics immediately began remedial
activities which continue to date. In addition, Texas Hydraulics paid the State
of Texas approximately $174,000 to settle all administrative compliance matters
and has settled several private claims relating to these events. During 1992 a
total of $9 million was accrued to reflect the costs of these matters. During
1993 the Company reviewed the status of these proceedings and concluded no
additional accrual was necessary.
During 1993 the Company paid $4.5 million to settle a patent infringement
lawsuit brought by Emhart Industries, Inc. in 1988 and which had been reported
as a $220 million contingency in prior years.
The Internal Revenue Service (IRS) has completed its examinations of the
Company's federal income tax returns for the eight years ended December 31,
1989, and has proposed certain adjustments which relate principally to the
Company's allocation of purchase price to acquisitions made during those years.
As a result, the IRS has proposed additional taxes aggregating $55,784,000 plus
interest to date of payment. The Company is vigorously contesting these
proposed assessments.
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 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 during 1991, 1992 and 1993, with limited recourse, to a third party.
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, 1993, was $39 million
($45 million in 1992 and $51 million in 1991) of which the Company has a
contingent liability of $9.6 million should all of the receivables become
uncollectible.
NOTE 14. DISCLOSURES ABOUT THE FAIR VALUE
OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards 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 approximate
fair value.
NOTE 15. BUSINESS SEGMENT INFORMATION:
Dover groups its products and services by industry lines into five segments as
set forth in the tables shown on page 16. These segments were restructured
during 1989 and 1991 in response to reorganization changes within Dover which
had taken place over the past several years. A description of the products
manufactured and services performed by each of the five segments is given on
pages 6 through 15.
OPERATING RETURN ON OPERATING INVESTMENT
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 3, 6, 8, 10, 12 and 14. 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.
26
<PAGE> 27
Information about the Company's Operations in Different Geographic Area
<TABLE>
<CAPTION>
For the years Ended December 31, (in thousands) 1993 1992 1991 1990 1989 1988
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers:
United States $2,093,354 $1,884,051 $1,805,13 $1,812,612 $1,782,675 $1,643,963
Foreign 390,574 387,529 390,653 397,733 337,759 309,791
Transfers between geographic areas:
United States 82,772 75,226 85,514 98,929 89,121 81,210
Foreign 20,983 19,147 10,448 14,258 7,271 7,240
Eliminations (103,755) (94,373) (95,962) (113,187) (96,392) (88,450)
Consolidated sales $2,483,928 $2,271,580 $2,195,786 $2,210,345 $2,120,434 $1,953,754
Operating profit:
United States $237,847 $187,118 $170,265 $223,350 $216,115 $186,335
Foreign 29,946 35,677 51,211 52,370 39,445 53,873
Consolidated total (excluding
corporate) $267,793 $222,795 $221,476 $275,720 $255,560 $240,208
Identifiable assets at December 31:
United States $1,454,198 $1,111,017 $1,017,003 $1,033,969 $1,053,700 $1,134,737
Foreign 265,260 256,539 267,565 242,702 206,494 182,135
Consolidated total (excluding
corporate) $1,719,458 $1,367,556 $1,284,568 $1,276,671 $1,260,194 $1,316,872
Export sales as a percentage of
United States sales 19% 23% 22% 20% 20% 19%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Dover Corporation:
We have audited the accompanying consolidated balance sheets of Dover
Corporation and subsidiaries as of December 31, 1993, 1992 and 1991 and the
related consolidated statements of earnings, retained earnings and cash flows
for the years then ended. These consolidated financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Dover
Corporation and subsidiaries at December 31, 1993, 1992 and 1991, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
As discussed in the notes to the consolidated financial statements, in 1992
the Company adopted the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," and the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions."
345 Park Avenue
New York, N.Y. 10154
February 22, 1994 KPMG Peat Marwick
27
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES:
The Company continues to be in excellent financial condition. The 1993
acquisition program resulted in cash outlays of $321 million, and although this
reduced some liquidity measures, other such measures were not adversely
affected due to the reclassification of $250 million of the Company's
commercial paper from current to non-current liabilities as explained in Note 7
to the Consolidated Financial Statements.
The Company's current ratio (current assets divided by current liabilities)
increased to 1.52 at December 31, 1993, compared with 1.36 at December 31,
1992, and 1.59 at December 31, 1991. The quick ratio (current assets net of
inventories, divided by current liabilities) also increased to 1.02 at December
31, 1993, compared with .91 at December 31, 1992, and 1.11 at December 31,
1991. Year-end working capital for the past three years expressed as a
percentage of sales was 12.4% in 1993, 8.9% in 1992 and 9.4% in 1991.
At December 31, 1993, the Company had bank lines of $419.1 million, all of
which were unused. Additional bank lines of credit are available at the
Company's request.
The Company enjoys the highest rating for its commercial paper. Notes payable
at December 31, 1993, aggregated $175 million which, together with internally
generated excess cash flows and the $250 million of commercial paper mentioned
above, financed the acquisition and stock repurchase programs during the past
several years.
With respect to debt percentages, current debt to tangible net worth
decreased from 53.3% in 1992 to 32.1% at December 31, 1993. However, total debt
to tangible net worth increased from 54.5% in 1992 to 78.4% at December 31,
1993. The Company's net debt (total debt less cash, cash equivalents and
marketable securities) increased by $206.3 million, and the net debt to equity
ratio jumped from 15.5% to 38.1%. Long-term debt maturities for the four years
1994 to 1997 aggregate $250.8 million. Management is not aware of any potential
impairment to the Company's liquidity.
Historically, capital expenditures have been financed with internally
generated funds, occasionally supplemented with the proceeds of Industrial
Development Revenue Bonds. During 1993 the entire capital expenditure program,
aggregating $47.5 million was financed internally. Internal financing is also
expected to provide all of the funds for capital expenditures in 1994, which
the Company believes will aggregate approximately $60 million. The Company
plans to continue its acquisition program, combining external financing, if
necessary, with internally generated cash.
During 1991 insurance reserves were strengthened resulting in a $33.4 million
charge to cost of sales.
As detailed in Note 1H to the Consolidated Financial Statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Statement Nos. 106 and 109 as of January 1, 1992. The
net cumulative offsetting effect of these two changes in accounting principles
was an increase of $565,000 or 1 cent per share as of the effective date.
In November 1992 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112 "Employers' Accounting for
Postemployment Benefits." This standard must be adopted on or before January 1,
1994, however, its application is expected to have an insignificant impact on
the financial statements.
RESULTS OF OPERATIONS 1993:
Results of operations are explained in detail in the stockholders' letter and
operations review, pages 1 through 15.
1992 COMPARED WITH 1991:
Dover's 1992 net earnings of $2.24 per share, while only 4% above 1991's $2.15
per share, reflected a somewhat broader improvement in operating results.
A discussion of operations by industry segment follows:
DOVER ELEVATOR INTERNATIONAL:
An improvement of more than 20% in the combined results of our five domestic
elevator companies in 1992 was largely offset by the declines we predicted in
Canada and the United Kingdom. The drop in foreign profits reflected a sharp
downturn in new elevator activity, along with reduced volumes and more
competitive pricing on modernization and major repair work. The overall profit
improvement reported by our U.S. companies resulted from growth in service
revenues and from a reduction in losses on new elevator activities. Both
factory and field costs for new elevators were reduced in the U.S., although
this improvement was offset to a disappointing degree by lower volumes and
highly competitive prices.
Thousands of banks, real estate developers and property owners have been
forced into bankruptcy as the full extent of overbuilding in the 1980s has
become clear. At Dover, the reduction of elevator profits has amounted to $.40
per share since our 1990 record year. While our elevator business remains
profitable and successful, it seems obvious that its profits will remain below
the 1990 peak for some time.
28
<PAGE> 29
DOVER RESOURCES:
Dover Resources experienced a 6% decline in profits on flat sales in 1992, even
though the majority of its companies achieved earnings increases.
Significant declines at a handful of companies determined the overall result.
De-Sta-Co's industrial tooling company in Germany retreated from its record
profits in 1991 because of the slowdown in German economy. Norris's sucker rod
and down-hole pump businesses had a difficult year, as did Norriseal, as the
domestic rig count hit an all-time low. Two companies that primarily serve the
gasoline station market--OPW Fueling Components and Petro Vend--also had
sizable declines.
DOVER INDUSTRIES:
Dover Industries showed flat earnings. Excluding a $9 million environmental
charge, however, operating profits actually increased 24%, as Dover Industries
was the first of our market segments to benefit significantly from the
improving U.S. industrial economy. Eight of the ten companies included in this
segment achieved earnings gains and one of the declines--at Tipper
Tie--resulted primarily from costs incurred to establishing its new German
operation. The other decline was at Chief Automotive, whose market for auto
body repair equipment shrank as the number of repair shops continued to
contract.
Marathon's development of a new line of products aimed at the recycling
market, Rotary Lift's focused business unit approach and new products, and
Groen's expanded manufacturing capabilities and new products all represent
important opportunities for improvement.
DOVER DIVERSIFIED:
Dover Diversified's earnings rose 4%, setting a new record by a slight margin.
The earnings improvement was aided by the acquisition in March of the A-C
Compressor Company, whose nine months of operating income more than compensated
for a high level of acquisition-related charges and the absence of profits from
Waukesha Bearings' marine seal business, which was sold in 1991.
Operating profits at Dover Diversified's six other companies were essentially
flat, with declines in several defense/aerospace markets offset by growth in
industrial product lines, notably at Tranter.
Tranter achieved record earnings for the ninth consecutive year, helped by
the acquisition of the Dean product line in mid-1991 and by aggressive pursuit
of sales opportunities in generally sluggish markets for Tranter's Platecoil
(TM) Superchanger(TM) and transformer radiator products.
Pathway Bellows achieved near-record earnings as cost reductions and a
favorable product mix offset a modest sales decline. The company's fabric
bellows and on-site service groups both achieved record sales and earnings, but
these were largely offset by softness in the much larger metal bellow market.
In the aerospace/defense area, Precision-Kahr and Sargent Aerospace both
experienced earnings declines as a result of shrinkage in defense and
commercial aircraft markets, including reduced spare parts purchases by both
the military and commercial airlines. This trend of the past several years is
expected to continue.
Sargent Controls, which was moved from Los Angeles to Tucson in 1990,
achieved higher profits in 1992 despite lower sales, largely because of
reduced costs and a more favorable mix of business.
DOVER TECHNOLOGIES:
Dover Technologies improved its profits by 9% to their best level since 1988.
One of the chief sources of profit improvement was the turnaround of DEK Ltd.,
whose new screen printing equipment for the surface mount industry met with
substantial success. DEK's sales increased 50%, while profits went from a
sizable loss to double digit margins.
Also showing an excellent gain was Dover Electronics Company, where sales
improved by almost $40 million, or more than 50%. The good news at Dover
Electronics was the expansion of its contract assembly business, which has
involved acquiring a facility in Ireland late in 1991 and subsequently
expanding facilities in Binghamton, New York and Boulder, Colorado. In the
space of approximately 18 months, Dover Electronics invested almost $10 million
in technically advanced surface mount assembly lines. DECO was disappointed,
however, by the cancellation of a contract with IBM for a component used in
IBM's mainframe computers. Although Dover Electronics had performed well, the
customer, faced with shrinking volumes, elected to move production "in-house"
to preserve its own employment base.
Profits declined at Universal Instruments, the largest company in the
segment, because of slightly lower volume, intensely competitive
pricing--especially in the surface mount market--and expenses incurred to
launch Universal's new GSM-1 surface mount machine.
29
<PAGE> 30
<TABLE>
<CAPTION>
Dover Corporation and Subsidiaries
11-YEAR CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA
(In thousands except per share figures)
1993 1992 1991 1990
===========================================================================================================================
<S> <C> <C> <C> <C>
Summary of Operations
Net sales $ 2,483,928 2,271,580 2,195,786 2,210,345
Cost of sales $ 1,733,256 1,601,596 1,580,051 1,516,753
Selling and administrative expenses $ 496,798 466,777 452,394 440,313
Interest expense $ 22,339 20,059 23,161 30,658
Other income (deductions), net $ 14,007 17,187 63,908 21,497
Earnings before taxes $ 245,542 200,335 204,088 244,118
Income taxes $ 87,288 71,192 75,880 88,439
- ---------------------------------------------------------------------------------------------------------------------------
Net earnings $ 158,254 129,707* 128,208 155,679
% of sales 6.4% 5.7% 5.8% 7.0%
Return on average equity 18.9% 15.9% 15.9% 20.3%
Net earnings per common share $ 2.77 2.24* 2.15 2.55
Dividends per common share $ .90 .86 .82 .76
- ---------------------------------------------------------------------------------------------------------------------------
Book value per common share $ 15.22 14.10 14.05 13.13
Depreciation and amortization $ 76,969 77,457 85,366 77,530
Capital expenditures $ 47,532 42,441 46,618 44,980
Acquisitions $ 321,002 111,243 13,192 102,834
Cash flow** $ 235,223 207,164 213,575 233,210
Weighted average number of common
shares outstanding 57,110 57,988 59,750 61,169
Number of employees 20,445 18,827 18,898 20,461
- ---------------------------------------------------------------------------------------------------------------------------
Financial position at December 31
Working capital $ 307,846 201,641 280,902 206,748
Net property, plant and equipment $ 283,363 251,270 251,145 268,386
Total assets $ 1,773,689 1,426,124 1,356,620 1,468,366
Long-term debt $ 252,065 1,230 6,317 20,955
Common stockholders' equity $ 870,002 804,937 828,374 787,660
Common shares outstanding 57,163 57,085 58,978 59,971
===========================================================================================================================
</TABLE>
* Net earnings and net earnings per common share include $565,000 and 1 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.
DOVER LONG TERM INVESTMENT
(MILLIONS)
<TABLE>
<CAPTION>
Capital Stock
Total Expenditures Acquisitions Repurchase
----- ------------ ------------ ----------
<S> <C> <C> <C> <C>
1983 110 22 88 --
1984 143 30 101 12
1985 74 35 29 10
1986 178 44 76 58
1987 145 40 58 47
1988 298 57 206 35
1989 157 63 -- 94
1990 228 45 103 80
1991 99 46 14 39
1992 238 42 112 84
1993 370 48 322 --
</TABLE>
DOVER RETURN ON AVERAGE EQUITY (%)
<TABLE>
<S> <C>
1983 16.3
1984 18.9
1985 16.9
1986 13.4
1987 17.2
1988 20.6
1989 19.4
1990 20.3
1991 15.9
1992 15.9
1993 18.9
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
1989 1988 1987 1986 1985 1984 1983
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
Net sales 2,120,434 1,953,754 1,588,224 1,440,745 1,439,548 1,288,481 1,009,674
Cost of sales 1,480,880 1,363,852 1,096,612 1,028,394 1,028,530 896,589 705,403
Selling and administrative expenses 404,043 360,122 306,792 270,432 250,176 215,877 167,060
Interest expense 29,644 21,324 15,044 16,475 12,677 10,329 2,893
Other income (deductions), net 21,112 16,304 11,083 9,022 11,923 10,402 6,843
Earnings before taxes 226,979 224,760 180,859 134,466 160,088 176,088 141,161
Income taxes 82,999 78,988 69,158 50,637 60,060 75,631 63,618
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings 143,890 145,772 111,701 83,829 100,028 100,457 77,543
% of sales 6.8% 7.5% 7.0% 5.8% 6.9% 7.8% 7.7%
Return on average equity 19.4% 20.6% 17.2% 13.4% 16.9% 18.9% 16.3%
Net earnings per common share 2.28 2.22 1.65 1.21 1.41 1.41 1.09
Dividends per common share .70 .62 .51 .45 .43 .39 .36
- ----------------------------------------------------------------------------------------------------------------------------------
Book value per common share 12.00 11.37 10.14 9.25 8.88 7.89 7.04
Depreciation and amortization 78,813 73,797 63,505 57,008 53,096 46,889 38,627
Capital expenditures 62,504 56,779 40,397 44,416 35,196 30,362 21,602
Acquisitions -- 205,765 57,718 76,142 29,244 100,517 88,015
Cash flow** 222,793 219,569 175,205 140,836 153,124 147,346 116,171
Weighted average number of common
shares outstanding 63,250 65,726 67,552 69,290 70,802 71,272 71,258
Number of employees 20,049 20,412 17,592 16,539 16,071 16,193 13,498
- ----------------------------------------------------------------------------------------------------------------------------------
Financial position at December 31
Working capital 245,755 198,038 316,116 295,370 368,998 305,153 266,855
Net property, plant and equipment 272,158 268,139 219,031 210,908 186,114 183,435 149,880
Total assets 1,406,376 1,365,630 1,155,226 1,036,846 1,017,019 918,166 704,446
Long-term debt 26,691 27,773 35,134 41,711 73,523 73,126 31,494
Common stockholders' equity 746,809 741,142 671,950 627,674 625,541 559,088 502,657
Common shares outstanding 62,243 65,208 66,252 67,812 70,476 70,886 71,460
==================================================================================================================================
</TABLE>
Adjusted to give retroactive effect to the 2 for 1 stock split in 1988.
CASH FLOW (MILLIONS)
<TABLE>
<CAPTION>
Net Income Deprec./Amortiz. Total
---------- ---------------- -----
<S> <C> <C> <C>
1983 78 38 116
1984 100 47 147
1985 100 53 153
1986 84 57 141
1987 112 63 175
1988 146 74 220
1989 144 79 223
1990 156 77 233
1991 128 85 213
1992 130 77 207
1993 158 77 235
</TABLE>
FREE CASH FLOW
AS A PERCENT OF SALE*
<TABLE>
<CAPTION>
Annual % 3-Year Moving Average
-------- ---------------------
<S> <C> <C>
1983 8.5 8.2
1984 0 5.8
1985 10.3 6.3
1986 6.4 5.6
1987 6.8 7.9
1988 2.8 5.3
1989 7.2 5.6
1990 6.1 5.4
1991 9.3 7.5
1992 3.7 6.4
1993 4.4 6.0
</TABLE>
* Defined as stock repurchase plus acquisitions plus/minus change in total
debt less cash, cash equivalents and marketable securities.
<PAGE> 32
<TABLE>
<CAPTION>
Dover Corporation and Subsidiaries
QUARTERLY DATA
(Unaudited)(In thousands except for share figures)
Quarter Net Sales Gross Profit Net Earnings Per Share
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
1993 FIRST $ 566,780 $ 168,114 $ 33,764 $ .59
SECOND 594,511 177,174 39,759 .70
THIRD 642,178 199,918 42,360 .74
FOURTH 680,459 205,466 42,371 .74
-------------------------------------------------------------------------
$ 2,483,928 $ 750,672 $ 158,254 $ 2.77
- -------------------------------------------------------------------------------------------------------------------------
1992 First $ 545,714 $ 155,356 $ 30,749 $ .52*
Second 574,115 166,414 31,288 .54
Third 569,965 173,089 33,750 .58
Fourth 581,786 175,126 33,920 .60
-------------------------------------------------------------------------
$ 2,271,580 $ 669,985 $ 129,707 $ 2.24*
=========================================================================================================================
</TABLE>
* Includes 1 cent per share cumulative effect of changes in methods of
accounting effective January 1, 1992; see Notes to Consolidated Financial
Statements, Note 1H.
<TABLE>
<CAPTION>
Dover Corporation and Subsidiaries
COMMON STOCK CASH DIVIDENDS AND MARKET PRICES
Market Prices**
-------------------------------- Dividends
Quarter High Low Per Share
=========================================================================================================================
<S> <C> <C> <C> <C>
1993 FIRST $ 50.00 $ 45.00 $ .22
SECOND 49.38 46.00 .22
THIRD 57.13 45.63 .23
FOURTH 61.88 51.88 .23
----------------------------------------------------
$ .90
- -------------------------------------------------------------------------------------------------------------------------
1992 First $ 43.25 $ 38.25 $ .21
Second 42.50 38.38 .21
Third 44.25 39.00 .22
Fourth 47.63 41.75 .22
----------------------------------------------------
$ .86
=========================================================================================================================
</TABLE>
** As reported in the Wall Street Journal.
32
<PAGE> 33
EXHIBIT 13
The electronic filing includes the following numeric tables which replace
graphical charts contained within the Annual Report:
Page 3: Dover Corporation's earnings per share for years 1988-1993.
Profitability measures for Dover Corporation for the years 1988-
1993.
Page 6: Dover Resources operating earnings (1989-1993).
Dover Resources after-tax operating return on investment (1989-
1993).
Page 8: Dover Industries operating earnings (1989-1993).
Dover Industries after-tax operating return on investment (1989-
1993).
Page 10: Dover Elevator International operating earnings (1989-1993).
Dover Elevator International after-tax operating return on
investment (1989-1993).
Page 12: Dover Technologies operating earnings (1989-1993).
Dover Technologies after-tax operating return on investment (1989-
1993).
Page 14: Dover Diversified operating earnings (1989-1993).
Dover Diversified after-tax operating return on investment (1989-
1993).
Page 30: Dover Corporation long term investments (1983-1993).
Dover Corporation return on equity (1983-1993).
Page 31: Dover Corporation cash flow (1983-1993).
Dover Corporation free cash flow as a percentage of sales (1983-
1993).
<PAGE> 1
EXHIBIT 21 - LIST OF SUBSIDIARIES
Domestic Subsidiaries
---------------------
<TABLE>
<CAPTION>
State of
Name Incorporation
- ---- --------------
<S> <C>
Dover Elevator International, Inc. Delaware
Dover Elevator Systems, Inc Delaware
Dover Elevator Company Delaware
Dover Technology International, Inc. Delaware
Dover Industries, Inc. Delaware
Waukesha Bearings Corp. Wisconsin
Tranter, inc. Michigan
Universal Instruments Corporation Delaware
Tipper Tie, Inc. Delaware
Measurement Systems, Incorporated Delaware
K&L Microwave, Inc. Delaware
Pathway Bellows, Inc. Delaware
Miami Elevator Company Delaware
Dover Industries Acceptance, Inc. Delaware
Stark Manufacturing, Inc. Delaware
Texas Hydraulics, Inc. Delaware
Old PME, Inc. Delaware
Randell Manufacturing, Inc. Delaware
Randell Warehouse of Arizona, Inc. Delaware
Randell Refrigeration, Inc. Delaware
American Metal Ware Co. Delaware
Arizona Elevator, Inc. Delaware
Sound Elevator Company Delaware
Corpane Industries, Inc. Delaware
Sargent Industries, Inc. Delaware
Dover Resources, Inc. Delaware
Delaware Capital Holdings, Inc. Delaware
Dielectric Laboratories, Inc. Delaware
Delaware Capital Formation, Inc. Delaware
Lagerquist Corporation Delaware
Communications Techniques, Inc. Delaware
Dover Europe Corporation Delaware
General Elevator Company, Incorporated Maryland
Petro Vend, Inc. Delaware
Pomeco Corporation Delaware
Novacap, Inc. Delaware
Dover Soltec, Inc. Delaware
Duncan Industries Parking Control
Systems Corp. Delaware
Weldcraft Products, Inc. Delaware
Chief Automotive Systems, Inc. Delaware
Chief Automotive Management Systems Inc. Delaware
Hawaiian Pacific Elevator Corporation Delaware
Security Elevator Company Delaware
DEK U.S.A., Inc. Delaware
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
State of
Name Incorporation
- ---- --------------
<S> <C>
Bernard International, Inc. Delaware
The Wittemann Company, Inc. Delaware
Marathon Equipment Company Delaware
Revod Corporation Delaware
Empire Elevator Corporation Delaware
Hudson Elevator Corp. Delaware
A-C Compressor Corporation Delaware
Vectron Laboratories, Inc. Delaware
Dover Caribbean, Inc. Delaware
Dover Elevator Service of Puerto Rico, Inc. Puerto Rico
</TABLE>
- 2 -
<PAGE> 3
Foreign Subsidiaries
--------------------
<TABLE>
<CAPTION>
Name Jurisdiction
- ---- ------------
<S> <C>
DTI-ARB, Inc. Canada
Dover Corporation (Canada) Limited Canada
De-Sta-Co Metallerzeugnisse GmbH Germany
Dover International, B.V. Netherlands
I.S.T. Molchtecknik GmbH Germany
Hammond & Champness, Limited United Kingdom
Universal Instruments GmbH Germany
Universal Instruments S.a.r.l. France
Universal Instruments (Electronics) Ltd. United Kingdom
DEK Printing Machines Ltd. United Kingdom
Sincotron - Nordic Sweden
Sincotron AB Sweden
Dover UK Holdings Limited United Kingdom
Dover UK Finance Limited United Kingdom
Dover UK Finance Services Limited United Kingdom
Universal Instruments Corporation
(Singapore) Pte. Ltd. Singapore
Universal Instruments Korea Limited Korea
Universal Hong Kong Hong Kong
Tipper Tie Verschlusstechnik Deutchland, Gmbh Germany
DEK Japan Limited Japan
DEK GmbH Germany
Soltec International, B.V. Netherlands
Soltec Group B.V. Netherlands
Petro Vend, Inc. Poland
Petro Vend of Canada, Inc. Canada
Petro Vend Europe Inc. United Kingdom
Chief Automotive Systems Canada, Inc. Canada
Chief Automotive Limited United Kingdom
Dr. Rotert/Dieterich Standard GmbH Germany
De-Sta-Co (Asia) Company, Limited Thailand
Universal Instruments (Malaysia) Sdn Bhd Malaysia
Allgemeine Aufzugswartung GmbH Germany
Tipper Tie (UK) Limited United Kingdom
A-C Compressor Canada Canada
Dover Exports, Ltd. Barbados
Grapas Nacionales de Mexico C.V. de S.A. Mexico
Dover Europe Aufzug GmbH Germany
Christian Hein GmbH Germany
European Lift Engineering GmbH Germany
</TABLE>
- 3 -
<PAGE> 1
EXHIBIT 24
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS that _________________________, a
director of Dover Corporation, a Delaware corporation (the "Company"), hereby
constitutes and appoints Gary L. Roubos, Thomas L. Reece, John F. McNiff and
Robert G. Kuhbach, and each of them (with full power to each of them to act
alone), his true and lawful attorney-in-fact and agent, for him/her on his/her
behalf and in his/her name, place and stead, to sign, execute and affix his/her
name thereto and file the Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, with the Securities and Exchange
Commission and any other appropriate authority, granting unto said attorneys
and each of them, full power and authority to do and perform each and every act
and thing required and necessary to be done in and about the premises in order
to effectuate the same as fully to all intents and purposes as he/she himself
might or could do if personally present, hereby ratifying and confirming all
that said attorneys-in-fact and agents, of any of them may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his/her hand this
3rd day of February, 1994.
/s/ Magalen O. Bryant
--------------------------------
Magalen O. Bryant
/s/ Lewis E. Burns
--------------------------------
Lewis E. Burns
/s/ Michael C. Devas
--------------------------------
Michael C. Devas
/s/ John F. Fort
--------------------------------
John F. Fort
/s/ James L. Koley
--------------------------------
James L. Koley
/s/ George L. Ohrstrom
--------------------------------
George L. Ohrstrom
/s/ Anthony J. Ormsby
--------------------------------
Anthony J. Ormsby
/s/ Thomas L. Reece
--------------------------------
Thomas L. Reece
/s/ Gary L. Roubos
--------------------------------
Gary L. Roubos
/s/ David G. Thomas
--------------------------------
David G. Thomas
