<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For six months ended June 30, 2000 Commission File No. 1-4018
DOVER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 53-0257888
(State of Incorporation) (I.R.S. Employer Identification No.)
280 Park Avenue, New York, NY 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 922-1640
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the Registrant's common stock as of the
close of the period covered by this report was 203,074,480.
<PAGE> 2
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
THREE MONTHS ENDED JUNE 30,
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
2000 1999
---------------- --------------------
<S> <C> <C>
Net sales $ 1,379,260 $ 1,077,850
Cost of sales 871,839 687,705
---------------- --------------------
Gross profit 507,421 390,145
Selling & administrative expenses 280,898 241,615
---------------- --------------------
Operating profit 226,523 148,530
---------------- --------------------
Other deductions (income):
Interest expense 23,673 12,329
Interest income (2,080) (4,097)
Foreign exchange (3,447) (700)
Loss on dispositions - -
All other, net (1,035) (1,827)
---------------- --------------------
Total 17,111 5,705
---------------- --------------------
Earnings before taxes on income 209,412 142,825
Federal & other taxes on income 72,679 49,515
---------------- --------------------
Net earnings $ 136,733 $ 93,310
================ ====================
Weighted average number of common
shares outstanding during the period
- Basic 202,895 213,796
================ ====================
- Diluted 204,683 215,248
================ ====================
Net earnings per share:
- Basic $ 0.67 $ 0.44
=======================================
- Diluted $ 0.67 $ 0.44
=======================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 3
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE EARNINGS
THREE MONTHS ENDED JUNE 30,
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
2000 1999
---------------- --------------------
<S> <C> <C>
Net earnings $ 136,733 $ 93,310
---------------- --------------------
Other comprehensive earnings, net of tax:
Foreign currency translation adjustments (48,288) (15,289)
Less: reclassification adjustment for adjustments
included in net earnings - -
---------------- --------------------
Total foreign currency translation adjustments (48,288) (15,289)
---------------- --------------------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period 27,110 (5)
Less: reclassification adjustment for gains (losses)
included in net earnings - -
---------------- --------------------
Total unrealized gains on securities (tax $14,597 in 2000
and $0 in 1999) 27,110 (5)
---------------- --------------------
Other comprehensive earnings (21,178) (15,294)
---------------- --------------------
Comprehensive earnings $ 115,555 $ 78,016
================ ====================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 4
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
SIX MONTHS ENDED JUNE 30,
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
2000 1999
---------------- --------------------
<S> <C> <C>
Net sales $ 2,630,543 $ 2,047,605
Cost of sales 1,665,983 1,314,587
---------------- --------------------
Gross profit 964,560 733,018
Selling & administrative expenses 544,977 475,334
---------------- --------------------
Operating profit 419,583 257,684
---------------- --------------------
Other deductions (income):
Interest expense 41,438 25,952
Interest income (4,416) (13,301)
Foreign exchange (2,633) (423)
Loss on dispositions 1,400 3,675
All other, net (4,611) (5,808)
---------------- --------------------
Total 31,178 10,095
---------------- --------------------
Earnings before taxes on earnings 388,405 247,589
Federal & other taxes on earnings 134,353 85,059
---------------- --------------------
Net earnings from continuing operations 254,052 162,530
Earnings from discontinued operations, net of tax - 523,938
---------------- --------------------
Net earnings $ 254,052 $ 686,468
================ ====================
Weighted average number of common shares
outstanding during the period
- Basic 202,895 213,796
================ ====================
- Diluted 204,683 215,248
================ ====================
Net earnings per share:
Basic - Continuing $ 1.25 $ 0.76
Gain on sale - 2.45
---------------- --------------------
Net earnings $ 1.25 $ 3.21
================ ====================
Basic - Continuing $ 1.24 $ 0.76
Gain on sale - 2.43
---------------- --------------------
Net earnings $ 1.24 $ 3.19
================ ====================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 5
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE EARNINGS
SIX MONTHS ENDED JUNE 30,
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
2000 1999
---------------- --------------------
<S> <C> <C>
Net earnings $ 254,052 $ 686,468
---------------- --------------------
Other comprehensive earnings, net of tax:
Foreign currency translation adjustments (46,387) (40,379)
Less: reclassification adjustment for adjustments
included in net earnings - -
---------------- --------------------
Total foreign currency translation adjustments (46,387) (40,379)
---------------- --------------------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period 27,110 (5)
Less: reclassification adjustment for gains (losses)
included in net earnings - -
---------------- --------------------
Total unrealized gains on securities (tax $14,597 in 2000
and $0 in 1999) 27,110 (5)
---------------- --------------------
Other comprehensive earnings (19,277) (40,384)
---------------- --------------------
Comprehensive earnings $ 234,775 $ 646,084
================ ====================
</TABLE>
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
SIX MONTHS ENDED JUNE 30,
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
2000 1999
---------------- --------------------
<S> <C> <C>
Retained earnings at January 1 $ 2,830,175 $ 1,992,991
Net earnings 254,052 686,468
---------------- --------------------
3,084,227 2,679,459
Deduct:
Common stock cash dividends
$ 0.23 per share ($0.21 in 1999) 46,691 44,805
---------------- --------------------
Retained earnings at end of period $ 3,037,536 $ 2,634,654
================ ====================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 6
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
June 30, 2000 December 31, 1999
---------------- --------------------
<S> <C> <C>
Assets:
-------
Current assets:
Cash & cash equivalents $ 135,711 $ 138,038
Marketable securities - -
Receivables, net of allowance for doubtful accounts 901,596 750,917
Inventories 715,837 639,379
Prepaid expenses 94,835 83,228
---------------- --------------------
Total current assets 1,847,979 1,611,562
---------------- --------------------
Property, plant & equipment (at cost) 1,533,594 1,480,833
Accumulated depreciation (860,520) (834,358)
---------------- --------------------
Net property, plant & equipment 673,074 646,475
---------------- --------------------
Intangible assets, net of amortization 1,919,558 1,813,359
Other intangible assets 7,358 7,358
Deferred charges & other assets 114,117 53,186
---------------- --------------------
$ 4,562,086 $ 4,131,940
================ ====================
Liabilities:
------------
Current liabilities:
Notes payable $ 793,257 $ 296,637
Current maturities of long-term debt 2,329 1,263
Accounts payable 276,258 253,650
Accrued compensation & employee benefits 147,837 157,392
Accrued insurance 46,756 50,274
Other accrued expenses 192,622 186,405
Income taxes 54,043 389,244
---------------- --------------------
Total current liabilities 1,513,102 1,334,865
---------------- --------------------
Long-term debt 630,018 608,025
Deferred taxes 64,397 42,061
Other deferrals (principally compensation) 119,622 108,233
Stockholders' equity:
---------------------
Preferred stock - -
Common stock 236,784 236,246
Additional paid-in surplus 44,535 33,060
Cumulative translation adjustments (126,372) (79,985)
Unrealized holding gains (losses) 27,156 46
---------------- --------------------
Accumulated other comprehensive earnings (99,216) (79,939)
---------------- --------------------
Retained earnings 3,037,536 2,830,175
---------------- --------------------
Subtotal 3,219,639 3,019,542
Less: treasury stock 984,692 980,786
---------------- --------------------
2,234,947 2,038,756
---------------- --------------------
$ 4,562,086 $ 4,131,940
================ ====================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 7
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
SIX MONTHS ENDED JUNE 30,
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
2000 1999
---------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 254,052 $ 686,468
---------------- --------------------
Adjustments to reconcile net earnings to net cash
from operating activities:
Gain on sale of discontinued business - (523,938)
Depreciation 68,462 60,286
Amortization 32,639 29,628
Net increase (decrease) in deferred taxes 4,768 239
Net increase (decrease) in LIFO reserves 1,192 928
Increase (decrease) in deferred compensation 13,888 (3,175)
(Gain) loss on sale of business and certain assets 1,400 -
Other, net (12,238) (10,364)
Changes in assets & liabilities (excluding acquisitions):
Decrease (increase) in accounts receivable (148,103) (60,296)
Decrease (increase) in inventories, excluding LIFO reserve (60,344) 4,723
Decrease (increase) in prepaid expenses (11,812) (6,468)
Increase (decrease) in accounts payable 14,963 (681)
Increase (decrease) in accrued expenses (14,735) (21,314)
Increase (decrease) in federal & other taxes on income (8,884) (28,243)
---------------- --------------------
Total adjustments (118,804) (558,675)
---------------- --------------------
Net cash from operating activities of continuing operations 135,248 127,793
---------------- --------------------
Cash flows from (used in) investing activities:
Additions to property, plant & equipment (77,347) (53,825)
Acquisitions, net of cash & cash equivalents (224,606) (304,304)
Proceeds from sale of business 14,923 1,169,599
Purchase of treasury stock (3,906) (437,448)
---------------- --------------------
Net cash from (used in) investing activities of continuing operations (290,936) 374,022
---------------- --------------------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable 485,097 (325,560)
Increase (decrease) in long-term debt 16,309 (3,429)
Proceeds from exercise of stock options 6,697 5,911
Cash dividends to stockholders (46,691) (44,805)
---------------- --------------------
Net cash from (used in) financing activities of continuing operations 461,412 (367,883)
---------------- --------------------
---------------- --------------------
Discontinued operations tax payments (308,051) -
---------------- --------------------
Net increase (decrease) in cash & cash equivalents (2,327) 133,932
Cash & cash equivalents at beginning of period 138,038 96,774
---------------- --------------------
Cash & cash equivalents at end of period $ 135,711 $ 230,706
================ ====================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 8
DOVER CORPORATION CONSOLIDATED
MARKET SEGMENT RESULTS
(unaudited)
<TABLE>
<CAPTION>
Second quarter ended June 30
---------------------------- Percent
SALES 2000 1999 Change
-----
-------------------- ------------------- --------
<S> <C> <C> <C>
Dover Technologies $ 527,352,000 $ 334,883,000 57%
Dover Industries 326,289,000 293,826,000 11%
Dover Diversified 310,412,000 260,715,000 19%
Dover Resources 217,506,000 189,554,000 15%
-------------------- -------------------
Total (after intramarket eliminations) $ 1,379,260,000 $ 1,077,850,000 28%
==================== ===================
EARNINGS
--------
Dover Technologies $ 110,344,000 $ 47,904,000 130%
Dover Industries 51,502,000 48,709,000 6%
Dover Diversified 44,214,000 34,808,000 27%
Dover Resources 32,012,000 24,895,000 29%
--------------------- -------------------
Subtotal (after intramarket eliminations) 238,072,000 156,316,000
Corporate expense (6,876,000) (5,158,000) 33%
Net interest expense (21,784,000) (8,333,000) 161%
--------------------- -------------------
Earnings before taxes on income 209,412,000 142,825,000 47%
Taxes on income 72,679,000 49,515,000 47%
--------------------- -------------------
Net earnings $ 136,733,000 $ 93,310,000 47%
===================== ===================
Net earnings per share:
Basic $ 0.67 $ 0.44 52%
===================== ===================
Diluted $ 0.67 $ 0.44 52%
===================== ===================
</TABLE>
<PAGE> 9
DOVER CORPORATION CONSOLIDATED
MARKET SEGMENT RESULTS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
SALES 2000 1999 *
----- -------------------- -------------------
<S> <C> <C> <C>
Dover Technologies $ 993,718,000 $ 623,003,000 60%
Dover Industries 625,330,000 552,532,000 13%
Dover Diversified 579,950,000 491,295,000 18%
Dover Resources 435,662,000 383,311,000 14%
-------------------- -------------------
Total (after intramarket eliminations) $ 2,630,543,000 $ 2,047,605,000 28%
==================== ===================
EARNINGS
--------
Dover Technologies $ 195,139,000 $ 73,818,000 164%
Dover Industries 101,917,000 85,993,000 19%
Dover Diversified 77,679,000 62,089,000 25%
Dover Resources 65,553,000 51,828,000 26%
--------------------- -------------------
Subtotal (after intramarket eliminations) 440,288,000 273,728,000
Gain (loss) on disposition (1,400,000) (3,675,000)
Corporate expense (13,117,000) (9,661,000) 36%
Net interest expense (37,366,000) (12,803,000) 192%
--------------------- -------------------
Earnings before taxes on income 388,405,000 247,589,000 57%
Taxes on Income 134,353,000 85,059,000 58%
--------------------- -------------------
Net earnings - Continuing Operations 254,052,000 162,530,000 56%
Gain on sale of discontinued operations * 523,938,000
--------------------- -------------------
Net earnings $ 254,052,000 $ 686,468,000 -63%
===================== ===================
Net earnings per share:
Basic - Continuing $ 1.25 $ 0.76 64%
Gain on sale - 2.45
--------------------- -------------------
Net earnings $ 1.25 $ 3.21
===================== ===================
Diluted - Continuing $ 1.24 $ 0.76 63%
Gain on sale - 2.43
--------------------- -------------------
Net earnings $ 1.24 $ 3.19
===================== ===================
Average number of shares outstanding - Basic 202,895,000 213,796,000
Average number of shares outstanding - Diluted 204,683,000 215,248,000
</TABLE>
* On January 5, 1999, Dover completed the sale of its elevator business to
Thyssen Industrie AG for $1.16 billion.
DOVER CORPORATION AND SUBSIDIARIES
MARKET SEGMENT IDENTIFIABLE ASSETS
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
June 30, December 31,
2000 1999
-------------------- -------------------
<S> <C> <C>
Dover Technologies $ 1,325,340 $ 1,206,549
Dover Industries 1,072,908 894,452
Dover Diversified 1,149,670 1,128,239
Dover Resources 854,996 804,664
Corporate (1) 159,172 98,036
--------------------- -------------------
Consolidated Total $ 4,562,086 $ 4,131,940
==================== ===================
</TABLE>
(1) - Principally cash, cash equivalents and marketable securities.
<PAGE> 10
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and changes in financial position in
conformity with generally accepted accounting principles. In the opinion of the
Company, all adjustments, consisting only of normal recurring items necessary
for a fair presentation of the operating results have been made. The results of
operations of any interim period are subject to year-end audit and adjustments,
and are not necessarily indicative of the results of operations for the fiscal
year.
NOTE B - Inventory
<TABLE>
<CAPTION>
Inventories, by components, are summarized as follows :
(000 omitted)
---------------------------------------
UNAUDITED
June 30, December 31,
2000 1999
---------------- --------------------
<S> <C> <C>
Raw materials $ 265,648 $ 239,498
Work in progress 228,290 205,792
Finished goods 259,246 233,671
---------------- --------------------
Total 753,184 678,961
Less LIFO reserve 37,347 39,582
---------------- --------------------
Net amount per balance sheet $ 715,837 $ 639,379
================ ====================
</TABLE>
NOTE C - Accumulated other Comprehensive Earnings
Accumulated other comprehensive earnings, by components
are summarized as follows:
<TABLE>
<CAPTION>
UNAUDITED (000 omitted)
-------------------------------------------------------------------------
Accumulated
Other Unrealized
Comprehensive Cumulative Holding
Earnings Translation Gains
(losses) Adjustments (losses)
------------------------------ ---------------- --------------------
<S> <C> <C> <C>
Beginning balance $ (79,939) $ (79,985) $ 46
Current-period change (19,277) (46,387) 27,110
------------------------------ ---------------- --------------------
Ending balance $ (99,216) $ (126,372) $ 27,156
============================== ================ ====================
</TABLE>
<PAGE> 11
NOTE D - Additional Information
For a more adequate understanding of the Company's financial position,
operating results, business properties and other matters, reference is made to
the Company's Annual Report on Form 10-K which was filed with the Securities and
Exchange Commission on March 16, 2000.
Net earnings as reported was used in computing both basic EPS and
diluted EPS without further adjustment. The Company does not have a complex
capital structure. Accordingly, the entire difference between basic weighted
average shares and diluted weighted average shares results from assumed stock
option exercise. The diluted EPS computation was made using the treasury stock
method.
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," marketable
securities are classified as available-for-sale and are recorded at current
market value. Net unrealized gains and losses on marketable securities available
for sale are credited or charged to Other Comprehensive Income.
At June 30, 2000 the fair value, cost basis and gross unrealized gains
on available-for-sales securities are approximately $42.8 million, $1.1 million
and $41.7 million, respectively. The Company held a small investment in Bookham
Technology PLC, which went public in April resulting in the second quarter
unrealized gain reported above. The Company is prohibited from selling the
investment for six months from the date of the initial public offering.
In March 2000, the FASB issued Interpretation No.44, "Accounting for
Certain Transactions Involving Stock Compensation -- an interpretation of APB
Opinion No. 25", effective for all fiscal quarters of all fiscal years beginning
after July 1, 2000. The Company does not expect the Interpretation to have a
significant impact on the consolidated results of operations or financial
position and related disclosure requirements.
In June 2000, the FASB issued statement of Financial Accounting
Standards No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities -- an Amendments of FASB Statement No. 133", effective for
all fiscal quarters of all fiscal years beginning after June 15, 2000. The
Company does not expect the statement to have a significant impact on the
consolidated results of operations or financial position and related disclosure
requirements.
In June 2000, the SEC staff issued SAB 101B "Second Amendment: Revenue
Recognition in Financial Statements" to provide registrants with additional time
to implement guidance contained in SAB 101, "Revenue Recognition in Financial
Statements". SAB 101, as amended is effective no later than the fourth fiscal
quarter of fiscal years beginning after December 15, 1999. The Company does not
expect the SAB to have a impact on the consolidated results of operations or
financial position and related disclosure requirements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(1) MATERIAL CHANGES IN CONSOLIDATED FINANCIAL CONDITION:
The Company's liquidity decreased slightly during the first half of
2000 as compared to the position at December 31, 1999. The taxes paid on the
gain from sale of the elevator business ($308 million), plus amounts invested in
acquisitions ($242 million) are the principle reasons for the decrease in
liquidity.
Working capital increased from $276.7 million at the end of last year
to $334.9 million at June 30, 2000. Capital expenditures were $77.3 million for
the first half 2000 compared to $53.8 million last year. The working capital
increase and capital expenditures were funded by internal cash flow.
At June 30, 2000, net debt (defined as long-term debt plus current
maturities on long-term debt plus notes payable less cash and equivalents and
marketable securities) of $1,290 million represented 36.6% of total capital.
This compares with 27.4% at December 31, 1999. The Company continues to be rated
A-1 by Standard & Poors and F-1 by Fitch IBCA. The Company believes its
significant free cash
<PAGE> 12
flow will enable it to fund internal growth and, together with modest debt
utilization, fund its acquisition program. The Company also believes it will
continue to maintain a solid credit profile.
The Company completed seven add-on acquisitions during the quarter at a
combined cost of $74 million bringing the total for the year to 12 acquisitions
for a total of $242 million.
ACQUISITIONS - SECOND QUARTER 2000
<TABLE>
<CAPTION>
DATE TYPE ACQUIRED COMPANIES LOCATION (NEAR) SEGMENT - OPERATING CO.
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10-APR STOCK GREER COMPANY SANTA ANA, CA. DRI TULSA WINCH
Manufactures systems that continuously monitor the load and configuration of mobile cranes.
12-APR ASSET HOEGGER ALPINA (HA) GOSSAU, SWITZERLAND DII TIPPER TIE
Manufactures machinery, clips and loops primarily serving the food processing industry.
24-MAY STOCK HYDROMOTION, INC. SPRING CITY, PA. DII TEXAS HYDRAULICS
Designs & manufactures hydraulic swivels, electric slip rings and telescopic waterway assemblies.
31-MAY STOCK SALWASSER MANUFACTURING COMPANY, INC. REEDLEY, CA. DDI SWF
Manufactures packaging machinery in automation of case packing for paper, dry goods and toiletries markets.
08-JUN ASSET PROVACON, INC. GONZALES, LA. DRI MIDLAND
Designs & manufactures specialty valves and fitting for the transfer of hazardous fluids in petro-chemical plants.
23-JUN STOCK C & H MANUFACTURING, INC. ONTARIO, CA. DDI SARGENT
Manufactures specialty fasteners, primarily for use in aircraft landing gears.
30-JUN STOCK GROUPE AOUSTIN NANTERRE, FRANCE DRI RONNINGEN-PETTER
Manufactures high volume, turnkey liquid filtration systems and specialty high-viscosity mixers-extruders.
</TABLE>
The profit impact in 2000 will be small due to acquisition write-offs, and
imputed financing costs. Acquisitions completed in the last twelve months
(7/1/99 - 6/30/00) added $105 million in sales and $19 million in operational
profit in the second quarter.
(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:
The Company earned $.67 per diluted share from continuing operations in the
second quarter ended June 30, 2000, an increase of 52% from the $.44 per diluted
share earned in the comparable quarter last year. Net income from continuing
operations for the second quarter was a record of $136.7 million, up 47% from
$93.3 million in net income from continuing operations last year. Sales in the
quarter were a record $1.38 billion, up 28% from $1.08 billion last year.
The Company reports its pretax earnings in two ways -- on the GAAP/SEC required
segment reporting described above, and on an EBITACQ basis (Earnings Before
Interest, Taxes, and non-cash charges arising from purchase accounting for
acquisitions). Second quarter EBITACQ of $252 million was 45% higher than prior
year. Of this, about 11 percentage points reflect acquisitions and 34
percentage points reflect the growth of existing companies (notably
electronics). The reduction in shares outstanding during the last 6 months of
1999 resulted in stronger growth for EBITACQ per outstanding share, as this
measure increased 55% to $1.24 per share.
The Company will report as part of its second quarter 10Q Statement of
Comprehensive Income an Unrealized Gain of $41.7 million ($27.1 after tax). In
1997, Dover Technologies made a small 720,000 share investment in Bookham
Technology PLC for strategic business reasons. Bookham (BKHM:NASDAQ) went
public in April of this year resulting in the unrealized appreciation. The
Company has no current plans to sell the investment and is in fact prohibited
from doing so for six months from the date of the initial public offering.
Strong performance in each of the Company's four business segments was led by
Technologies where income more than doubled from the second quarter last year.
<PAGE> 13
DOVER TECHNOLOGIES:
Sales in the second quarter increased 57% to $527.4 million, from $334.9 million
last year, and segment profit increased 130% to $110.3 million, from $47.9
million last year. These strong results were a continuation of trends apparent
in the second half of last year. Segment bookings set a quarterly record, and at
$628 million were 19% greater than shipments.
Technologies' companies which make production equipment for circuit board
assembly and test (CBAT), used in a broad array of high volume electronics
manufacturing applications, achieved their fifth consecutive quarterly
improvement in orders, shipments, and earnings. CBAT bookings were up 66% from
last year to $386 million, sales were up 71% to $ 356 million, and earnings were
up 154% to $74 million. The book-to-bill ratio in the quarter was 1.08. The
continuation of robust growth into the second quarter is the result of high
customer demand in telecom, data com, and networking markets.
Technologies' companies that make specialty electronic components (SEC) also
experienced a continuing strong market, driven by telecommunications spending.
SEC sales were $121 million, up 54% from the prior period, profits more than
doubled to $24 million, and bookings were up 113% to $188 million on a 54%
sales gain. The quarter's book-to-bill ratio was 1.56. In response to these
strong trends, numerous capacity expansion projects have been undertaken at the
SEC companies.
The plans of the telecommunications companies to replace much of the
infrastructure for wired and wireless communications, along with the robust
demand growth for portable communication devices with broadband connection to
the network makes the outlook for these businesses bright. The electronics
industry recovery that began late in the second quarter of 1999 has continued.
Comparisons for the balance of 2000 will be made to a period after the industry
recover had begun.
Technologies' industrial marking business, Imaje, also continues its steady
growth, with earnings up over 21% on an 18% sales increase.
DOVER INDUSTRIES:
Sales in the second quarter increased 11% to $326.3 million from $293.8 million
last year, and segment earnings increased 6% from $48.7 million to $51.5
million. Acquisitions made in the last year, including Triton, the manufacturer
of cash dispenser systems acquired in the first quarter contributed all of the
sales increase. Segment earnings were down 9% excluding acquisitions made in the
last year. Segment bookings in the quarter were up 7% to $307 million and the
book-to-bill ratio was .94.
Sales and earnings at Heil Environmental and Dovatech set quarterly records. The
automotive service equipment market remains strong, helping Rotary Lift and
Chief achieve higher sales and earnings, but the impact of pending new product
introductions on sales of existing products temporarily negatively impacted PDQ.
Heil Trailer, the liquid and dry bulk tank trailer company, has experienced
weakness in its markets since last year due to the impact of higher fuel costs
on its customer base.
DOVER DIVERSIFIED:
Sales in the second quarter increased 19% to $310.4 million from $260.7 million,
last year, and segment income increased 27% to $44.2 million from $34.8 million.
Segment bookings in the quarter were down 1% to $294 million and the
book-to-bill was 0.95.
As in first quarter, acquisitions made in 1999 (especially Crenlo and JE
Piston), contributed strongly to this result, as did the performances at AC
Compressor, Mark Andy, Wiseco, and Sargent. Acquisitions, net of divestments,
added about $37 million to Diversified's second quarter sales. The Belvac
turnaround also boosted the second quarter.
Hill Phoenix, which manufactures commercial refrigeration equipment and display
cases, has been adversely impacted by consolidation in its customer base.
<PAGE> 14
DOVER RESOURCES:
Sales in the second quarter increased to $217.5 million from $189.6 million last
year, or 15%, and segment income increased 29%, from $24.9 million to $32.0
million. Segment bookings in the quarter were up 18% to $221 million and the
book-to-bill ratio was 1.01.
The Petroleum Equipment Group, which is heavily influenced by North American
oil production activity and particularly existing wells, continued its very
strong performance in the quarter, compared to the lower oil price environment
last year. Quartzdyne and C. Lee Cook, more heavily influenced by new
production and development, have also begun to improve compared to the prior
year. Companies serving the process industries (Wilden, Blackmer,
Ronningen-Petter) were about flat to the prior year.
OPW Fueling Components, which serves the retail petroleum distribution market,
has been hurt by the current pressure on customers' retail margins, and industry
consolidation.
OUTLOOK:
The Dover Technologies results, which while they may not continue to strengthen,
certainly appear unlikely to deteriorate soon. Together with the admirable
profit improvements at Industries, Diversified and Resources, which also appear,
in aggregate, sustainable, the Company may well finish the year with earnings
per share growth approaching 35%.
Special Notes Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q, the Annual Report on Form
10-K and the documents that are incorporated by reference, particularly
sections of any report to Stockholders under the headings "Outlook" or
"Management's Discussion and Analysis", contain forward-looking statements
within the meaning of the Securities Act of 1933, as amended, and the Exchange
Act of 1934, as amended, and the Private Securities Litigation Reform Act of
1995. Such statements relate to, among other things, industries in which the
Company operates, the U.S. and global economies, earnings, cash flow and
operating improvements and may be indicated by words or phrases such as
"anticipates," "supports," "plans," "projects," "expects," "should," "hope,"
"forecast," "Dover believes," "management is of the opinion" and similar words
or phrases. Such statements may also be made by management orally.
Forward-looking statements are subject to inherent uncertainties and risks,
including among others: increasing price and product/service competition by
foreign and domestic competitors, including new entrants; technological
developments and changes; the ability to continue to introduce competitive new
products and services on a timely, cost effective basis; the mix of
products/services; the achievement of lower costs and expenses; domestic and
foreign governmental and public policy changes including environmental
regulations; protection and validity of patent and other intellectual property
rights; the continued success of the Company's acquisition program; the
cyclical nature of the Company's business; and the outcome of pending and
future litigation and governmental proceedings. In addition, such statements
could be affected by general industry and market conditions and growth rates,
and general domestic and international economic conditions including interest
rate and currency exchange rate fluctuations. In light of these risks and
uncertainties, actual events and results may vary significantly from those
included in or contemplated or implied by such statements. Readers are
cautioned not to place undue reliance on such forward-looking statements. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
PART II OTHER INFORMATION
Item 4. Submission of Matter to Vote of Security Holders
The Annual Meeting of Stockholders was held in Wilmington, Delaware on
April 25, 2000. Stockholders representing 171,687,002 shares of common stock, or
approximately 85% of the outstanding stock, were present in person or by proxy.
All of the nominees for director, namely David H. Benson, Kristiane C.
Graham, Jean-Pierre M. Ergas, Roderick J. Fleming, James J. Koley, Richard K.
Lochridge, Thomas L. Reece, Gary L. Roubos,
<PAGE> 15
and Michael B. Stubbs were elected directors for a one year term, each receiving
at least 163,530,317 votes.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
(a) Exhibit 27 - Financial Data Schedule.
(b) No reports on Form 8-K were filed this quarter.
<PAGE> 16
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DOVER CORPORATION
Date: July 18, 2000 /s/ David S. Smith
---------------------- -----------------------------------------
David S, Smith, Chief Financial Officer,
Vice President, Finance
Date: July 18, 2000 /s/ George F. Meserole
---------------------- -----------------------------------------
George F. Meserole, Chief Accounting
Officer, Vice President and Controller
