<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 nine months ended September 30, 2000 Commission File No. 1-4018
DOVER CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
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 203,094,568.
<PAGE> 2
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
THREE MONTHS ENDED SEPTEMBER 30,
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
2000 1999
----------- -----------
<S> <C> <C>
Net sales $ 1,390,486 $ 1,150,531
Cost of sales 876,243 734,564
----------- -----------
Gross profit 514,243 415,967
Selling & administrative expenses 288,813 234,261
----------- -----------
Operating profit 225,430 181,706
----------- -----------
Other deductions (income):
Interest expense 27,007 12,257
Interest income (1,656) (2,916)
Foreign exchange 1,386 (49)
Loss (gain) on dispositions and sale of
equity securities (13,741) (20,931)
All other, net (1,540) 5,266
----------- -----------
Total 11,456 (6,373)
----------- -----------
Earnings before taxes on income 213,974 188,079
Federal & other taxes on income 69,512 66,544
----------- -----------
Net earnings from continuing operations 144,462 121,535
Gain (loss) on sale of discontinued
business, net of tax (13,595)
----------- -----------
Net earnings $ 130,867 $ 121,535
=========== ===========
Weighted average number of common shares
outstanding during the period
- Basic 202,937 211,238
=========== ===========
- Diluted 204,736 212,776
=========== ===========
Net earnings per common share:
Basic - Continuing $ 0.71 $ 0.58
Gain (loss) on sale (0.06) --
----------- -----------
Net earnings $ 0.65 $ 0.58
=========== ===========
Diluted - Continuing $ 0.71 $ 0.58
Gain (loss) on sale (0.07) --
----------- -----------
Net earnings $ 0.64 $ 0.58
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 3
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE EARNINGS
THREE MONTHS ENDED SEPTEMBER 30,
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
2000 1999
--------- ---------
<S> <C> <C>
Net earnings $ 130,867 $ 121,535
--------- ---------
Other comprehensive earnings, net of tax:
Foreign currency translation adjustments (9,134) 3,783
Less: reclassification adjustment
for adjustments included in net earnings -- --
--------- ---------
Total foreign currency translation adjustments (9,134) 3,783
--------- ---------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during period (7,627) --
Less: reclassification adjustment for
gains (losses) included in net earnings 8,994 --
--------- ---------
Total unrealized gains (losses) on securities
(tax -$8,924 in 2000 and $0 in 1999) (16,621) --
--------- ---------
Other comprehensive earnings (25,755) 3,783
--------- ---------
Comprehensive earnings $ 105,112 $ 125,318
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 4
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30,
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
2000 1999
----------- -----------
<S> <C> <C>
Net sales $ 4,021,029 $ 3,198,136
Cost of sales 2,542,226 2,049,151
----------- -----------
Gross profit 1,478,803 1,148,985
Selling & administrative expenses 833,790 709,595
----------- -----------
Operating profit 645,013 439,390
----------- -----------
Other deductions (income):
Interest expense 68,445 38,209
Interest income (6,072) (16,217)
Foreign exchange (1,247) (472)
Loss (gain) on dispositions and sale of
equity securities (12,341) (17,256)
All other, net (6,151) (542)
----------- -----------
Total 42,634 3,722
----------- -----------
Earnings before taxes on earnings 602,379 435,668
Federal & other taxes on earnings 203,865 151,603
----------- -----------
Net earnings from continuing operations 398,514 284,065
Gain (loss) on sale of discontinued
business, net of tax (13,595) 523,938
----------- -----------
Net earnings $ 384,919 $ 808,003
=========== ===========
Weighted average number of common shares
outstanding during the period
- Basic 202,937 211,238
=========== ===========
- Diluted 204,736 212,776
=========== ===========
Net earnings per common share:
Basic - Continuing $ 1.96 $ 1.34
Gain (loss) on sale (0.06) 2.49
----------- -----------
Net earnings $ 1.90 $ 3.83
=========== ===========
Diluted - Continuing $ 1.95 $ 1.34
Gain (loss) on sale (0.07) 2.46
----------- -----------
Net earnings $ 1.88 $ 3.80
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 5
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE EARNINGS
NINE MONTHS ENDED SEPTEMBER 30,
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
2000 1999
--------- ---------
<S> <C> <C>
Net earnings $ 384,919 $ 808,003
--------- ---------
Other comprehensive earnings, net of tax:
Foreign currency translation adjustments (55,521) (36,596)
Less: reclassification adjustment
for adjustments included in net earnings -- --
--------- ---------
Total foreign currency translation
adjustments (55,521) (36,596)
--------- ---------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during period 19,483 (5)
Less: reclassification adjustment for
gains (losses) included in net earnings 8,994 --
--------- ---------
Total unrealized gains (losses) on securities
(tax $5,673 in 2000 and $0 in 1999) 10,489 (5)
--------- ---------
Other comprehensive earnings (45,032) (36,601)
--------- ---------
Comprehensive earnings $ 339,887 $ 771,402
========= =========
</TABLE>
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
NINE MONTHS ENDED SEPTEMBER 30,
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
2000 1999
---------- ----------
<S> <C> <C>
Retained earnings at January 1 $2,830,175 $1,992,991
Net earnings 384,919 808,003
---------- ----------
3,215,094 2,800,994
Deduct:
Common stock cash dividends
$ 0.355 per share ($0.325 in 1999) 72,076 68,508
---------- ----------
Retained earnings at end of period $3,143,018 $2,732,486
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 6
DOVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
September December
30, 2000 31, 1999
------------ ------------
<S> <C> <C>
Assets:
Current assets:
Cash & cash equivalents $ 210,860 $ 138,038
Marketable securities - -
Receivables, net of allowance for doubtful accounts 936,130 750,917
Inventories 768,887 639,379
Prepaid expenses 96,430 83,228
------------ ------------
Total current assets 2,012,307 1,611,562
------------ ------------
Property, plant & equipment (at cost) 1,600,553 1,480,833
Accumulated depreciation (893,869) (834,358)
------------ ------------
Net property, plant & equipment 706,684 646,475
------------ ------------
Intangible assets, net of amortization 1,937,777 1,813,359
Other intangible assets 7,358 7,358
Deferred charges & other assets 127,199 53,186
------------ ------------
$4,791,325 $4,131,940
============ ============
Liabilities:
Current liabilities:
Notes payable $836,047 $296,637
Current maturities of long-term debt 2,501 1,263
Accounts payable 282,822 253,650
Accrued compensation & employee benefits 178,094 157,392
Accrued insurance 48,917 50,274
Other accrued expenses 221,336 186,405
Income taxes 99,006 389,244
------------ ------------
Total current liabilities 1,668,723 1,334,865
------------ ------------
Long-term debt 629,294 608,025
Deferred taxes 44,526 42,061
Other deferrals (principally compensation) 133,575 108,233
Stockholders' equity:
Preferred stock - -
Common stock 236,805 236,246
Additional paid-in surplus 45,070 33,060
Cumulative translation adjustments (135,506) (79,985)
Unrealized holding gains (losses) 10,535 46
------------ ------------
Accumulated other comprehensive earnings (124,971) (79,939)
------------ ------------
Retained earnings 3,143,018 2,830,175
------------ ------------
Subtotal 3,299,922 3,019,542
Less: treasury stock 984,715 980,786
------------ ------------
2,315,207 2,038,756
------------ ------------
$4,791,325 $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
NINE MONTHS ENDED SEPTEMBER 30,
(000 OMITTED)
<TABLE>
<CAPTION>
ROUNDING &
UNAUDITED ADJUST.
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 384,919 $ 808,003
----------- -----------
Adjustments to reconcile net earnings to net cash
from operating activities:
(Gain) loss on sale of discontinued business 13,595 (523,938)
Depreciation 101,358 97,093
Amortization 49,902 44,069
Net increase (decrease) in deferred taxes (10,587) (2,581)
Net increase (decrease) in LIFO reserves 1,572 1,623
Increase (decrease) in deferred compensation 25,486 7,880
(Gain) loss on sale of business and
equity investments (12,341) (17,256)
Other, net (5,943) (13,480)
Changes in assets & liabilities
(excluding acquisitions):
Decrease (increase) in accounts receivable (173,837) (140,378)
Decrease (increase) in inventories, excluding
LIFO reserve (97,621) 1,863
Decrease (increase) in prepaid expenses (13,424) (7,846)
Increase (decrease) in accounts payable 13,629 10,585
Increase (decrease) in accrued expenses 51,395 1,523
Increase (decrease) in federal & other
taxes on income 10,414 (6,568)
----------- -----------
Total adjustments (46,402) (547,411)
----------- -----------
Net cash from operating activities of continuing
operations 338,517 260,592
----------- -----------
Cash flows from (used in) investing activities:
Additions to property, plant & equipment (134,537) (86,911)
Acquisitions, net of cash & cash equivalents (314,084) (368,616)
Proceeds from sale of business 1,771 1,209,695
Proceeds from sale of equity investment 14,185 --
Purchase of treasury stock (3,928) (629,772)
----------- -----------
Net cash from (used in) investing activities of
continuing operations (436,593) 124,396
----------- -----------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable 527,978 (245,072)
Increase (decrease) in long-term debt 14,465 (769)
Proceeds from exercise of stock options 7,046 7,215
Cash dividends to stockholders (72,076) (68,508)
----------- -----------
Net cash from (used in) financing activities of
continuing operations 477,413 (307,134)
----------- -----------
----------- -----------
Discontinued operations - tax payments (306,515) --
----------- -----------
Net increase (decrease) in cash & cash equivalents 72,822 77,854
Cash & cash equivalents at beginning of period 138,038 96,774
----------- -----------
Cash & cash equivalents at end of period $ 210,860 $ 174,628
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 8
DOVER CORPORATION CONSOLIDATED
MARKET SEGMENT RESULTS
(UNAUDITED)
<TABLE>
<CAPTION>
Third quarter ended September 30,
---------------------------------
Percent
SALES 2000 1999 Change
----- ---- ---- ------
<S> <C> <C> <C>
Dover Technologies $ 564,988,000 $ 400,325,000 41%
Dover Industries 314,037,000 291,920,000 8%
Dover Diversified 286,772,000 268,330,000 7%
Dover Resources 226,311,000 191,373,000 18%
--------------- ---------------
Total (after intramarket
eliminations) $ 1,390,486,000 $ 1,150,531,000 21%
=============== ===============
EARNINGS
--------
Dover Technologies $ 116,038,000 $ 74,042,000 57%
Dover Industries 48,762,000 45,141,000 8%
Dover Diversified 39,313,000 40,080,000 -2%
Dover Resources 28,985,000 24,650,000 18%
--------------- ---------------
Subtotal (after intramarket
eliminations) 233,098,000 183,913,000
Gain (loss) on disposition
and sale of equity investments $ 13,741,000 20,931,000 -34%
Corporate expense (7,337,000) (7,361,000)
Net interest expense (25,528,000) (9,404,000) 171%
--------------- ---------------
Earnings before taxes on income 213,974,000 188,079,000 14%
Taxes on income 69,512,000 66,544,000 4%
--------------- ---------------
Net earnings - Continuing Operations 144,462,000 121,535,000 19%
Loss on sale of discontinued
operations * (13,595,000) --
--------------- ---------------
Net earnings $ 130,867,000 $ 121,535,000 8%
=============== ===============
Net earnings per common share:
Basic - Continuing $ 0.71 $ 0.58 22%
Gain (loss) on sale (0.06) --
--------------- ---------------
Net earnings $ 0.65 $ 0.58
=============== ===============
Diluted - Continuing $ 0.71 $ 0.58 22%
Gain (loss) on sale (0.07) --
--------------- ---------------
Net earnings $ 0.64 $ 0.58
=============== ===============
</TABLE>
* On January 5, 1999, Dover completed the sale of its elevator business to
Thyssen Industrie AG for $1.16 billion resulting in a net gain of $523.9
million in 1999. The loss of $13.6 million in 2000 reflects subsequent
adjustments to both the purchase price and expenses related to the sale.
See Notes to Consolidated Financial Statements.
<PAGE> 9
DOVER CORPORATION CONSOLIDATED
MARKET SEGMENT RESULTS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
SALES 2000 1999
----- ---- ----
<S> <C> <C> <C>
Dover Technologies $1,558,706,000 $1,023,328,000 52%
Dover Industries 939,367,000 844,452,000 11%
Dover Diversified 866,722,000 759,625,000 14%
Dover Resources 661,973,000 574,684,000 15%
-------------- --------------
Total (after intramarket eliminations) $4,021,029,000 $3,198,136,000 26%
============== ==============
EARNINGS
--------
Dover Technologies $ 311,177,000 $ 147,860,000 110%
Dover Industries 150,679,000 131,134,000 15%
Dover Diversified 116,992,000 102,169,000 15%
Dover Resources 94,538,000 76,478,000 24%
-------------- --------------
Subtotal (after intramarket eliminations) 673,386,000 457,641,000
Gain (loss) on disposition
and sale of equity investments 12,341,000 17,256,000 -28%
Corporate expense (20,454,000) (17,021,000) 20%
Net interest expense (62,894,000) (22,208,000) 183%
-------------- --------------
Earnings before taxes on income 602,379,000 435,668,000 38%
Taxes on Income 203,865,000 151,603,000 34%
-------------- --------------
Net earnings - Continuing Operations 398,514,000 284,065,000 40%
Gain / (loss) on sale of discontinued operations* (13,595,000) 523,938,000
-------------- --------------
Net earnings $ 384,919,000 $ 808,003,000 -52%
============== ==============
Net earnings per common share:
Basic - Continuing $ 1.96 $ 1.34 46%
Gain (loss) on sale (0.06) 2.49
-------------- --------------
Net earnings $ 1.90 $ 3.83
============== ==============
Diluted - Continuing $ 1.95 $ 1.34 46%
Gain (loss) on sale (0.07) 2.46
-------------- --------------
Net earnings $ 1.88 $ 3.80
============== ==============
Average number of shares outstanding - Basic 202,937,000 211,238,000
Average number of shares outstanding - Diluted 204,736,000 212,776,000
</TABLE>
* On January 5, 1999, Dover completed the sale of its elevator business to
Thyssen Industrie AG for $1.16 billion resulting in a net gain of $523.9
million in 1999. The loss of $13.6 million in 2000 reflects subsequent
adjustments to both the purchase price and expenses related to the
disposition.
DOVER CORPORATION AND SUBSIDIARIES
MARKET SEGMENT IDENTIFIABLE ASSETS
(000 OMITTED)
<TABLE>
<CAPTION>
UNAUDITED
September 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Dover Technologies $1,414,305 $1,206,549
Dover Industries 1,081,452 894,452
Dover Diversified 1,196,832 1,128,239
Dover Resources 895,087 804,664
Corporate(1) 203,649 98,036
---------- ----------
Consolidated Total $4,791,325 $4,131,940
========== ==========
</TABLE>
(1) - Principally cash and cash equivalents.
See Notes to Consolidated Financial Statements.
<PAGE> 10
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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
Inventories, by components, are summarized as follows:
<TABLE>
<CAPTION>
(000 omitted)
-------------
UNAUDITED
September 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Raw materials $284,493 $239,498
Work in progress 244,485 205,792
Finished goods 277,636 233,671
-------- --------
Total 806,614 678,961
Less LIFO reserve 37,727 39,582
-------- --------
Net amount per balance sheet $768,887 639,379
======== =========
</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 (45,032) (55,521) 10,489
--------- -------- -------
Ending balance $(124,971) $(135,506) $10,535
========= ======== =======
</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 non-vested restricted
stock and assumed stock option exercises. 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 Earnings.
At September 30, 2000 the fair value, cost basis and gross unrealized gains on
available-for-sales securities are approximately $16.7 million, $0.6 million and
$16.1 million, respectively. The Company held a small investment in Bookham
Technology PLC, which went public in April resulting in the year-to-date
unrealized gain reported above. On September 26th the Company sold 43% of its
investment which resulted in a realized gain of $13.7 million, $8.9 million
after tax.
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 during the first nine months of 2000 as
compared to the position at December 31, 1999. The taxes paid on the gain from
sale of the elevator business ($307 million), plus amounts invested in
acquisitions ($333 million) are the principal reasons for the decrease in
liquidity.
Working capital increased from $276.7 million at the end of last year to $343.6
million at September 30, 2000. Capital expenditures were $134.5 million for the
nine months compared to $86.9 million last year. The working capital increase
and capital expenditures were funded by internal cash flow.
At September 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 $1,257 million represented 35.2% 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 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 filed
a shelf registration for the possible issuance of up to $1 billion in senior
debt securities on October 5th, 2000. The Company believes this will provide
flexibility to issue public debt rapidly depending on market conditions or
financing needs.
<PAGE> 12
The Company completed six add-on acquisitions during the quarter at a combined
cost of $91 million, bringing the total for the year to 18 acquisitions for a
total of $333 million.
ACQUISITIONS-THIRD QUARTER 2000
<TABLE>
<CAPTION>
DATE TYPE ACQUIRED COMPANIES LOCATION (NEAR) SEGMENT-OPERATING CO.
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
18-JUL STOCK SYFER TECHNOLOGY LTD. NORWICH, U.K. DTI NOVACAP
Manufacturer of specialty ceramic electronic components.
24-JUL ASSET CHESTERTON SYSTEM ONE PUMP DIVISION STONEHAM, MA DRI BLACKMER
Manufacturer of a high-end robust centrifugal pump line.
08-AUG STOCK KESSELTRONICS SYSTEMS CORPORATION HUDSON, QUEBEC DII PDQ
Developer of unique electronic products primarily for
the Vehicle Wash Equipment Industry.
01-SEP ASSET VERTEX PISTON S.P.A. REGGIO EMILA, ITALY DDI PERFORMANCE MOTORSPORTS
Manufacturer of cast aluminum pistons.
15-SEP ASSET NATIONAL COOLER CORPORATION SAN DIMAS, CA DDI HILL PHOENIX
Manufacturers of walk-in coolers, freezers and cold
storage doors.
26-SEP STOCK PULLMASTER WINCH SURREY, VANCOUVER DRI TULSA WINCH
Manufacturer of hydraulic planetary winches ranging
from 1,000 to 50,000 pounds linepull.
</TABLE>
The profit impact in 2000, of these acquisitions, will be small due to
acquisition write-offs, and imputed financing costs. Acquisitions completed in
the last twelve months (11/1/99 - 9/30/00) added $101 million in sales and $15
million in operational profit in the third quarter.
(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:
The company earned $.67 per diluted share in the third quarter ended September
30, 2000, excluding two non-recurring items. This was an increase of 26% from
the $.53 per diluted share earned in the comparable quarter last year, excluding
non-recurring items.
After taking into account a $.04 gain on the sale of 43% of an equity investment
and a non-recurring charge to discontinued operations of $ .07 per diluted
share, the Company earned $.64 per diluted share outstanding. The $.07 per
diluted share charge ($13.6 million after tax) is a result of finalizing the
purchase price adjustment on the sale of the Dover Elevator International
segment in January 1999 (which generated a $524 million after-tax or $2.49 per
diluted share gain in that quarter).
Operating income for the third quarter was $265.3 million, up 27% from $208.9
million last year. Net income from continuing operations for the third quarter
was $135.5 million, up 23% from $110.4 million in net income from continuing
operations last year, excluding the $ 8.9 million after tax gain on the equity
investment sale this year, and the $11.1 million after-tax ( or $.05 per share)
non-recurring gain last year. Sales in the quarter were a record $1.39 billion,
up 21% from $1.15 billion last year.
The Company completed six add-on acquisitions during the quarter at a combined
investment of $91 million, bringing the total for the year to 18 acquisitions
for a total investment of $333 million. The profit impact of these acquisitions
in 2000 will be small due to acquisition write-offs, and imputed financing
<PAGE> 13
costs. Acquisitions completed in the last twelve months added $101 million in
sales and $15 million in operating profit in the third quarter.
The Company also reports its pretax earnings on an EBITACQ basis (Earnings
Before Interest, Taxes, and non-cash charges arising from purchase accounting
for acquisitions). Third quarter EBITACQ of $252 million was 28% higher than
prior year. Of this, about 8 percentage points reflect acquisitions and 20
percentage points reflect the growth of existing companies (notably
electronics).
In 1997, Dover Technologies made a small investment in Bookham Technology PLC
for strategic business reasons. Bookham (BKHM: NASDAQ) went public in April of
this year. During the second quarter, Dover participated in a secondary
offering, and the resultant sale of 313,043 Bookham shares resulted in a gain of
$13.7 million, or $8.9 million after tax. To reflect it's remaining investment
of 406,957 shares, Dover will report as part of its Statement of Comprehensive
Income a year-to-date Unrealized Gain of $ 10.5 million after tax.
This strong performance was led by Dover Technologies, where income increased
57% from the third quarter last year. Dover Resources and Dover Industries
earnings were also up, by 18% and 8%, respectively, while Dover Diversified
experienced a 2% earnings decline.
DOVER TECHNOLOGIES:
Sales in the third quarter increased 41% to $565.0 million, from $400.3 million
last year, and segment profit increased 57% to $116.0 million, from $74.0
million last year. Segment bookings at $591.9 million were 5% greater than
shipments.
Technologies' Specialty Electronic Components (SEC) business has increased
production dramatically in response to continued very strong demand from the
data transmission, telecommunications, and networking markets it serves. This
business, which supplies high-value components, precision devices, and
multifunction integrated assemblies to OEM customers in these markets, is
expanding capacity to address expected continued growth opportunities. SEC's
sales in the quarter were $147.5 million, up 75% from the prior period, profits
more than doubled to $29.6 million, and bookings were up 122% to $204 million,
another new record. The quarter's book-to-bill ratio was 1.39 and the year-to
date book-to-bill is 1.5.
Technologies' Circuit Board Assembly and Test (CBAT) sales were up 38% to $ 366
million from last year, bookings were up 23% to $338 million, and earnings were
up 57% to $80.5 million. These results represent the sixth quarter in a row that
CBAT has shown improvement from the prior year's comparable quarter, and the
seventh in a string of quarter-to quarter improvements. Sales have increased
110% and earnings 400% since the cyclical trough in this market in the first
quarter of 1999. Operating margins in the quarter increased to 22%. The book-to
bill ratio in the quarter slipped to .92, and was slightly lower at the largest
CBAT company, Universal Instruments. Underlying demand for electronics
(especially in the telecommunications industry), and thus demand for CBAT's
production equipment for high volume electronics manufacturing, is expected to
continue to grow. However, it appears that some customers are experiencing
difficulty in managing the rate of their recent capacity expansions, and some
have reported components shortages which have also dampened their enthusiasm for
adding production capacity at the recent pace.
Dover believes that while both of these Technologies businesses are affected by
the electronics manufacturing market, the SEC business will experience less
variability in sales and earnings than the CBAT business, which is more
dependent on its customers' capital absorption capacity.
Technologies' industrial marking business, Imaje, also continued its steady
growth, with earnings up over 18% on a 15% sales increase, as measured in French
Francs.
<PAGE> 14
DOVER INDUSTRIES:
Sales in the third quarter increased 8% to $314.0 million from $291.9 million
last year, and segment earnings also increased 8% from $45.1 million to $48.8
million. Acquisitions made in the last year contributed all of the sales and
earnings increase. Segment bookings in the quarter were up 7% to $309 million
and the book-to-bill ratio was 0.99.
Sales at Heil Environmental, Industries' largest company, were up, with
excellent operating leverage, partly due to shipments on a large contract with
New York City. However, sales and earnings declines at Heil Trailer, the liquid
and dry bulk tank trailer company, more than offset these results, with
continued comparative weakness in its markets, particularly in dry bulk.
Industries' automotive service equipment businesses, Rotary Lift and Chief,
again turned in very favorable comparisons to the prior year. PDQ, the
manufacturer of touch-less car wash systems, whose comparisons had suffered in
the second quarter from the adverse impact of new product introductions on
existing product sales, strongly contributed to the prior year comparisons this
quarter.
TipperTie/Technopack, while solidly profitable and generating high returns, hurt
the quarterly comparisons and is focused on cost reductions, as well as product
line and marketing organization rationalization.
The food service equipment businesses, Groen and Randell, both showed
double-digit earnings increases on essentially flat sales in a very competitive
market.
DOVER DIVERSIFIED:
Sales in the third quarter increased 7% to $286.8 million from $268.3 million
last year, and segment income declined 2% to $39.3 million from $40.1 million.
Segment bookings in the quarter were up 22% to $289 million and the book-to-
bill was 1.01. Acquisitions in the last year, particularly Crenlo, were
meaningful contributors to both sales and earnings.
Hill Phoenix, the refrigeration systems and display case company, and
Diversified's largest sales and second largest profit business, has experienced
double-digit sales declines and margin erosion as capital spending in the
supermarket and retail grocery industry has slowed due to industry
consolidation, and as some key accounts have slowed store expansions.
AC Compressor, serving the process industries, is a long lead-time business.
While results were comparable to last year-to-date and though prospects of a
stronger market are evident, experienced a weaker quarter due to weak bookings
earlier in the year. Sargent's results, in its Aerospace components business,
have felt the effect of lower OEM airframe and aftermarket overhaul demand.
Partially offsetting these negatives, Tranter, Diversified's most profitable
company, had improved margins on modest sales growth for both the quarter and
year to date. And as in prior quarters this year, the turnaround at Belvac from
marginal profitability last year to high margins this year, has been a major
contributor to Diversified's comparisons.
DOVER RESOURCES:
Sales in the third quarter increased to $226.3 million from $191.4 million last
year, or 18%, and segment income also increased 18%, from $24.7 million to $29.0
million. Segment bookings in the quarter were up 9% to $217 million and the
book-to-bill ratio was 0.96.
The oil production equipment company, Petroleum Equipment Group, is operating at
record levels. C. Lee Cook, influenced by the gas gathering and transmission
markets, is also sharply up from last year. Quartzdyne is now benefiting from
increased drilling activity in the "measurement while drilling" market.
OPW Fueling Components' sales improvement over the prior year's third quarter
and the second quarter of this year reached low double digits, with substantial
earnings leverage. OPW Fluid Transfer Group is well ahead of last year's
restructuring and strike-impacted performance. Tulsa Winch reported strong
results due to both internal growth and acquisitions. Companies serving the
process industries (Wilden, Blackmer, Ronninger - Petter) have faced an
unsettled market this year, and were up 16% in sales but down 6% in earnings
compared to the prior period.
<PAGE> 15
OUTLOOK:
At the end of the second quarter we said we were on a track that could lead to a
full year earnings per share gain of as much as 35%. Although the CBAT
businesses' series of sequential quarter improvements may well be broken in the
fourth quarter, with the strength in the SEC businesses, and strong prospects
for improvement from the third quarter at several of the Companies in the other
Subsidiaries, we still believe that is possible.
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 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.
<PAGE> 16
PART II OTHER INFORMATION
Item 5. Other Information
The Company amended Article IV, Paragraph 1 of its By-Laws, regarding the titles
and election of officers.
The Company included this table in its third quarter press release. See also
1999 Annual Report page 4.
DOVER CORPORATION
OPERATIONAL PROFITS(1)
(in millions)
<TABLE>
<CAPTION>
2000 - NINE MONTHS 1999 - NINE MONTHS 1999 - FULL YEAR
------------------------ ------------------------ ----------------------
SALES EARNINGS % SALES EARNINGS % SALES EARNINGS %
------ -------- --- ------ -------- --- ------ -------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Circuit board assembly/test.................... $1,037 $216 21 $ 647 $ 96 15 $ 934 $154 16
Electronic components.......................... 372 71 19 235 35 15 328 48 15
Marking........................................ 151 48 32 142 42 30 196 59 30
------ -------- --- ------ -------- --- ------ -------- ---
Dover Technologies............................... 1,560 335 21 1,024 173 17 1,458 261 18
Dover Industries................................. 939 169 18 844 149 18 1,145 203 18
Dover Diversified................................ 867 138 16 760 119 16 1,072 177 17
Dover Resources.................................. 662 117 18 575 91 16 778 128 16
------ -------- --- ------ -------- --- ------ -------- ---
Operational subtotal (after elim.)(1)............ $4,021 759 19 $3,198 532 17 $4,446 769 17
====== ======== === ====== ======== === ====== ======== ===
Corporates and other............................. (37) (29) (44)
-------- -------- --------
EBITACQ(2)....................................... 722 503 725
Gain (loss) on dispositions &
Sale of equity securities...................... 12 17 10
Interest......................................... (63) (22) (35)
Acquisition Write-offs........................... (69) (62) (85)
-------- -------- --------
Dover Pre-tax income............................. $602 $436 $615
======== ======== ========
</TABLE>
(1) Differs from segment operating profits in that all non-cash write-offs
relating to acquisitions are excluded, along with the expenses of each
segment's corporate group.
(2) Earnings before taxes, interest, acquisition write-offs and non-recurring
gains.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits for this quarter.
(3.ii) By-Laws
(27) Financial Data Schedule. (EDGAR filing only)
(b) No reports on Form 8-K were filed this quarter.
<PAGE> 17
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: October 18, 2000 /s/ David S. Smith
---------------- ----------------------------------------
David S. Smith, Chief Financial Officer,
Vice President, Finance
Date: October 18, 2000 /s/ George F. Meserole
---------------- ----------------------------------------
George F. Meserole, Chief Accounting
Officer, Vice President and Controller
