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[LOGO]
Dover Corporation
1999
Annual
Report
[GRAPHICS OMITTED]
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Dover's business goal is to be the leader in all the markets we serve. We earn
that status by applying a simple philosophy to the management of our businesses.
This requires us to:
o Perceive our customers' real needs for products and support.
o Provide better products and services than the competition.
o Invest to maintain our competitive edge.
o Ask our customers to pay a fair price for extra value we add.
Service to our customers, product quality, innovation and a long-term
orientation are implicit in this credo. Pursuit of this market leadership
philosophy by all our businesses, plus... value oriented acquisitions of
companies that share this philosophy, plus... a decentralized management style
that gives the greatest scope to the talented people who manage these
companies... have combined to produce results featuring:
o Long-term earnings growth
o High cash flow
o Superior returns on stockholders' equity
Table of Contents
1 Comparative Highlights
2 To Our Stockholders
8 Dover Technologies
11 Dover Industries
14 Dover Diversified
17 Dover Resources
20 Financial Statements
24 Notes to Consolidated Financial Statements
32 Independent Accountants' Report
32 Quarterly Data -- Common Stock
Cash Dividends and Market Prices
33 Management's Discussion and Analysis of
Financial Condition and Results of Operations
35 Directors and Officers
36 11-Year Consolidated Summary
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Dover Corporation and Subsidiaries
1999 Comparative Highlights(1)
<TABLE>
<CAPTION>
Increase 1999
(Dollars and shares in thousands except per share figures) 1999 1998 1997 versus 1998
====================================================================================================================
<S> <C> <C> <C> <C>
Net sales $4,446,420 $3,977,666 $3,669,568 12%
Earnings before taxes $ 615,004 $ 488,646 $ 492,274 26%
Net earnings $ 405,054 $ 326,397 $ 324,914 24%
Per common share
Net earnings per diluted share:
Continuing(2) $ 1.90 $ 1.45 $ 1.43 31%
Net earnings(3) $ 4.41 $ 1.69 $ 1.79 161%
Dividends $ .44 $ .40 $ .36 10%
Capital expenditures $ 130,112 $ 125,730 $ 122,082
Acquisitions(4) $ 599,171 $ 556,019 $ 261,460
Purchase of treasury stock $ 671,670 $ 106,304 $ 86,267
Cash flow(5) $ 588,298 $ 494,084 $ 480,118
Return on average equity(2) 21.7% 20.5% 23.2%
Approximate number of stockholders 16,000 16,000 16,000
Number of employees 26,584 23,314 21,814
====================================================================================================================
</TABLE>
(1) Represents results from continuing operations; excludes disposition of
Dover Elevator International market segment. See Notes to Consolidated
Financial Statements, Note 2.
(2) 1999 "Return on average equity" and continuing net earnings per diluted
common share excludes gain from sale of businesses which amounted to $.02
per share.
(3) 1999 Net earnings per diluted common share includes the gain from sale of
Dover Elevator International market segment which amounted to $2.49 per
share and the $.02 gain from sale of businesses.
(4) See Notes to Consolidated Financial Statements.
(5) Represents net earnings plus depreciation and amortization.
Earnings Per Share Growth (average annual rate) Total Return To Investors
For 10-Year Periods
*Excluding gains on sale of Ending 12/31 of each
businesses in 1999 and 1996. year shown
[BAR GRAPH OMITTED]
Year Dover S & P 500 Year Dover S & P 500
- ---- ----- --------- ----- ----- ---------
1990 0.13 0.14 1990 0.099 0.035
91 0.13 0.17 91 0.051 0
92 0.15 0.16 92 0.061 0.04
93 0.18 0.15 93 0.098 0.045
94 0.15 0.14 94 0.097 0.065
95 0.16 0.15 95 0.133 0.090
96 0.18 0.15 96 0.172 0.099
97 0.18 0.18 97 0.152 0.091
98 0.19 0.19 98 0.119 0.065
99 0.19 0.18 99 0.128 0.070
** Dover * S&P
1
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To Our Stockholders
IN LAST YEAR'S ANNUAL REPORT I SAID THAT DOVER'S MANAGEMENT WOULD BE
DISAPPOINTED IF EARNINGS PER SHARE DID NOT GROW BY AT LEAST 15% FROM THE 1998
LEVEL OF $1.45. THE RECOVERY IN THE CIRCUIT BOARD ASSEMBLY AND TEST (CBAT)
MARKET ARRIVED SOONER AND STRONGER THAN WE HAD HOPED AND WE ENDED UP VERY
HAPPILY WITH EPS (BEFORE SPECIAL ITEMS AND NON-RECURRING INCOME) OF $1.90 -- AN
INCREASE OF 31%.
Fundamentally, the year-over-year earnings improvement came from three sources:
(1) the dramatic gains by our electronics industry businesses (CBAT and
Specialty Electronic Components); (2) the earnings benefit from reinvesting the
$1.16 billion we received from the January, 1999 sale of the Elevator business
($.24 per share earned by Elevator operations in 1998 is not included in the
$1.45 mentioned above); and (3) a modest net improvement by our commercial and
industrial businesses (Resources, Industries, Diversified and Imaje) following
their large gains in 1998.
The strong year resulted in an EPS growth rate for the period 1990-1999 of
13% (including elevator earnings in the base year), which is about what Dover
has achieved since 1955. Our EPS growth rate slipped in the 1980s to 10%. The
1990-1999 EPS growth from continuing operations, excluding elevator in 1990 and
its $.23 per share "contribution" to 1999 (described below), has been 18%. Your
management is especially pleased with this recovery in the 1990s, which has been
a particular goal of ours since 1990 under a program we have described as "tilt
toward growth."
REINVESTMENT OF ELEVATOR PROCEEDS
We used the $1.16 billion from the sale of our Elevator business to reduce our
share base via stock repurchases and to lower our interest costs by reducing the
need for outside financing to fund our acquisition program. The reduction in
interest expense, coupled with the lower number of average shares outstanding,
contributed $.23 per share to our reported $1.90.
While this is less than the $.24 per share provided by Elevator operations
in 1998, it was a better short-term result than we had expected, having
anticipated that two, or even three, years might be needed to reinvest this
capital productively. I believe we met the test for acquisitions and share
repurchases that I set forth in last year's report: "We are committed only to
not spending any of your money on questionable investments, just because we have
it."
[BAR GRAPHS OMITTED]
DILUTED EARNINGS PER SHARE
*Excluding gains on sale of businesses in 1999 and 1996.
Year EPS
---- ---
94 $0.78
95 $1.13
96 $1.24
97 $1.43
98 $1.45
99 $1.90
EARNINGS BEFORE INTEREST, TAXES AND
WRITE-OFFS PER DILUTED SHARE
*Excluding gains on sale of businesses in 1999 and 1996.
(Write-offs are costs relating to premium over book paid
for acquisitions.)
After-Tax Operating Return
Year On Investment Return on Stockholder's Equity
- ---- -------------------------- ------------------------------
94 33 24
95 37 28
96 36 25
97 39 23
98 35 20
99 37 21
PROFITABILITY MEASURES (in percent)
*Excluding gains on sale of businesses in 1999 and 1996.
(Acquisition adjustments have been excluded,
see page 30, footnote 12 for explanation.)
DTI Segment Earnings
Year Data(Earnings)
---- --------------
05 134
96 146
97 195
98 147
99 227
After-Tax Operating Return On Investment
Return on Stockholder's Equity
2
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[PHOTO OMITTED]
(left to right)
John McNiff, Robert Tyre, Robert Kuhbach
(seated)
Tom Reece
ELECTRONICS INDUSTRY RECOVERY
The electronics industry is a cyclical market, particularly for the companies
within it that supply capital equipment. Dover is not embarrassed to be part of
the multitude of industry participants, forecasters and "sages" who consistently
have been unable to identify (accurately and well in advance) the points in time
at which cyclical trends reverse. Dover's largest company participating in this
industry -- Universal Instruments -- has seen its own operating level both rise
and fall sharply within short periods. Universal's order pattern during 1996-99
illustrates this point quite well. Taking 1996 as a baseline (i.e., index at
100%), monthly orders accelerated to 130% during the first 10 months of 1997,
suddenly retreated to less than 100% for the next 19 months, then accelerated
again in June, 1999 to 150% during the last seven months of the year.
Universal's monthly sales and profits in the second half of 1999 moved higher
than they had been during their previous peak in 1997. Universal's management
team has proven very adept at dealing with these market swings, never having
earned less than a 10% margin during the 20 years of Dover ownership, and being
able to retain and nurture its key technical, product development, marketing,
field support, manufacturing, and supply chain management capabilities during
the down cycles. On an apples-to-apples basis, Universal's internal growth has
averaged more than 12% per year for the past two decades, with sufficient
profitability to be a strong generator of free cash flow as well.
GROWTH IN INDUSTRIAL AND COMMERCIAL MARKETS
The table on Page 4 indicates modest earnings growth of 5% for the companies
that are organizationally grouped as the Industries, Diversified and Resources
segments (including Imaje, which is organizationally part of the Technologies
segment).
Individually, these companies faced widely disparate market conditions,
with strong internal growth at companies such as Heil Environmental, Hill
Phoenix, PDQ, Texas Hydraulics, Waukesha Bearings and Hydro Systems. Other
companies faced depressed markets: Duncan Parking Systems, Ronningen-Petter, OPW
Fluid Transfer, OPW Fueling Components, A-C Compressor and Belvac. Within the
Petroleum Equipment Group, business went from famine, during the early part of
the year, to feast in the latter part of the year, completing a traumatic cycle
that began with the collapse of oil prices in early 1998.
3
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Growth is more fun to manage than decline, but Dover's experience has been that
our niche leadership companies are better positioned than their competitors to
respond intelligently to downturns, and tend to emerge from these in an even
stronger competitive position.
The modest 1999 gain in industrial/commercial profits followed large gains
in 1997 and 1998. We have continued to invest heavily in this type of business,
spending $504 million of our record 1999 acquisition investment in these areas.
Our ability to find, evaluate, provide a good home for, and stimulate the
management of manufacturing companies with market niche leadership is a core
Dover competency that has underpinned Dover's long-term success record.
Dover Corporation and Subsidiaries
Operational Profits
<TABLE>
<CAPTION>
(unaudited) (in millions) 1999 1998 1997
===================================== ========================= ========================= =========================
Sales Income % Sales Income % Sales Income %
====== ====== ====== ====== ====== ====== ====== ====== ======
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Circuit board assembly/test $ 934 $ 154 16 $ 745 $ 90 12 $ 852 $ 147 17
Electronic components 328 48 15 282 31 11 272 39 14
Marking 196 59 30 184 57 31 177 57 32
------ ------ ------ ------ ------ ------ ------ ------ ------
Technologies 1,458 261 18 1,211 178 15 1,301 243 19
Industries 1,145 203 18 1,012 173 17 860 145 17
Diversified 1,072 177 17 958 164 17 767 123 16
Resources 778 128 16 801 144 18 745 130 17
------ ------ ------ ------ ------ ------ ------ ------ ------
Operational subtotal (after elim.)(1) $4,446 769 17 $3,978 659 17 $3,670 641 17
====== ====== ====== ====== ====== ====== ====== ====== ======
Corporate and other (44) (40) (30)
------ ------ ------
EBITACQ(2) 725 619 611
Gain on dispositions 10 -- --
Interest (35) (57) (36)
Acquisition write-offs (85) (73) (83)
------ ------ ------
Dover pretax income $ 615 $ 489 $ 492
=========================================================================================================================
</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.
ACQUISITIONS
During 1999 we completed 18 acquisitions, of which three were stand-alone, niche
leadership companies, and 15 were targeted add-ons to existing Dover companies.
Each of the acquired companies is discussed in the sections of this report
dealing with our four business segments. The $599 million we invested was split
quite evenly, with about $300 million paid for stand-alone companies (Crenlo,
Somero and Graphic Microsystems), and a similar amount for add-ons (of which
Alphasem, J. E. Piston, Dp Winch, Hydra-Tight and Van Dam were the largest).
Profits from these acquisitions are reported under "purchase" accounting
rules, which require amortization of the premium Dover paid above the seller's
historical book value. Including this non-cash "cost" and the interest expense
to finance the purchase price, the program added $.03 to earnings per share. The
companies acquired added $239 million to sales and $44 million to operational
profits (as defined in the table above). Most of these companies are included
for only a portion of the 1999 calendar year, and our expectation is that the
sales and operational profit effects will approximately double in 2000, creating
a larger contribution to EPS.
The non-cash write-off on all Dover acquisitions, made in 1999 and prior
years, amounted to $.29 per share in 1999, compared to $.23 in 1998 and $.26 in
1997. We have been reporting these numbers for some years now because many
investors think them relevant. All companies will be required to do similarly in
the future, if FASB proposals on eliminating "poolings" accounting survive in
their present form.
4
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NEW DOVER -- OLD DOVER
Your management team is pleased that we have been able to accelerate Dover's
growth rate in the 10 years just ended. However, this is old news for today's
shareholders, who properly are looking to the future. In this respect, a
comparison of where we were in 1989 to where we are at the end of 1999 shows
some important changes. A few relevant figures are presented below.
Dover Corporation and Subsidiaries
Ten Years Of Change
<TABLE>
<CAPTION>
1999 1989 Change
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
EBITACQ(1) $ 725m $ 275m +163%
Shares at year-end 203m 249m -18%
EBITACQ as % of sales 16.3% 12.9% +26%
EBITACQ per share $ 3.58 $ 1.09 +228%
Sales per share:
Elevator -- $ 3.03
Electronics $ 6.25 $ 1.77
Industrial/commercial $15.75 $ 3.58
------ ------
Total $22.00 $ 8.38 +163%
EBITACQ coverage of interest(2) 14X 14X
- --------------------------------------------------------------------------------
</TABLE>
(1) Earnings before interest, taxes and acquisition write-offs.
(2) Interest at annual rate of fourth quarter.
The numbers for 1989 were good, but for 1999 were better, and would be
better still if the pro forma full-year effect of 1999 acquisitions were
included. (In 1989, Dover did not make any acquisitions.)
In my view, the most important structural changes over the decade are the
increase of our involvement in the electronics industry (a high-growth area),
the termination of our participation in the elevator industry (a no-growth
business in its primarily North American market), and the expansion of higher
growth potential industrial/commercial activities. Also significant is the 26%
improvement in the profit margins of our continuing businesses, which has
increased our potential for free cash flow generation in relation to sales.
Faster growing markets and more internally generated cash to reinvest will help
us maintain growth at least in line with past achievements.
These improvements, however, do not reflect any fundamental change in our
business strategies or culture. Dover will continue to support the independence
and growth of our existing companies and will continue to invest free cash flow,
as well as our growing borrowing capacity, in good acquisitions and in timely
repurchase of our own common stock. The goals and methods that we show on the
inside cover of our annual report have served us well for many years and remain
unchanged.
SEGMENT RESULTS
Each of our four business segments is discussed on Pages 8-19 of this report.
Profit results are presented within this report in two fashions. One method is
that shown in the table on Page 4. The other is the traditional (and required)
format shown on Page 20. These are the same numbers, but the Page 4 presentation
shows all acquisition premium write-offs as a separate item, and shows the
management costs of our four Independent Subsidiaries (Segments) as "corporate
cost." The presentation on Page 20 allocates these costs back to the four
individual market segments.
It is impossible to capture a company's financial progress in a single
number, but the one that management feels is most relevant in Dover's
circumstances is the trend (shown above, in the table on Page 4, and in the
chart on page 2) of Earnings before interest, taxes and acquisition write-offs
(EBITACQ) per actual share outstanding at year-end. Internal business growth,
successful acquisition investments, timely share repurchases, and effective use
of the increased debt capacity created by rising cash earnings all become
reflected in this measure over time.
5
<PAGE> 8
TECHNOLOGIES
The electronics industry portions of this segment showed very strong gains (67%
combined for the eight companies involved), compared to what, with 20-20
hindsight, appears to have been a bottom-of-the-cycle year in 1998. Obviously,
long-term growth at these percentage rates is not possible and, in fact, it
remains to be seen whether the profit levels achieved in the latter part of 1999
can be continued throughout all of 2000. We would still be happy with less
growth than the 35% that is implied by "continued." All but one of the
electronics companies achieved excellent profit growth, largely from market
recovery, but also from new product introductions and improved internal
operations. Imaje continued to achieve outstanding profitability with good
growth, partly masked by the decline in value of the Euro.
INDUSTRIES
Dover Industries' strong year reflected both above-trend internal growth and the
favorable impact of acquisitions. Most of Industries' companies produce
commercial products rather than equipment used in industrial production
processes. Automotive service equipment, solid waste handling equipment, and
construction-related products, including newly acquired Somero, enjoyed strong
markets, as nine of Industries' 12 companies achieved record profits.
Particularly noteworthy were the dramatic gains in sales, earnings and backlog
at Heil Environmental that made it the star performer of 1999, as well as very
effective internal profit growth initiatives at Rotary Lift and Texas
Hydraulics. Heil Trailer, which was the star in 1998, matched its record profit
levels despite softness in its marketplace, and has, we believe, positioned
itself for a resumption of growth in 2000.
DIVERSIFIED
Dover Diversified also achieved higher earnings, but with much more mixed
outcomes on an individual company basis and with most of its overall earnings
growth resulting from new acquisitions. Only six of Diversified's 13 companies
achieved internal profit growth, and their improvements were offset by a
significant decline at Belvac. Aluminum can-makers continued to postpone
investments in new equipment, which required a restructuring of Belvac's
activities in the third quarter. A-C Compressor and Tranter also experienced
declines in income -- the former as expected, based on its opening backlog, and
the latter as a consequence of weaker-than-anticipated industrial process
equipment markets. Hill Phoenix extended its profit records and is now beginning
to fulfill the vision of Grant Brown. Mr. Brown died tragically in an airplane
accident in 1995, shortly after leading the merger of the industry's
best-performing refrigeration company (which he founded) with a well known, but
poorly performing, display case company. The new enterprise, under the
leadership of Ralph Coppola and Randy Frederick, has grown to more than $250
million in sales.
RESOURCES
Profits at Dover Resources dropped 14%, despite the inclusion of a full year's
results from Wilden Pump and the contribution of several other acquisitions made
in 1998 and 1999. All but a few of Resources' companies faced weak markets as a
result of the downturn in energy prices in 1998 and of reduced investment by
petroleum and chemical processors and transporters, who are key customers for
many of Resources' companies. Additionally, two of Resources' smaller companies
- -- Duncan Parking Systems and Ronningen-Petter -- experienced extremely weak
markets after record performances in 1998. As the year ended, conditions
appeared to be improving for Resources, with strong profit improvement in
petroleum production equipment and modest gains for pumps and industrial
automation equipment.
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MANAGEMENT CHANGES
Pictured in this year's report are the subsidiary management teams and company
presidents who are the key resources for our continued success. Dover
shareholders are entering the 21st Century with a terrific group of company
presidents, to which retirement, promotion and business change added some new
faces during 1999. We appointed seven new company presidents -- five from within
Dover -- and acquired two more in stand-alone acquisitions. Nigel Davis, a
longtime Dover manager, became President of Imaje and Ian McEvoy became Managing
Director of DEK Printing Machines after serving in senior management roles at
Universal and DEK. John Knowles will remain Chairman of DEK, but is retiring
from day-to-day activity after 17 years as a Dover president, during which
period DEK's sales grew 20-fold. Randy Frederick, formerly General Manager of
the Hill Phoenix Refrigeration division, became President of newly acquired
Crenlo. We were also pleased to promote Jeroen Schmits as President of Vitronics
Soltec and Robert Wiggins as President of Quartzdyne. We recruited Lou Abbagnaro
to join us as President of K&L Microwave and Rick Potter as President of
Civacon/Knappco. And we welcome on board the ongoing presidents of our other two
stand-alone acquisitions, Jack Cooney at Somero and Steve Runyon at Graphic
Microsystems.
Key staff management changes included John McNiff's decision to retire in
2000 after 17 years as our CFO, the appointment of Graeme McMahon as European
Development Director, and of Roland Parker as CFO of our Dover Diversified
subsidiary. Graeme has been a Dover employee for more than 10 years, serving
most recently at Dover Diversified in the CFO role. Roland, a Dover financial
executive for 14 years, served previously as controller of several of
Diversified's companies.
On the Dover Board of Directors, we were pleased to welcome three new
directors this year. Kristiane Graham, who started learning about Dover the
instant she was born, very ably continues the board membership continuity of the
Ohrstrom family into a third generation. Michael Stubbs is an investment
manager, major Dover shareholder and son of an original Dover director. Richard
Lockridge was a managing partner of Boston Consulting Group before starting his
own consulting business. I believe that shareholders are best served by a board
whose members both know about business and also have a major financial stake in
Dover's future. At year-end, the senior management group and outside directors
collectively owned, or have an interest in, almost 20 million Dover shares --
which insures that successes, and shortcomings, get plenty of attention.
OUTLOOK
We enter 2000 with strong business momentum and with no sign that any of our
important markets are about to decline. In the Resources, Diversified and
Industries segments, we are expecting strong earnings growth in 2000, reflecting
the full-year effect of 1999 acquisitions and some recovery in demand for
industrial production and petrochemical industry equipment. In the Technologies
segment, we are confident of an improvement in full-year profits but are unable
to express a reliable judgment as to "by how much."
On a non-operational note, our 2000 results will include a significant
increase in interest expense that will be offset by a further decline in average
shares outstanding. Earnings per share in 1999 were computed on the basis of 211
million average diluted shares, while we ended the year with 203 million fully
diluted shares actually outstanding. We anticipate strong quarter-over-quarter
gains in the early part of 2000. A continuation of our present operating rates
in electronics would lead to earnings per share growth above the 20% "best
guess" we made when reporting 1999 results in January. But guesses and hopes
must face the test of achievement, which is not assured.
All in all, 1999 was a wonderful year for Dover. I am optimistic about
2000 as well.
Thomas L. Reece
/s/ Thomas L. Reece
Chairman and Chief Executive Officer
February 18, 2000
7
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DOVER TECHNOLOGIES
[GRAPHICS OMITTED]
A SECOND-HALF RECOVERY IN THE ELECTRONICS INDUSTRY FUELED A 55% GAIN IN SEGMENT
EARNINGS ON A 20% SALES IMPROVEMENT. OPERATIONAL PROFITS (SEE PAGE 4) ROSE FROM
$178 MILLION TO $261 MILLION, WITH ALL THREE AREAS -- (CIRCUIT BOARD ASSEMBLY
AND TEST (CBAT), SPECIALTY ELECTRONIC COMPONENTS (SEC), AND MARKING -- SETTING
RECORDS. EARNINGS MARGINS IMPROVED, AND AFTER-TAX OPERATING RETURN ON INVESTMENT
ROSE SHARPLY TO 40%, A FEW POINTS HIGHER THAN THE DOVER CORPORATION'S AVERAGE OF
37%.
Both CBAT and SEC more than recovered the earnings ground lost to the 1998
downturn. CBAT's operational profits of $154 million narrowly exceeded 1997's
record $147 million. SEC, at $48 million, was well above its previous record
result of $39 million in 1997.
CBAT: NOT A YEAR BUT TWO HALF-YEARS
The first half of 1999 saw a continuation of the low activity levels experienced
in 1998. Orders turned sharply upward beginning in June, and then set a
six-month record in the second half. In the second half of 1999, CBAT earned
substantially more than in any prior six-month period, 20% ahead of its previous
six best consecutive months (achieved in the record 1997 calendar year).
Universal, which is the largest of the four CBAT companies, experienced a
huge change in operating rates between the first and second halves. The response
of its supply chain, manufacturing, sales engineering and field support
organizations in this rapidly changing environment was excellent. Universal's
new FlexJet surface mount assembly machine was "best-in-class" for flexible,
fine pitch assembly applications and helped Universal increase its leadership
position in this segment of its market. However, the FlexJet only narrowly
expanded Universal's competitive capabilities within the high-speed chip
placement market. Universal will continue its efforts to improve the placement
speed of its "platform" machines to increase their usage in high-speed assembly
applications.
Universal continued to position itself at the "leading edge" for assembly
of new electronic packages. The acquisition of Alphasem at the beginning of 1999
proved timely and technologically rewarding. Universal and Alphasem are both
well recognized for production equipment used in
[PHOTO OMITTED]
"Our companies combine technical excellence with responsiveness to customer
needs. Keeping this in focus, throughout the up/down market cycles inherent in
our industry, is fundamental to successful growth. The record profits in the
second half of the year were "really" earned by doing the right things in the
1998-1999 downturn."
John Pomeroy
President & CEO
<PAGE> 11
SEGMENT EARNINGS ($ millions) AFTER-Tax OPERATING RETURN
ON INVESTMENT (%)*
*(Acquisition adjustments have been
exclued, see page 30, footnote 12 for
explanation.)
[GRAPHS OMITTED]
DTI Segment Earnings DTI After-Tax Operating ROI
Year Data(Earnings) Year Data(Percent)
---- -------------- ---- --------------
95 118 95 44%
96 116 96 43%
97 129 97 47%
98 155 98 31%
99 180 99 40%
(standing, left to right)
Barry Hegarty, Dave Van Loan,
Jeroen Schmits, Peter Marshall,
Terry Ede, Nigel Davis,
Lou Abbagnaro, Gerhard Meese,
Ian McEvoy
(seated, left to right)
John Pomeroy, Andre Galliath,
Bob Livingston
[PHOTO OMITTED]
9
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Dover Technologies
3 Universal Instruments Corporation*
Gerhard D. Meese, President
Products: Automated assembly equipment for printed circuit boards and
semiconductors
1 Everett Charles Technologies, Inc.*
David R. Van Loan, President
Products: Spring probes, test equipment, test fixtures for printed circuit
boards and semiconductors
1 DEK Printing Machines, Ltd (U.K.)*
Ian P. McEvoy, Managing Director
Products: Screen printers for surface mount printed circuit boards and
semiconductors
2 Vitronics Soltec*
Jeroen Schmits, President
Products: Automated soldering equipment for printed circuit boards
2 Imaje, S.A.*
Nigel P. Davis, President
Products: continuous inkjet printers, consumables
1 Quadrant Technologies
Terence W. Ede, President
Vectron International, Inc.
Products: Precision crystal devices
Dielectric Laboratories, Inc.
Products: High frequency capacitors
Communication Techniques, Inc.
Products: Microwave frequency sources
1 K&L Microwave, Inc.
Lou Abbagnaro, President
Products: Microwave/R.F. filters; Dow-Key coaxial switches
Novacap, Inc.
Dr. Andre P. Galliath, President
Products: Multilayer ceramic capacitors
DT Magnetics
Wm. F. Barry Hegarty, President
Products: Ferrite transformers
Numbers indicate position in served market, North America, or worldwide when
noted by *.
the assembly of chip-on-board products, which is expanding both in the "back
end" of semiconductor production (Alphasem's focus) and in circuit board
assembly equipment for the on-board placement of advanced semiconductor packages
(the focus at Universal).
DEK Printing Machines had a record year, both for shipments and earnings,
and made important progress toward rationalizing its product range. This will
increase commonality of parts and the potential for quicker retrofit and will
shorten manufacturing cycle time and time-to-market for product improvements.
Vitronics Soltec also gained in its soldering equipment product line with record
earnings.
Everett Charles Technologies (ECT) also set an earnings record, enhanced
by the success of its aggressive add-on acquisition program. Its two German test
equipment companies and most recent U.S. fixtures acquisition were strong
performers. The U.S. test equipment market was slow in 1999, as the printed
circuit board fabricators tightened capital spending. This held back the scope
of ECT's gains, leaving further upside opportunity in 2000.
SPECIALTY ELECTRONIC COMPONENTS BENEFIT FROM WIRELESS AND DATA COMMUNICATIONS
From its origins as primarily an aerospace and defense electronics business, the
SEC group has evolved into a successful participant in products that serve the
much larger and faster-growing telecom and datacom markets. Its key product
lines of oscillators, filters, transformers and specialty capacitors are
integral to many wireless and hard-wired communications systems. Key customers
include Lucent, Motorola, Cisco and QualComm. Quadrant Technologies set sales
and earnings records by substantial margins as a result of strong demand for its
oscillators, which are used as timing devices in transmission and switching
equipment. Novacap's focus on highly engineered, high voltage ceramic capacitors
produced its fifth consecutive year of record sales and profits. Superior
customer service, product rationalization and cost improvements enabled DT
Magnetics to turn its 1998 loss into respectable profits. Similar programs have
been put in place at K&L Microwave and will help take this company beyond its
peak profit levels of 1997. All four SEC companies are targeting improvements
and growth in 2000, based upon the strength of their markets, increased product
development activity, and the further impact from profit improvement actions
taken in the latter part of 1998 and throughout 1999.
IMAJE GROWS
Although included in Dover Technologies for organizational and reporting
purposes, Imaje serves a non-electronic marketplace, producing printers and
specialty inks for high speed, small character marking by beer and soft drink
bottlers, pharmaceutical manufacturers, and food packagers. These end markets
for Imaje's established products have grown moderately over the past several
years. The focus of management is now changing from cost control/profit
improvement to new investment/growth initiatives.
OUTLOOK
Profit performance in 2000 will be strongly influenced by the direction of the
electronics industry, particularly as it affects the CBAT companies. Industry
forecasters are projecting further growth in 2000 and 2001. We hope they are
right. We remain confident that peak-to-peak and trough-to-trough, our CBAT
companies will continue to generate strong earnings growth.
10
<PAGE> 13
Dover Industries
[GRAPHICS OMITTED]
THE INDUSTRIES SEGMENT ACHIEVED RECORD PROFITS OF $180 MILLION, (UP 16%), WITH
THE MAJORITY OF THIS YEAR-OVER-YEAR GROWTH COMING FROM COMPANIES OWNED AT THE
START OF THE YEAR. HEIL ENVIRONMENTAL WAS THE STAR PERFORMER, AS A STRONG MARKET
AND IMPROVED MARKET SHARE RESULTED IN A GAIN OF MORE THAN 20% IN SALES AND AN
EVEN STRONGER GAIN IN PROFITS. MOST OF INDUSTRIES' 12 ONGOING COMPANIES ACHIEVED
HIGHER SALES, WITH ONLY THREE DECLINES, EACH LESS THAN 3%. OPERATIONAL PROFIT
MARGINS AND AFTER-TAX OPERATING RETURN ON INVESTMENT WERE EACH UP ONE POINT, TO
18% AND 39%, RESPECTIVELY.
FIVE COMPANIES EARN OVER $20 MILLION
The five largest earners in 1999 -- Heil Environmental, Heil Trailer, Rotary
Lift, Tipper Tie and DovaTech -- combined to earn 60% of Industries' $203
million of operational profits on a similar percentage of sales. Heil
Environmental became the fifth largest earner within Dover Corporation, setting
records for sales, earnings, margins and bookings. The decision by major waste
haulers to update their garbage truck fleets after several years of neglect, the
award of a delayed procurement contract by one major city, and the success of
Heil's efforts to expand its distribution capabilities were important factors
underpinning its 1999 gains. The manufacturing ramp-up required to meet customer
demand produced record shipments in the fourth quarter, up 34% from prior year.
However, bookings for the quarter of 1.4 times shipments suggest further
increases will be needed in 2000.
Heil Trailer, the star performer in 1998, matched its record profits, as
cost control and productivity improvement kept margins steady, despite a small
drop in sales. The company continued to increase its production capacity in the
U.S. and made further investments in wholly owned facilities in the U.K.,
Argentina and Thailand, from which it hopes to ship over $30 million of product
in 2000.
Rotary Lift set records for sales and profits, primarily through the
acquisition of the Advantage product line (parallelgram lifts) to expand its
heavy duty product range, and of Forward Manufacturing, whose proprietary
two-post lift design reaches end-users through a distinct and different
distribution channel. Rotary continued to reduce prices, thereby boosting sales
and market share, while improving capacity and productivity to achieve
corresponding decreases in unit cost.
[PHOTO OMITTED]
"Our companies continue to "Raise the Bar" for their own performance and for
customers' expectations through a focus on improved business processes, product
innovation, and intelligent pricing."
Lew Burns
President & CEO
11
<PAGE> 14
Dover Industries
1 Heil Trailer International
Robert A. Foster, President
Products: Liquid and dry bulk tank trailers, trucks and intermodal containers
1 HEIL Environmental
Glenn M. Chambers, President
Products: Refuse collection vehicles and dump bodies
1 Tipper Tie/Technopack
Philip L. Tribel, President
Products: Clip closures, packaging systems, netting, and wire products
1 Marathon Equipment
Edward A. Furnari, President
Products: Solid waste compactors, balers, and recycling equipment
1 Rotary Lift
Timothy J. Sandker, President
Products: Automotive lifts and alignment racks
2 DovaTech
A. Patrick Cunningham, President
Products: Welding, torches, laser power sources, chillers and consumables
1 PDQ
Charles R. Lieb, President
Products: Touchless car wash equipment
1 Texas Hydraulics
Vernon E. Pontes, President
Products: Engineered hydraulic cylinders
2 Randell
Lynn L. Bay, President
Products: Commercial refrigeration; Food service preparation and holding
equipment
1 Chief Automotive Systems
Daniel E. Faltin, President
Products: Auto collision measuring and repair systems
1 Groen
Thomas Phillips, Jr., President
Products: Commercial food service cooking equipment/industrial processing
equipment
1 Somero
John T. Cooney, President
Products: Laser controlled concrete floor spreading equipment
Numbers indicate position in served market, North America, or worldwide when
noted by *.
Tipper Tie's sales and earnings were essentially flat, as modest
improvements in the U.S. were offset by weakness in Europe. Purchases by
customers in East European countries and Russia declined and sales into the
former Yugoslavia declined even more. Reported profits were also adversely
affected by the decline of the Euro, relative to the dollar.
DovaTech's record sales and earnings resulted primarily from the full-year
effect of its 1998 acquisition of Koolant Koolers and part-year results from Lee
Laser, acquired in mid-1999. Growth in traditional MIG and TIG welding guns
proved elusive because of worldwide softness in markets for industrial
production equipment. DovaTech's substantially enhanced position in laser power
supplies and welding systems offers significant potential for growth over the
next several years.
IMPRESSIVE GROWTH AT FOUR COMPANIES
Texas Hydraulics achieved a 30% increase in earnings on only an 8% gain in
sales, primarily as a result of cost reduction and production-methods
rationalization. These improved margins to historical levels after a
disappointment in 1998. The company plans to increase its manufacturing capacity
and expand its product range in 2000.
Marathon also benefited from the strong solid waste market, with
double-digit sales and earnings gains. Marathon has a broader customer base and
a less cyclical market than Heil Environmental, although the overall growth
drivers are similar -- ongoing increases in solid waste streams and the rising
cost of disposal.
PDQ completed its first full year as a Dover company in impressive
fashion, with double-digit gains in sales and earnings on top of its own
full-year 1998 record. PDQ's touchless car washing systems continued to be
best-in-class, with an increasing share of the U.S. car washing market.
Somero, acquired in mid-1999, improved its year-over-year financial
results by more than 20%. U.S. cement contractors are becoming increasingly
aware of the time, labor and material usage benefits of using Somero's
proprietary, laser-guided equipment. The penetration of the market by this
relatively new technology is still small, thus offering substantial opportunity
for continued growth.
MIXED RESULTS ELSEWHERE
Both Groen and Randell achieved higher sales and profits, with a combined income
gain of 11% on a smaller sales gain. The food equipment market has not been
particularly strong and has been roiled by mergers. Groen and Randell
concentrated on keeping their best-in-class status within their own product
niches and continued to offer superior quality, service and innovation to their
appreciative customers.
Chief Automotive had lower profits on flat sales. New computerized
measuring systems introduced late in the year were well received by the market
and offer a basis for financial improvement in 2000.
Davenport continued to suffer from a weak market and from difficulty in
developing new machine tool products. This company was sold in January, 2000.
OUTLOOK
All of the Dover Industries companies are planning profit gains in 2000 and most
are likely to achieve them. Operational profits of $203 million and segment
profits of $180 million should improve again in 2000, possibly by more than 10%.
12
<PAGE> 15
SEGMENT EARNINGS ($ millions) ATER-TAX OPERATING RETURN
ON INVESTMENT (%)*
*(Acquisition adjustments have been
exclued, see page 30, footnote 12 for
explanation.)
[GRAPHS OMITTED]
DII Segment Earnings DII After-Tax Operating ROI
Year Data(Earnings) Year Data(Percent)
---- -------------- --- --------------
95 118 95 40%
96 116 96 33%
97 129 97 34%
98 155 98 38%
99 180 99 39%
(seated, left to right)
Lewis E. Burns, Robert F. Scheuer,
Vernon E. Pontes, Glenn M. Chambers
(standing, left to right)
Edward A. Furnari, Lynn L. Bay,
Thomas Phillips, Jr., John T. Cooney,
Charles R. Lieb, Philip L. Tribel,
A. Patrick Cunningham,
Timothy J. Sandker, Robert A. Foster,
Daniel E. Faltin
[PHOTO OMITTED]
13
<PAGE> 16
Dover Diversified
[GRAPHICS OMITTED]
DOVER DIVERSIFIED ACHIEVED ITS EIGHTH STRAIGHT YEAR OF PROFIT INCREASES, AS
SEGMENT PROFITS ADVANCED 6% TO $152 MILLION AND SALES EXCEEDED $1 BILLION FOR
THE FIRST TIME. IN 1990, THESE FIGURES WERE $36 MILLION AND $210 MILLION,
RESPECTIVELY. THE SALES AND EARNINGS RECORDS FOR 1999 REFLECT THREE MAIN THEMES:
(1) SHARP DECLINES AT SEVERAL COMPANIES THAT MAKE CAPITAL EQUIPMENT USED IN
INDUSTRIAL PRODUCTION, (2) GOOD INTERNAL GROWTH IN SEVERAL NICHE MARKETS, (3)
THE FAVORABLE IMPACT OF DIVERSIFIED'S $327 MILLION OF ACQUISITION INVESTMENTS
DURING 1999.
DECLINES AT THREE COMPANIES
As anticipated at the beginning of the year, both A-C Compressor and Belvac
experienced declines in sales and profits. Bookings at A-C Compressor for its
oil-free and centrifugal gas compressors during 1998 had decreased as a result
of the slowdown in the petrochemical industry, leaving A-C with a low backlog at
the start of 1999. Belvac also began 1999 with a low backlog, but its
performance fell even further below 1998 than expected as a result of continued
cancellation or delay of capital investments by can-makers. This cut Belvac's
sales in half in 1999 and required significant work force reductions and
restructuring in the third quarter. All of Belvac's modest profits for the year
were achieved in the fourth quarter. Tranter had a smaller overall decline in
earnings concentrated in domestic results for its plate and frame and
Platecoil(TM) product lines, reflecting weakness in spending for industrial
process equipment. The combined operating profit decline from these three
businesses was approximately $23 million. New order input at all three companies
improved in the fourth quarter as Belvac and A-C Compressor enjoyed
year-over-year bookings gains of more than 50%.
INTERNAL GROWTH AT SIX COMPANIES
Sargent Controls achieved strong internal growth, primarily from gains in its
submarine controls business, which is closely tied to engineering contracts and
production releases for the Navy's SSN program. Profits for its aerospace
hydraulic controls and specialty bearings also improved. Hill Phoenix continued
its pattern of strong earnings improvement, setting
[PHOTO OMITTED]
"Excellence in manufacturing and engineering underpins the success of our
companies. End-markets and competition for our products are worldwide in scope
and we must be relentless in pursuit of "best value" status with our customers."
Jerry Yochum
President & CEO
<PAGE> 17
SEGMENT EARNINGS ($ millions) AFTER-TAX OPERATING RETURN
ON INVESTMENT (%)*
*(Acquisition adjustments have been
exclued, see page 30, footnote 12
for explanation.)
[GRAPHS OMITTED]
DDI Segment Earnings DDI After-Tax Operating ROI
Year Data(Earnings) Year Data(Percent)
---- -------------- --- --------------
95 93 95 34%
96 107 96 35%
97 115 97 38%
98 143 98 39%
99 152 99 38%
(seated, left to right)
Jim Schneiders, Tom Bell,
Jerry Yochum, Jack Ditterline,
Don Tarquin, Don Fancher
(standing, left to right)
Roland Parker, Jim Johnson,
Gary Walker, Cees Bootsman,
Ralph Coppola, Randy Frederick,
John Eulich, Steve Runyan,
Brent Parker, Wolfgang Engelbracht
[PHOTO OMITTED]
15
<PAGE> 18
Dover Diversified
1 Tranter
Jack Ditterline, President
Products: Plate/frame and compact brazed heat exchangers; transformer
radiators
2 A-C Compressor
Gary Walker, President
Products: Centrifugal, oil-free screw, and rotary compressors; turbine and
compressor re-rate and repair
2 Hill Phoenix
Ralph Coppola, President
Products: Commercial refrigeration systems; refrigerated display cases
1 Sargent**
Donald C. Tarquin, President
Products: Submarine fluid controls; aircraft hydraulic controls;
self-lubricating bearings; aircraft fasteners
1 Belvac*
Jim Schneiders, President
Products: Can necking, trimming and shaping equipment
2 Waukesha Bearings
Donald A. Fancher, President
Products: Fluid film bearings; Sweeney torquing tools; CRL manipulators and
isolators
1 Wiseco
James A. Johnson, President
Products: High performance specialty pistons
1 Mark Andy*
John Eulich, President
Products: Narrow web printing presses
3 Langbein & Engelbracht
Wolfgange Engelbracht, Managing Director
Products: Environmental control equipment
1 Graphics Microsystems
Steve Runyan, President
Products: Pressroom automation equipment
1 Crenlo
Randy Frederick, President
Products: Construction and agriculture operator cabs and electronic enclosures
1 Van Dam
Cees Bootsman, Managing Director
Products: Cup printing equipment
1 SWF
Brent L. Parker, President
Products: Machinery for corrugated boxes and other packaging materials
Numbers indicate position in served market, North America, or worldwide when
noted by *.
** Position for submarine product line
both sales and profit records and establishing itself as the clear No. 2 company
within the supermarket refrigeration and display case industry. Hill Phoenix
acquired a new production facility in Brazil, opened a new branch operations
center in the southeastern U.S. and added walk-in coolers to its refrigeration
product line. Mark Andy's strong performance reflected major internal production
cycle time improvements that reduced costs while boosting sales in its very
competitive market. Waukesha Bearings achieved significant gains within its
"large industrial bearings" product line as a result of an increase in market
share and strong growth in the demand for power generation turbines. Langbein &
Engelbracht (L&E) also improved profits sharply. Diversified originally acquired
L&E as an add-on to Pathway Bellows, but it was not involved in the profitable
sale of Pathway to Senior Engineering in the third quarter of the year. SWF also
made earnings progress as a result of product line additions and strong gains at
its Sanger operation in the production of corrugated box-forming equipment. The
total internal growth from these specialty markets improved Diversified's
profits by approximately $18 million, almost offsetting the declines at A-C,
Belvac and Tranter.
RECORD ACQUISITION PROGRAM
Diversified added three new stand-alone companies during the year, spending $261
million, and four add-ons, involving $76 million. Crenlo was Dover's largest
acquisition in 1999. It is the leading independent supplier of farm tractor and
construction equipment cabs, with a customer list that includes Caterpillar,
John Deere and Case-New Holland. Crenlo is also a growing factor in the design
and fabrication of metal enclosures for sophisticated electronic products. Van
Dam, originally purchased as an add-on by Belvac, makes equipment used to
decorate large cylindrical cups, such as the stadium cup with which football and
baseball fans are well acquainted. Graphic Microsystems specializes in software
systems used in printing, particularly in color processes. The add-ons were
Hydratight (U.K.), which joined Waukesha; J. E. Piston, which joined Wiseco; and
two smaller companies. These acquisitions contributed approximately $14 million
to segment profits.
OUTLOOK
Diversified ended the year with very strong fourth-quarter earnings totaling $50
million -- almost one-third of the total year's profits. This level of quarterly
profits is not anticipated throughout 2000, since it resulted primarily from a
bunch-up of shipments at A-C Compressor.
The full-year effect of the record 1999 acquisition investment and the expected
improvements at Belvac, A-C and Tranter should lead to higher profits for
Diversified in 2000, hopefully with percentage growth in the high teens.
16
<PAGE> 19
Dover Resources
[GRAPHICS OMITTED]
THE RESOURCES SEGMENT'S GROWTH TREND HALTED IN 1999 AFTER SIX YEARS, DURING
WHICH TIME PROFITS DOUBLED. THE $18 MILLION (14%) DECLINE IN SEGMENT EARNINGS
WAS CAUSED BY WEAKNESS IN THE CHEMICAL AND PROCESS INDUSTRIES, AND BY LARGE
PROFIT DROPS AT FOUR COMPANIES THAT SET RECORDS IN 1998.
DECLINES AT FOUR COMPANIES
After setting individual profit records in 1998 ($65 million of combined
earnings), OPW Fueling Components Group, OPW Fluid Transfer Group,
Ronningen-Petter and Duncan Parking Systems experienced major declines in their
markets, each for different reasons. Profits at each of these companies fell
more than 20%, and they finished the year with combined profits of only $36
million. The decline at OPW Fueling Components was expected, resulting from the
year-end 1998 deadline for compliance with EPA regulations on underground
storage of petroleum. This led to large gains in 1998 as end-users and
distributors completed, or placed orders to complete, their compliance efforts.
In retrospect, this phenomenon also accelerated business into late 1998 that
normally might have fallen into 1999. The fall-off at OPW Fluid Transfer Group
reflected a downturn in railroad tank car production, for which Midland supplies
valves (a consequence of weakness in the chemicals industry), and a drop in
purchases of transfer and process equipment from Civacon/Knappco and OPW
Engineered Systems (also related to chemicals). Declines here were exacerbated
by a month-long strike at two important facilities and the closure of one of
these to reduce costs.
At Ronningen-Petter (filters for paper-making and petroleum refining) and
Duncan (parking meters and systems) markets fell sharply, more resembling a
depression than a downturn. Profits at each of these companies declined
substantially. Recovery is expected in 2000, but probably not to the record
levels of 1998.
TURNAROUND IN PETROLEUM EQUIPMENT
The demand for equipment used to produce oil and gas increased sharply in the
second half of 1999, after collapsing in the prior year. Effective downsizing
kept the Petroleum Equipment Group profitable throughout the downturn, but left
it scrambling to keep up with demand
[PHOTO OMITTED]
"Difficulties in energy markets adversely affected many of our companies during
the later part of 1998 and much of 1999. Our Presidents responded effectively
and have positioned their companies for strong participation in the recovery
expected during 2000."
Rudy Herrmann
President & CEO
17
<PAGE> 20
Dover Resources
1 OPW Fueling Components*
David J. Ropp, President
Products: Gasoline nozzles, fittings, valves, and environmental protection
products; PetroVend fuel management and key card sytems, tank monitors
1 Wilden Pump & Engineering Co.
Bruce J. Bartells, CEO/CFO
John D. Allen, President/COO
Products: air operated double diaphragm pumps
OPW Fluid Transfer Group
John Anderson, President
1 Midland Manufacturing
Donald Rodda, President
Products: Tank car and barge valves, safety valves, and liquid level
measuring devices
1 Civacon/Knappco
Rick Potter, President
Products: Tank truck valves and electronic monitoring systems; Knappco
manhole/access covers and valves
1 OPW Engineered Systems
Tom Niehaus, President
Products: Loading arms, swivels, sight flow indicators, ISO rings,
Kamloks(R)and Kamvaloks(R)
1 De-Sta-Co Industrial Products*
Jon H. Simpson, President
Products: Toggle clamps, cylinders, and workholding devices; Robohand, CCMOP,
EOA robotic and automation components
1 Blackmer
Ray Pilch, President
Products: Rotary vane, progressing cavity, eccentric disk, and peristaltic
positive displacement pumps; vane and screw type mobile compressors;
reciprocating piston stationary gas compressors
1 C. Lee Cook
David Jackson, President
Products: Piston rings, packings for gas compressors and aerospace sealing
applications; Compressor Components compressor rods, pistons, and repair
services; Cook Manley compressor valves and related plastics
1 Petroleum Equipment Group
James R. Kosh, President
James I. Mitchell, President
1 Alberta Oil Tool (Canada)*
Products: Sucker rods, fittings, valves and controls; Norriseal process
valves and instrumentation systems
1 Norris*
Products: Sucker rods, couplings, well servicing equipment, polished rods;
Ferguson-Beauregard/ Logic Controls oil and gas production systems
1 Ronningen-Petter*
Peter Scovic, President
Products: Liquid pressure filter systems; hydraulic/mechanical clean-in-place
filters, bag filters and high efficiency media
1 Duncan Parking Systems
Richard Farrell, President
Products: Parking control products and systems
1 Quartzdyne*
Robert B. Wiggins, President
Products: Quartz based pressure transducers
1 Hydro Systems Company
Gary E. Golub, President
Products: Cleaning chemical proportioning systems; Nova electronically
controlled systems
1 De-Sta-Co Manufacturing*
Bob Leisure, President
Products: Reed valves for compressors, stamped precision components, and
specialized aluminum tubular products
Tulsa Winch
Ron Hoffman, President
Products: Worm and planetary gear winches, speed reducers, swing drives and
wheel drives
1 Wittemann William Geiger, President
Products: CO2 gas generation and recovery systems, merchant CO2 and industrial
refrigeration systems
Numbers indicate position in served market, North America, or worldwide when
noted by *.
as the year progressed. Production and profit rates were at strong levels at
year-end. Quartzdyne, which also participates in this market, saw some recovery
during the latter part of the year, but well short of the record level of 1997
and of 1998.
CHEMICAL AND PROCESS MARKET DECLINES AFFECT FOUR COMPANIES
Wilden, Blackmer, C. Lee Cook and Wittemann each devote significant portions of
their product lines to chemical, process and energy markets, which were soft
during most of 1999. In this difficult environment, two companies achieved
modest earnings gains, while two had modest declines, with combined profits
about equal to 1998. As a group, these companies achieved sales of approximately
$225 million, with average margins in the high teens, except at Wittemann, which
continued near break-even levels in a very depressed market. Improved results in
the fourth quarter, particularly at Wilden and Blackmer, were encouraging for
these companies' prospects in 2000.
OTHER COMPANIES GAIN
Despite lower sales, De-Sta-Co Manufacturing improved its profits as a result of
substantial internal improvement in its automotive manifold business.
Additionally, sales of compressor valves remained strong and the company moved
forward with a new plant in the U.K. to support automotive customers' higher
level of air conditioning compressor production outside North America. Hydro
Systems had a strong year as its markets for cleaning fluid metering devices
showed good growth and Nova Controls, acquired during 1998, contributed for a
full year. De-Sta-Co Industries improved sales modestly with flat profits as its
expanded range of industrial automation equipment more than offset a slowdown in
demand for automotive tooling and clamping systems. Tulsa Winch's earnings were
off slightly as increased OEM applications and one month's results of newly
acquired Dp Winch could not offset a decline in oilfield winch sales and the
cost of a move to new facilities.
OUTLOOK
All Resources companies are planning improvements in 2000, with particularly
strong potential foreseen by the Petroleum Equipment Group and by OPW Fluid
Transfer. A new earnings record is expected.
18
<PAGE> 21
SEGMENT EARNINGS ($ millions) AFTER-TAX OPERATING RETURN
ON INVESTMENT (%)*
*(Acquisition adjustments have
been exclued, see page 30,
footnote 12 for explanation.)
[BAR GRAPHS OMITTED]
DRI Segment Earnings DRI After-Tax Operating ROI
Year Data(Earnings) Year Data(Percent)
---- -------------- ---- --------------
95 91 95 32%
96 105 96 34%
97 114 97 33%
98 125 98 34%
99 107 99 30%
(first row)
Rudy Herrmann, Loren Armstrong
(second row)
John Allen, Ron Hoffman, Dave Ropp,
Pete Scovic, Bob Leisure
(third row)
Dave Jackson, Jim Mitchell,
Jim Kosh, Gary Golub, Bill Geiger
(fourth row)
Don Rodda, Rick Potter, John Anderson,
Tom Niehaus, Bob Wiggins, Ray Pilch
(fifth row)
Jon Simpson, Dick Farrell, Bruce Bartells
[PHOTO OMITTED]
19
<PAGE> 22
Dover Corporation and Subsidiaries
Sales, Operating Profit and Other Data by Market Segment
(in thousands except % figures)
<TABLE>
<CAPTION>
For the Years Ended December 31, 1999 1998 1997 1996 1995 1994
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers:
Dover Technologies $ 1,457,792 $ 1,211,416 $ 1,300,503 $ 993,326 $ 873,505 $ 603,068
Dover Industries 1,144,599 1,012,440 859,778 846,866 798,173 691,342
Dover Diversified 1,071,574 957,579 767,194 730,074 672,503 472,706
Dover Resources 777,691 800,914 745,429 648,546 583,727 525,971
Intramarket sales (5,236) (4,683) (3,336) (3,239) (3,547) (1,115)
-------------------------------------------------------------------------------------------
Consolidated total $ 4,446,420 $ 3,977,666 $ 3,669,568 $ 3,215,573 $ 2,924,361 $ 2,291,972
-------------------------------------------------------------------------------------------
Operating profit:
Dover Technologies $ 226,761 $ 146,612 $ 195,393 $ 146,341 $ 133,641 $ 76,205
Dover Industries 179,554 154,500 128,945 115,857 117,841 81,028
Dover Diversified 152,139 143,157 114,902 106,850 92,948 67,220
Dover Resources 107,264 125,225 113,538 105,394 90,745 83,979
Gain on dispositions, net 10,256 -- -- 75,065 -- --
Interest income, interest
expense and general
corporate expenses, net (60,970) (80,848) (60,504) (47,398) (50,911) (39,401)
-------------------------------------------------------------------------------------------
Consolidated earnings before
taxes on income $ 615,004 $ 488,646 $ 492,274 $ 502,109 $ 384,264 $ 269,031
-------------------------------------------------------------------------------------------
Profit margin (pretax):
Dover Technologies 15.6% 12.1% 15.0% 14.7% 15.3% 12.6%
Dover Industries 15.7 15.3 15.0 13.7 14.8 11.7
Dover Diversified 14.2 14.9 15.0 14.6 13.8 14.2
Dover Resources 13.8 15.6 15.2 16.3 15.5 16.0
-------------------------------------------------------------------------------------------
Consolidated profit margin 13.8% 12.3% 13.4% 15.6% 13.1% 11.7%
-------------------------------------------------------------------------------------------
Identifiable assets at December 31:
Dover Technologies $ 1,206,549 $ 1,000,209 $ 1,032,922 $ 924,745 $ 721,831 $ 330,661
Dover Industries 894,452 732,136 598,643 613,512 591,228 541,109
Dover Diversified 1,128,239 802,872 704,591 547,341 570,269 452,074
Dover Resources 804,664 781,933 478,279 380,805 326,047 291,480
Corporate, (principally cash and
equivalents and marketable
securities) 98,036 65,243 84,536 136,438 94,402 106,167
-------------------------------------------------------------------------------------------
Total continuing 4,131,940 3,382,393 2,898,971 2,602,841 2,303,777 1,721,491
-------------------------------------------------------------------------------------------
Net assets from discontinued
operations -- 244,883 181,263 205,365 191,000 188,879
-------------------------------------------------------------------------------------------
Consolidated total $ 4,131,940 $ 3,627,276 $ 3,080,234 $ 2,808,206 $ 2,494,777 $ 1,910,370
-------------------------------------------------------------------------------------------
Depreciation and amortization:
Dover Technologies $ 57,407 $ 56,853 $ 69,882 $ 34,071 $ 19,750 $ 13,904
Dover Industries 37,574 33,379 28,992 27,918 26,783 25,453
Dover Diversified 46,500 41,040 30,188 26,857 27,141 21,948
Dover Resources 40,039 34,802 24,738 20,686 17,816 19,089
Corporate 1,724 1,613 1,404 952 696 922
-------------------------------------------------------------------------------------------
Consolidated total $ 183,244 $ 167,687 $ 155,204 $ 110,484 $ 92,186 $ 81,316
-------------------------------------------------------------------------------------------
Capital expenditures:
Dover Technologies $ 41,432 $ 40,544 $ 42,303 $ 36,001 $ 18,546 $ 13,425
Dover Industries 32,242 29,046 24,689 28,495 20,675 23,299
Dover Diversified 25,799 26,050 24,400 26,274 31,299 19,419
Dover Resources 29,409 29,473 28,317 22,149 21,127 16,340
Corporate 1,230 617 2,373 760 72 226
-------------------------------------------------------------------------------------------
Consolidated total $ 130,112 $ 125,730 $ 122,082 $ 113,679 $ 91,719 $ 72,709
=================================================================================================================================
</TABLE>
20
<PAGE> 23
Dover Corporation and Subsidiaries
Consolidated Statements of Earnings, Accumulated Comprehensive Earnings, and
Retained Earnings
(in thousands except per share figures)
<TABLE>
<CAPTION>
Statement of earnings for the years ended December 31, 1999 1998 1997
==============================================================================================================
<S> <C> <C> <C>
Net sales $ 4,446,420 $ 3,977,666 $ 3,669,568
Cost of sales 2,837,960 2,551,381 2,342,268
-----------------------------------------
Gross profit 1,608,460 1,426,285 1,327,300
Selling and administrative expenses 973,049 894,325 807,793
-----------------------------------------
Operating profit 635,411 531,960 519,507
-----------------------------------------
Other deductions (income):
Interest expense 53,401 60,746 46,163
Interest income (18,528) (14,308) (9,495)
All other, net (14,466) (3,124) (9,435)
-----------------------------------------
Total 20,407 43,314 27,233
-----------------------------------------
Earnings before taxes on income 615,004 488,646 492,274
Federal and other taxes on income 209,950 162,249 167,360
-----------------------------------------
Net earnings from continuing operations 405,054 326,397 324,914
Earnings from discontinued operations -- 52,448 57,084
Gain on sale of discontinued business, net of tax 523,938 -- 23,433
-----------------------------------------
Net earnings $ 928,992 $ 378,845 $ 405,431
=========================================
Net earnings per common share:
Basic -- Continuing operations $ 1.94 $ 1.47 $ 1.46
-- Discontinued operations -- .23 .36
-- Gain on sale 2.50 -- --
-----------------------------------------
-- Net earnings $ 4.44 $ 1.70 $ 1.82
=========================================
Diluted -- Continuing operations $ 1.92 $ 1.45 $ 1.43
-- Discontinued operations -- .24 .36
-- Gain on sale 2.49 -- --
-----------------------------------------
-- Net earnings $ 4.41 $ 1.69 $ 1.79
=========================================
Weighted average number of common shares
outstanding during the period:
Basic 209,063 222,793 223,181
Diluted 210,679 224,386 226,815
<CAPTION>
==============================================================================================================
Accumulated Comprehensive Earnings for the years ended December 31, 1999 1998 1997
==============================================================================================================
<S> <C> <C> <C>
Net earnings $ 928,992 $ 378,845 $ 405,431
-----------------------------------------
Other comprehensive earnings, net of tax:
Foreign currency translation adjustments (52,742) 10,166 (43,894)
Less: reclassification adjustment for adjustments
included in net earnings -- (486) (4,099)
-----------------------------------------
Total foreign currency translation adjustments $ (52,742) $ 10,652 $ (39,795)
-----------------------------------------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period (5) (27) 2,135
Less: reclassification adjustment for gains (losses)
included in net earnings -- 5,713 7
-----------------------------------------
Total unrealized gains (losses) on securities (tax $27 in 1998) (5) (5,740) 2,128
-----------------------------------------
Other comprehensive earnings (52,747) 4,912 (37,667)
-----------------------------------------
Comprehensive earnings $ 876,245 $ 383,757 $ 367,764
-----------------------------------------
<CAPTION>
==============================================================================================================
Retained Earnings for the years ended December 31, 1999 1998 1997
==============================================================================================================
<S> <C> <C> <C>
Balance at beginning of year $ 1,992,991 $ 1,703,335 $ 1,470,008
Net earnings 928,992 378,845 405,431
-----------------------------------------
2,921,983 2,082,180 1,875,439
Deductions:
Stock split -- -- 91,757
Common stock cash dividends of $.44 per share
($.40 in 1998; $.36 in 1997) 91,808 89,189 80,347
-----------------------------------------
Balance at end of year $ 2,830,175 $ 1,992,991 $ 1,703,335
==============================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
21
<PAGE> 24
Dover Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands except share and per share figures)
<TABLE>
<CAPTION>
December 31, 1999 1998
======================================================================================
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 138,038 $ 96,774
Receivables (less allowance for doubtful accounts of
$23,375 in 1999, $20,955 in 1998) 750,917 575,630
Inventories 639,379 559,267
Prepaid expenses and other current assets 83,228 72,853
--------------------------
Total current assets 1,611,562 1,304,524
--------------------------
Property, plant and equipment, at cost:
Land 41,291 33,845
Buildings 356,548 315,594
Machinery and equipment 1,082,994 932,997
--------------------------
1,480,833 1,282,436
Less accumulated depreciation 834,358 710,473
--------------------------
Net property, plant and equipment 646,475 571,963
--------------------------
Intangible assets, net of amortization 1,813,359 1,438,793
Other intangible assets 7,358 7,358
Other assets and deferred charges 53,186 59,755
Net assets of discontinued operations -- 244,883
--------------------------
$ 4,131,940 $ 3,627,276
======================================================================================
Liabilities
Current Liabilities:
Notes payable $ 296,637 $ 427,529
Current maturities of long-term debt 1,263 6,060
Accounts payable 253,650 187,738
Accrued compensation and employee benefits 157,392 149,855
Accrued insurance 50,274 43,246
Other accrued expenses 186,405 175,036
Federal and other taxes on income 389,244 283
--------------------------
Total current liabilities 1,334,865 989,747
--------------------------
Long-term debt 608,025 610,090
Deferred income taxes 42,061 50,196
Other deferrals (principally compensation) 108,233 66,359
Commitments and contingent liabilities
Stockholders' Equity
Capital Stock:
Preferred, $100 par value per share
Authorized 100,000 shares; issued none -- --
Common, $1 par value per share
Authorized 500,000,000 shares; issued
236,246,384 in 1999, (235,570,770
shares in 1998) 236,246 235,571
Additional paid-in capital 33,060 18,630
Cumulative translation adjustments (79,985) (27,243)
Unrealized holding gains 46 51
Retained earnings 2,830,175 1,992,991
--------------------------
3,019,542 2,220,000
Less common stock in treasury, at cost
33,617,535 shares in 1999 (15,163,974
shares in 1998) 980,786 309,116
--------------------------
Net stockholders' equity 2,038,756 1,910,884
--------------------------
$ 4,131,940 $ 3,627,276
======================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
22
<PAGE> 25
Dover Corporation and Subsidiaries
Consolidated Statements of Cash Flows
increase (decrease) in cash and cash equivalents (in thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31, 1999 1998 1997
========================================================================================================================
<S> <C> <C> <C>
Cash flow from operating activities:
Net earnings $ 928,992 $ 378,845 $ 405,431
-----------------------------------------
Adjustments to reconcile net earnings to net cash from
operating activities:
Income from discontinued operations -- (52,448) (57,084)
Gain on sale of discontinued business, net (523,938) -- (23,433)
Depreciation and amortization 183,244 167,687 155,204
Provision for losses on accounts receivable 6,803 6,542 7,248
Net increase (decrease) in LIFO reserve (859) (190) 842
Deferred income taxes (25,595) (311) (13,553)
Loss (gain) on sale of property and equipment (479) 898 (890)
Increase (decrease) in deferred compensation 22,486 4,704 12,892
Acquisition inventory premium write-off 10,534 7,804 9,202
(Gain) loss on sale of businesses and certain assets (10,256) (40) 10,870
Other, net (5,679) (20,380) (19,004)
Changes in assets and liabilities (excluding effects of
acquisitions and dispositions):
Decrease (increase) in accounts receivable (149,631) 74,655 (91,350)
Decrease (increase) in inventories excluding LIFO reserve (21,036) (17,263) (30,573)
Decrease (increase) in prepaid expenses (8,644) (11,479) (4,045)
Decrease (increase) in other assets (3,366) 117 (4,645)
Increase (decrease) in accounts payable 48,526 (24,685) 18,822
Increase (decrease) in accrued expenses (22,271) (150) 34,282
Increase (decrease) in federal and other taxes on income 32,514 (26,181) 9,363
-----------------------------------------
Total adjustments (467,647) 109,280 14,148
-----------------------------------------
Net cash from operating activities of continuing operations 461,345 488,125 419,579
-----------------------------------------
Cash flows from (used in) investing activities:
Net sale of marketable securities -- 21,979 1,701
Proceeds from sale of property and equipment 2,637 6,270 6,412
Additions to property, plant and equipment (includes rental equipment:
$232 in 1999, $400 in 1998 and $217 in 1997) (130,344) (126,130) (122,299)
Acquisitions (net of cash and cash equivalents: $38,186 in 1999,
$7,421 in 1998 and $6,689 in 1997) (575,011) (549,762) (251,754)
Proceeds from sale of businesses 40,096 668 167
Purchase of treasury stock (18,454 shares in 1999, 3,252 shares in 1998
and 3,254 shares in 1997) (671,670) (106,304) (86,267)
-----------------------------------------
Net cash used in investing activities of continuing operations (1,334,292) (753,279) (452,040)
-----------------------------------------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable (135,640) (8,235) (55,908)
Payment of long-term debt (13,379) (2,724) (6,782)
Proceeds from long-term debt 1,916 349,115 1,088
Proceeds from exercise of stock options 12,291 19,036 13,022
Proceeds from sale (repurchases) of lease receivables -- -- (2,672)
Cash dividend to stockholders (91,808) (89,189) (80,347)
-----------------------------------------
Net cash from (used in) financing activities of continuing operations (226,620) 268,003 (131,599)
-----------------------------------------
Effect of exchange rate changes on cash (6,982) 1,986 (3,780)
Cash from discontinued operations 9,599 (11,172) 104,619
Taxes paid on gain from sale of elevator market segment (21,786) -- --
Proceeds from sale of elevator market segment 1,160,000 -- --
-----------------------------------------
Net increase (decrease) in cash and cash equivalents 41,264 (6,337) (63,221)
Cash and cash equivalents at beginning of year 96,774 103,111 166,332
-----------------------------------------
Cash and cash equivalents at end of year $ 138,038 $ 96,774 $ 103,111
-----------------------------------------
Supplemental information-continuing operations, cash paid during the period for:
Income taxes $ 220,000 $ 188,196 $ 175,995
Interest 53,581 75,858 46,463
========================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
23
<PAGE> 26
Dover Corporation and Subsidiaries
Notes To Consolidated Financial Statements
December 31, 1999, 1998 and 1997
1. Description of Business and Summary of Significant Accounting Policies:
The Company is a multinational, diversified manufacturing corporation comprised
of over 48 different operating companies which manufacture a broad range of
specialized industrial products and sophisticated manufacturing equipment. The
Company also provides some engineering and testing services. The Company groups
its products and services by industry into four segments as set forth in the
tables shown on page 20. A description of the products manufactured and services
performed by each of the four segments is given on pages 8 through 19.
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 all significant subsidiaries after
elimination of all significant intercompany accounts and transactions, and
include the results of operations of purchased businesses from the dates of
acquisitions. On January 5, 1999, the Company sold its Dover Elevator
International segment to Thyssen Industrie, AG and the segment has been treated
as a discontinued operation. The assets, liabilities, results of operations and
cash flows have been segregated and reported as discontinued operations for all
periods presented. (See Note 2).
In conformity with the Financial Accounting Standards Board Statement No.
52, "Foreign Currency Translation," 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 1999 and 1998 in the cumulative translation adjustments
shown on the balance sheets follows:
Accumulated Other Comprehensive Earnings, Foreign Currency Translation
Adjustments:
<TABLE>
<CAPTION>
(in thousands) 1999 1998
================================================================================
<S> <C> <C>
Balance at beginning of year $(27,243) $(37,895)
Aggregate adjustment for year (52,742) 10,652
--------------------------
Balance at end of year $(79,985) $(27,243)
================================================================================
</TABLE>
B. Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
C. Inventories:
Generally domestic net inventory is stated at cost, determined on the last-in,
first-out (LIFO) basis, which is less than market value. Inventory of foreign
subsidiaries, the Dover Technologies segment and some recently acquired domestic
companies are stated at the lower of cost, determined on the first-in, first-out
(FIFO) basis, or market.
D. Property, Plant and Equipment and Depreciation:
Property, plant and equipment includes the cost of land, buildings, equipment
and significant improvements to 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 the gain or loss
realized on disposition is reflected in earnings.
Plant and equipment is generally depreciated based upon accelerated
methods, utilizing estimated useful property lives for both accounting and tax
purposes. Building lives range from 5 to 50 years; machinery and equipment lives
range from 3 to 15 years. Depreciation expense was $122,713,000 in 1999,
$114,116,000 in 1998; $98,316,000 in 1997.
E. Intangible Assets:
Intangible assets subject to amortization include goodwill purchased after 1970,
and the cost of certain patents, drawings, trademarks, work force, customer
lists, and covenants not to compete. Goodwill is being amortized on a
straight-line basis over a period, generally, of 40 years; the remaining
intangible amortization is based on estimated useful lives which range from 3 to
20 years. The Company evaluates its amortization policies regularly to determine
whether later events and circumstances warrant revised estimates of useful
lives. The Company periodically evaluates the recoverability of goodwill and
other long-lived assets including their relation to the operating performance
and future undiscounted net cash flows of the related business. In accordance
with SFAS 121, impairment losses are recognized when warranted. Goodwill, net of
amortization, aggregated $1,628,317,000 at December 31, 1999 and $1,242,666,000
at December 31, 1998. Amortization of all intangibles was $60,531,000 in 1999,
$53,571,000 in 1998, and $56,888,000 in 1997, of which goodwill was $41,229,000,
$32,612,000, and $28,554,000, respectively.
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.
F. Revenue Recognition:
Revenue is generally recognized as products are shipped or services rendered.
G. Income Taxes:
The provision for income taxes includes Federal, state, local and foreign taxes.
Tax credits, primarily for research and experimentation, are recognized as a
reduction of the provision for income taxes in the year in which they are
available for tax purposes, and aggregated $7,174,000 for 1999, $5,815,000 for
1998, and $4,522,000 for 1997. Research and experimentation expenditures charged
to earnings amounted to $139,333,000 in 1999, $131,265,000 in 1998, and
$106,747,000 in 1997. 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.
H. 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.
24
<PAGE> 27
I. Self Insurance:
The Company is generally self-insured for losses and liabilities related
primarily to workers' compensation, health and welfare claims, business
interruption resulting from certain events and comprehensive general, product
and vehicle liability. Losses are accrued based upon the Company's estimates of
the aggregate liability for claims incurred using certain actuarial assumptions
followed in the insurance industry and based on Company experience.
J. Marketable Securities:
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," trading
securities are reported at fair value with unrealized gains and losses
recognized in earnings, and available-for-sale securities are also reported at
fair value but unrealized gains and losses are shown in the caption "unrealized
holding gains" included in stockholders' equity.
The Company held an immaterial amount of trading securities which are
classified in other assets at December 31, 1999 and December 31, 1998. The net
realized gains for the years ended December 31, 1998, and 1997 were, $5,713,000,
and $1,995,000, respectively. As of December 31, 1999 and December 31, 1998 the
Company did not hold any available-for-sale securities. In each of the above
mentioned years, gains and losses were determined using average cost.
K. New Accounting Pronouncements:
In June 1998 the FASB issued Statement of Financial Accounting Standards No.
133, as amended in June 1999 by Statement of Financial Accounting Standards No.
137, "Accounting for Derivative Instruments and Hedging Activities," effective
for all fiscal quarters of all fiscal years beginning after June 15, 2000. The
Company does not expect the statement to have a significant effect on its
current financial reporting and disclosure requirements.
2. Acquisition, Dispositions and Discontinued Operations:
1997 Completed Acquisitions
<TABLE>
<CAPTION>
Date Type Acquired Companies Location (Near)
================================================================================
<S> <C> <C> <C>
1-Jan Stock SWEP Warmetauscher Vienna, Austria
Austria, GmbH
Manufactures heat exchangers (compact brazed, plate and frame).
31-Jan Asset Hydro Systems Company Cincinnati, OH
Leading independent designer and manufacturer of proportioning and dispensing
systems sold primarily to the institutional industrial cleaning market.
1-Feb Asset Quarzkeramik, GmbH Frankfurt, Germany
Manufacturers oversized crystal oscillators.
24-Feb Stock Telefilter, GmbH Tetlow, Germany
Manufactures low priced, high volume, SAW filters for the emerging wireless
telecommunications market, mainly for subscriber applications.
6-Mar Stock Luther & Maelzer, GmbH Hanover, Germany
Manufactures test equipment used to test bare printed circuit boards.
16-Mar Stock Langbein & Englebracht, Dusseldorf, Germany
GmbH & Co.
Designer and manufacturer of air pollution control systems and specialized air
handling systems.
22-May Asset Buffalo Environmental Hanover, MD
Products Corporation
Manufactures flexible piping for underground service station and industrial
applications.
1-Jul Stock K&K Welding Products, Inc. Lake Zurich, IL
Manufactures torches and consumable welding parts generally sold as component
replacements.
1-Jul Stock Emmert, GmbH Efringen, Germany
Manufactures flexible modular punching units, used primarily in the automotive
industry.
28-Aug Stock Sarment S.A. Paris, France
Manufactures under Mouvex S.A. and Abaque Industrie S.A. a comprehensive range
of pumps and compressors for the transfer of both liquids and powdered products.
29-Aug Asset ESH, Inc. Temple, AZ
Designs and manufactures specialty printed circuit boards that are used in
testing semiconductors.
3-Sep Stock Preco Turbine Services, Inc. Houston, TX
Primarily engaged in the repair of large steam and gas turbines for both utility
and industrial based customers.
30-Sep Asset Conmec, Inc. Bethlehem, PA
Manufactures turbo machinery for the petrochemical and utility industries.
3-Oct Stock Star Technology Group, Inc. Hudson, NH
Manufactures under the name of "Circuitest" fixtures and creates software for
bare circuit board testing, and performs contract service for bare board
testing.
1-Dec Stock EOA Systems, Inc. Dallas, TX
Manufactures automation components and accessories used in conjunction with
industrial robots.
2-Dec Stock Vitronics Corporation Newmarket, NH
Engaged in designing, engineering, manufacturing and marketing state-of-the art
thermal processing systems for soldering surface mount devices to printed
circuit boards and cleaning of the finished assembly.
5-Dec Stock Sanger Works Factory Sanger, CA
Holdings, Inc.
Manufactures specialty corrugated packaging machinery for consumer products
companies, food processors and industrial products manufacturers.
================================================================================
</TABLE>
The aggregate cost of these 1997 acquisitions, including all direct costs was
approximately $258,443,000 of which $141,091,000 represents goodwill which is
being amortized over a forty-year period. The $258,443,000 purchase price
accounting cost can be reconciled to the $261,460,000 "economic cost" amount
shown elsewhere in this report by considering long-term debt assumed and cash
acquired on date of acquisition.
1998 Completed Acquisitions
<TABLE>
<CAPTION>
Date Type Acquired Companies Location (Near)
================================================================================
<S> <C> <C> <C>
1-Jan Asset Thermofluid International Arlington, TX
Custom designs and manufactures heat transfer equipment for the refrigeration
industry.
5-Jan Asset Quartzdyne, Inc. Salt Lake City, UT
Manufactures highly specialized quartz pressure transducers used in oil/gas
drilling.
8-Jan Stock Thompson Carmichael W. Midlands, U.K.
Holdings, Ltd.
Manufactures aluminum and stainless steel tank trailers and truck tanks.
10-Feb Asset Wiseco Piston Company, Inc. Mentor, OH
Designs and manufactures forged aluminum-alloy pistons found in racing cars,
motorcycles, power boats and snowmobiles.
16-Apr Stock Nova Controls Santa Cruz, CA
Manufactures electronic dispensing systems used in commercial laundry and
dishwashing applications.
21-Apr Stock Sonic Industries Torrence, CA
Produces high strength, structured fasteners for the aerospace industry.
30-Apr Asset Avtec Industries, Inc. Oswego, IL
Manufactures food service and kitchen ventilation equipment.
</TABLE>
25
<PAGE> 28
<TABLE>
<S> <C> <C> <C>
1-May Asset PDQ Manufacturing, Inc. Green Bay, WI
Manufactures "touchless" vehicle wash equipment.
30-Jun Stock Wilden Pump and Grand Terrace, CA
Engineering, Inc.
Manufactures air activated double diaphragm pumps.
30-Jun Asset Koolant Koolers Kalamazoo, MI
Manufactures industrial chillers.
30-Jun Stock Prox International, B.V. Netherlands
Distributes engine components.
30-Jun Stock Jag Industries, S.A. Paris, France
Produces automation components (grippers, tool changers, collision sensing
compliance devices, slides and rotate units).
10-Dec Stock Ing. Mas Rosario, Argentina
Manufactures refrigeration systems, parallel racks and HVAC systems used in
supermarkets and commercial and industrial buildings.
23-Dec Stock atg test services, GmbH Wertheim, Germany
Manufactures circuit board test equipment.
================================================================================
</TABLE>
The aggregate cost of these 1998 acquisitions, including all direct costs
was approximately $557,183,000 of which $416,104,000 represents goodwill which
is being amortized over a forty-year period. The $557,183,000 purchase price
accounting cost can be reconciled to the $556,019,000 "economic cost" amount
shown elsewhere in this report by considering long-term debt assumed and cash
acquired on date of acquisition.
In November 1998, the Company reached an agreement to sell Dover Elevator
International Inc. to Thyssen Industrie, AG for $1,160,000,000. The amount
received was recorded in the first quarter of 1999, and resulted in a net gain
for the Company of $523,938,000, equal to $2.49 per share. The Dover Elevator
International segment is accounted for as a discontinued operation, and
accordingly, amounts in the financial statements and related notes for all
periods shown reflect discontinued operations accounting. Summarized results of
the discontinued business are shown separately as discontinued operations in the
accompanying consolidated financial statements. The net assets of discontinued
operations are primarily comprised of accounts receivable, inventory, fixed
assets, net of liabilities. Effective June 1, 1997 the Company sold 100% of the
stock of three small elevator installation and services companies located in
Germany. Effective June 30, 1997 the Company sold all of the capital stock of
its U.K. elevator company, Hammond & Champness, Ltd., thus completing the
divestiture of the Company's European elevator operations. Operating results of
the discontinued segment are as follows:
<TABLE>
<CAPTION>
(in thousands except per share figures)
For the years ended December 31, 1998 1997
================================================================================
<S> <C> <C>
Net sales $899,015 $880,307
=======================
Earnings before income taxes 82,246 92,391
Income taxes 29,798 35,307
-----------------------
Net earnings from
discontinued operations 52,448 57,084
Gain on sale of discontinued
businesses, net of taxes -- 23,433
-----------------------
Net earnings from
discontinued segment $ 52,448 $ 80,517
=======================
Net earnings per diluted common share:
Discontinued operations $ .24 $ .25
Gain on sale of discontinued
businesses -- .11
================================================================================
</TABLE>
1999 Completed Acquisitions
<TABLE>
<CAPTION>
Date Type Acquired Companies Location (Near)
================================================================================
<S> <C> <C> <C>
8-Jan Stock EMA Industia e Comercio, Sao Jose dos
Ltda. Campos, Brazil
Manufactures manual and pneumatic toggle clamps.
15-Jan Stock Van Dam Machine, B.V. Amsterdam, Netherlands
Producer of multi-color dry offset printing presses, focused on the rigid
plastic container market.
23-Jan Stock Alphasem Holding, A.G. Berg, Switzerland
Manufacturer of electronic assembly equipment.
19-Feb Stock Hydra-Tight, Ltd. W. Midlands, UK
Provider of bolt tensioning and pipeline coupling products and services tailored
to the oil/gas and power generation industries.
4-Mar Stock Graphics Microsystems Sunnyvale, CA
Manufactures closed-loop color control systems and digital remote link control
systems for web, sheet-fed and specialty printing presses.
10-Mar Asset TTI Testron Consolidated Woonsocket, RI
Manufacturer of test fixtures and interconnect devices for automated test
equipment.
8-Apr Stock Richards Industries Rockwood, TN
Manufactures petroleum handling equipment and safety devices.
10-May Stock Somero Enterprises Houghton, MI
Producer of laser controlled concrete floor spreading equipment.
31-May Asset JE Piston Huntington Beach, CA
Manufactures the highest quality forged racing pistons.
1-Jul Asset Parts, Inc. Piedmont, SC
Manufactures quality replacement parts and cylinders for the refuse equipment
industry.
23-Jul Asset Advantage Lift Systems San Diego, CA
Manufactures surface lifts for heavy duty automotive applications, as well as
other complimentary designs.
1-Aug Stock Lee Laser, Inc. Orlando, FL
Producer of solid state, high quality diode and lamp pumped lasers.
1-Sept Stock Forward Manufacturing Fort Worth, FL
Manufactures surface lifts for light duty automotive applications.
16-Sept Stock ARCOM, Inc. Salem, NH
Manufactures transceivers used in high frequency millimeter-wave digital radios
and millimeter-wave subsystems.
4-Oct Stock Crenlo, Inc. Rochester, MN
Manufacturer of operator cabs for the construction machinery and agricultural
equipment markets.
19-Nov Asset HAS, Inc. Miami, FL
Specializes in the overhaul and repair of hydraulic and electromechanical
aircraft components and has expanded into pneumatic and fuel systems.
30-Nov Stock Dp Manufacturing Tulsa, OK
Manufactures hydraulically powered planetary gear winches ranging from 2,000 to
150,000 lbs. linepull.
3-Dec Stock Heil Asia Bangkok, Thailand
Manufactures liquid and dry bulk tank trailers and refuse collection vehicles.
================================================================================
</TABLE>
The aggregate cost of these 1999 acquisitions, including all direct costs
was approximately $613,197,000 of which $437,515,000 represents goodwill which
is being amortized over a forty-year period. The $613,197,000 purchase price
accounting cost can be reconciled to the $599,171,000 "economic cost" amount
shown elsewhere in this report by considering long-term debt assumed and cash
acquired on date of acquisition.
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 acquisitions.
26
<PAGE> 29
The following unaudited pro forma information presents the results of
operations of the Company as if the 1999 acquisitions had taken place on January
1, 1998.
<TABLE>
<CAPTION>
(in thousands except per share figures)
For the years ended December 31, 1999 1998
================================================================================
<S> <C> <C>
Net sales from continuing operations:
As reported $4,446,420 $3,977,666
Pro forma 4,643,767 4,449,494
Net earnings from continuing operations available
to common stockholders:
As reported $ 405,054 $ 326,397
Pro forma 410,261 341,775
Basic earnings per share from continuing operations:
As reported $ 1.94 $ 1.47
Pro forma 1.96 1.54
Diluted earnings per share from continuing operations:
As reported $ 1.92 $ 1.45
Pro forma 1.94 1.52
================================================================================
</TABLE>
These pro forma results of operations have been prepared for comparative
purposes only and include certain adjustments, such as additional amortization
expense as a result of goodwill and increased interest expense on acquisition
debt. They do not purport to be indicative of the results of operations which
actually would have resulted had the acquisitions occurred on the date
indicated, or which may result in the future.
Effective March 27, the Company sold 100% of the stock of CoEv, Inc. In
the first quarter the Company closed down it's Thermofluid operation. Effective
July 30, the Company sold 100% of the stock of Pathway Bellows, Inc. Effective
January 1, 2000, the Company sold 100% of the assets of Davenport Machine, Inc.
As a result of these transactions, the Company recorded a $10.3 million gain
before tax. The operating profits of these companies, separately or in
aggregate, were not significant to the Company.
3. Inventories:
<TABLE>
<CAPTION>
Summary by components at December 31, (in thousands) 1999 1998
================================================================================
<S> <C> <C>
Raw materials $239,498 $220,467
Work in process 205,792 175,117
Finished goods 233,671 204,123
---------------------------
Total 678,961 599,707
Less LIFO reserve 39,582 40,440
---------------------------
$639,379 $559,267
================================================================================
</TABLE>
At December 31, 1999, domestic inventories determined by the LIFO inventory
method amounted to $165,092,000 ($160,705,000 at December 31, 1998).
During each of the years in the two year period ended December 31, 1999,
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 less than 1 cent per share in both 1999
and 1998.
4. Bank Line of Credit:
The Company has open bank lines of credit and other bank credit agreements
totaling $470,000,000, which support its issuance of commercial paper. These
lines are in amounts requested by the Company and not the maximum that could be
obtained.
5. Debt:
<TABLE>
<CAPTION>
A summary of long-term debt at December 31,
(in thousands) 1999 1998
================================================================================
<S> <C> <C>
6.45% Notes due Nov. 15, 2005
(less unamortized discount of $345)
with an effective interest rate of 6.51% $249,655 $249,613
6.25% Notes due June 1, 2008
(less unamortized discount of $91)
with an effective interest rate of 6.26% 149,909 149,901
6.65% Debentures due June 1, 2028
(less unamortized discount of $876)
with an effective interest rate of 6.68% 199,133 199,124
Other 10,591 17,512
---------------------
Total long-term debt 609,288 616,150
Less current installments 1,263 6,060
---------------------
Long-term debt excluding current installments $608,025 $610,090
================================================================================
</TABLE>
Annual repayments of long-term debt in the four years following 2000 are
scheduled as follows: 2001-$2,950,000, 2002-$1,947,000, 2003-$1,343,000, and
2004-$704,000.
The notes payable shown on the balance sheets for 1999 and 1998 represent
principally commercial paper. The weighted average interest rates at December
31, 1999 and 1998 were 5.3% and 5.5% respectively.
6. 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.
<TABLE>
<CAPTION>
Treasury Stock
Common Stock Additional ---------------------
(in thousands) $1 Par Value Paid-in Capital Shares Amount
================================================================================
<S> <C> <C> <C> <C>
Balance at
December 31, 1997 $234,507 $ 658 11,912 $202,812
Stock options exercised 1,053 17,624 86* 2,746
Treasury stock purchased -- -- 3,166 103,558
Stock issued 11 348 -- --
-------- -------- -------- --------
Balance at
December 31, 1998 $235,571 $ 18,630 15,164 $309,116
Stock options exercised 590 11,701 52* 1,760
Treasury stock purchased -- -- 18,402 669,910
Stock issued 85 2,729 -- --
-------- -------- -------- --------
Balance at
December 31, 1999 $236,246 $ 33,060 33,618 $980,786
================================================================================
</TABLE>
* Shares received 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. On November 7, 1996, the Board of Directors
amended the original Plan by changing some of its features and extending the
Plan to November 2006.
27
<PAGE> 30
7. Stock Option and Performance Incentive Program
(Adjusted for stock splits):
On April 24, 1984, the stockholders approved an incentive stock option plan and
cash performance program under which a maximum aggregate of 19 million shares
was reserved for grants to key personnel until January 30, 1994. This plan
expired on January 30, 1995, but certain previous grants remain outstanding at
December 31, 1999.
On April 25, 1995, the stockholders approved an incentive stock option
plan and a cash performance program to replace the expired 1984 plan and
program. Under the new plan a maximum aggregate of 20 million shares was
reserved for grants to key personnel until January 30, 2005. 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.
Transactions in stock options (all of which are non-qualified and vest
three years after grant) under this plan are summarized as follows:
<TABLE>
<CAPTION>
Shares Under Option Price Range
================================================================================
<S> <C> <C>
Outstanding at January 1, 1998 5,504,653 $7.43 - $24.72
Granted 932,108 $ 35.00
Exercised (1,052,721) $7.43 - $14.88
Canceled (221,056) $7.43 - $35.00
----------------------------
Outstanding at December 31, 1998 5,162,984 $7.43 - $35.00
============================
Exercisable at December 31, 1998
through February 2, 2005 2,566,723 $7.43 - $14.88
============================
Outstanding at January 1, 1999 5,162,984 $7.43 - $35.00
Granted 1,312,207 $ 31.00
Exercised (590,272) $7.43 - $23.53
Canceled (161,434) $8.67 - $35.00
----------------------------
Outstanding at December 31, 1999 5,723,485 $8.67 - $35.00
================================================================================
Exercisable at December 31, 1999 through:
February 28, 2000 109,890 $ 8.67
February 28, 2001 170,586 $ 9.62
March 6, 2002 286,016 $ 9.67
March 4, 2003 266,959 $ 11.43
February 27, 2004 349,800 $ 14.88
February 2, 2005 871,096 $ 14.22
February 4, 2006 721,530 $ 23.53
----------------------------
Total 2,775,877 $8.67 - $23.53
================================================================================
</TABLE>
The Company applies APB Opinion 25 and related Interpretations in
accounting for stock options; accordingly, no compensation cost has been
recognized. Had compensation cost been determined based upon the fair value of
the stock options at grant date consistent with the method in SFAS Statement
123, the Company's net income and earnings per share would have been reduced to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
(in thousands except per share figures)
For the years ended December 31, 1999 1998 1997
================================================================================
<S> <C> <C> <C>
Net earnings from continuing
operations available to
common stockholders:
As reported $405,054 $326,397 $324,914
Pro forma 393,783 322,746 318,527
Basic earnings per share from
continuing operations:
As reported $ 1.94 $ 1.47 $ 1.46
Pro forma 1.88 1.45 1.43
Diluted earnings per share from
continuing operations:
As reported $ 1.92 $ 1.45 $ 1.43
Pro forma 1.87 1.44 1.40
================================================================================
</TABLE>
The fair value of each option grant was estimated on the date of grant
using a Black-Scholes option-pricing model with the following assumptions for
1999, 1998 and 1997, respectively: risk-free interest rates of 4.97, 5.57 and
6.06 percent; dividend yield of 1.15, 1.16, and 1.10 percent; expected lives of
6 years for each year; and volatility of 22.20, 22.45, and 17.1 percent.
8. Earnings per Share:
The computations of basic and diluted earnings per share from continuing
operations for each year were as follows:
<TABLE>
<CAPTION>
(in thousands except per share figures) 1999 1998 1997
================================================================================
<S> <C> <C> <C>
Numerator:
Net earnings from continuing
operations available to
common stockholders: $405,054 $326,397 $324,914
====================================
Denominator:
Basic weighted average shares 209,063 222,793 223,181
------------------------------------
Effect of diluted securities:
Employee stock options 1,616 1,593 3,634
------------------------------------
Denominator:
Diluted weighted average shares 210,679 224,386 226,815
====================================
Basic earnings per share from
continuing operations $ 1.94 $ 1.47 $ 1.46
------------------------------------
Diluted earnings per share from
continuing operations $ 1.92 $ 1.45 $ 1.43
================================================================================
</TABLE>
There were no anti-dilutive stock options in 1999 or 1997 because the
average market price was greater than the options' exercise price. In 1998
704,000 options were anti-dilutive and were excluded from the 1998 calculation
of diluted weighted average shares. The diluted EPS computation was made using
the treasury stock method.
28
<PAGE> 31
9. Taxes on Income:
Total income taxes for the years ended December 31, 1999, 1998 and 1997 were
allocated as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
================================================================================
<S> <C> <C> <C>
Income from continuing operations $ 209,950 $ 162,249 $ 167,360
Income from discontinued
operations -- 29,798 35,307
Gain on sale of
discontinued business 372,395 -- 8,738
Stockholders' equity, for
compensation expense for tax
purposes in excess of amounts
recognized for financial
reporting purposes (4,771) (8,101) (4,999)
-------------------------------------
$ 577,574 $ 183,946 $ 206,406
================================================================================
</TABLE>
Income tax expense (benefit) is made up of the following components:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
================================================================================
<S> <C> <C> <C>
Current:
U.S. Federal $ 170,801 $ 107,257 $ 131,294
State and local 9,544 8,864 8,425
Foreign 55,200 45,916 43,773
-------------------------------------
Total current 235,545 162,037 183,492
-------------------------------------
Deferred
U.S. Federal (22,547) 4,804 (14,412)
State and local (603) (296) 421
Foreign (2,445) (4,296) (2,141)
-------------------------------------
Total deferred (25,595) 212 (16,132)
-------------------------------------
Total expense $ 209,950 $ 162,249 $ 167,360
================================================================================
</TABLE>
Income taxes have been based on the following components of earnings
before taxes on continuing income:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
================================================================================
<S> <C> <C> <C>
Domestic $ 474,667 $ 383,819 $ 393,674
Foreign 140,337 104,827 98,600
-------------------------------------
$ 615,004 $ 488,646 $ 492,274
================================================================================
</TABLE>
The reasons for the difference between the effective rate and the U.S.
Federal income statutory rate of 35% follow:
<TABLE>
<CAPTION>
1999 1998 1997
================================================================================
<S> <C> <C> <C>
U.S. Federal income tax rate 35.0% 35.0% 35.0%
State and local taxes, net of Federal
income tax benefit 0.9 1.1 1.2
R&E tax credits (1.2) (1.2) (0.9)
FSC benefit (2.4) (2.8) (2.7)
Foreign tax credits (0.2) (1.4) (2.2)
Foreign operation tax effect 0.6 1.0 1.5
Non-tax deductible items 1.4 1.4 1.8
Miscellaneous items -- 0.1 0.3
--------------------------------------
Effective rate 34.1% 33.2% 34.0%
================================================================================
</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
of each year are:
<TABLE>
<CAPTION>
(in thousands) 1999 1998
================================================================================
<S> <C> <C>
Deferred Tax Assets:
Accrued insurance $ 11,516 $ 8,903
Accrued compensation, principally
postretirement benefits, and
compensated absences 37,059 31,999
Accrued expenses, principally for reserves,
interest and warranty 9,005 9,216
Inventories, principally due to reserves for financial
reporting purposes and capitalization for tax
purposes 17,468 13,335
Accounts receivable, principally due to allowance
for doubtful accounts 5,828 5,541
Other 578 306
-----------------------
Total gross deferred tax assets 81,454 69,300
-----------------------
Deferred Tax Liabilities:
Accounts receivable, principally due to
accrual acceptance on contracts (18,938) (21,691)
Plant and equipment, principally due to
differences in depreciation (12,473) (20,639)
Intangible assets, principally due to different tax
and financial reporting bases and
amortization lives (62,032) (58,448)
Prepaid expenses, principally due to
overfunded pension plans (18,433) (17,228)
-----------------------
Total gross deferred tax liabilities (111,876) (118,006)
-----------------------
Net deferred tax liability (30,422) (48,706)
----------------------
Net current deferred tax asset 11,639 1,490
-----------------------
Net non-current deferred tax liability $ (42,061) $ (50,196)
================================================================================
</TABLE>
10. 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 $32,796,000, $22,648,000,
and $16,556,000 for 1999, 1998, and 1997, 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 $108 million as of
December 31, 1999 and are payable as follows (in millions): 2000-$24; 2001-$19;
2002-$14; 2003-$10; 2004-$7 and after 2005-$34.
11. Commitments and Contingent Liabilities:
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 and is anticipated to
be immaterial to the Company. In addition,
29
<PAGE> 32
several of the Company's subsidiaries are involved in ongoing remedial
activities at certain plant sites, in cooperation with regulatory agencies, and
appropriate reserves have been established.
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, results of operations or cash flows.
The Company has certain commitments with regard to its long-term notes and
debentures. The ratio of consolidated EBIT to consolidated interest, measured
for any four consecutive quarters, must not be less than 4 to 1. The Company's
current ratio of EBIT to consolidated interest is 12.5. The Company was in
compliance with certain restrictions on liens, guarantees and subsidiary debt at
December 31, 1999.
12. Operating Return on Operating Investment (Unaudited):
When companies are acquired, the Company'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 the Company'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, the Company does not include these asset values or
amortizable cost in the calculation of "After-tax Operating Return on
Investment" as shown in the unaudited charts on pages 2, 9, 13, 15, and 19.
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.
13. Disclosures About the Fair Value of Financial Instruments:
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. In addition, the
Company believes the long-term debt approximates fair value because present
long-term interest rates approximate the Company's actual interest rates.
14. Employee Benefit Plans:
The Company has many 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 Standards No. 132 "Employers' Disclosure About Pensions and
Other Postretirement Benefits," No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and No. 87 "Employers' Accounting
for Pensions," for U.S. defined benefit pension plans; foreign defined benefit
pension plans are not considered material.
<TABLE>
<CAPTION>
Pension Benefits Others Benefits
--------------------------------- --------------------------------
(in thousands) 1999 1998 1997 1999 1998 1997
================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic expense
Expected return on plan assets $ 21,455 $ 20,522 $ 18,715 $ -- $ -- $ --
Benefits earned during year (6,059) (5,829) (5,637) (572) (521) (513)
Interest accrued on benefit obligation (11,791) (12,113) (11,293) (1,559) (1,575) (1,588)
Amortization:
Prior service cost (766) (761) (426) 11 7 --
Actuarial gains (losses) (169) 4,256 1,230 77 82 96
Transition 1,257 1,268 1,268 -- -- --
Settlement and curtailment gain (loss) 122 (65) -- -- -- 144
--------------------------------------------------------------------
Net periodic (expense) credit $ 4,049 $ 7,278 $ 3,857 $ (2,043) $ (2,007) $ (1,861)
================================================================================================================
</TABLE>
30
<PAGE> 33
The funded status and resulting prepaid pension cost of U.S. defined benefit
plans for the years ended December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
Pension Benefits Others Benefits
----------------------- ----------------------
(in thousands) 1999 1998 1999 1998
=================================================================================================
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 176,068 $ 165,573 $ 24,221 $ 26,934
Benefits earned during the year 6,059 5,829 572 521
Interest cost 11,791 12,113 1,559 1,575
Amendments 235 3,655 (6) (7)
Actuarial loss (gain) (2,373) 7,402 (403) (2,816)
Settlement and curtailments (1,904) (65) -- --
Benefits paid (11,406) (18,439) (2,117) (1,986)
------------------------------------------------
Benefits obligation at end of year 178,470 176,068 23,826 24,221
------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year 229,930 247,310 -- --
Actual return on plan assets 39,351 914 -- --
Company contributions 1,139 -- 2,117 1,986
Settlements paid (2,114) 145 -- --
Benefits paid (11,406) (18,439) (2,117) (1,986)
------------------------------------------------
Fair value of plan assets at end of year 256,900 229,930 -- --
------------------------------------------------
Funded status 78,430 53,862 (23,826) (24,221)
Unrecognized actuarial (gain) (25,405) (4,767) (2,847) (2,479)
Unrecognized prior service cost 5,902 5,796 (38) (281)
Unrecognized transition (gain) (8,368) (9,473) -- --
------------------------------------------------
Prepaid (accrued) benefit cost $ 50,559 $ 45,418 $ (26,711) $ (26,981)
=================================================================================================
</TABLE>
The assumptions used in determining the above were as follows: a weighted
average discount rate of 7% (6.5% in 1998), an average wage increase of 5% (4%
in 1998) and an expected long-term rate of return on plan assets of 10%.
Approximately 91% (77% in 1998) 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) 1999 1998 1997
================================================================================
<S> <C> <C> <C>
Pension benefit obligation $ 17,483 $ 17,248 $ 17,819
Pension expense 6,875 3,992 3,495
================================================================================
</TABLE>
Pension cost for all world wide defined contribution and benefit plans was
$25,987,000 for 1999, $18,806,000 for 1998 and $20,026,000 for 1997.
For postretirement benefit measurement purposes a 5% to 11% annual rate of
increase in the per capita cost covered benefit (i.e., health care cost trend
rates) was assumed for 2000; the rates were assumed to decrease gradually to 5%
by the year 2010 and remain at that level thereafter. The health care cost trend
rate assumption has a significant effect on the amount reported. For example,
increasing (decreasing) the assumed health care cost trend rates by one
percentage point in each year would increase (decrease) the accumulated
post-retirement benefit obligation as of December 31, 1999 by $1,578,000
($1,141,000) and the net postretirement benefit cost for 1999 by approximately
$194,000 ($135,000).
15. Information about the Company's Operations in Different Geographic Areas:
In June 1997 the FASB issued Statements of Financial Accounting Standards No.
131 "Disclosures about Segments of an Enterprise and Related Information,"
effective in 1998. The segment information on page 20 and the following
information is disclosed as required by the statement:
<TABLE>
<CAPTION>
Revenues(1) Long-lived assets(2)
------------------------------------ -----------------------
For the years ended December 31, 1999 1998 1997 1999 1998
===============================================================================================
<S> <C> <C> <C> <C> <C>
United States $2,709,534 $2,497,770 $2,250,326 $1,969,553 $1,695,336
Europe 862,156 749,824 692,351 522,302 365,690
Other Americas 394,599 357,719 319,111 21,044 11,657
Total Asia 396,750 295,744 332,431 7,162 4,868
Rest of the World 83,381 76,609 75,349 317 318
--------------------------------------------------------------
$4,446,420 $3,977,666 $3,669,568 $2,520,378 $2,077,869
--------------------------------------------------------------
U.S. Exports $ 927,742 $ 840,021 $ 867,362
===============================================================================================
</TABLE>
(1) Revenues are attributed to countries based on location of customer.
(2) Long-lived assets are comprised of net property, plant and equipment;
intangible assets, net of amortization; other intangible assets; and other
assets and deferred charges.
31
<PAGE> 34
Dover Corporation and Subsidiaries
Independent Accountants' Report
To the Board of Directors and
Shareholders of Dover Corporation:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, accumulated comprehensive earnings,
retained earnings and cash flows present fairly, in all material respects, the
financial position of Dover Corporation and its subsidiaries at December 31,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 4, 2000
================================================================================
Dover Corporation and Subsidiaries
Quarterly Data
(unaudited) (in thousands except per share figures)
<TABLE>
<CAPTION>
Common Stock
Cash Dividends and Market Prices
Per Share Continuing(2) --------------------------------
Net Gross Net ----------------------------- Market Prices(1) Dividends
Quarter Sales(2) Profit(2) Earnings(2) Basic Diluted High Low Per Share
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999
First $ 969,755 $ 342,873 $ 69,220 $ .32 $ .32 $37.69 $29.31 $.105
Second 1,077,850 390,145 93,310 .44 .44 40.88 32.00 .105
Third 1,150,531 415,967 121,535 .58 .58 42.88 36.13 .115
Fourth 1,248,284 459,475 120,989 .60 .58 47.94 37.25 .115
---------- ---------- ---------- ------------- ------------- -----
$4,446,420 $1,608,460 $ 405,054 $ 1.94 $ 1.92 $.44
========== ========== ========== ============= ============= =====
1998
First $ 930,496 $ 332,124 $ 73,843 $ .33 $ .33 $39.69 $32.50 $.095
Second 1,009,772 358,915 84,708 .38 .38 39.94 33.25 .095
Third 1,018,532 369,061 85,781 .39 .38 35.31 25.50 .105
Fourth 1,018,866 366,185 82,065 .37 .36 36.94 26.88 .105
---------- ---------- ---------- ------------- ------------- -----
$3,977,666 $1,426,285 $ 326,397 $ 1.47 $ 1.45 $.40
=================================================================================== ===============================
</TABLE>
(1) As reported in the Wall Street Journal
(2) Represents results from continuing operations; excludes disposition of
Dover Elevator International market segment (see note 2).
32
<PAGE> 35
Dover Corporation and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity and Capital Resources:
Despite the record amount spent during 1999 on the Company's acquisition
program, $599.2 million, liquidity measures decreased only slightly when
compared to 1998 and the Company continues to be in excellent financial
condition.
The Company's current ratio decreased to 1.21 at December 31, 1999,
compared with 1.32 at December 31, 1998. The quick ratio (current assets net of
inventories, divided by current liabilities) decreased slightly to .73 at
December 31, 1999, compared with .75 at December 31, 1998.
At December 31, 1999, the Company had bank lines of $470.0 million, which
support its commercial paper. Additional bank lines of credit are available at
the Company's request. The Company's commercial paper is rated A-1 by Standard &
Poors and F-1 by Fitch Investor Services.
In January 1999 the Company received $1.16 billion from the sale of its
Dover Elevator International segment. The proceeds were used primarily to retire
short-term debt, fund acquisitions and stock repurchases. The net debt (notes
payable plus long-term debt and current maturities of long-term debt less cash
and equivalents and marketable securities) to total capital ratio decreased to
27.4% ($767.9 million) at December 31, 1999, compared with 33.1% ($946.9
million) at December 31, 1998. Long-term debt maturities for the four years 2000
to 2003 aggregate $7.5 million. Management is not aware of any potential
impairment to the Company's liquidity.
During 1999 the entire capital expenditure program ($130 million) was
financed internally as it is expected to be in 2000, when the Company plans
capital spending of $194 million.
The Company had an unrecognized actuarial gain of $25.4 million at
December 31, 1999 resulting from favorable stock market returns on assets net of
actuarial gains and losses on pension benefit obligation of its defined benefit
plans. These gains may be amortized over future periods and are not expected to
have a material effect on the Company or any of its segments.
As indicated by the Consolidated Statement of Cash Flows (page 23), net
cash from operating activities decreased to $461.3 million in 1999 from $488.1
million in 1998. This decrease was driven by increased accounts receivable as
sales increased more rapidly in the second half.
Net cash used in investment activities aggregated $1,334.3 million in 1999
compared with $753.3 million in 1998. Major differences from year to year
included increased acquisitions and stock repurchases.
Net cash used in financing activities was $226.6 million in 1999 compared
with net cash from financing activities of $268.0 in 1998. The principal
difference was a decrease of $147.1 million in long-term debt and notes payable
in 1999 compared to an increase of $338.2 million in 1998, a swing of $485.3
million.
At December 31, 1999, the Company's net property, plant, and equipment
amounted to $646.5 million compared with $572.0 million at the end of the
preceding year. Intangible assets, net of amortization increased by $374.6
million during 1999 as a result of goodwill arising from acquisitions.
The aggregate of current and deferred income tax liabilities increased
from $50.5 million at the beginning of the year to $431.3 million at year end.
This increase resulted primarily from income tax due in 2000 on the sale of the
Dover Elevator International segment.
Retained earnings increased from $1.993 billion at the beginning of 1999
to $2.830 billion at December 31, 1999. The $837 million increase results from
1999 net earnings of $929 million, less cash dividends which aggregated $92
million. Stockholders' equity increased from $1.911 billion to $2.039 billion.
The $128 million increase results mainly from the $837 million increase in
retained earnings offset by $627 million of stock repurchases.
Results of Operations 1999:
Results of operations are explained in detail in the stockholders' letter and
operations review, pages 2 through 19.
Year 2000:
The Company has experienced no substantive, let alone material Year 2000
problems to date. In the unlikely event that subsequent Year 2000 problems were
to occur the Company believes the contingency plans developed and completed in
1998 and 1999 would still be applicable. The Company believes any such problems
that might become evident will not be material to the Company.
During 1999 and 1998 the Company spent approximately $29 million and $27
million, respectively, on computer equipment, software, and non-employee
consultants. Most of these expenditures were for new systems and improved
functionality, but an undetermined amount also served to meet Year 2000
compliance needs. The Company does not separately track the internal cost
incurred for the Y2K project.
The above statement and similar statements, including estimated future
costs, timetables, contingency plans and remediation plans, and statements
containing the words "believes," "intends," "anticipates" and "expects" and
words of similar import, constitute "forward-looking" statements within the
meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E
of the Securities Exchange Act of 1934.
This "Year 2000 Plan" constitutes a "Year 2000 Readiness Disclosure"
within the meaning of the "Year 2000 Information and Readiness Disclosure Act."
1998 Compared With 1997:
During 1998 the Company raised $350 million in new long-term debt, repurchased
3.3 million Dover shares, raised dividends for the 38th consecutive year, and
invested $126 million in new capital equipment. The combined investment in
capital equipment, acquisitions and stock repurchases set a record by a wide
margin at $788 million. The comparable number in 1997 was $470 million.
Stand-alone acquisitions in 1998 -- those companies which report directly
to one of our independent subsidiary CEOs -- included Wilden Pump (Resources),
an inventor of the air-operated double-diaphragm pump, Quartzdyne (Resources),
the manufacturer of quartz-based pressure transducers used primarily in gas and
oil drilling, Wiseco (Diversified), producer of high-performance pistons used in
racing engines for autos, motorcycles, boats and snowmobiles and PDQ
(Industries), manufacturer of touchless car washing equipment.
The 10 add-on companies ranged in size from $3 million to $30 million in
sales, and accounted for $119 million of our total acquisition investment. Since
the Company began its more aggressive approach to add-on acquisitions in 1994,
it has completed 48 add-ons, representing an expenditure of $593 million.
33
<PAGE> 36
Dover Technologies
The decline in 1998 profits (and the even sharper decline in operational
profits) does not represent anything other than the periodic, unpredictable
cycles of capital spending within the electronic equipment industry. Operational
margins in this area of its business remained in double digits in a year in
which many electronics capital equipment producers struggled to survive. In
circuit board assembly and test equipment, earnings were off over 40% from the
1997 record year.
Imaje slightly exceeded the sales and profit records it set in 1997,
despite the expected decline in Asian industrial markets, where Imaje is a
particularly strong factor. This decline was offset by double-digit sales growth
in Europe and in the Americas. Technologies' electronic components companies
recorded a modest overall sales increase, though earnings were down 22% from
1997.
Dover Technologies' companies have continued to invest heavily so as to
remain at the leading edge of product technology, while cutting back in other
areas to reflect the reality of current volume. When one invests in a cyclical
market, one needs managers who can sort out priorities and respond appropriately
throughout the cycle. It helps, of course, to pick an industry where the secular
growth is solidly double-digit, as has been our experience in the electronic
circuit assembly/test area. Universal Instruments' 1997 profits, for example
were 10 times the level of 1979, when Dover bought the company. Last year, at
the bottom of the market cycle, they were "only" five times the 1979 level, but
more than double the previous market bottom.
Dover Industries
Dover Industries Increased its profits 20%, primarily as a result of internal
growth at the majority of its businesses, notably Tipper Tie, Heil Trailer Heil
Environmental, Marathon and DovaTech. This strong growth made Dover Industries
our largest profit producer in 1998. Eight companies in the segment earned more
than $12 million in 1998, with no single business earning as much as $30
million, reflecting Dover Industries' overall balance and the strong positions
of its individual companies. The operational margins for the 12 Industries
companies reached a record level of 17%, with nine companies earning more than
15%.
Heil Trailer achieved the distinction of being the largest single
contributor in Dover Industries. Five years after Dover's acquisition of Heil,
its two businesses -- Heil Trailer and Heil Environmental -- have more than
doubled earnings to over $50 million in 1998 on sales of approximately $350
million. Stronger markets, sharp focus on a few product areas, $36 million of
capital investment, and eight small add-on acquisitions contributed to this
success.
The three companies producing automotive service equipment -- Rotary Lift
(auto lifts), Chief Automotive (frame-measuring and straightening systems), and
PDQ (touchless car washing equipment) -- all had strong years in more difficult
markets, and contributed about 20% of Industries' operational profits.
Dover Diversified
This segment combined growth by acquisition with internal profit improvement to
achieve Dover's highest percentage gain in earnings. Segment profits were up
25%. Several years of struggle by new managers in new facilities to integrate
three formerly competitive businesses resulted in a resounding success for Hill
Phoenix in 1998. Sales reached record levels, market share improved and profits
gained more than 50%. The profit improvement program at A-C Compressor, and its
successful acquisition expansion in the U.S. aftermarket, allowed this company
as well to increase its earnings more than 50%. The market for Belvac's
can-making equipment contracted further. Weak demand experienced by many soft
drink and beer companies, particularly in developing markets, led can-makers to
delay planned capital spending projects. Belvac ended the year with a very low
backlog, and aftermarket business.
Profits on Sargent's submarine valve business declined as the result of
delayed placement of orders for the Navy's next nuclear submarine. However, the
addition of Sonic Industries, a leading manufacturer of specialty fasteners for
commercial aircraft, more than offset this decline, allowing Sargent's overall
profits to rise sharply.
Tranter, Waukesha and Mark Andy all continued their growth, with Tranter
and Waukesha setting new earnings records. Tranter maintained its position as
Diversified's largest earner (and Dover's third largest) as it restructured its
organization to worldwide product line responsibilities from the previous
geographical focus.
Dover Resources
Dover Resources, had a very mixed year, with excellent profit gains in some
areas almost offset by unavoidable declines in others. Profits from the Norris
companies dropped $12 million. Market demand for their products -- most of them
used for the artificial lift of hydrocarbon fluids -- has always been sensitive
to oil price levels.
Most other Resources companies, however, achieved earnings gains, led by
near doubling of profits at Ronningen-Petter and by substantial growth at OPW
Fueling Components and Duncan Industries. De-Sta-Co Industries (DSI) and
Blackmer, also had strong years on sales that topped $190 million. DSI
experienced some weakness in automotive demand for its automation devices and
Blackmer encountered soft markets for its petroleum and propane product lines.
Both companies had offsetting gains in other product areas and continued their
programs of small add-on acquisitions that broaden their product/market range.
Wilden and Quartzdyne, both acquired in the first half of the year, turned
in good financial results and strengthened their niche market leadership
positions. Acquisitions added $8 million to reported segment profits, which,
combined with the other companies' increases and declines, allowed Resources to
achieve a 10% overall profit gain.
34
<PAGE> 37
Dover Corporation and Subsidiaries
Directors and Officers
BOARD OF DIRECTORS
David H. Benson+
Non-Executive Director,
Kleinwort-Benson Group, Plc.
Jean-Pierre M. Ergas*(N)
Chairman and Chief Executive Officer,
BWAY Corporation
Roderick J. Fleming+
Chairman,
Robert Fleming Holdings, Limited
Kristiane C. Grahamn(N)
Private Investor
James L. Koley+*
Chairman, Koley,
Jessen, Daubman
& Rupiper, P.C.
Richard K. Lochridgen(N)
President,
Lochridge & Company, Inc.
John F. McNiff
Thomas L. Reece*
Gary L. Roubos+*
Director of various
corporations and former
Dover Chief Executive Officer
John E. Pomeroy
Michael B. Stubbs
Private Investor
OFFICERS
Thomas L. Reece
Chairman, President, and
Chief Executive Officer
John F. McNiff
Vice President, Finance
Robert G. Kuhbach
Vice President,
General Counsel
and Secretary
Robert A. Tyre
Vice President,
Corporate Development
George F. Meserole
Vice President, Controller
Charles R. Goulding
Vice President, Taxes
DOVER TECHNOLOGIES INTERNATIONAL, INC:
John E. Pomeroy
President and Chief
Executive Officer
DOVER
INDUSTRIES, INC:
Lewis E. Burns
President and Chief
Executive Officer
DOVER
DIVERSIFIED, INC:
Jerry W. Yochum
President and Chief
Executive Officer
DOVER
RESOURCES, INC:
Rudolf J. Herrmann
President and Chief
Executive Officer
STOCKHOLDER INFORMATION
TRANSFER AGENT/REGISTRAR:
Harris Trust & Savings Bank
Chicago, Illinois
Requests concerning stockholder records, issuance of stock certificates, and
distribution of our dividends and the IRS Form 1099 are most efficiently
answered by corresponding directly with Harris Trust at the following address:
HARRIS TRUST & SAVINGS BANK
311 West Monroe Street
Post Office Box A3504
Chicago, Illinois 60690
(312) 360-5197
Dover common stock is listed on the New York Stock Exchange with symbol DOV. The
common stock is also listed on The London Stock Exchange.
INDEPENDENT ACCOUNTANTS:
PRICEWATERHOUSECOOPERS LLP
New York, New York
EXECUTIVE OFFICES:
Dover Corporation
280 Park Avenue
New York, New York 10017-1292
(212) 922-1640
Internet: www.dovercorporation.com
* Members of Executive Committee
+ Members of Audit Committee
N Members of Compensation Committee
35
<PAGE> 38
Dover Corporation and Subsidiaries
11-Year Consolidated Summary of
Selected Financial Data for Continuing Operations(1)
<TABLE>
<CAPTION>
(dollars and shares in thousands except per share figures) 1999 1998 1997 1996
========================================================================================================================
<S> <C> <C> <C> <C>
Summary of Operations(1)
Net sales $4,446,420 3,977,666 3,669,568 3,215,573
Cost of sales 2,837,960 2,551,381 2,342,268 2,076,921
Selling and administrative expenses 973,049 894,325 807,793 686,101
Interest expense 53,401 60,746 46,163 41,663
Other income, net 32,994 17,432 18,930 91,221
Earnings before taxes 615,004 488,646 492,274 502,109
Income taxes 209,950 162,249 167,360 165,590
-----------------------------------------------------------
Net earnings $ 405,054 326,397 324,914 336,519
% of sales 9.1% 8.2% 8.9% 10.5%
Return on average equity 21.7%(2) 20.5% 23.2% 24.7%(2)
Net earnings per diluted common share $ 1.90(2) 1.45 1.43 1.24(2)
EBITACQ per diluted common share(3) $ 3.44(2) 2.71 2.70 2.16(2)
Dividends per common share $ .44 .40 .36 .32
-----------------------------------------------------------
Book value per common share $ 10.06 7.56 6.84 5.71
Depreciation and amortization $ 183,244 167,687 155,204 110,484
Capital expenditures $ 130,112 125,730 122,082 113,679
Acquisitions $ 599,171 556,019 261,460 281,711
Cash flow(4) $ 588,298 494,084 480,118 447,003
Weighted average number of diluted common
shares outstanding 210,679 224,386 226,815 230,518
Number of employees 26,584 23,314 21,814 19,213
-----------------------------------------------------------
Financial position at December 31
Working capital $ 276,697 314,777 292,195 237,429
Net property, plant and equipment $ 646,475 571,963 522,344 454,144
Total assets $4,131,940 3,382,393 2,898,971 2,602,841
Long-term debt $ 608,025 610,090 262,630 252,955
Common stockholders' equity $2,038,756 1,910,884 1,703,584 1,489,703
Common shares outstanding 202,629 220,407 222,596 225,060
Closing common stock price per share $ 45.38 36.63 36.13 25.50
-----------------------------------------------------------
Net earnings per diluted common share(5) $ 4.41 1.69 1.79 1.69
========================================================================================================================
</TABLE>
(1) Represents results from continuing operation; excludes disposition of
Dover Elevator International market segment. See Notes to Consolidated
Financial Statements, Note 2.
(2) 1999 and 1996 "Return on Average Equity" and earnings per common share
excludes gain from sale of businesses which amounted to 2 and 22 cents per
share respectively.
(3) Earnings before taxes, net interest and acquisition write-offs from
continuing operations per weighted average diluted common share.
DOVER RETURN ON AVERAGE EQUITY
(%)
[BAR GRAPHS OMITTED]
Year DOVER RETURN ON AVERAGE EQUITY
- ---- ------------------------------
1990 17.8%
91 16.7%
92 16.4%
93 20.8%
94 24.4%
95 27.9%
96 24.7%
97 23.2%
98 20.5%
99 21.3%
DOVER LONG TERM INVESTMENT
(in $ milliions)
Free Cash
Flow
Year Capital Expenditures Stock Repurchases Acquisitions
---- -------------------- ----------------- ------------
1990 $33 $80 $86
91 $37 $39 $3
92 $37 $85 $101
93 $39 $2 $312
94 $73 $30 $185
95 $92 $8 $323
96 $114 $63 $282
97 $122 $86 $261
98 $126 $106 $556
99 $130 $672 $599
36
<PAGE> 39
Dover Corporation and Subsidiaries
<TABLE>
<CAPTION>
(dollars and shares in thousands except per share figures) 1995 1994 1993 1992 1991
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
Summary of Operations(1)
Net sales 2,924,361 2,291,972 1,706,220 1,480,481 1,404,386
Cost of sales 1,936,944 1,527,442 1,129,127 998,587 976,001
Selling and administrative expenses 599,170 483,414 378,505 339,502 321,644
Interest expense 39,586 36,083 21,717 19,257 22,366
Other income, net 35,603 23,998 13,753 15,090 61,501
Earnings before taxes 384,264 269,030 190,625 138,225 145,877
Income taxes 126,696 90,185 66,153 46,851 52,559
------------------------------------------------------------------
Net earnings 257,568 178,845 124,472 91,374 93,318
% of sales 8.8% 7.8% 7.3% 6.2% 6.6%
Return on average equity 27.9% 24.4% 20.8% 16.4% 16.7%
Net earnings per diluted common share 1.13 .78 .54 .39 39
EBITACQ per diluted common share(3) 1.99 1.44 1.00 .75 .80
Dividends per common share .28 .25 .23 .22 .21
------------------------------------------------------------------
Book value per common share 4.56 3.56 2.88 2.37 2.44
Depreciation and amortization 92,186 81,316 62,921 63,773 71,000
Capital expenditures 91,719 72,709 39,420 37,304 36,671
Acquisitions 323,291 185,324 312,480 100,961 3,315
Cash flow(4) 349,754 260,161 187,393 155,147 164,319
Weighted average number of diluted common
shares outstanding 227,815 228,740 228,441 231,953 239,000
Number of employees 18,337 15,512 12,941 11,235 11,008
------------------------------------------------------------------
Financial position at December 31
Working capital 209,850 280,797 217,808 111,962 198,869
Net property, plant and equipment 384,981 292,698 235,310 201,046 193,655
Total assets 2,303,777 1,721,492 1,406,287 1,051,506 980,104
Long-term debt 255,600 253,587 252,065 980 1,393
Common stockholders' equity 1,227,706 1,011,230 883,240 810,026 828,277
Common shares outstanding 227,340 226,920 228,652 228,340 235,912
Closing common stock price per share 18.44 12.91 15.19 11.47 10.44
------------------------------------------------------------------
Net earnings per diluted common share(5) 1.22 .88 .69 .56 .54
===============================================================================================================================
<CAPTION>
(dollars and shares in thousands except per share figures) 1990 1989
===================================================================================
<S> <C> <C>
Summary of Operations(1)
Net sales 1,379,756 1,354,736
Cost of sales 908,925 917,515
Selling and administrative expenses 312,635 289,074
Interest expense 29,650 30,873
Other income, net 17,691 18,792
Earnings before taxes 146,237 136,065
Income taxes 50,740 46,169
-----------------------
Net earnings 95,497 89,896
% of sales 6.9% 6.6%
Return on average equity 17.8% 16.9%
Net earnings per diluted common share .39 .36
EBITACQ per diluted common share(3) .74 .72
Dividends per common share .19 .18
-----------------------
Book value per common share 2.25 2.14
Depreciation and amortization 64,839 64,954
Capital expenditures 32,931 36,835
Acquisitions 85,634 --
Cash flow(4) 160,336 154,850
Weighted average number of diluted common
shares outstanding 244,675 253,000
Number of employees 11,567 11,686
-----------------------
Financial position at December 31
Working capital 129,261 181,389
Net property, plant and equipment 209,862 217,281
Total assets 1,091,599 1,077,013
Long-term debt 7,465 13,136
Common stockholders' equity 787,787 746,682
Common shares outstanding 239,884 248,972
Closing common stock price per share 9.94 9.00
-----------------------
Net earnings per diluted common share(5) .64 .57
===================================================================================
</TABLE>
(4) Represent net earnings plus depreciation and amortization.
(5) Includes the discontinued operations of the elevator market segment and
gain on sale of businesses (Note 2).
Adjusted, where applicable, to give retroactive effect to the 2 for 1 stock
splits in 1995 and 1997.
FREE CASH FLOW+ FREE CASH FlOW AS
(in $ Millions) A Percentage Of Sales+
(%)
+ Free cash flow is operating cash generated after funding capital
expenditures, working capital and dividends, but excluding acquisitions,
net proceeds from dispositions and stock repurchases
*Excluding sale of business in 1999 and 1996.
[BAR GRAPHS OMITTED]
Three Year
Year Free Cash Flow Year Annual Moving Average
---- -------------- ---- ------ --------------
1990 $112 1990 8.1% 7.4%
91 $101 91 7.2% 8.8%
92 $74 92 5.0% 6.8%
93 $86 93 5.0% 5.7%
94 $179 94 7.8% 5.9%
95 $172 95 5.9% 6.2%
96 $250 96 7.8% 7.1%
97 $332 97 9.0% 7.6%
98 $289 98 7.3% 8.0%
99 $272 99 6.1% 7.5%
37
<PAGE> 40
[LOGO]
Dover Corporation
280 Park Avenue
New York, New York 10017-1292
