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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A No. 1
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For nine months ended September 30, 2000 Commission File No. 1-4018
DOVER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 53-0257888
(State of Incorporation) (I.R.S. Employer Identification No.)
280 Park Avenue, New York, NY 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 922-1640
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the Registrant's common stock as of the
close of the period covered by this report was 203,094,568.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(1) MATERIAL CHANGES IN CONSOLIDATED FINANCIAL CONDITION:
The Company's liquidity decreased during the first nine months of 2000 as
compared to the position at December 31, 1999. The taxes paid on the gain from
sale of the elevator business ($307 million), plus amounts invested in
acquisitions ($333 million) are the principal reasons for the decrease in
liquidity.
Working capital increased from $276.7 million at the end of last year to $343.6
million at September 30, 2000. Capital expenditures were $134.5 million for the
nine months compared to $86.9 million last year. The working capital increase
and capital expenditures were funded by internal cash flow.
At September 30, 2000, net debt (defined as long-term debt plus current
maturities on long-term debt plus notes payable less cash and equivalents and
marketable securities) of $1,257 million represented 35.2% of total capital.
This compares with 27.4% at December 31, 1999. The Company continues to be rated
A-1 by Standard & Poors and F-1 by Fitch IBCA. The Company believes its
significant free cash flow will enable it to fund internal growth and, together
with modest debt utilization, fund its acquisition program. The Company also
believes it will continue to maintain a solid credit profile. The Company filed
a shelf registration for the possible issuance of up to $1 billion in senior
debt securities on October 5th,, 2000. The Company believes this will provide
flexibility to issue public debt rapidly depending on market conditions or
financing needs.
The Company completed six add-on acquisitions during the quarter at a combined
cost of $91 million, bringing the total for the year to 18 acquisitions for a
total of $333 million.
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ACQUISITIONS - THIRD QUARTER 2000
DATE TYPE ACQUIRED COMPANIES LOCATION (NEAR) SEGMENT - OPERATING CO.
18-JUL STOCK SYFER TECHNOLOGY LTD. NORWICH, U.K. DTI NOVACAP
Manufacturer of specialty ceramic electronic components.
24-JUL ASSET CHESTERTON SYSTEM ONE PUMP DIVISION STONEHAM, MA DRI BLACKMER
Manufacturer of a high-end robust centrifugal pump line.
08-AUG STOCK KESSELTRONICS SYSTEMS CORPORATION HUDSON, QUEBEC DII PDQ
Developer of unique electronic products primarily for the Vehicle Wash Equipment Industry.
PERFORMANCE
01-SEP ASSET VERTEX PISTON S.P.A. REGGIO EMILA, ITALY DDI MOTORSPORTS
Manufacturer of cast aluminum pistons.
15-SEP ASSET NATIONAL COOLER CORPORATION SAN DIMAS, CA DDI HILL PHOENIX
Manufacturers of walk-in coolers, freezers and cold storage doors.
26-SEP STOCK PULLMASTER WINCH SURREY, VANCOUVER DRI TULSA WINCH
Manufacturer of hydraulic planetary winches ranging from 1,000 to 50,000 pounds linepull.
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ACQUISITIONS -- FIRST QUARTER 2000
DATE TYPE ACQUIRED COMPANIES LOCATION (NEAR) SEGMENT -- OPERATING CO.
1-JAN STOCK SURESEAL, INC. MINERAL PT, MO. DRI CIVACON/KNAPPCO
Supplier of butterfly valves, actuators and other components used in piping systems, pneumatic
conveying, transportation and industrial applications.
29-FEB STOCK YAKIMA WIRE WORKS, INC. YAKIMA, WA. DDI SWF
Manufactures bagging machinery for the packaging of soft perishable produce.
8-MAR STOCK TRITON SYSTEMS, INC. LONG BEACH, MS. DII
Manufactures cash-dispensing ATMs for off-premise locations, including ATM management software.
8-MAR STOCK PRIME YIELD SYSTEMS, INC. ST. PAUL, MN. DTI EVERET CHARLES
Manufactures semiconductor test sockets and distributes probe cards.
30-MAR ASSET HYDRO-CAM ENGINEERING COMPANY TROY, MI. DRI DE-STA-CO MFG.
Manufactures stamping dies for the electric motor, generator, transformer and automotive markets.
ACQUISITIONS -- SECOND QUARTER 2000
DATE TYPE ACQUIRED COMPANIES LOCATION (NEAR) SEGMENT -- OPERATING CO.
10-APR STOCK GREER COMPANY SANTA ANA, CA. DRI TULSA WINCH
Manufactures systems that continuously monitor the load and configuration of mobile cranes.
12-APR ASSET HOEGGER ALPINA (HA) GOSSAU, SWITZERLAND DII TIPPER TIE
Manufactures machinery, clips and loops primarily serving the food processing industry.
24-MAY STOCK HYDROMOTION, INC. SPRING CITY, PA. DII TEXAS HYDRAULICS
Designs and manufactures hydraulic swivels, electric slip rings and telescopic waterway assemblies.
31-MAY STOCK SALWASSER MANUFACTURING COMPANY, INC. REEDLEY, CA. DDI SWF
Manufactures packaging machinery in automation of case packing for paper, dry goods and toiletries
markets.
8-JUN ASSET PROVACON, INC. GONZALES, LA. DRI MIDLAND
Designs & manufactures specialty valves and fitting for the transfer of hazardous fluids in
petro-chemical plants.
23-JUN STOCK C & H MANUFACTURING, INC. ONTARIO, CA. DDI SARGENT
Manufactures specialty fasteners, primarily for use in aircraft landing gears.
30-JUN STOCK GROUPE AOUSTIN NANTERRE, FRANCE DRI RONNINGEN-PETTER
Manufactures high volume, turnkey liquid filtration systems and specialty high-viscosity
mixers-extruders.
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The profit impact of these acquisitions in 2000 will be small due to acquisition
write-offs, and imputed financing costs. Acquisitions completed in the last
twelve months (October 1999-September 2000) added $101 million in sales and $15
million in operational profit in the third quarter, bringing the total for nine
months to $240 million in sales and $40 million in operational profit.
(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:
The company earned $.67 per diluted share in the third quarter ended September
30, 2000, excluding two non-recurring items. This was an increase of 26% from
the $.53 per diluted share earned in the comparable quarter last year, excluding
non-recurring items. The company earned $1.90 per diluted share for the nine
months, which was an increase of 46% from the comparable prior year $1.30 per
share, excluding non-recurring items.
After taking into account a $.04 gain on the sale of 43% of an equity investment
and a non-recurring charge to discontinued operations of $ .07 per diluted
share, the Company earned $.64 ($1.88 year-to-date) per diluted share
outstanding. The $.07 per diluted share charge ($13.6 million after tax) is a
result of finalizing the purchase price adjustment on the sale of the Dover
Elevator International segment in January 1999 (which generated a $524 million
after-tax or $2.49 per diluted share gain in that quarter).
Operating income for the third quarter was $265.3 million, up 27% from $208.9
million last year. On a year-to-date basis operating income increased 42% to
$755.2 million from $530.9 last year.
Net income from continuing operations for the third quarter was $135.5 million,
up 23% from $110.4 million in net income from continuing operations last year,
excluding the $ 8.9 million after tax gain on the equity investment sale this
year, and the $11.1 million after-tax ( or $.05 per share) non-recurring gain
last year. On a year-to-date basis net income increased 42% to $390.6 million
from $275.8 in the comparable period last year.
Sales in the quarter were a record $1.39 billion, up 21% from $1.15 billion last
year. On a year to date basis sales were $4.02 billion, up 26% from $3.20
billion last year.
The Company also reports its pretax earnings on an EBITACQ basis (Earnings
Before Interest, Taxes, and non-cash charges arising from purchase accounting
for acquisitions). Third quarter EBITACQ of $252 million was 28% higher than
prior year. The year-to-date EBITACQ of $722 million was 44% higher than prior
year.
In 1997, Dover Technologies made a small investment in Bookham Technology PLC
for strategic business reasons. Bookham (BKHM: NASDAQ) went public in April of
this year. During the second quarter, Dover participated in a secondary
offering, and the resultant sale of 313,043 Bookham shares resulted in a gain of
$13.7 million, or $8.9 million after tax. To reflect it's remaining investment
of 406,957 shares, Dover will report as part of its Statement of Comprehensive
Income a year-to-date Unrealized Gain of $ 10.5 million after tax.
The third quarter strong performance was led by Dover Technologies, where income
increased 57% from the third quarter last year (110% year-to-date). Dover
Resources and Dover Industries earnings were also up, by 18% and 8%,
respectively (24% and 15%, on a year-to-date basis), while Dover Diversified
experienced a 2% quarterly earnings decline with a 15% increase year-to-date..
DOVER TECHNOLOGIES:
Sales in the third quarter increased 41% to $565.0 million, from $400.3 million
last year, and segment profit increased 57% to $116.0 million, from $74.0
million last year. Segment bookings at $591.9 million were 5% greater than
shipments. Year-to-date results were a 52% sales increase to $1,558.7 million
from $1,023.3 million; profit increased 110% to $311.2 from $147.9 million;
bookings at $1,782.2 million were 14% greater than shipments.
Technologies' Specialty Electronic Components (SEC) business has increased
production dramatically in response to continued very strong demand from the
data transmission, telecommunications, and networking markets it serves. This
business, which supplies high-value components, precision devices, and
multifunction, integrated assemblies to OEM customers in these markets, is
expanding capacity to address expected continued growth opportunities. SEC's
sales in the quarter were $147.5 million, up 75% from the
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prior period, profits more than doubled to $29.6 million, and bookings were up
122% to $204 million, another new record. The quarter's book-to-bill ratio was
1.39 and the year-to date book-to-bill is 1.5. On a year-to-date basis sales
were up 58%, to $ 372 million, bookings were up 113% to $ 550 million, and
earnings were up 112% to $ 71.2 million.
Technologies' Circuit Board Assembly and Test (CBAT) sales were up 38% to $ 366
million from last year, bookings were up 23% to $338 million, and earnings were
up 57% to $80.5 million. These results represent the sixth quarter in a row that
CBAT has shown improvement from the prior year's comparable quarter, and the
seventh in a string of quarter-to quarter improvements. On a year-to-date basis
sales were up 60%, to $ 1,037 million, bookings were up 56% to $ 1,081 million,
and earnings were up 125% to $ 216.3 million. Sales have increased 110% and
earnings 400% since the cyclical trough in this market in the first quarter of
1999. Operating margins in the quarter increased to 22% (21% year-to-date). The
book-to bill ratio in the quarter slipped to .92 (1.04 year-to-date), and was
slightly lower at the largest CBAT company, Universal Instruments. Underlying
demand for electronics (especially in the telecommunications industry), and thus
demand for CBAT's production equipment for high volume electronics
manufacturing, is expected to continue to grow. However, it appears that some
customers are experiencing difficulty in managing the rate of their recent
capacity expansions, and some have reported components shortages which have also
dampened their enthusiasm for adding production capacity at the recent pace.
Dover believes that while both of these Technologies businesses are affected by
the electronics manufacturing market, the SEC business will experience less
variability in sales and earnings than the CBAT business, which is more
dependent on its customers' capital absorption capacity.
Technologies' industrial marking business, Imaje, also continued its steady
growth, with earnings up over 18% on a 15% sales increase, as measured in French
Francs. On a year-to-date basis earnings were up over 30% on a 21% sales
increase.
DOVER INDUSTRIES:
Sales in the third quarter increased 8% to $314.0 million from $291.9 million
last year, and segment earnings also increased 8% from $45.1 million to $48.8
million. Acquisitions made in the last year contributed all of the sales and
earnings increase. Segment bookings in the quarter were up 7% to $309 million
and the book-to-bill ratio was 0.99. Year-to-date results were a 11% sales
increase to $939.4 million from $844.5 million; profit increased 15% to $150.7,
from $131.1 million; bookings at $909.0 million were 3% less than shipments.
Sales at Heil Environmental, Industries' largest company, were up, with
excellent operating leverage, partly due to shipments on a large contract with
New York City. However, sales and earnings declines at Heil Trailer, the liquid
and dry bulk tank trailer company, more than offset these results, with
continued comparative weakness in its markets, particularly in dry bulk.
Industries' automotive service equipment businesses, Rotary Lift and Chief,
turned in very favorable comparisons to the prior year. PDQ, the manufacturer of
touch-less car wash systems, whose comparisons had suffered in the second
quarter from the adverse impact of new product introductions on existing product
sales, strongly contributed to the prior year comparisons this quarter and
year-to date.
TipperTie/Technopack, while solidly profitable and generating high returns, hurt
the quarterly and year - to date comparisons and is focused on cost reductions,
as well as product line and marketing organization rationalization.
The food service equipment businesses, Groen and Randell, showed double-digit
earnings increases on essentially flat sales in a very competitive market.
DOVER DIVERSIFIED:
Sales in the third quarter increased 7% to $286.8 million from $268.3 million
last year, and segment income declined 2% to $39.3 million from $40.1 million.
Segment bookings in the quarter were up 22% to $289 million and the book-to-
bill was 1.01. Acquisitions in the last year, particularly Crenlo, were
meaningful contributors to both sales and earnings. Year-to-date results were a
14% sales increase to $866.7 million from $759.6 million; profit increased 15%
to $117.0 from $102.2 million; bookings at $893.5 million were 3% greater than
shipments.
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Hill Phoenix, the commercial refrigeration systems and display case company, and
Diversified's largest sales and second largest profit business, has experienced
double-digit sales declines and margin erosion as capital spending in the
supermarket and retail grocery industry has slowed due to industry
consolidation, and as some key accounts have slowed store expansions.
AC Compressor, serving the process industries, is a long lead-time business.
While results were comparable to last year-to-date and though prospects of a
stronger market are evident, AC experienced a weaker quarter due to weak
bookings earlier in the year. Sargent's results, in its Aerospace components
business, have felt the effect of lower OEM airframe and aftermarket overhaul
demand.
Partially offsetting these negatives, Tranter, Diversified's most profitable
company, had improved margins on modest sales growth for both the quarter and
year to date. And as in prior quarters this year, the turnaround at Belvac from
marginal profitability last year to high margins this year, has been a major
contributor to Diversified's favorable earnings comparisons.
DOVER RESOURCES:
Sales in the third quarter increased to $226.3 million from $191.4 million last
year, or 18%, and segment income also increased 18%, from $24.7 million to $29.0
million. Segment bookings in the quarter were up 9% to $217 million and the
book-to-bill ratio was 0.96. Year-to-date sales increased 15% to $662.0 million
from $574.7 million; profit increased 24% to $94.5 million from $76.5 million;
bookings at $667.4 million were 1% greater than shipments.
The Petroleum Equipment Group is operating at record levels. C. Lee Cook,
influenced by the gas gathering and transmission markets, is also sharply up
from last year. Quartzdyne is now benefiting from increased drilling activity in
the "measurement while drilling" market.
OPW Fueling Components' sales improvement over the prior year's third quarter
and the second quarter of this year reached low double digits, with substantial
earnings leverage, but year-to-date results are still below the prior year
because of pressure on customers profitability due to high gas prices and the
impact on capital spending caused by the consolidation of several large
customers. OPW Fluid Transfer Group is well ahead of last year's restructuring
and strike-impacted performance in both the quarter and year-to-date
comparisons. Tulsa Winch reported strong results due to both internal growth and
acquisitions. Companies serving the process industries (Wilden, Blackmer,
Ronninger - Petter) have faced an unsettled market this year, and were up 16% in
sales but down 6% in earnings compared to the same quarter the prior year. On a
year-to-date basis earnings were flat on a 5% sales increase.
OUTLOOK:
At the end of the second quarter we said we were on a track that could lead to a
full year earnings per share gain of as much as 35%. Although the CBAT
businesses' series of sequential quarter improvements may well be broken in the
fourth quarter, with the strength in the SEC businesses, and strong prospects
for improvement from the third quarter at several of the Companies in the other
Subsidiaries, we still believe that is possible.
Special Notes Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q, the Annual Report on Form 10-K and the
documents that are incorporated by reference, particularly sections of any
report under the headings "Outlook" or "Management's Discussion and Analysis",
contain forward-looking statements within the meaning of the Securities Act of
1933, as amended, and the Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995. Such statements relate to, among other
things, industries in which the Company operates, the U.S. and global economies,
earnings, cash flow and operating improvements and may be indicated by words or
phrases such as "anticipates", "supports", "plans",
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"projects," "expects," "should," "hope", "forecast," "Dover believes",
"management is of the opinion" and similar words or phrases. Such statements may
also be made by management orally. Forward-looking statements are subject to
inherent uncertainties and risks, including among others: increasing price and
product/service competition by foreign and domestic competitors, including new
entrants; technological developments and changes; the ability to continue to
introduce competitive new products and services on a timely, cost effective
basis; the mix of products/services; the achievement of lower costs and
expenses; domestic and foreign governmental and public policy changes including
environmental regulations; protection and validity of patent and other
intellectual property rights; the continued success of the Company's acquisition
program; the cyclical nature of the Company's business; and the outcome of
pending and future litigation and governmental proceedings. In addition, such
statements could be affected by general industry and market conditions and
growth rates, and general domestic and international economic conditions
including interest rate and currency exchange rate fluctuations. In light of
these risks and uncertainties, actual events and results may vary significantly
from those included in or contemplated or implied by such statements. Readers
are cautioned not to place undue reliance on such forward-looking statements.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DOVER CORPORATION
Date: February 2, 2001 /s/ David S. Smith
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David S, Smith, Chief Financial Officer,
Vice President, Finance
Date: February 2, 2001 /s/ George F. Meserole
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George F. Meserole, Chief Accounting
Officer, Vice President and Controller