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[GRAPHIC OF PHOTOGRAPHIC COLLAGE]
Our Goal is
[DOVER LOGO]
Annual Report 2000
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DOVER'S BUSINESS PHILOSOPHY
Our goal is to be the leader in every market we serve, to the benefit of our
customers and our shareholders. To achieve and maintain market leadership, we
manage according to this consistent philosophy:
- Perceive customers' real needs and provide products and services to
meet or exceed them,
- Provide better products and services than competitors,
- Invest to maintain competitive advantage, and
- Expect a fair price for the extra value we add.
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Success demands a constant focus on product quality and innovation, and
exceptional customer service. It requires a long-term orientation.
Dover enhances its market leadership and shareholder value by acquiring
like-minded businesses that strengthen our existing market positions and offer
new markets.
Intrinsic to Dover's success is a decentralized management style that gives
the maximum possible autonomy to the talented people who manage our companies.
Dover will continue to adapt to market conditions, but its philosophy,
which has served shareholders well for 45 years, will not change.
TABLE OF CONTENTS INSIDE FRONT COVER Dover Business Philosophy FOLDOUT Company
Listing 2 Comparative Highlights 3 Letter to our
Shareholders 6 Dover Technologies 10 Dover Industries 14
Dover Diversified 18 Dover Resources 22 Corporate Financial
Overview 24 Financial Statements 37 Management's Discussion
40 11-Year Consolidated Summary 42 Quarterly Data 42 Common
Stock Cash Dividends and Market Prices 42 Directors and
Officers INSIDE BACK COVER Stockholder Information
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...TO BE THE LEADER IN EVERY MARKET WE SERVE
[GRAPHIC OF ARROW AND 4 BOXES]
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TECHNOLOGIES
[PIE CHARTS]
DTI SALES 39%
DTI OPERATIONAL INCOME 43%
1 DEK PRINTING MACHINES
IAN P. MCEVOY, Managing Director
Products: Screen printers for surface mount printed circuit boards and
semiconductors.
www.dek.com
1 DOW-KEY MICROWAVE
DAVID W. WIGHTMAN, President
Products: Microwave/R.F. switches.
www.dowkey.com
1 DT MAGNETICS
WM. F. BARRY HEGARTY, President
Products: Custom transformer and inductor magnetics.
www.dtmagnetics.com
1 EVERETT CHARLES TECHNOLOGIES
DAVID R. VAN LOAN, President
Products: Spring probes, test equipment, test fixtures for printed circuit
boards and semiconductors.
www.ectinfo.com
2 IMAJE
OMAR KERBAGE, President
Products: continuous inkjet printers, consumables.
www.imaje.com
1 K&L MICROWAVE
LOUIS ABBAGNARO, President
Products: Microwave/R.F. filters.
www.klmicrowave.com
2 NOVACAP
DR. ANDRE P. GALLIATH, President
Products: Application specific multilayer capacitors.
www.novacap.com
1 OK INTERNATIONAL
MICHAEL J. GOULDSMITH, President
Products: Bench top tools for printed circuit board assembly and repair.
www.okinternational.com
1 QUADRANT TECHNOLOGIES
TERENCE W. EDE, President
ARCOM WIRELESS INC.
Products: Microwave transceivers.
COMMUNICATION TECHNIQUES, INC.
Products: Microwave frequency sources.
DIELECTRIC LABORATORIES, INC.
Products: High frequency capacitors.
VECTRON INTERNATIONAL, INC.
Products: Precision crystal devices.
www.vectron.com
3 UNIVERSAL INSTRUMENTS CORPORATION*
GERHARD D. MEESE, President
Products: Automated assembly equipment for printed circuit boards.
ALPHASEM
Products: Semiconductor assembly equipment.
www.uic.com
2 VITRONICS SOLTEC*
JEROEN SCHMITS, President
Products: Automated soldering equipment for printed circuit boards.
www.vitronics-soltec.com
INDUSTRIES
[PIE CHARTS]
DII SALES 23%
DII OPERATIONAL INCOME 22%
1 CHIEF AUTOMOTIVE SYSTEMS
DANIEL E. FALTIN, President
Products: Auto collision measuring and repair systems.
www.chiefautomotive.com
2 DOVATECH
A. PATRICK CUNNINGHAM, President
Products: Welding torches, laser power sources, chillers and consumables.
www.dovatech.com
1 GROEN
RONALD A. ROSATI, President
Products: Commercial food service cooking equipment.
www.groen.com
1 HEIL ENVIRONMENTAL
GLENN M. CHAMBERS, President
Products: Refuse collection vehicles and dump bodies.
www.heilco.com
1 HEIL TRAILER INTERNATIONAL
ROBERT A. FOSTER, President
Products: Liquid and dry bulk tank trailers, trucks and intermodal
containers, and other specialty trailers.
www.heiltrailer.com
1 MARATHON EQUIPMENT
EDWARD A. FURNARI, President
Products: Waste compactors, conveyors, balers, hoists, shredders, grinders,
transfer stations.
www.marathonequipment.com
1 PDQ
CHARLES R. LIEB, President
Products: Touchless car wash equipment.
www.pdqinc.com
2 RANDELL
LYNN L. BAY, President
Products: Commercial refrigeration; Food service preparation and holding
equipment.
www.randell.com
1 ROTARY LIFT
MICHAEL G. JOBE, President
Products: Automotive lifts and alignment racks.
www.rotarylift.com
1 SOMERO
JOHN T. COONEY, President
Products: Laser controlled concrete floor spreading equipment.
www.somero.com
1 TEXAS HYDRAULICS
VERNON E. PONTES, President
Products: Engineered hydraulic cylinders.
www.texashyd.com
1 TIPPER TIE/TECHNOPACK
DAVID PIERCE, President
Products: Clip closures, packaging systems, netting, and wire products.
www.tippertie.com
2 TRITON SYSTEMS
ERNEST L. BURDETTE, President
Products: Off-premise ATMs.
www.tritonatm.com
[GRAPHIC OF PHOTOGRAPHIC COLLAGE]
Numbers indicate position in served markets, North America, or worldwide when
noted by *. ** Position for compact brazed heat exchangers and transformer
radiators worldwide; gasketed plate/frame and welded heat exchangers in North
America. *** Position for submarine product line.
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DIVERSIFIED
[PIE CHARTS]
DDI SALES 22%
DDI OPERATIONAL INCOME 20%
2 A-C COMPRESSOR
THOMAS E. BELL, President
Products: Centrifugal, oil-free screw, and rotary compressors; turbine and
compressor re-rate and repair.
www.accompressor.com
1 BELVAC*
E. JAMES SCHNEIDERS, President
Products: Can necking, trimming, shaping equipment; capping machinery;
plastic container machinery.
www.belvac.com
1 CRENLO
RANDAL FREDERICK, President
Products: Construction and agriculture operator cabs; electronic
enclosures.
www.crenlo.com
2 HILL PHOENIX
RALPH COPPOLA, President
Products: Commercial refrigeration systems; refrigerated display cases;
walk-in coolers; electrical distribution products.
www.hillphoenix.com
3 Langbein & Engelbracht
JOST WEIMER, Managing Director
Products: Paint systems; environmental control equipment; air handling
systems.
www.l-e.de.com
1 MARK ANDY*
JOHN EULICH, President
Products: Narrow web printing presses; pressroom automation equipment;
offset printing equipment.
www.markandy.com
1 PERFORMANCE MOTORSPORTS
JAMES A. JOHNSON, President
Products: High performance pistons; engine components.
1 SARGENT***
DONALD C. TARQUIN, President
Products: Submarine fluid controls; aircraft hydraulic controls;
self-lubricating bearings; aircraft fasteners; autoclaves.
www.sargentcontrols.com
1 SWF
BRENT L. PARKER, President
Products: Machines for the forming and packing of corrugated boxes.
www.swfmachinery.com
1 Tranter**
JACK DITTERLINE, President
Products: Gasketed plate/frame, compact brazed heat exchangers; transformer
radiators.
www.tranter.com
1 Waukesha Bearings
DONALD A. FANCHER, President
Products: Fluid film bearings; torque and tension tools; manipulators and
isolators.
www.waukbearing.com
RESOURCES
[PIE CHARTS]
DRI SALES 16%
DRI OPERATIONAL INCOME 15%
1 BLACKMER
RAYMOND PILCH, President
Products: Rotary vane, progressing cavity, eccentric disk, and peristaltic
positive displacement pumps, ANSI centrifugal pumps, vane and screw type
mobile compressors and reciprocating piston stationary gas compressors.
www.blackmer.com
1 C. LEE COOK
DAVID JACKSON, President
Products: Piston rings, packings for gas compressors and aerospace sealing
applications; Compressor Components compressor rods, pistons, valves,
vanes, and repair services; Cook Manley compressor valves and related
plastics.
www.cleecook.com
1 DE-STA-CO INDUSTRIES
JON H. SIMPSON, President
Products: Toggle clamps and pneumatic and hydraulic workholding devices;
Factory automation components and assemblies.
www.destaco.com
1 DE-STA-CO MANUFACTURING*
ROBERT LEISURE, President
Products: Reed valves for compressors, stamped precision components, and
specialized aluminum tubular products.
www.destacomanufacturing.com
1 DUNCAN PARKING SYSTEMS
RICHARD FARRELL, President
Products: Parking control products and systems.
www.duncanindustries.com
1 HYDRO SYSTEMS COMPANY
GARY E. GOLUB, President
Products: Cleaning chemical proportioning systems; Nova electronically
controlled systems.
www.hydrosystemsco.com
1 OPW FLUID TRANSFER GROUP
JOHN F. ANDERSON, President
CIVACON/KNAPPCO/SURE SEAL
RICK POTTER, President
Products: Tank truck valves and electronic monitoring systems; Valves, and
manhole access devices for truck, rail, and industrial applications;
Valves, fittings, and aeration products for transportation and industrial
applications.
www.civacon.com
MIDLAND MANUFACTURING
John F. Anderson, Acting President
Products: Tank car and barge valves, safety valves, and liquid level
measuring devices; Provacon/Beltech process valves and accessories.
www.midlandmfg.net
OPW ENGINEERED SYSTEMS
TIMOTHY L. WARNING, President
Products: Loading arms, swivels, sight flow indicators, ISO rings,
Kamloks(R) and Kamvaloks(R).
www.opw-es.com
1 OPW FUELING COMPONENTS*
DAVID J. ROPP, President
Products: Gasoline nozzles, fittings, valves, and environmental protection
products and tire inflation equipment; PetroVend fuel management and key
card sytems, tank monitors.
www.opw-fc.com
1 PETROLEUM EQUIPMENT GROUP
JAMES R. KOSH, President
JAMES L. MITCHELL, President
Alberta Oil Tool (Canada)* Products: Sucker rods, fittings, valves and
controls; Norriseal process valves and instrumentation systems.
www.aot.ab.ca
NORRIS*
Products: Sucker rods, couplings, well servicing equipment, polished rods;
Ferguson-Beauregard/Logic Controls oil and gas production systems.
www.norrisrods.com
1 QUARTZDYNE*
ROBERT B. WIGGINS, President
Products: Quartz based pressure transducers.
www.quartzdyne.com
1 RONNINGEN-PETTER*
PETER SCOVIC, President
Products: Liquid pressure filter systems, solids recovery systems, and
high-viscosity mixer-extruder systems.
www.ronningen-petter.com
1 TULSA WINCH
STEVEN C. ODEN, President
Products: Tulsa Winch, DP, and Pullmaster worm and planetary gear winches,
speed reducers, swing drives, wheel drives; Greer electronic load
monitoring systems.
www.tulsawinch.com
1 WILDEN PUMP & ENGINEERING CO.
JOHN D. ALLEN, President/COO
Bruce J. Bartells, CEO/CFO
Products: air operated double diaphragm pumps.
www.wildenpump.com
1 WITTEMANN
WILLIAM GEIGER, President
Products: CO2 gas generation and recovery systems, merchant CO2 and
industrial refrigeration systems.
www.wittemann.com
[GRAPHIC OF PHOTOGRAPHIC COLLAGE]
Numbers indicate position in served markets, North America, or worldwide when
noted by *. ** Position for compact brazed heat exchangers and transformer
radiators worldwide; gasketed plate/frame and welded heat exchangers in North
America. *** Position for submarine product line.
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Dover Corporation and Subsidiaries
2000 COMPARATIVE HIGHLIGHTS
(unaudited)
Increase 2000
(Dollars in thousands except per share figures) 2000 1999 1998 versus 1999
- -------------------------------------------------------------------------------------------------------------------
Net sales $5,400,717 $4,446,420 $3,977,666 21%
Earnings before taxes $ 772,315 $ 615,004 $ 488,646 26%
Net earnings $ 533,207 $ 405,054 $ 326,397 32%
Per common share
Continuing net earnings per diluted share $ 2.57 $ 1.90 $ 1.45 35%
Dividends $ .48 $ .44 $ .40 9%
Capital expenditures $ 197,768 $ 130,112 $ 125,730
Acquisitions $ 506,251 $ 599,171 $ 556,019
Purchase of treasury stock $ 5,874 $ 671,670 $ 106,304
Cash flow $ 736,591 $ 588,298 $ 494,084
Return on average equity 23.5% 21.7% 20.5%
Number of employees 29,489 26,584 23,314
- -------------------------------------------------------------------------------------------------------------------
"Comparative Highlights" represents results from continuing operations; 1998
excludes disposition of Dover Elevator International market segment.
"Return on average equity" and "Continuing net earnings per diluted share"
excludes gains and losses from sale of businesses and equity investments.
"Cash Flow"represents net earnings plus depreciation and amortization.
See Notes to Consolidated Financial Statements.
DILUTED EARNINGS PER SHARE
[LINE GRAPH]
YEAR EPS
95 $ 1.13
96* $ 1.24
97 $ 1.43
98 $ 1.45
99* $ 1.90
00* $ 2.57
*Excluding gains on sale of businesses in 2000, 1999 and 1996
PROFITABILITY MEASURES - IN PERCENT
[LINE GRAPH]
YEAR AFTER-TAX OPERATING RETURN ON INVESTMENT RETURN ON STOCKHOLDER'S EQUITY
---- ---------------------------------------- ------------------------------
95 33 28
96* 36 25
97 38 23
98 35 20
99* 37 22
00* 42 24
(Acquisition adjustments have been excluded, see page 34, footnote 12 for
explanation.)
*Excluding gains on sale of businesses in 2000, 1999 and 1996
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LETTER TO OUR SHAREHOLDERS
Dover turned in a robust, and characteristic, performance in this first year of
the new century and millennium, driven primarily by explosive growth in the
electronics sector. All four of Dover's business segments reported record sales
and three had record earnings. The results were impressive: sales $5.4 billion,
up 21%; net earnings, $533.2 million, up 32%; earnings per share $2.57, up 35%;
return on average equity 23.5%, up one and eight tenths of a point.
Those are exceptionally strong numbers in a year when Dover, like other
manufacturers, encountered flat or declining markets for many of its products.
Consolidation at the customer level affected purchasing dynamics in some
industries our companies serve, such as oil and retail groceries. The
combination of higher interest rates and higher fuel costs also had a dampening
impact on some of our businesses. The slowing of the U.S. economy, coupled with
the sluggish recovery of some portions of the oil and gas markets and
uncertainty in the global electronics market, suggests that 2001 will be an even
more challenging year.
I am often asked, particularly in the current climate: Can Dover
continue to generate the strong, sustained growth that has rewarded our
stockholders so well? I believe it can, because of the kind of company Dover is,
and because of the approach and values that have guided us since its founding
nearly a half century ago. Dover's basic business proposition is as viable today
as it was then - find and acquire financially strong, niche manufacturing
businesses that are managed well by people who will stay on and continue to
manage them without a lot of corporate oversight. Improve efficiency to increase
profitability and cash flow. Build market leadership with high value-added
products that deliver for the customer.
Contributing to the success of this approach are several
characteristics that make Dover different. First, we truly believe that the most
important job is that of the operating company president. We vest the maximum
possible authority and responsibility at that level. We expect our presidents to
run their companies as if they own them, and that is a powerful tool for
focusing top management attention. They typically operate conservatively, and
set high hurdle rates for themselves and their businesses. Second, we don't have
a career path as such within Dover. Although people do move in Dover from time
to time, we encourage people to think of a career within an operating company,
not at the corporate level. Third, we have a results-based reward system. We
expect people to operate effectively, and we emphasize mutual trust. But we
compensate based on actual results, not results against plan.
Our decentralized approach has enabled Dover to succeed in a wide range
of industries. Our resulting financial strength and the reduced volatility
afforded by our diversity have rewarded stockholders well.
Our goals have evolved, but we aim for a 15% pre-tax return on sales, a
25% after-tax return on investment, and a 15% compound annual growth rate for
earnings, achieved over time by internal and acquisition growth in more or less
equal measure.
To reach these goals, we have encouraged our company presidents in
recent years to think a little more aggressively. The acquisition of stand-alone
companies has long been a Dover core competency, but by the mid-1990s it was
apparent that stand-alone acquisitions alone would not provide sufficient
growth. Accordingly, in the early 1990s we established our "tilt toward growth"
program, for the first time encouraging our operating company presidents to make
synergistic or strategic add-on acquisitions.
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With their strong market positions, our companies tend to emerge from a downturn
in a better position than they went in, as Dover's financial strength enables
them to continue their growth plans while weaker competitors cut back.
[DOVER RETURN ON AVERAGE EQUITY (IN PERCENT) LINE GRAPH]
Year DOVER RETURN ON AVERAGE EQUITY
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 * 21.7%
00 * 23.5%
* Excluding gains on sale of businesses in 2000, 1999, and 1996.
Our sales, earnings and acquisition figures reflect this effort's success.
In the past three years, our businesses have invested more than $1.6 billion in
55 acquisitions, including nine stand-alone companies that accounted for 60% of
that total investment. Of the 55 acquisitions, three were based in Canada, and
15 others were outside of North America, primarily in Europe. Sales, meanwhile,
have risen 47% since 1997, and net earnings 64%. A decade ago, only three Dover
companies had sales over $100 million. Today, 17 exceed that size. Add-on
acquisitions have enabled our companies to expand their market niches, move into
new geographic or product markets and, because of greater size, attract better
management talent.
With their strong market positions, our companies tend to emerge from a
downturn in a better position than they went in, as Dover's financial strength
enables them to continue their growth plans while weaker competitors cut back.
The stronger margins afforded by highly engineered, premium products also
provide downside protection.
SEGMENTS GAIN
All four of Dover's independent subsidiaries had record sales and three set
operating profit records. The year 2000 saw huge profit gains by Dover
Technologies and very solid growth by Dover Resources, Dover Industries and
Dover Diversified.
Surging worldwide demand in the telecommunications, data networking and
computer industries for most of the year generated sharply higher sales and
earnings for all 11 of Dover Technologies' companies, which make circuit board
assembly and test equipment, specialty electronic components, and inkjet
printing and coding equipment. Demand trailed off in the year's last few months,
but growth is expected to resume as we move through 2001. The five specialty
component companies had particularly strong results and remain optimistic for
the coming year. Overall, Dover Technologies contributed more than 44% of
Dover's operating profits.
Dover Resources and Dover Industries both had record sales, and Dover
Industries also had record earnings, up 11% from 1999. Dover Resources' profits
were also up 11% from 1999, falling just short of its 1998 high water mark.
Dover Diversified, despite weak markets faced by many of its companies, also had
record sales and earnings, both up 10%.
STRONG ACQUISITION PROGRAM
Dover made 23 acquisitions in 2000 at an investment of $506 million. Two of them
were stand-alone companies: Triton Systems, a producer of off-premise automated
teller machines and related software, now part of Dover Industries, and OK
International, a manufacturer of hand tools and consumable products focused on
the circuit board manufacturer workbench and now part of Dover Technologies. All
the rest were synergistic or strategic add-ons destined to operate under an
existing stand-alone company, or product line additions to be folded into the
acquiring operating company. Dover Diversified, for example, has 47 separate
businesses operating under its 12 stand-alone companies -- one indicator of just
how diversified Dover has really become. In acquisitions, we diligently
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[GRAPHIC - PHOTOGRAPH]
(left to right)
Rudy Herrmann, President & CEO, Dover Resources
Tom Reece, Chairman and CEO, Dover Corporation
John Pomeroy, President & CEO, Dover Technologies
Jerry Yochum, President & CEO, Dover Diversified
Lew Burns, President & CEO, Dover Industries
apply Dover's proven acquisition criteria, and in the case of add-ons, an
integration plan is in place before a transaction is completed. The major
acquisitions are described in the segment sections that follow this letter.
USING DOVER'S FINANCIAL STRENGTH
Our companies' operating success results in increasing cash flow -- defined as
net earnings plus amortization and depreciation -- which we invest productively
on behalf of our stockholders. Some goes to pay dividends but most we invest in
our existing businesses or use to fund acquisitions. We also repurchase Dover
shares in the open market when that seems the best use of the cash. After
repurchases totaling $672 million and $106 million in 1999 and 1998,
respectively, we invested only $5.8 million this way in 2000.
Dover's growing cash flow -- $736.6 million in 2000 -- enables the
company to borrow on favorable terms. Total debt is a moderate $1.47 billion,
resulting in a net debt-to-capital ratio of about 35%.
MANAGEMENT CHANGES
Retirements, replacements, promotions and new hires resulted in some new faces
in Dover's management at corporate, independent subsidiary and operating company
levels. David S. Smith became Dover's Chief Financial Officer, succeeding John
F. McNiff, who retired after 17 years in that post. Smith brings investment
banking experience and was Chief Financial Officer at Crane Co. before joining
Dover. Timothy J. Sandker, previously President of Rotary Lift, became Executive
Vice President of Dover Industries. Ronald L. Hoffman, who helped consolidate
the North American winch industry as President of Tulsa Winch, became Executive
Vice President of Dover Resources. Both were succeeded by executives from within
their respective operating companies. No new directors were elected in 2000.
OUTLOOK
Dover's prospects for earnings growth in the years ahead are good but a gain in
2001 is far from certain. The acquisitions we made in 2000 will contribute a
full year's earnings in 2001. An expected pickup in capital spending in oil and
gas-related markets, particularly downstream, and in the chemical processing
industry, should benefit Dover Resources and Dover Diversified. The outlook for
transportation, industrial and construction markets is murky, but our company
presidents are moving vigorously to pare down costs, increase market share and
push into new markets. Meanwhile, the weakening of the U.S. dollar may make it
easier for our domestic companies to compete abroad, while making the earnings
of our overseas operations more valuable. On the down side, a stronger Euro
might make it harder for our European businesses to compete, and any fall-off in
U.S. demand could slow economic growth elsewhere.
Despite the favorable growth prospects in the telecommunications and
electronics industry worldwide, spending by our customers for circuit board
assembly and test equipment slackened in the fourth quarter. At this point, we
expect some recovery in this market as the year progresses but the timing of the
recovery will determine whether Dover can maintain the record earnings level of
2000 in 2001.
At this writing it is impossible to predict the extent, duration or
global fallout of the long-expected economic slowdown in the U.S. But I am
confident that Dover is well positioned to weather it, and that our companies,
as in the past, will emerge from any downturn stronger than they went in.
Dover's fundamental growth proposition thus remains intact.
In closing, I want to thank our customers and suppliers for their
loyalty and our growing family of Dover employees, now 29,489 strong, for their
dedication and hard work. I look forward to another successful year.
/s/ Thomas L. Reece
Thomas L. Reece
Chairman and Chief Executive Officer
February 15, 2001
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10
TECHNOLOGIES
Dover Technologies' results shot up dramatically as a huge upturn in the
worldwide electronics industry favorably impacted all of Technologies'
companies. Sales increased 44% to $2,100.0 million, and segment earnings
increased 73% to $392.0 million, both new records. With the rapid increase in
sales and earnings, which began mid-year 1999, all companies significantly
ramped up production to meet demand. All 11 companies in the segment had
increased sales and earnings.
Technologies' companies are grouped in three product areas: circuit
board assembly and test equipment (CBAT), specialty electronic components (SEC),
and marking equipment.
A marked decline in bookings in CBAT at the end of 2000 continued into
the first part of 2001, resulting in expectations of lower results in 2001.
CBAT COMPANIES SURGE
Technologies' five CBAT companies that make production equipment used to
assemble and test printed circuit boards and semiconductor devices benefited
from worldwide demand for additional production capacity, driven largely by
Internet-spawned growth in data networking and telecommunications. CBAT's sales
were up 47% to $1,369.3 million and operational profit was up 72% to $265.2
million. All five companies had record sales and earnings.
Universal Instruments markets a full range of high speed component
placement machines for circuit board assembly. As circuit boards have continued
to shrink in size, Universal's GSM machine has become the world market leader in
flexible fine pitch applications. Universal has also adapted the GSM platform to
create a machine that places bare semiconductors on boards too small to allow
for insulation and packaging of the component. Universal successfully introduced
its Polaris machine, which does odd-form and light mechanical assembly,
automating tasks previously done by hand at the end of an assembly line.
Alphasem, a maker of die-bonding equipment used to package semiconductors before
assembly on a circuit board, thrived after its acquisition by Universal in 1999.
Overall, Universal's sales increased 52% as its customers, particularly the
"electronics manufacturing services" customers who have become the largest part
of their market, sought to expand quickly to meet booming worldwide demand.
DEK Printing Machines, the U.K.based producer of screen printers for
applying solder paste to printed circuit boards before components are applied,
became the CBAT group's highest margin company, with earnings nearly tripling.
DEK's expanded line of printers is the industry's most complete.
Another strong performer was Everett Charles, which makes a range of
equipment and devices for testing both bare and assembled printed circuit boards
and packaged semiconductor components. Because its products are generally less
capital intensive than those of some other CBAT companies, Everett Charles's
business is somewhat steadier and less prone to up and down swings. It turned in
record results.
Vitronics Soltec, a maker of wave and reflow soldering equipment, also
had a record year and was highly successful with its new reflow soldering oven,
introduced in 1999.
[JOHN POMEROY PHOTO]
"THE STRENGTH OF OUR COMPANIES WAS SHOWN THIS YEAR BY THEIR REMARKABLE RAMP-UP
IN PRODUCTION IN RESPONSE TO UNPRECEDENTED MARKET CONDITIONS."
JOHN POMEROY
PRESIDENT & CEO
DOVER TECHNOLOGIES
(clockwise from lower left) Vectron International Inc.; Everett Charles
Technologies; K&L Microwave; DT Magnetics; Everett Charles Technologies; DEK
Printing Machines (See following page 7)
6
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[PHOTO MONTAGE]
"DEK HAD THE RIGHT PRODUCTS AND PLANS IN PLACE WHEN THE MARKET SHOT UP, AND
WE'VE STAYED VERY FOCUSED ON THE RACE WE'RE RUNNING - TO WIN WITH OUR
CUSTOMERS."
SUE BAKER
DEK PRINTING MACHINES
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[GRAPH PHOTO MONTAGE ( LOGO'S OMITTED AS PART OF GRAPHIC)]
(left to right) DEK Printing Machines; Novacap, Imaje
In November 2000, Technologies acquired OK International, a
California-based producer of consumables and hand tools for the professional
electronic manufacturer's workbench, including proprietary soldering irons,
dispensing machines, fume extractors, wire-wrap tools and electrostatic
discharge materials. OK International is the world market leader in this field
and should be less dependent on the capital spending cycles in this market.
BOOM YEAR FOR SEC COMPANIES
Operational profits more than doubled to $104.0 million on a 62% increase in
sales to $531.1 million for the five SEC companies. These companies provide
high-value components, precision devices and multifunction assemblies for the
data transmission, telecommunications and networking markets, often engineered
in collaboration with customers for specialized applications. Demand in these
markets resulted in increasing orders and backlogs, and led most of the SEC
companies to embark on capacity expansions.
One of the five, Quadrant, itself consists of four successful niche
businesses: Vectron International (leader in precision oscillators and surface
acoustic wave filters), Dielectric Laboratories (high frequency capacitors),
Communications Techniques (microwave frequency sources), and Arcom (microwave
transceivers). Quadrant's businesses serve a broad base of leading OEM's in the
wired and wireless infrastructure and access markets and invested $21 million in
plant and equipment to respond to strong demand. Its sales were up 67% and
earnings more than doubled.
Novacap (multilayer ceramic capacitors) acquired Syfer Technology, Ltd.
(UK) in July and both experienced strong demand for their high voltage and
safety certified capacitors used in a broad range of telecom and electronics
equipment. Sales and earnings more than doubled.
DT Magnetics (ferrite transformers) had record sales, and earnings
increased over 200% as it quickly responded to increased demand from DSL and
network switch customers.
K&L Microwave (RF and microwave filters) had record sales driven by
demand from base station and digital radio customers.
With a new President, Dow-Key (RF and microwave switches) was focused
on operational improvements and product development. It had record bookings.
STRONG YEAR FOR IMAJE
Imaje, S.A., a highly profitable maker of continuous inkjet printing and coding
equipment and consumables based in Valence, France, is organizationally part of
the Technologies segment although it primarily serves other industrial markets.
High-speed Imaje equipment puts date codes, serial numbers, bar codes, labels
and addresses on a huge range of prod-
8
13
[GRAPH PHOTO MONTAGE ( LOGO'S OMITTED AS PART OF GRAPHIC)]
(left to right) Vectron International Inc.; Universal Instruments Corporation
ucts on production lines around the world. Imaje has 32 subsidiaries selling in
90 countries, and recently revamped its logistics to operate in network fashion.
Because of the strong dollar and the modest portion of its business that is in
the U.S., Imaje's strong sales and profit gains measured in local currency
translated into essentially level results in dollar terms.
OUTLOOK
The underlying long-term growth rate for electronics equipment is substantially
higher than for the economy as a whole. In particular, the expansion of both
wireless and wired communications infrastructure worldwide will fuel this
growth, though as the year progressed tightening capital markets raised concerns
about the pace at which this expansion would be financed.
Unless order rates for Technologies' CBAT products recover more quickly
than is now expected, Technologies' sales and earnings will be lower in 2001
than in 2000. The SEC businesses have entered the year with strong backlogs, and
while influenced by the same industry fundamentals, are less subject to the
fluctuations in capital spending for production equipment than the CBAT
companies. Continued growth in SEC, augmented by continued strength at Imaje,
should dampen the impact of the CBAT slowdown.
Segment Earnings
[LINE GRAPH]
Year Data(Earnings)
96 146
97 195
98 147
99 227
00 392
After-Tax
Operating ROI
[LINE GRAPH]
Year Data(Earnings)
96 43
97 47
98 31
99 40
00 55
* (Acquisition adjustments have been excluded, see page 34, footnote 12 for
explanation.)
9
14
[GRAPH PHOTO MONTAGE]
"This year Heil trailer has done more than ever to improve our business, and we
are serving our customers better too."
Mike Johnson
Heil Trailer International
10
15
INDUSTRIES
Dover Industries had yet another record year for sales, up 9% to $1,246.0
million, and earnings, up 11% to $199.7 million. Operating profit margins
improved for the fourth year in a row to 16.0% and after-tax operating return on
investment remained in the high 30s. Heil Environmental followed its star
performance in 1999 with even greater earnings growth in 2000, remaining
Industries' clear sales and earnings leader. Recent acquisitions, particularly
Industries' largest, Triton (a manufacturer of ATM machines), also bolstered the
performance improvement. These very positive contributions were dampened by the
profit decline at Heil Trailer, which struggled all year in a weak market for
dry bulk trailers. Somero, a 1999 acquisition which serves the construction
industry, had a large decline in sales and an even larger decline in profits.
STRONG YEAR FOR FOUR COMPANIES
Heil Environmental turned in robust sales and profit gains, with shipments of
refuse collection vehicles to New York City more than offsetting declining
business with major waste management companies, many of which have postponed
equipment purchases because of consolidation or financial constraints. Earnings
increased over 1999's levels and a solid backlog suggests a good start in 2001.
Rotary Lift, one of Dover's original companies, recorded sales and
earnings gains of 16%. The 1999 acquisition of a competitor in the automobile
lift market and an additional product line in the heavy duty lift market boosted
Rotary's leading share in its markets.
PDQ (touchless, in-bay car washing machines) set new sales and earnings
records. Many of PDQ's customers are entrepreneurial investors, and they, along
with most major oil companies, increasingly view car washes at service stations
as separate profit centers. PDQ, whose unattended machines are fast, reliable
and perceived as customer friendly, is the innovator and leader in this fastest
growing portion of the industry. This position was further enhanced by the
mid-year acquisition of Kesseltronics, a Canadian-based manufacturer of
electronic products for this industry.
DovaTech also had higher sales, with earnings rising 17% on growing
sales of laser power sources and cooling equipment for laser welding and cutting
machines. Although the markets for its traditional, hand-held welding equipment
are flat to declining, DovaTech has prospered by acquiring makers of laser and
related components used in robotic welding machines and specialized
applications. The company also benefited from a full year's results from its
1999 acquisition, Lee Laser, which makes laser cutting tools used in
semiconductor manufacture.
DECLINES AT TWO COMPANIES
Marathon Equipment (solid waste compactors, balers and recycling equipment) had
lower earnings on slightly higher sales after encountering some of the same
problems with large, cash-constrained waste management customers as Heil
Environmental. Marathon's compactors are typically located in shopping centers
and factories, while its balers are used in large retail stores or at recycling
centers.
(clockwise from lower left) Heil Trailer International; Heil Environmental;
Randell; Chief Automotive Systems; Triton Systems; Groen (see Prior page - 10)
[GRAPHIC - LEW BURNS PHOTO]
"Dover has a history of investing for the long-term, a philosophy that has
contributed to our companies successes in their diverse markets."
Lew Burns
President & CEO
Dover Industries
11
16
[GRAPH IC PHOTO MONTAGE ( LOGO'S OMITTED AS PART OF GRAPHIC)]
(left to right) PRC Corporation (DovaTech); Texas Hydraulics; Rotary Lift
Tipper Tie/Technopack (clip closures, packaging systems, netting and
wire products) reported lower sales and earnings because of second half price
pressure from the U.S. poultry industry and declining consumption of beef and
sausages in Europe because of the "mad cow" disease scare. New leadership
installed at Tipper Tie in mid-year expects internal operational improvements,
along with the benefits of the Hoegger Alpina acquisition (April 2000), to begin
showing results as the market improves in 2001.
A SUCCESSFUL LONG-TERM STRATEGY
Texas Hydraulics (engineered hydraulic cylinders) raised sales 12% but earnings
declined slightly because of extra expense in expanding capacity at its
Tennessee plant. The company has successfully focused on finding under-served
market niches requiring top quality, custom engineered cylinders, which generate
higher margins. Its cylinders are critical to such applications as aerial work
platforms and utility devices, as well as in the construction, mining, refuse
and material handling equipment industries. In pursuit of its value-adding
strategy, during the second quarter Texas Hydraulics acquired Hydromotion Inc.,
which makes hydraulic swivels used in heavy equipment. The acquisition should
enhance earnings in 2001.
NEW STRATEGY AT CHIEF
Chief Automotive Systems (automotive measuring and repair systems) had an
earnings resurgence in 2000 after a weak 1999, although not quite reaching
previous highs. Chief's sales of car-straightening systems suffered when the
collision repair market became saturated. In a strategic shift which began in
1999, Chief successfully marketed new models by accepting customers' trade-ins,
which are then refurbished and sold to smaller repair shops.
GAINS AT FOOD SERVICE EQUIPMENT COMPANIES
Groen and Randell increased their sales slightly and earnings substantially.
Groen (commercial cooking equipment) improved manufacturing productivity in the
face of flat markets, and sold its low-margin industrial process equipment
business, closing its Elk Grove, Illinois factory. Randell (commercial
refrigeration, and food preparation and holding equipment) improved
manufacturing efficiency and benefited from strong sales of mobile food service
equipment for golf courses.
EARNINGS DROP AT THREE COMPANIES
Heil Trailer International (liquid and dry bulk tank trailers and intermodal
containers), hit a transportation market downturn in late 1999 that extended
throughout 2000. Management reacted strongly to reduce costs and Heil margins
continued to recover as the year progressed. Heil is poised for dramatic
earnings improvement when the market improves.
12
17
[PHOTO OF HEIL TRUCK]
[PHOTO OF MEN LOOKING AT BLUEPRINTS]
(left to right) Heil Environmental, Heil Trailer
Somero (laser-controlled concrete floor spreading equipment) also
disappointed after good 1999 results, as its customers, large concrete
contractors, experienced an extended downturn beginning in late 1999. Somewhat
improved results are expected in 2001.
Triton (non-bank ATMs for off-premise locations), though a contributor to
overall results, also stumbled after being acquired early in 2000, as strong
exports were not enough to offset weak U.S. sales. Triton's small-footprint
cash-dispensing machines had been very successful but quality problems with a
new product led to market share erosion. Triton hopes to recoup with new
products scheduled for mid-2001.
SEGMENT EARNINGS ($ MILLIONS)
[LINE GRAPH]
YEAR DATA(EARNINGS)
---- --------------
96 116
97 129
98 155
99 180
00 200
OUTLOOK
A weakening economy dampens the prospects in many of Industries' commercial
markets. For example, a quick recovery at Heil Trailer seems unlikely, and Heil
Environmental's performance improvements of the last two years will be hard to
repeat. However, sharply improved results are expected at some of the businesses
which had disappointing results in 2000. In addition, the benefits of add-on
acquisitions in 2000, at Tipper Tie and Heil Trailer in particular, will help.
At several businesses facing flat or slow growth market environments, company
managements plan product introductions and cost reduction initiatives. Thus,
Industries has entered 2001 with the expectation of obtaining traditional levels
of internal earnings growth for the year.
AFTER-TAX OPERATING RETURN ON INVESTMENT (IN PERCENT)*
[LINE GRAPH]
YEAR DATA(EARNINGS)
---- --------------
96 33
97 34
98 38
99 39
00 36
*(Acquisition adjustments have been excluded, see page 34, footnote 12 for
explanation.)
13
18
DIVERSIFIED
Dover Diversified, whose earnings have grown at a compound annual rate of almost
19% since 1992, increased its earnings for a ninth straight year to $167.9
million, up 10% from last year, on a 10% sales increase to $1,175.5 million.
Diversified's profit margin increased slightly to 14.3%, despite the fact that
several companies struggled with flat or depressed markets. Five small add-on
acquisitions contributed little profit in 2000, but in addition to strengthening
their companies' market position, are expected to contribute very positively in
2001, particularly as measured by return on investment.
TRANTER LARGEST EARNER AGAIN
As expected, Tranter (plate/frame and compact brazed heat exchangers,
transformer radiators) was the segment's largest profit producer again in 2000,
maintaining its market share and coming in just above its 1999 sales levels with
profit margins also up slightly despite challenging markets. Besides the U.S.,
Tranter manufactures in Canada, Malaysia, Sweden and Switzerland, and
unfavorable exchange rates have masked the strong overseas results of its
predominantly international sales. Tranter's strong backlog entering 2001
suggested that profits could challenge its 1998 profit record.
SOLID PERFORMANCES AT THREE COMPANIES
Crenlo, Performance Motorsports and Sargent performed well in 2000. Crenlo
(operator cabs for construction and agricultural equipment, and electronic
enclosures), acquired in October of 1999, improved Diversified's comparisons to
the prior year with higher earnings on solid sales growth and expects strong
results in 2001. Crenlo, perhaps the world's largest specialized maker of cabs,
benefited from increased outsourcing by heavy equipment OEMs. It is building a
plant in Florence, South Carolina to serve major OEM customers, such as
Caterpillar and John Deere, in that region. In its smaller but fast-growing
electronic enclosures business, Crenlo markets standard products through
distribution and custom enclosures directly to such end users as Hewlett-Packard
and AT&T Wireless.
Performance Motorsports, Inc (PMI), which manufactures high performance
specialty pistons, recorded sharply higher gain and profits, fueled by strong
aftermarket demand for its automotive and motorcycle products and a full year of
its 1999 acquisition, JE Piston. PMI serves the performance and power sports
aftermarkets (motorcycles, all terrain vehicles, snowmobiles and personal
watercraft). During 2000, the company acquired Vertex, an Italian maker of cast
pistons, which are used in less demanding applications, such as automobiles,
lawn mowers and chain saws.
Dover's only defense/aerospace business, Sargent (submarine fluid controls,
aircraft hydraulic controls, self-lubricating bearings and aircraft fasteners),
increased its sales despite a lower aircraft build rate at Boeing, its largest
aerospace customer, by increasing sales to Airbus and regional aircraft OEMs.
Sargent maintained profitability by improving productivity, and kept its
business with the Navy, which is an important contributor to earnings but
unlikely to grow with only one submarine a year being built. Overall profits
dipped slightly because of a less favorable product mix in its bearings
business.
"DOVER'S MARKETS AND PRODUCTS ARE VERY DIVERSIFIED, BUT A COMMON THEME AT ALL
COMPANIES IS COMMITMENT TO EARNINGS GROWTH."
[PHOTO OF JERRY YOCHUM, PRESIDENT & CEO]
Jerry Yochum
President & CEO
Dover Diversified
(clockwise from lower left) Tranter; SWF; A-C Compressor; Tranter; Hill
Phoenix (See following page - 15)
14
19
[GRAPHIC MONTAGE]
"WITH NEW EQUIPMENT, AND TEAMWORK, HILL PHOENIX HAS BEEN ABLE TO GET A HIGHER
QUALITY PRODUCT TO OUR CUSTOMERS, FASTER."
NANCY LEE NGUYEN
HILL PHOENIX
15
20
[Photo of Hill Phoenix; Sargent, Crenlo]
(left to right) Hill Phoenix; Sargent, Crenlo
TURNAROUND AT BELVAC
Belvac contributed importantly to Diversified's overall improvement as it
returned to strong profitability in 2000 after a weak 1999 performance led to
restructuring and workforce reductions. Further cost reductions in 2000 set the
stage for solid profits as sales levels improved. Belvac's sales and profits
ballooned in the mid-1990s, as can-makers clamored for its can-necking
machinery, but market saturation, substitution of plastics, and industry
consolidation brought a steep drop beginning in 1998.
INDUSTRY CONSOLIDATIONS AFFECT SEVERAL COMPANIES
Industry consolidation affected several of Diversified's businesses in 2000.
Hill Phoenix (commercial refrigeration systems and refrigerated display cases),
Diversified's largest business, saw a consolidation-driven drop in its business
with supermarkets, resulting in lower overall sales and a steep profit falloff
after a record 1999. But the company may actually have increased its market
share, thereby positioning itself for gains when markets rebound. Customers'
stated spending plans suggest that 2001 could be a very strong, if not record,
year.
Also heavily impacted was A-C Compressor (centrifugal, oil-free screw, and
rotary compressors; turbine and compressor repair), another of the segment's
larger businesses. Its sales and profits were flat but backlog is below last
year's high levels, as a result of oil and gas industry consolidation, the
margin squeeze that soaring oil prices have inflicted on its "downstream"
customers, and the strength of the dollar, which has hurt A-C's ability to sell
its U.S. manufactured products abroad.
Despite a booming bearings business driven by strong power generation
markets, Waukesha Bearings reported flat sales and lower earnings, as its
torquing tools business encountered weak demand from its large oil company
customers in the North Sea and Gulf of Mexico. Industry consolidation and
exchange rates also hurt results, but margins, though lower, remained strong.
Waukesha's position in the power generation industry gives it a strong core
business as it enters 2001.
Mark Andy, whose flexographic printing presses for labeling and other
applications have faced flat markets for several years, increased sales and
earnings, partly from restructuring but mainly from the addition of Van Dam (cup
printing equipment). Van Dam, a Dutch company originally acquired in early 1999
as an add-on to Belvac, later operated as a stand-alone business before becoming
part of Mark Andy in 2000. In a related field, Graphics Microsystems, which
makes specialized ink-meas-
16
21
[PHOTO OF HILL PHOENIX; MARK ANDY; AND WAUKESHA BEARINGS]
(left to right) Hill Phoenix; Mark Andy; Waukesha Bearings)
uring and monitoring equipment for color printing and large presses, managed to
increase sales moderately and profits strongly, despite flat markets.
SWF (corrugated box-making machinery) continued to consolidate the
fragmented packaging industry. The company is the result of the acquisition of
eight small packaging equipment manufacturers, including two in 2000. The recent
acquisitions pushed up sales, but earnings were flat as integration costs eroded
margins.
EXCHANGE RATES HURT PROFITS
Langbein & Engelbracht, a German maker of air handling systems and other
environmental control equipment acquired by Dover in 1997, reported a
significant exchange-related decline in sales and earnings in dollar terms in
flat markets. The company expects to benefit longer term from Europe's growing
governmental interest in reducing air pollution.
OUTLOOK
Diversified anticipates higher sales and earnings in 2001, driven largely by an
upturn expected at Hill Phoenix, sales and productivity gains at various other
businesses, including Tranter, A-C Compressor, Waukesha and Mark Andy, and the
contribution of recent acquisitions.
SEGMENT EARNINGS ($ MILLIONS)
[LINE GRAPH]
YEAR DATA(EARNINGS)
---- --------------
96 107
97 115
98 143
99 152
00 168
AFTER-TAX OPERATING RETURN ON INVESTMENT (IN PERCENT)*
[LINE GRAPH]
YEAR DATA(EARNINGS)
---- --------------
96 35
97 38
98 39
99 38
00 39
*(Aquisition adjustments have been excluded, see page 34, footnote 12 for
explanation.)
17
22
[PHOTO OF MEN WORKING]
"PRIDE COMES FROM SEEING OPW'S PRODUCTS IN THE MARKET AND KNOWING I HAD AN
IMPORTANT ROLE IN PUTTING THEM IN OUR CUSTOMERS' HANDS."
FRED LEWIS
OPW FUELING COMPONENTS
18
23
RESOURCES
Dover Resources' operating earnings increased 11% to $119.0 million in 2000 on a
sales increase of 14% to $887.0 million, but did not quite return to the record
earnings level of 1998. This performance was led by the Petroleum Equipment
Group, which benefited not only from a strong market but also from the results
of both investment and management-led internal improvements over the last two
years. OPW Fluid Transfer Group, which faced a difficult market, nevertheless
recovered from a restructuring and strike-impacted 1999. Tulsa Winch, the winch
industry "roll-up," grew both internally and through acquisition. In total,
Resources completed eight add-on acquisitions.
PETROLEUM EQUIPMENT GROUP SHOWS STRENGTH
Buoyed by continuing recovery in the oil patch and internal productivity gains,
the Petroleum Equipment Group had its most profitable year since the early
1980s, surpassing its 1997 earnings peak. Benefiting from cost-cutting
initiatives, investments in capacity and rising demand were the Group's four oil
and gas production equipment companies -- Alberta Oil Tool (sucker rods and
accessories, valves and controls), Norris (sucker rods and accessories),
Ferguson-Beauregard (gas plunger lift equipment) and Norriseal (valves and
controls). The Petroleum Equipment Group, along with C. Lee Cook (gas compressor
components) and Quartzdyne (specialized pressure transducers), is well
positioned for further growth as drilling activity continues to increase. C. Lee
Cook gained both from the improving dynamics upstream in the gas industry and
from solid demand from processing plants for its aftermarket components.
Quartzdyne benefited from new exploration and development, and from industry
emphasis on more complex drilling and production techniques that improve output
of new and existing wells through the use of its pressure transducers.
WINCH INDUSTRY "ROLL-UP" SUCCESS
Tulsa Winch Consolidated (industrial winches) showed a substantially improved
performance as it continued its successful roll-up of profitable, niche
companies in the fragmented winch industry. In 1999, Tulsa Winch built a new
plant and later acquired Dp Manufacturing, a leading supplier of winches for
military applications. In April 2000, it acquired Greer Company, maker of in-cab
information systems for mobile cranes, and in September 2000, it acquired
Pullmaster Winch, North America's leading manufacturer of marine winches.
SQUEEZE IN FLUID HANDLING EQUIPMENT MARKETS
Flat or depressed markets and the downstream impact of soaring oil prices
squeezed margins in the hydrocarbon and chemical process industries and at Dover
Resources' companies that serve them. Demand growth was constrained for
industrial pumps, impacting both Blackmer and Wilden. The strong U.S. dollar
hurt Blackmer's and Wilden's pump exports and eroded the dollar value of profits
from Blackmer's pump and compressor manufacturing operations in France and the
U.K., which were restructured during the fourth quarter. Ronningen-Petter faced
soft petroleum refining and pulp and paper markets for its filters, but market
strength in paints, inks and adhesives somewhat cushioned its cyclicality.
"DOVER'S PRINCIPLE OF MARKET LEADERSHIP IS A PRIMARY FOCUS AT ALL OF OUR
COMPANIES."
[PHOTO OF RUDY HERRMANN]
RUDY HERRMANN
PRESIDENT & CEO
Dover Resources
(Clockwise From Lower Left) OPW Fueling Components; Wilden Pump & Engineering
Co.; Norris; Midland Manufacturing; De-Sta-Co Industries (see prior page - 18)
19
24
[PHOTO OF BLACKMER, OPW FUELING COMPONENTS AND QUARTZDYNE]
(Left to right) Blackmer; OPW Fueling Components; Quartzdyne
The OPW Fluid Transfer Group increased earnings although its markets
weakened as the year progressed. Sales at OPW Engineered Systems (loading arms),
Civacon-Knappco (tank trailer valves and fittings) and Midland Manufacturing
(valves, fittings and gauging devices for the rail tank car industry) were
constrained by a falloff in bulk transportation markets. The 1999 restructuring,
which involved closing a factory and shifting production to other facilities,
contributed to the earnings increase.
REDUCED RESULTS IN PETROLEUM RETAILING EQUIPMENT
OPW Fueling Components experienced slightly lower volume in a soft market that
showed signs of improving by year-end, and a somewhat larger percentage
reduction in earnings. However, the company achieved record results
internationally, succeeded with new products, and significantly reduced its cost
structure. Product mix unfavorably impacted margins on gasoline nozzles and new
construction related products. The company's PISCES(TM) underground piping
systems continued to increase market penetration in spite of weak overall market
conditions. Its Petro Vend unit (automated fuel management and leak detection
systems) had near-record sales and earnings.
That portion of Blackmer serving the petroleum retailing market (vapor recovery
and gasoline dispensing pumps), which has been responsive to new service station
construction and regulatory requirements, saw declining demand and a shift
toward aftermarket sales.
AUTOMOTIVE INDUSTRY IMPACTS DE-STA-CO COMPANIES
De-Sta-Co Industries (modular automation components) experienced exceptional
strength in its Robohand unit (end-of-arm equipment) and solid results in its
French and German operations. De-Sta-Co continues to benefit from the ongoing
drive to improve productivity in manufacturing, and is becoming an increasingly
global producer in support of its customers, many in the automotive sector.
However, weakness in that sector, particularly in the fourth quarter, led to a
slight earnings decline for the year. De-Sta-Co Manufacturing (flapper and reed
valves, automotive manifolds), with heavy exposure to automotive markets,
endured severe price pressure that compressed margins.
OTHER MARKETS SERVED
Hydro Systems continues to benefit from robust demand for its specialized
cleaning chemical dispensing systems. Wittemann's markets for carbon dioxide
generation and recovery systems remain weak, though recent improvement in
bookings and backlog is encouraging. Duncan is aggressively right-sizing itself
in response to a lingering soft market for its parking meter products.
20
25
[PHOTO OF NORRIS, DUNCAN INDUSTRIES, CIVACON/KNAPPCO/SURE SEAL AND C. LEE COOK]
(left to right) Norris; Duncan Industries; Civacon/Knappco/Sure Seal; C. Lee
Cook
ACQUISITIONS ENHANCE FUTURE SEGMENT STRENGTH
Dover Resources companies made eight add-on acquisitions during the year. Tulsa
Winch acquired Greer and Pullmaster, described above. Sure Seal (butterfly
valves, actuators and components) complements Civacon-Knappco. Hydro Cam
Engineering (specialized stamping dies) joined De-Sta-Co Manufacturing. Provacon
(specialty valves for hazardous fluids) became part of Midland Manufacturing. A
French company, Groupe Aoustin (turnkey liquid filtration systems and
high-viscosity mixers-extruders) joined Ronningen-Petter, and Blackmer acquired
A. W. Chesterton's System One Pump Division (high-end centrifugal pump line). RG
Industries, Ltd. expands Alberta Oil Tool's product offering to the Canadian oil
patch.
POSITIVE OUTLOOK FOR 2001
Dover Resources anticipates further sales and earnings gains in 2001, driven
largely by increased oil and gas drilling and production spending, by higher
capital expenditures in the petroleum and chemical processing industries, and by
full-year results from 2000 acquisitions. Earnings growth will be constrained by
continued softness in bulk transportation markets and heavy price pressure in
automotive markets.
SEGMENT EARNINGS ($ MILLIONS)
[LINE GRAPH]
YEAR DATA (EARNINGS)
---------------------------
96 105
97 114
98 125
99 107
00 119
AFTER-TAX OPERATING RETURN ON INVESTMENT (IN PERCENT)*
[LINE GRAPH]
YEAR DATA (EARNINGS)
-----------------------------
96 34
97 33
98 34
99 30
00 31
*(Acquisition adjustments have been excluded, see page 34, footnote 12 for
explanation.)
21
26
CORPORATE FINANCIAL OVERVIEW
The ability to consistently generate high and growing levels of cash flow is a
key to the successful execution of our long-term value creation strategy. Guided
by the principles explained in the inside front cover and the Chairman's letter,
we generate consistent, above-market returns on cash reinvestment. Growth in all
measures of cash flow is every bit as dynamic and pleasing as this year's 21%
growth in sales, 32% growth in net income and 35% growth in earnings per share.
But our strong growth track record is long-term and not isolated to the past
year:
Compound Average
Growth Rate Annual Growth Rate
1999 to 2000 1990 to 2000
==================================================================
Sales 21% 15%
*Segment operating profit 32 17
Per-share:
EBIT 37 21
Gross cash flow 29 19
EBITDA 32 19
EBITACQ 34 20
==================================================================
*Segment operating profit is found on page 24
2000 10 Year Average
==================================================================
Return on sales 14% 13%
Return on equity 24 23
Although we report results according to Generally Accepted Accounting
Principles (GAAP), we measure acquisitions on an after-tax cash flow basis. To
help investors focus on this, we have long disclosed supplemental information
about EBITACQ (earnings before interest, taxes and acquisition write-offs), as
can be seen in the chart on the next page. We report this income by segment
before acquisition write-offs because we believe it is a better measure of
Dover's true profitability. We call it "operational income" to distinguish it
from "GAAP operating profit."
All companies will be required to report earnings per share before goodwill
write-offs net of tax, beginning, we hope, later in 2001. Since we believe this
is significant information for our shareholders, we have included it in our
11-year Summary of Financial Data on page 40. In 2000, before goodwill charges,
our earnings per share were $ 2.77, up 35% from the prior year. Over 10 years,
our growth on this measure has been at an average annual compound rate of 21%.
In addition, because we believe it is helpful to our shareholders, we also
report net earnings per share before all acquisition write-offs, not just
goodwill. On this measure, our growth in EPS has been 20% over 10 years.
Dover tries to structure its acquisitions not to maximize GAAP reported
earnings, but to maximize after-tax cash flow. Thus, many of our non-cash
acquisition-related accounting write-offs are actually tax-deductible, and thus
create a cash benefit by reducing taxes. We suspect that astute investors will
recognize that Dover's cash earnings, focus and strength are comparatively
higher when this fact is considered. Therefore we will continue to disclose
these factors separately, as can be seen in the chart on the next page.
Where does all this cash flow go? Some key uses of cash are:
($ in millions) 2000 10 Year Total
==================================================================
Capital expenditures $ 198 $ 967
Research & experimentation 175 988
Working capital 85 326
Acquisitions 506 3,130
Dividends 97 701
Stock repurchases 6 1,042
Our industrial manufacturing businesses are not highly capital intensive;
however, over the last few years, capital expenditures have slightly exceeded
depreciation (by $62 million in 2000). We invest first in our existing
businesses to support their sales growth and cost reduction initiatives. We
expect this trend to continue in 2001, despite a somewhat tempered sales growth
forecast. Our reported "research and experimentation" investment, a good (but
incomplete) benchmark for our investment in future products, is also a key
growth priority that we expect to continue.
Our acquisition program is tailored to fit the opportunities we create or
that markets make available, as well as our financial capacity. Just as it is
critical to maintain the financial flexibility and credit quality that permit us
to finance these investments in shareholder value, it is also critical that we
do not invest in acquisitions beyond the level which would allow us to properly
support continued investment in existing businesses. Our current debt level,
debt-to-total capital ratios and credit ratings are consistent with this
approach.
Dover's strong after-tax cash flow belongs to our shareholders. In addition
to the internal investment and acquistion program described above, this cash has
been returned to the shareholders aggressively over the past 10 years, both in
the form of dividends and in stock repurchases. Repurchases of our own stock are
made only when it makes financial sense compared to our other cash investment
opportunities and in the context of our leverage profile. While many
shareholders prefer to realize the gains in Dover stock as capital gains (which
we agree makes sense, given the tax code), many long-term shareholders have also
come to count on the income that dividends provide. We particularly appreciate
our long-term shareholders and are proud of our 46-year record of uninterrupted
dividends, and we plan to continue that outstanding track record.
22
27
Dover Corporation and Subsidiaries
OPERATIONAL INCOME
(UNAUDITED) (IN MILLIONS)
2000 1999 1998
==========================================================================================================================
Sales Income % Sales Income % Sales Income %
----- ------ ----- ----- ------ ----- ----- ------ -----
Circuit board assembly/test $ 1,369 $ 265 19 $ 934 $154 16 $ 745 $ 90 12
Electronic components 531 104 20 328 48 15 282 31 11
Marking 200 60 30 196 59 30 184 57 31
---------------------------- ----------------------- -------------------------
Dover Technologies 2,100 429 20 1,458 261 18 1,211 178 15
Dover Industries 1,246 224 18 1,145 203 18 1,012 173 17
Dover Diversified 1,176 194 17 1,072 177 17 958 164 17
Dover Resources 887 149 17 778 128 16 801 144 18
---------------------------- ----------------------- -------------------------
Operational subtotal
(after elim.) $ 5,401 996 18 $4,446 769 17 $3,978 659 17
============================ ====================== =========================
Corporate and other (49) (44) (40)
------ ----- -----
EBITACQ $ 947 $725 $619
==========================================================================================================================
"Operational Income" -- differs from segment operating profits because it
excludes all non-cash write-offs relating to acquisitions, the expenses of each
segment's corporate group, and foreign exchange gains or losses. "EBITACQ" --
earnings before taxes, interest, acquisition write-offs and non-recurring gains.
See Notes to Consolidated Financial Statements.
ANALYSIS OF CASH FLOW: DEPRECIATION, AMORTIZATION & ACQUISITION WRITE-OFFS, WITH
TAX EFFECTS
(Unaudited) (In Millions)
2000
===============================================================================
Tax Deductible
--------------
Total Yes No Tax
--------------------------------------
EBIT $ 851 $ 267
Acquisition related:
Goodwill amortization 49 24 25 9
--------------------------------------
Other amortization 15
Depreciation 18
Inventory write-offs 14
--------------------------------------
Subtotal other write-offs 47 38 9 13
Total acquisition
write-offs 96 62 34 22
--------------------------------------
EBITACQ 947 $ 289
---------
Other depreciation 118
Other amortization 3
-----
EBITDAI 1,068
======
Inventory write-offs (14)
-----
EBITDA $ 1,054
===============================================================================
1999
================================================================================
Tax Deductible
--------------
Total Yes No Tax
-------------------------------------
EBIT $ 640 $218
Acquisition related:
Goodwill amortization 41 20 21 7
--------------------------------------
Other amortization 16
Depreciation 17
Inventory write-offs 11
--------------------------------------
Subtotal other write-offs 44 41 3 15
Total acquisition
write-offs 85 61 24 22
--------------------------------------
EBITACQ 725 $240
----
Other depreciation 106
Other amortization 4
---
EBITDAI 835
---
Inventory write-offs (11)
---
EBITDA $ 824
================================================================================
1998
================================================================================
Tax Deductible
--------------
Total Yes No Tax
----------------------------
EBIT $546 $184
Acquisition related:
Goodwill amortization 33 17 16 6
----------------------------
Other amortization 15
Depreciation 17
Inventory write-offs 8
----------------------------
Subtotal other write-offs 40 39 1 15
Total acquisition
write-offs 73 56 17 21
----------------------------
EBITACQ 619 $205
----
Other depreciation 97
Other amortization 6
----
EBITDAI 722
----
Inventory write-offs (8)
----
EBITDA $ 714
================================================================================
"EBIT" -- represents earnings before interest and taxes. "EBITACQ" -- represents
earnings before interest, taxes and acquisition write-offs. "EBITDAI" --
represents earnings before interest, taxes, depreciation, amortization and
inventory write-offs. "EBITDA" -- represents earnings before interest, taxes,
depreciation and amortization.
EBIT, EBITACQ, EBITDAI and EBITDA -- all exclude gains (losses) on sale of
businesses and equity investment.
EARNINGS BEFORE INTEREST, TAXES AND WRITE-OFFS PER DILUTED SHARE
[BAR GRAPH OMITTED]
YEAR EPS
---- ---
91 $ 0.80
92 $ 0.75
93 $ 1.00
94 $ 1.44
95 $ 1.99
96* $ 2.16
97 $ 2.70
98 $ 2.71
99* $ 3.44
00* $ 4.62
* Excluding gains on sale of businesses in 2000, 1999 and 1996 (Write-offs are
costs relating to premium over book paid for acquisitions)
23
28
Dover Corporation and Subsidiaries
SALES, OPERATING PROFIT AND OTHER DATA BY MARKET SEGMENT
(in thousands except % figures)
For the Years Ended December 31, 2000 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
SALES TO UNAFFILIATED CUSTOMERS:
Dover Technologies $2,100,004 $1,457,792 $1,211,416 $1,300,503 $ 993,326 $ 873,505
Dover Industries 1,245,608 1,144,599 1,012,440 859,778 846,866 798,173
Dover Diversified 1,175,519 1,071,574 957,579 767,194 730,074 672,503
Dover Resources 887,042 777,691 800,914 745,429 648,546 583,727
Intramarket sales (7,456) (5,236) (4,683) (3,336) (3,239) (3,547)
---------------------------------------------------------------------------------------
Consolidated total $5,400,717 $4,446,420 $3,977,666 $3,669,568 $3,215,573 $2,924,361
---------------------------------------------------------------------------------------
OPERATING PROFIT:
Dover Technologies $ 391,960 $ 226,761 $ 146,612 $ 195,393 $ 146,341 $ 133,641
Dover Industries 199,693 179,554 154,500 128,945 115,857 117,841
Dover Diversified 167,861 152,139 143,157 114,902 106,850 92,948
Dover Resources 119,026 107,264 125,225 113,538 105,394 90,745
Gain (loss) on dispositions, net 10,495 10,256 -- -- 75,065 --
Interest income, interest expense
and general corporate expenses, net (116,720) (60,970) (80,848) (60,504) (47,398) (50,911)
---------------------------------------------------------------------------------------
Consolidated earnings before taxes $ 772,315 $ 615,004 $ 488,646 $ 492,274 $ 502,109 $ 384,264
---------------------------------------------------------------------------------------
PROFIT MARGIN (PRETAX):
Dover Technologies 18.7% 15.6% 12.1% 15.0% 14.7% 15.3%
Dover Industries 16.0 15.7 15.3 15.0 13.7 14.8
Dover Diversified 14.3 14.2 14.9 15.0 14.6 13.8
Dover Resources 13.4 13.8 15.6 15.2 16.3 15.5
---------------------------------------------------------------------------------------
Consolidated profit margin 14.3% 13.8% 12.3% 13.4% 15.6% 13.1%
---------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS AT DECEMBER 31:
Dover Technologies $1,537,268 $1,206,549 $1,000,209 $1,032,922 $ 924,745 $ 721,831
Dover Industries 1,088,540 894,452 732,136 598,643 613,512 591,228
Dover Diversified 1,211,151 1,128,239 802,872 704,591 547,341 570,269
Dover Resources 928,841 804,664 781,933 478,279 380,805 326,047
Corporate (principally cash
and equivalents and marketable
securities) 126,316 98,036 65,243 84,536 136,438 94,402
---------------------------------------------------------------------------------------
Total continuing 4,892,116 4,131,940 3,382,393 2,898,971 2,602,841 2,303,777
---------------------------------------------------------------------------------------
Net assets from discontinued
operations -- -- 244,883 181,263 205,365 191,000
---------------------------------------------------------------------------------------
Consolidated total $4,892,116 $4,131,940 $3,627,276 $3,080,234 $2,808,206 $2,494,777
---------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION:
Dover Technologies $ 61,452 $ 57,407 $ 56,853 $ 69,882 $ 34,071 $ 19,750
Dover Industries 42,600 37,574 33,379 28,992 27,918 26,783
Dover Diversified 52,835 46,500 41,040 30,188 26,857 27,141
Dover Resources 44,426 40,039 34,802 24,738 20,686 17,816
Corporate 2,071 1,724 1,613 1,404 952 696
---------------------------------------------------------------------------------------
Consolidated total $ 203,384 $ 183,244 $ 167,687 $ 155,204 $ 110,484 $ 92,186
---------------------------------------------------------------------------------------
CAPITAL EXPENDITURES:
Dover Technologies $ 78,880 $ 41,432 $ 40,544 $ 42,303 $ 36,001 $ 18,546
Dover Industries 33,550 32,242 29,046 24,689 28,495 20,675
Dover Diversified 54,566 25,799 26,050 24,400 26,274 31,299
Dover Resources 30,056 29,409 29,473 28,317 22,149 21,127
Corporate 716 1,230 617 2,373 760 72
---------------------------------------------------------------------------------------
Consolidated total $ 197,768 $ 130,112 $ 125,730 $ 122,082 $ 113,679 $ 91,719
=======================================================================================
See Notes to Consolidated Financial Statements.
24
29
Dover Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS,
ACCUMULATED COMPREHENSIVE EARNINGS, AND
RETAINED EARNINGS
(in thousands except per share figures)
Statement of earnings for the years ended December 31, 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
Net sales $ 5,400,717 $ 4,446,420 $ 3,977,666
Cost of sales 3,433,495 2,837,960 2,551,381
---------------------------------------------------
Gross profit 1,967,222 1,608,460 1,426,285
Selling and administrative expenses 1,124,012 973,049 894,325
---------------------------------------------------
Operating profit 843,210 635,411 531,960
---------------------------------------------------
Other deductions (income):
Interest expense 97,538 53,401 60,746
Interest income (9,043) (18,528) (14,308)
Gain (loss) on sale of investments and businesses (10,495) (10,256) --
All other, net (7,105) (4,210) (3,124)
---------------------------------------------------
Total 70,895 20,407 43,314
---------------------------------------------------
Earnings before taxes on income 772,315 615,004 488,646
Federal and other taxes on income 239,108 209,950 162,249
---------------------------------------------------
Net earnings from continuing operations 533,207 405,054 326,397
Earnings from discontinued operations -- -- 52,448
Gain (loss) on sale of discontinued business, net of tax (13,595) 523,938 --
---------------------------------------------------
Net earnings $ 519,612 $ 928,992 $ 378,845
===================================================
Net earnings per common share:
Basic -- Continuing operations $ 2.63 $ 1.94 $ 1.47
-- Discontinued operations -- -- .23
-- Gain (loss) on sale of discontinued business, net of tax (.07) 2.50 --
---------------------------------------------------
-- Net earnings $ 2.56 $ 4.44 $ 1.70
===================================================
Diluted -- Continuing operations $ 2.61 $ 1.92 $ 1.45
-- Discontinued operations -- -- .24
-- Gain (loss) on sale of discontinued business, net of tax (.07) 2.49 --
---------------------------------------------------
-- Net earnings $ 2.54 $ 4.41 $ 1.69
===================================================
Weighted average number of common shares outstanding during the period:
Basic 202,971 209,063 222,793
Diluted 204,677 210,679 224,386
===================================================================================================================================
Accumulated Comprehensive Earnings for the years ended December 31, 2000 1999 1998
===================================================================================================================================
Net earnings $ 519,612 $ 928,992 $ 378,845
---------------------------------------------------
Other comprehensive earnings, net of tax:
Foreign currency translation adjustments (32,726) (52,742) 10,166
Less: reclassification adjustment for adjustments
included in net earnings -- -- (486)
---------------------------------------------------
Total foreign currency translation adjustments $ (32,726) $ (52,742) $ 10,652
---------------------------------------------------
Unrealized gains (losses) on marketable securities:
Unrealized holding gains (losses) arising during period 12,080 (5) (27)
Less: reclassification adjustment for gains (losses)
included in net earnings 8,994 -- 5,713
---------------------------------------------------
Total unrealized gains (losses) on securities
(tax $1,687 in 2000, $27 in 1998) 3,086 (5) (5,740)
---------------------------------------------------
Other comprehensive (loss) earnings (29,640) (52,747) 4,912
---------------------------------------------------
Accumulated comprehensive earnings $ 489,972 $ 876,245 $ 383,757
===================================================================================================================================
Retained Earnings for the years ended December 31, 2000 1999 1998
===================================================================================================================================
Balance at beginning of year $ 2,830,175 $ 1,992,991 $ 1,703,335
Net earnings 519,612 928,992 378,845
---------------------------------------------------
3,349,787 2,921,983 2,082,180
Deductions:
Common stock cash dividends of $.48 per share
($.44 in 1999; $.40 in 1998) 97,468 91,808 89,189
---------------------------------------------------
Balance at end of year $ 3,252,319 $ 2,830,175 $ 1,992,991
===================================================================================================================================
See Notes to Consolidated Financial Statements.
25
30
Dover Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share figures)
December 31, 2000 1999
=============================================================================================================
Assets
Current Assets:
Cash and cash equivalents $ 181,399 $ 138,038
Marketable securities, at market 5,341 --
Receivables (less allowance for doubtful accounts
of $26,109 in 2000, $23,375 in 1999) 903,177 750,917
Inventories 783,200 639,379
Prepaid expenses and other current assets 101,732 83,228
----------------------------
Total current assets 1,974,849 1,611,562
----------------------------
Property, plant and equipment, at cost:
Land 46,853 41,291
Buildings 389,159 356,548
Machinery and equipment 1,247,479 1,082,994
----------------------------
1,683,491 1,480,833
Less accumulated depreciation 927,943 834,358
----------------------------
Net property, plant and equipment 755,548 646,475
----------------------------
Intangible assets, net of amortization 2,071,281 1,813,359
Other intangible assets 7,358 7,358
Other assets and deferred charges 83,080 53,186
----------------------------
$ 4,892,116 $ 4,131,940
============================================================================================================
Liabilities
Current Liabilities:
Notes payable $ 839,880 $ 296,637
Current maturities of long-term debt 2,657 1,263
Accounts payable 277,910 253,650
Accrued compensation and employee benefits 178,280 157,392
Accrued insurance 45,855 50,274
Other accrued expenses 209,247 186,405
Federal and other taxes on income 50,811 380,865
----------------------------
Total current liabilities 1,604,640 1,326,486
----------------------------
Long-term debt 631,846 608,025
Deferred income taxes 67,381 50,440
Other deferrals (principally compensation) 146,674 108,233
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 236,944,308
in 2000, (236,246,384 shares in 1999) 236,944 236,246
Additional paid-in capital 48,552 33,060
Cumulative translation adjustments (112,711) (79,985)
Unrealized holding gains 3,132 46
Retained earnings 3,252,319 2,830,175
----------------------------
3,428,236 3,019,542
Less common stock in treasury, at cost 33,760,636
shares in 2000 (33,617,535 shares in 1999) 986,661 980,786
----------------------------
Net stockholders' equity 2,441,575 2,038,756
----------------------------
$ 4,892,116 $ 4,131,940
==============================================================================================================
See Notes to Consolidated Financial Statements.
26
31
Dover Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents (in thousands)
For the Years Ended December 31, 2000 1999 1998
========================================================================================================================
Cash flow from operating activities:
Net earnings $ 519,612 $ 928,992 $ 378,845
----------------------------------------------
Adjustments to reconcile net earnings to net cash
from operating activities:
Income from discontinued operations -- -- (52,448)
(Gain) loss on sale of discontinued business 13,595 (523,938) --
(Gain) loss on sale of equity investment (13,741) -- --
Depreciation and amortization 203,384 183,244 167,687
Provision for losses on accounts receivable 8,045 6,803 6,542
Net increase (decrease) in LIFO reserve (395) (859) (190)
Deferred income taxes 17,507 (17,216) (311)
Loss (gain) on sale of property and equipment (1,212) (479) 898
Increase (decrease) in deferred compensation 38,657 22,486 4,704
Acquisition inventory premium write-off 13,756 10,534 7,804
(Gain) loss on sale of businesses and certain assets 3,246 (10,256) (40)
Other, net 6,011 (908) (12,279)
Changes in assets and liabilities (excluding effects of
acquisitions and dispositions):
Decrease (increase) in accounts receivable (123,787) (149,631) 74,655
Decrease (increase) in inventories excluding LIFO reserve (89,396) (21,036) (17,263)
Decrease (increase) in prepaid expenses (16,560) (8,644) (11,479)
Decrease (increase) in other assets (3,303) (3,366) 117
Increase (decrease) in accounts payable 1,640 48,526 (24,685)
Increase (decrease) in accrued expenses 19,079 (22,271) (150)
Increase (decrease) in federal and other taxes on income (41,467) 24,135 (26,181)
----------------------------------------------
Total adjustments 35,059 (462,876) 117,381
----------------------------------------------
Net cash from (used in) operating activities of
continuing operations 554,671 466,116 496,226
----------------------------------------------
Cash flows from (used in) investing activities:
Proceeds from the sale of marketable securities 14,185 -- 21,979
Proceeds from sale of property and equipment 7,302 2,637 6,270
Additions to property, plant and equipment (includes rental
equipment: $133 in 2000, $232 in 1999, and $400 in 1998) (197,901) (130,344) (126,130)
Acquisitions (net of cash and cash equivalents: $9,255 in 2000,
$38,186 in 1999, and $7,421 in 1998) (442,658) (575,011) (549,762)
Proceeds from sale of businesses 16,919 40,096 668
----------------------------------------------
Net cash from (used in) investing activities of
continuing operations (602,153) (662,622) (646,975)
----------------------------------------------
Cash flows from (used in) financing activities:
Increase (decrease) in notes payable 532,023 (135,640) (8,235)
Reduction of long-term debt (49,675) (13,379) (2,724)
Proceeds from long-term debt 22,257 1,916 349,115
Purchase of treasury stock (143 shares in 2000, 18,454 shares
in 1999 and 3,252 shares in 1998) (5,874) (671,670) (106,304)
Proceeds from exercise of stock options 9,003 7,520 10,935
Cash dividend to stockholders (97,468) (91,808) (89,189)
----------------------------------------------
Net cash from (used in) financing activities of
continuing operations 410,266 (903,061) 153,598
----------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (4,103) (6,982) 1,986
Cash (to) from discontinued operations (12,951) 9,599 (11,172)
Taxes paid on gain from sale of elevator market segment (302,369) (21,786) --
Proceeds from sale of elevator market segment -- 1,160,000 --
----------------------------------------------
Net increase (decrease) in cash and cash equivalents 43,361 41,264 (6,337)
Cash and cash equivalents at beginning of year 138,038 96,774 103,111
----------------------------------------------
Cash and cash equivalents at end of year $ 181,399 $ 138,038 $ 96,774
==============================================
Supplemental information-continuing operations, cash paid
during the period for:
Income taxes $ 263,351 $ 220,000 $ 188,196
Interest 95,426 53,581 75,858
========================================================================================================================
See Notes to Consolidated Financial Statements.
27
32
Dover Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- --------------------------------------------------------------------------
The Company is a multinational, diversified manufacturing corporation
comprised of over 50 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 24. A description of the products
manufactured and services performed by each of the four segments is given on
the inside front cover.
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 market 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 2000 and 1999 in
the cumulative translation adjustments shown on the balance sheets follows:
Accumulated Other Comprehensive Earnings, Foreign Currency Translation
Adjustments:
(in thousands) 2000 1999
================================================================================
Balance at beginning of year $ (79,985) $(27,243)
Aggregate adjustment for year (32,726) (52,742)
-------------------------------------
Balance at end of year $(112,711) $(79,985)
================================================================================
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, 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:
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. Other domestic
inventory is stated at cost, determined on the last-in, first-out (LIFO)
basis, which is less than market value.
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 2 to 20 years. Depreciation expense was
$136,277,000 in 2000, $122,713,000 in 1999, and $114,116,000 in 1998.
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 $1,889,357,000 at
December 31, 2000 and $1,628,317,000 at December 31, 1999. Amortization of
all intangibles was $67,107,000 in 2000, $60,531,000 in 1999, and $53,571,000
in 1998, of which goodwill was $49,184,000, $41,229,000, and $32,612,000,
respectively.
Other intangible assets principally represent 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 they have not been amortized.
F. REVENUE RECOGNITION:
On December 3, 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements, implementation of which was effective in the fourth quarter 2000.
SAB 101 reflects the basic principles of revenue recognition in existing
generally accepted accounting principles (GAAP). The Company was in
compliance with the basic principles of revenue recognition and as such,
implementation of the SAB 101 did not have a material effect on its results.
In conformity with SAB 101, revenue is generally recognized and earned
when all of the following circumstances are satisfied, a) persuasive evidence
of an arrangement exists, b) price is fixed or determinable, c)
collectibility is reasonably assured and d) delivery has occurred or services
have been rendered.
Shipping and handling fees are not material and are generally credited to
revenue with related costs principally charged to cost of sales.
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 $9,698,000 for
2000, $7,174,000 for 1999, and $5,815,000 for 1998. Research and
experimentation
28
33
expenditures charged to earnings amounted to $175,263,000 for 2000,
$139,333,000 in 1999, and $131,265,000 in 1998. 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.
I. RISK RETENTION, INSURANCE:
The Company generally retains the risk 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.
As part of the company's risk management program, insurance is maintained
to transfer risk beyond the level of self retention and provides stop loss
protection on both an individual claim and annual aggregate basis. Limits of
insurance are maintained at levels considered prudent based on experience of
the company and market conditions. A world wide program of property insurance
covers the Company's owned property and any business interruptions which may
occur due to a hazard risk affecting those properties.
J. MARKETABLE SECURITIES:
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities"
available-for-sale securities are reported at fair value but unrealized gains
and losses are shown in the caption "unrealized holding gains" included in
stockholders' equity.
As of December 31, 2000 available-for-sale securities totaled $5,341,000
with related unrealized gains of $3,086,000, net of tax and consisted of an
investment in Bookham Technology PLC for strategic business reasons. During
2000 the Company reported realized gains in the amount of $8,994,000 net of
tax on the sale of approximately 43% of its investment in Bookham. The cost
was based on the original amount invested. At December 31, 1999 the Company
did not hold any available-for-sale securities.
K. RECLASSIFICATIONS:
Certain amounts, in prior years, have been reclassified to reflect current
year's presentation.
2. ACQUISITIONS, DISPOSITIONS AND DISCONTINUED OPERATIONS:
- ---------------------------------------------------------
1998 COMPLETED ACQUISITIONS
Date Type Acquired Companies Location (Near) Segment Operating Co.
===================================================================================================================================
1-Jan Asset Thermofluid International Arlington, TX DDI Tranter
Manufactures custom heat
transfer equipment for the
refrigeration industry.
5-Jan Asset Quartzdyne, Inc. Salt Lake City, UT DRI Stand-alone
Manufactures highly specialized
quartz pressure transducers
used in oil/gas drilling.
8-Jan Stock Thompson Carmichael W. Midlands, U.K. DII Heil Trailer
Holdings, Ltd. International
Manufactures aluminum and
tainless steel tank trailers
and truck tanks.
10-Feb Asset Wiseco Piston Mentor, OH DDI Stand-alone
Company, Inc.
Manufactures forged
aluminum-alloy pistons found
in racing cars, motorcycles,
power boats and snowmobiles.
16-Apr Stock Nova Controls Santa Cruz, CA DRI HydroSystems
Manufactures electronic
dispensing systems
used in commercial laundry and
dishwashing applications.
21-Apr Stock Sonic Industries Torrence, CA DDI Sargent
Produces high strength, structured
fasteners for the aerospace industry.
30-Apr Asset Avtec Industries, Inc. Oswego, IL DII Randell
Manufactures food service and kitchen
ventilation equipment.
1-May Asset PDQ Manufacturing, Inc. Green Bay, WI DII Stand-alone
Manufactures "touchless" vehicle
wash equipment.
30-Jun Stock Wilden Pump and Grand Terrace, CA DRI Stand alone
Engineering, Inc.
Manufactures air activated double
diaphragm pumps.
30-Jun Asset Koolant Koolers Kalamazoo, MI DII DovaTech
Manufactures industrial chillers.
30-Jun Stock Prox International B.V. Amsterdam, DDI Performance
Distributes engine Netherlands Motorsports
components
30-Jun Stock Jag Industries S.A. Paris, France DRI De-Sta-Co
Produces automation Industries
components
(grippers, tool changers, collision
sensing compliance devices,
slides and rotate units).
10-Dec Stock Ing. Mas Rosario, Argentina DDI Hill Phoenix
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 DTI Everett Charles
Manufactures circuit board Technologies
test equipment
====================================================================================================================================
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. The net assets
of discontinued operations is primarily comprised of accounts receivable,
inventory and fixed assets, net of liabilities. Operating results of the
discontinued segment are as follows:
(in thousands except per share figures)
For the year ended December 31, 1998
================================================================================
Net sales $899,015
Earnings before income taxes 82,246
Income taxes 29,798
--------
Net earnings from
discontinued operations $ 52,448
========
Net earnings per diluted
common share:
Discontinued operations $ .24
================================================================================
29
34
1999 COMPLETED ACQUISITIONS
Date Type Acquired Companies Location (Near) Segment Operating Co.
===================================================================================================================================
8-Jan Stock EMA Industriae Comercio Sao Jose DRI De-Sta-Co
Ltda. Campos, Brazil Industries
Manufactures manual
and pneumatic toggle clamps.
15-Jan Stock Van Dam Machine B.V. Amsterdam, DDI Mark Andy
Manufactures multi-color Netherlands
dry offset printing presses, focused on
the rigid plastic container market.
23-Jan Stock Alphasem Holding A.G. Berg, Switzerland DTI Universal
Manufactures electronic Instruments
assembly equipment.
19-Feb Stock Hydra-Tight, Ltd. W. Midlands, UK DDI Waukesha
Manufactures bolt tensioning Bearings
and pipeline coupling products and
services tailored for the oil/gas
and power generation industries.
4-Mar Stock Graphics Microsystems Sunnyvale, CA DDI Stand-alone
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 DTI Everett Charles
Manufactures test fixtures Technologies
and interconnect devices for automated
test equipment.
8-Apr Stock Richards Industries Rockwood, TN DRI OPW Fueling
Manufactures petroleum Components
handling equipment and safety devices.
10-May Stock Somero Enterprises Houghton, MI DII Stand-alone
Manufactures laser controlled concrete
floor spreading equipment.
31-May Asset JE Piston Huntington Beach, CA DDI Performance
Manufactures high quality Motorsports
forged racing pistons.
1-Jul Asset Parts, Inc. Piedmont, SC DII Heil
Manufactures quality Environmental
replacement parts and cylinders
for the refuse equipment industry.
23-Jul Asset Advantage Lift Systems San Diego, CA DII Rotary Lift
Manufactures surface lifts for heavy
duty automotive applications, as well as
other complimentary designs.
1-Aug Stock Lee Laser, Inc. Orlando, FL DII Dova Tech
Manufactures solid state,
high quality diode and lamp
pumped lasers.
1-Sep Stock Forward Manufacturing Fort Worth, FL DII Rotary Lift
Manufactures surface lifts for light
duty automotive applications.
16-Sep Stock ARCOM, Inc. Salem, NH DTI Quadrant
Manufactures transceivers Technologies
used in high frequency millimeter-
wave digital radios and millimeter
-wave subsystems.
4-Oct Stock Crenlo, Inc. Rochester, MN DDI Stand-alone
Manufactures operator cabs for the
construction machinery and agricultural
equipment markets.
19-Nov Stock HAS, Inc. Miami, FL DDI Sargent
Specializes in the overhaul and repair
of hydraulic and electromechanical aircraft
components.
30-Nov Stock DP Manufacturing Tulsa, OK DRI Tulsa Winch
Manufactures hydraulically powered
planetary gear winches.
3-Dec Stock Heil Asia Bangkok, Thailand DII Heil Trailer
Manufactures liquid and International
dry bulk tank trailers and refuse
collection vehicles.
===================================================================================================================================
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.
Effective March 27, 1999 the Company sold 100% of the stock of CoEv Inc.
In the first quarter of 1999 the Company closed down its Thermofluid
operation. Effective July 30, 1999 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 $10.3 million
gain before tax in 1999 ($.02 per share after tax), and a $3.2 million loss
in year 2000. The operating profits of these companies, separately or in
aggregate, were not material to the Company.
2000 COMPLETED ACQUISITIONS
Date Type Acquired Companies Location (Near) Segment Operating Co.
===================================================================================================================================
1-Jan Stock SureSeal, Inc. Mineral Pt, MO DRI Civacon/
Manufactures butterfly Knappco
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
packaging of soft perishable produce.
8-Mar Stock Triton Systems, Inc. Long Beach, MS DII Stand-alone
Manufactures cash-dispensing
ATMs for off-premise locations,
including ATM management software.
8-Mar Stock Prime Yield Systems, Inc. St. Paul, MN DTI Everett Charles
Manufactures semiconductor Technologies
test sockets and distributes probe cards.
30-Mar Asset Hydro-Cam Engineering Troy, MI DRI De-Sta-Co
Company Manufacturing
Manufactures stamping dies
for the electric motor, generator,
transformer and automotive markets.
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 packaging Technopack
machinery, clips and loops
primarily used in the food
processing industry
24-May Stock Hydromotion, Inc. Spring City, PA DII Texas
Manufactures hydraulic swivels, Hydraulics
electric slip rings and telescopic
waterway assemblies.
31-May Stock Salwasser Manufacturing Reedley, CA DDI SWF
Company, Inc.
Manufactures packaging machinery in
automation of case packing for paper,
dry goods and toiletries markets.
8-Jun Asset Provacon, Inc. Gonzales, LA DRI Midland
Manufactures specialty valves and Manufacturing
fittings 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
35
30-Jun Stock Groupe Aoustin Nanterre, France DRI Ronningen-
Manufactures high volume, turnkey Petter
liquid filtration systems specialty
high-viscosity mixers-extruders.
18-Jul Stock Syfer Technology Ltd. Norwich, U.K. DTI Novacap
Manufactures specialty
ceramic electronic
components.
24-Jul Asset Chesterton System One Stoneham, MA DRI Blackmer
Pump Division
Manufactures high-end
robust centrifugal pump line.
8-Aug Stock Kesseltronics Systems Hudson, Quebec DII PDQ
Corporation
Developer of electronic
products primarily for the
vehicle wash equipment industry.
1-Sep Asset Vertex Piston S.P.A. Reggio Emila, Italy DDI Performance
Manufactures cast Motorsports
aluminum pistons.
15-Sep Asset National Cooler San Dimas, CA DDI Hill Phoenix
Corporation
Manufactures walk-in
coolers, freezers and
cold storage doors.
26-Sep Stock Pullmaster Winch Surrey, Vancouver DRI Tulsa Winch
Manufactures hydraulically and
planetary powered winches ranging
from 1,000 to 50,000 pounds linepull.
1-Oct Stock Vitech Galeen, Netherlands DTI Everett Charles
Manufactures printed circuit Technologies
board test fixtures and provider
of test services for pc boards.
23-Oct Stock RG Industries Ltd. Edmonton, Alberta CA DRI Petroleum
Manufactures sucker Equipment
rod guides and urethane- Group
coated couplings.
7-Nov Stock OK International Inc. Menlo Park, CA DTI Stand-alone
Manufactures professional
tools and assembly equipment used
in electronics, telecommunications
and general manufacturing industries.
30-Nov Asset Cinox Cincinnati, Ohio DTI Quadrant
Manufactures precision
quartz crystals.
5-Dec Stock Kalyn/Siebert, Gatesville, TX DII Heil Trailer
Incorporated International
Manufactures heavy duty customized
truck trailers for commercial and
U.S. government/military customers.
The aggregate cost of these 2000 acquisitions, including all direct costs was
approximately $451,913,000 #of which $316,002,000 represents goodwill which
is being amortized over a forty-year period. The $451,913,000 purchase price
accounting cost can be reconciled to the $506,251,000 "economic cost" amount
shown elsewhere in this report by considering long-term debt assumed and cash
acquired on date of acquisition.
The company reported a $13.6 million loss ($.07 per share) in 2000 due to
subsequent adjustment to both the purchase price and expenses related to the
disposition of the Dover Elevator International market segment in 1999. These
results are reported as loss on discontinued operations in 2000.
The Company reported a gain before tax of $10.5 million ($.04 per share
after tax). The pre-tax gain results from sale of an equity investment ($13.7
million) reported in Note 1.J, and loss on sale of Davenport ($3.2 million)
reported in the 1999 section of this footnote.
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.
The following unaudited pro forma information presents the results of
operations of the Company as if the 2000 acquisitions had taken place on
January 1, 1999.
(in thousands except per share figures)
For the years ended December 31, 2000 1999
===========================================================================================
Net sales from continuing operations:
As reported $ 5,400,717 $ 4,446,420
Pro forma 5,621,904 4,850,992
Net earnings from continuing operations available
to common stockholders:
As reported $ 533,207 $ 405,054
Pro forma 541,605 406,092
Basic earnings per share from continuing operations:
As reported $ 2.63 $ 1.94
Pro forma 2.67 1.94
Diluted earnings per share from continuing operations:
As reported $ 2.61 $ 1.92
Pro forma 2.65 1.92
===========================================================================================
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.
During January and early February 2001 the Company acquired three separate
businesses at a cost of approximately $35 million.
3 INVENTORIES:
- --------------------------------------------------------------------------------
Summary by components at December 31, (in thousands) 2000 1999
================================================================================
Raw materials $311,211 $239,498
Work in process 217,678 205,792
Finished goods 290,178 233,671
Total 819,067 678,961
Less LIFO reserve 35,867 39,582
$783,200 $639,379
At December 31, 2000, domestic inventories determined by the LIFO inventory
method amounted to $155,940,000 ($165,092,000 at December 31, 1999).
During each of the years in the two year period ended December 31, 2000, 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 one cent per share in both 2000
and 1999.
4 BANK LINE OF CREDIT:
- --------------------------------------------------------------------------------
The Company has open bank lines of credit and other bank credit agreements
totaling $750,000,000, which support its issuance of commercial paper. These
lines are in amounts requested by the Company and not the maximum that could be
obtained.
31
36
- --------------------------------------------------------------------------------
5 Debt:
- --------------------------------------------------------------------------------
A summary of long-term debt at December 31,
(in thousands) 2000 1999
-------- --------
6.45% Notes due Nov. 15, 2005
(less unamortized discount of $302)
with an effective interest rate of 6.51% $249,698 $249,655
6.25% Notes due June 1, 2008
(less unamortized discount of $84)
with an effective interest rate of 6.26% 149,916 149,909
6.65% Debentures due June 1, 2028
(less unamortized discount of $857)
with an effective interest rate of 6.68% 199,143 199,133
Other 35,746 10,591
-------- --------
Total long-term debt 634,503 609,288
Less current installments 2,657 1,263
-------- --------
Long-term debt excluding current installments $631,846 $608,025
======== ========
Annual repayments of long-term debt in the four years following 2001 are
scheduled as follows: 2002 -- $4,358,000, 2003 -- $1,455,000, 2004 --
$1,166,000, and 2005 -- $398,000.
The notes payable shown on the balance sheets for 2000 and 1999 principally
represent commercial paper. The weighted average interest rates at December 31,
2000 and 1999 were 6.4% and 5.3% respectively.
On February 12, 2001, Dover completed its underwritten offering of
$400,000,000, 6.50% Notes due February 15, 2011. The proceeds were used to
reduce short-term debt.
- --------------------------------------------------------------------------------
6 Capital Stock, Additional Paid - In Capital and Treasury Stock:
- --------------------------------------------------------------------------------
A summary of equity activity follows:
Additional Treasury Stock
Common Stock Paid-in --------------------
(in thousands) $1 Par Value Capital Shares Amount
-------- -------- ------ --------
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
Stock options exercised 661 15,033 94* 4,007
Treasury stock purchased -- -- 49 1,868
Stock issued 37 459 -- --
Balance at
December 31, 2000 $236,944 $ 48,552 33,761 $986,661
======== ======== ====== ========
* Shares received as consideration for exercise price.
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.
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.
- --------------------------------------------------------------------------------
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, 2000.
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:
Shares
Under Option Price Range
--------- ---------------
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 4, 2006 2,775,877 $ 8.67 - $23.53
========= ===============
Outstanding at January 1, 2000 5,723,485 $ 8.67 - $35.00
Granted 1,032,671 $39.00 - $43.00
Exercised (660,524) $ 8.67 - $24.72
Canceled (119,713) $ 8.67 - $39.00
--------- ---------------
Outstanding at December 31, 2000 5,975,919 $ 9.62 - $43.00
========= ===============
Exercisable at December 31, 2000 through:
February 28, 2001 71,544 $ 9.62
March 6, 2002 149,048 $ 9.67
March 4, 2003 189,339 $ 11.43
February 27, 2004 286,520 $ 14.88
February 2, 2005 804,972 $ 14.22
February 4, 2006 656,990 $ 23.53
February 4, 2007 768,590 $ 24.72
--------- ---------------
Total 2,927,003 $ 9.62 - $24.72
========= ===============
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:
(in thousands except per share figures)
For the years ended December 31, 2000 1999 1998
----------- ----------- -----------
Net earnings from continuing
operations available to
common stockholders:
As reported $ 533,207 $ 405,054 $ 326,397
Pro forma 517,092 393,783 322,746
Basic earnings per share from
continuing operations:
As reported $ 2.63 $ 1.94 $ 1.47
Pro forma 2.55 1.88 1.45
Diluted earnings per share from
continuing operations:
As reported $ 2.61 $ 1.92 $ 1.45
Pro forma 2.53 1.87 1.44
=========== =========== ===========
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
2000, 1999 and 1998, respectively: risk-free interest rates of 6.91, 4.97 and
32
37
5.57 percent; dividend yield of 1.18, 1.15, and 1.16 percent; expected lives
of 6 years for each year; and volatility of 22.57, 22.20, and 22.45 percent.
- --------------------------------------------------------------------------------
8 EARNINGS PER SHARE:
- --------------------------------------------------------------------------------
The computations of basic and diluted earnings per share from continuing
operations for each year were as follows:
(in thousands except per share figures) 2000 1999 1998
-------- -------- --------
Numerator:
Net earnings from continuing
operations available to
common stockholders: $533,207 $405,054 $326,397
======== ======== ========
Denominator:
Basic weighted average shares 202,971 209,063 222,793
-------- -------- --------
Effect of diluted securities:
Employee stock options 1,706 1,616 1,593
-------- -------- --------
Denominator:
Diluted weighted average shares 204,677 210,679 224,386
======== ======== ========
Basic earnings per share from
continuing operations $ 2.63 $ 1.94 $ 1.47
======== ======== ========
Diluted earnings per share from
continuing operations $ 2.61 $ 1.92 $ 1.45
======== ======== ========
There were no anti-dilutive stock options in 2000 or 1999 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.
- --------------------------------------------------------------------------------
9 TAXES ON INCOME:
- --------------------------------------------------------------------------------
Total income taxes for the years ended December 31, 2000, 1999 and 1998 were
allocated as follows:
(in thousands) 2000 1999 1998
--------- --------- ---------
Income from continuing operations $ 239,108 $ 209,950 $ 162,249
Income from discontinued
operations -- -- 29,798
Gain (loss) on sale of
discontinued business (4,895) 372,395 --
Stockholders' equity, for
compensation expense for tax
purposes in excess of amounts
recognized for financial
reporting purposes (6,691) (4,771) (8,101)
--------- --------- ---------
$ 227,522 $ 577,574 $ 183,946
========= ========= =========
Income tax expense (benefit) is made up of the following components:
(in thousands) 2000 1999 1998
--------- --------- ---------
Current:
U.S. Federal $ 158,700 $ 166,611 $ 107,257
State and local 2,778 9,544 8,864
Foreign 59,991 51,011 45,916
--------- --------- ---------
Total current 221,469 227,166 162,037
--------- --------- ---------
Deferred
U.S. Federal 18,351 (18,357) 4,804
State and local 1,466 (603) (296)
Foreign (2,178) 1,744 (4,296)
--------- --------- ---------
Total deferred 17,639 (17,216) 212
--------- --------- ---------
Total expense $ 239,108 $ 209,950 $ 162,249
========= ========= =========
Income taxes have been based on the following components of earnings before
taxes on continuing income:
(in thousands) 2000 1999 1998
-------- -------- --------
Domestic $573,843 $474,667 $383,819
Foreign 198,472 140,337 104,827
-------- -------- --------
$772,315 $615,004 $488,646
======== ======== ========
The reasons for the difference between the effective rate and the U.S.
Federal income statutory rate of 35% follow:
2000 1999 1998
---- ---- ----
U.S. Federal income tax rate 35.0% 35.0% 35.0%
State and local taxes, net of
Federal income tax benefit 0.4 0.9 1.1
Foreign operations tax effect (0.1) 0.6 1.0
---- ---- ----
Subtotal 35.3 36.5 37.1
R&E tax credits (1.3) (1.2) (1.2)
FSC benefit (2.6) (2.4) (2.8)
Foreign tax credits (0.3) (0.2) (1.4)
Non-tax deductible items 1.4 1.4 1.5
---- ---- ----
Recurring effective rate 32.5 34.1 33.2
Non-recurring foreign restructuring (1.5) -- --
---- ---- ----
Effective rate 31.0% 34.1% 33.2%
==== ==== ====
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:
(in thousands) 2000 1999
--------- ---------
Deferred Tax Assets:
Accrued insurance $ 9,681 $ 11,516
Accrued compensation, principally postretirement
benefits, and compensated absences 48,066 37,059
Accrued expenses, principally for disposition
of businesses, interest and warranty 12,529 9,005
Inventories, principally due to reserves for financial
reporting purposes and capitalization for tax
purposes 16,270 17,468
Accounts receivable, principally due to allowance
for doubtful accounts 5,940 5,828
Other assets 2,284 2,284
--------- ---------
Total gross deferred tax assets 94,770 83,160
--------- ---------
Deferred Tax Liabilities:
Accounts receivable, principally due to retainage
and accrual acceptance on contracts (29,690) (18,938)
Plant and equipment, principally due to
differences in depreciation (17,276) (12,473)
Intangible assets, principally due to different tax
and financial reporting bases and
amortization lives (92,262) (70,411)
Prepaid expenses, principally due to
overfunded pension plans (18,321) (18,433)
Other liabilities (4,268) (1,706)
--------- ---------
Total gross deferred tax liabilities (161,817) (121,961)
--------- ---------
Net deferred tax liability (67,047) (38,801)
--------- ---------
Net current deferred tax asset 334 11,639
--------- ---------
Net non-current deferred tax liability $ (67,381) $ (50,440)
========= =========
33
38
- --------------------------------------------------------------------------------
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 $36,109,000, $32,796,000,
and $22,648,000 for 2000, 1999, and 1998, 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 $121 million as of
December 31, 2000 and are payable as follows (in millions): 2001 -- $28, 2002 --
$21; 2003 -- $17; 2004 -- $11, and 2005 and subsequent years -- $44.
- --------------------------------------------------------------------------------
11 COMMITMENTS AND CONTINGENT LIABILITIES:
- --------------------------------------------------------------------------------
A few 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 very 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, a few 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 commercial paper
backup credit agreement. 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 8.9. The
Company was in compliance with restrictions on liens, guarantees and subsidiary
debt at December 31, 2000.
- --------------------------------------------------------------------------------
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 9, 13, 17, and 21.
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 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 funded from the general
assets of the Company.
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.
34
39
Pension Benefits Other Benefits
----------------------------------------- ----------------------------------------
(in thousands) 2000 1999 1998 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
COMPONENTS OF NET PERIODIC EXPENSE
Expected return on plan assets $ 22,812 $ 21,455 $ 20,522 $ -- $ -- $ --
Benefits earned during year (8,060) (7,680) (7,330) (573) (572) (521)
Interest accrued on benefit obligation (15,435) (14,535) (14,660) (1,583) (1,559) (1,575)
Amortization:
Prior service cost (2,579) (2,394) (2,389) 11 11 7
Unrecognized actuarial gains (losses) 190 (169) 4,256 20 77 82
Transition 1,145 1,257 1,268 -- -- --
Settlement and curtailment gain (loss) -- 122 (65) 16 -- --
--------------------------------------------------------------------------------------
Net periodic (expense) credit $ (1,927) $ (1,944) $ 1,602 $(2,109) $(2,043) $(2,007)
=================================================================================================================================
The funded status and resulting prepaid pension cost of U.S. defined
benefit plans for the years ended December 31, 2000 and 1999 were as follows:
Pension Benefits Other Benefits
-------------------------- --------------------------
(in thousands) 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 220,375 $ 220,248 $ 23,826 $ 24,608
Benefits earned during the year 8,060 7,681 573 572
Interest cost 15,435 14,534 1,582 1,559
Amendments 1,813 235 -- (6)
Actuarial loss (gain) (21,280) (2,404) (859) (790)
Settlement and curtailments -- (1,904) (15) --
Acquisitions 9,652 -- -- --
Divestitures (13,704) -- (1,370) --
Benefits paid (20,047) (18,015) (1,840) (2,117)
------------------------------------------------------------
Benefits obligation at end of year 200,304 220,375 21,897 23,826
------------------------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year 256,900 229,930 -- --
Actual return on plan assets 27,397 39,351 -- --
Company contributions 4,828 7,748 1,422 1,701
Employee contributions -- -- 418 416
Settlements paid -- (2,114) -- --
Benefits paid (20,047) (18,015) (1,840) (2,117)
Acquisitions 7,149 -- -- --
Divestitures (11,815) -- -- --
------------------------------------------------------------
Fair value of plan assets at end of year 264,412 256,900 -- --
------------------------------------------------------------
Funded status 64,108 36,525 (21,897) (23,826)
Unrecognized actuarial (gain) (52,721) (25,280) (3,037) (2,847)
Unrecognized prior service cost 29,487 30,324 (27) (38)
Unrecognized transition (gain) (6,502) (8,368) -- --
------------------------------------------------------------
Prepaid (accrued) benefit cost $ 34,372 $ 33,201 $(24,961) $(26,711)
=================================================================================================================
The assumptions used in determining the above were as follows: a
weighted average discount rate of 7.5% (7% in 1999), an average wage increase of
5% (6% in 1999) and an expected long-term rate of return on plan assets of 9.75%
(10% in 1999).
Approximately 86% (91% in 1999) of defined benefit plan assets were
invested in equity securities with the remainder in fixed income and short term
investments.
Pension cost for all world wide defined contribution and benefit plans
was $31,505,000 for 2000, $25,987,000 for 1999 and $18,806,000 for 1998.
For post retirement benefit measurement purposes a 5% to 8.75% 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 2006 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
postretirement benefit obligation as of December 31, 2000 by $1,579,000
($1,140,000) and the net postretirement benefit cost for 2000 by approximately
$193,000 ($134,000). As a result of the 1999 acquisition of Crenlo, their
existing Pension Plan was merged into the Dover Pension Plan in 2000. The
Davenport Pension Plan was divested from the Dover Pension Plan as a result of
the sale reported in Footnote No. 2.
35
40
- --------------------------------------------------------------------------------
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 24 and the following
information is disclosed as required by the statement:
Revenues Long-lived assets
-------------------------------------------------- ------------------------------
For the years ended December 31, 2000 1999 1998 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
United States $3,249,304 $2,709,534 $2,497,770 $2,386,995 $2,045,569
Europe 962,545 862,156 749,824 492,256
446,286
Other Americas 513,377 394,599 357,719 25,196 21,044
Total Asia 563,185 396,750 295,744 12,553 7,162
Rest of the World 112,306 83,381 76,609 267 317
-----------------------------------------------------------------------------------------
$5,400,717 $4,446,420 $3,977,666 $2,917,267 $2,520,378
-----------------------------------------------------------------------------------------
U.S. Exports $1,288,677 $ 944,973 $ 840,021
==================================================================================================================================
"Revenues" are attributed to countries based on location of customer.
"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.
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,
2000 and 1999, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America. 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 of America, 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 our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 2, 2001
36
41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES:
Despite the amount spent during 2000 on the Company's acquisition program, $506
million, liquidity measures improved slightly when compared to 1999 and the
Company continues to be in excellent financial condition.
The Company's current ratio increased to 1.23 at December 31, 2000,
compared with 1.21 at December 31, 1999. The quick ratio (current assets net of
inventories, divided by current liabilities) increased slightly to .74 at
December 31, 2000, compared with .73 at December 31, 1999.
At December 31, 2000, the Company had bank lines of $750.0 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 P-1 by Moody's.
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 increased to 34.5% ($1,287.6 million) at December 31, 2000,
compared with 27.4% ($767.9 million) at December 31, 1999. Long-term debt
maturities for the four years 2001 to 2004 aggregate $9.6 million. Management is
not aware of any potential impairment to the Company's liquidity and with regard
to long term debt, the Company was in compliance with all commitments and
restrictions on liens, guarantees and subsidiary debt with regard to long-term
debt.
During 2000 the entire capital expenditure program ($198 million) was
financed internally as it is expected to be in 2001, when the Company plans
capital spending of $271 million. The Company capital spending plans for the
year frequently differs from the amount that actually is spent.
The Company had an unrecognized actuarial gain of $52.7 million at
December 31, 2000 resulting from favorable stock market returns on assets net of
actuarial gains and losses on pension benefit obligations 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 Statements of Cash Flows (page 27),
net cash from operating activities increased to $554.7 million in 2000 from
$466.1 million in 1999. This increase was driven primarily by a 32% increase in
earnings offset by increases in accounts receivable and inventory as sales
increased 21% from last year.
Net cash used in investment activities aggregated $602.2 million in
2000 compared with $662.6 million in 1999. The change from year to year was due
to decreased acquisition spending.
Net cash from financing activities was $410.3 million in 2000 compared
with net cash used in financing activities of $903.1 in 1999. The principal
differences for the swing of $1,313.4 million were a) an increase of $504.6
million in long-term debt and notes payable in 2000 compared to a decrease of
$147.1 million in 1999, a swing of $651.7 and b) $665.8 million decrease in the
amount spent on stock repurchases. Net increase in debt was due primarily to the
need to finance the $302 million tax payment in 2000 on the 1999 sale of the
Dover Elevator International market segment and acquisitions.
At December 31, 2000, the Company's net property, plant, and equipment
amounted to $755.5 million compared with $646.5 million at the end of the
preceding year. Intangible assets, net of amortization increased by $257.9
million during 2000 as a result of goodwill arising from acquisitions.
The aggregate of current and deferred income tax liabilities decreased
from $431.3 million at the beginning of the year to $118.2 million at year end.
This decrease resulted primarily from $302 million of income taxes paid in 2000
on the sale of the Dover Elevator International segment.
Retained earnings increased from $2.830 billion at the beginning of
2000 to $3.252 billion at December 31, 2000. The $422 million increase results
from 2000 net earnings of $520 million, less cash dividends which aggregated $97
million. Stockholders' equity increased from $2.039 billion to $2.442 billion.
The $403 million increase results mainly from the $422 million increase in
retained earnings.
In June 1998 the FASB issued Statement of Financial Accounting
Standards No. 137 as amended in June 2000 by Statement of Financial Accounting
Standards No. 138 "Accounting for Derivative Instruments and Hedging
Activities", effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. The statement is not material to the Company's financial
reporting and disclosure requirements.
RESULTS OF OPERATIONS 2000:
During 2000 the Company repurchased 143,000 Dover shares, raised dividends for
the 38th consecutive year, and invested $198 million in new capital equipment.
The combined investment in capital equipment, acquisitions and stock repurchases
was $710 million. The comparable number in 1999 was $1,401 million.
Stand-alone acquisitions in 2000--those companies which report directly
to one of our independent subsidiary CEOs--included Triton Systems, a producer
of off-premise automated teller machines and related software, now part of Dover
Industries--and OK International, a manufacturer of hand tools and consumable
products focused on the circuit board manufacturer workbench and part of Dover
Technologies.
The 21 add-on companies, acquired in 2000, accounted for $245 million
of the Companies total 2000 acquisition investment. Since the Company began its
more aggressive approach to add-on acquisitions in 1994, it has completed 84
add-ons through the end of 2000, representing an expenditure of $1,132 million.
All four of Dover's business segments reported record sales and three had record
earnings. The results, although not quite as dramatic as in the previous year,
were: sales $5.4 billion, up 21%; net earnings from continuing operations,
$526.6 million, up 31%; earnings per share $2.57 up 35%; return on average
equity 23.5%, up one and eight tenths of a point.
Dover Technologies sales increased 44% to $2100.0 million, and segment
earnings increased 73% to $392.0 million. Dover Industries sales increased 9% to
$1245.6 million and segment earnings increased 11% to $199.7 million. Dover
Diversified's sales increased 10% to $1,175.5 million and segment earnings
increased 10% to $167.9 million. Dover Resources sales increased 14% to $887.0
million and segment earnings increased 11% to $119.0 million.
Results of segment operations are explained in detail in the operations
review, pages 6 through 21.
1999 COMPARED WITH 1998:
During 1999 the Company repurchased 18 million Dover shares, raised dividends
for the 37th consecutive year, and invested $130 million in new capital
equipment. The combined investment in capital equipment, acquisitions and stock
repurchases was $1,401 million. The comparable number in 1998 was $788 million.
Stand-alone acquisitions in 1999--those companies which report directly
to one of our independent subsidiary CEOs--included Graphics Microsystems, a
manufacturer of closed-loop color control systems and digital remote link
37
42
control systems for web, sheet-fed and specialty printing presses, Somero
Enterprises, a producer of laser controlled concrete floor spreading equipment,
and Crenlo Inc., a manufacturer of operator cabs for the construction machinery
and agricultural equipment markets.
The 15 add-on companies, acquired in 1999, accounted for $294 million
of the Companies total 1999 acquisition investment. Since the Company began its
more aggressive approach to add-on acquisitions in 1994, it has completed 63
add-ons through the end of 1999, representing an expenditure of $887 million.
DOVER TECHNOLOGIES
A second-half recovery in the electronics industry fueled a 55% gain in segment
earnings in 1999 on a 20% sales improvement. Operational profits rose from $178
million in 1998 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%.
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 Instruments, which is the largest of the four CBAT companies,
experienced a huge change in operating rates between the first and second
halves. 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.
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 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.
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 manufacturer
acquisitions were strong performers. The U.S. test equipment market was slow in
1999, as the printed circuit board fabricators tightened capital spending.
From it 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.
Similar programs have been put in place at K&L Microwave.
DOVER INDUSTRIES
The Industries segment achieved record profits of $180 million in 1999, (up
16%), with the majority of this year-over-year growth coming from companies
owned at the beginning of 1999. 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, in 1999, achieved higher sales, with only three declines, each less
than 3%. Operational profit margins and after-tax operating return in investment
were each up one point, to 18% and 39%, respectively.
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 in 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.
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.
Rotary Lift set records for sales and profits, primarily through the
acquisition of the Advantage product line (parallelogram 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.
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.
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 initiatives improved margins to historical levels after a
disappointment in 1998.
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.
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%.
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.
38
43
Chief Automotive had lower profits on flat sales. New computerized
measuring systems introduced late in the year were well received by the market.
Davenport continued to suffer from a weak market and from difficulty in
developing new machine tool products. This company was sold in January, 2000.
DOVER DIVERSIFIED
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.
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%.
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 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. 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.
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 makes equipment used to decorate large cylindrical cups, such
as the stadium cup with which football and baseball fans are well acquainted.
Graphics 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.
DOVER RESOURCES
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 had set records in 1998.
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. 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 at these two companies 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.
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 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.
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.
Despite lower sales, De-Sta-Co Manufacturing improved its profits as a
result of 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 Manufacturing could not offset a decline in oilfield winch sales and
the cost of a move to new facilities.
39
44
Dover Corporation and Subsidiaries
11-YEAR CONSOLIDATED SUMMARY OF SELECTED
FINANCIAL DATA FOR CONTINUING OPERATIONS
SUMMARY OF OPERATIONS (in thousands except per share figures) 2000 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
Net sales $5,400,717 4,446,420 3,977,666 3,669,568
Cost of sales 3,433,495 2,837,960 2,551,381 2,342,268
Selling and administrative expenses 1,124,012 973,049 894,325 807,793
Interest expense 97,538 53,401 60,746 46,163
Other income, net 26,643 32,994 17,432 18,930
Earnings before taxes 772,315 615,004 488,646 492,274
Income taxes 239,108 209,950 162,249 167,360
-------------------------------------------------------------
Net earnings $ 533,207 405,054 326,397 324,914
% of sales 9.9% 9.1% 8.2% 8.9%
Return on average equity 23.5% 21.7% 20.5% 23.2%
-------------------------------------------------------------
EPS per diluted common share:
Net earnings before discontinued $ 2.57 1.90 1.45 1.43
Goodwill write-offs (net of tax) 0.20 .15 .12 .10
-------------------------------------------------------------
Net earnings before discontinued & goodwill 2.77 2.05 1.57 1.53
Other acquisition write-offs (net of tax) 0.17 .14 .12 .17
-------------------------------------------------------------
Net earnings before acquisition write-offs $ 2.94 2.19 1.69 1.70
=============================================================
Net earnings including dispositions $ 2.54 4.41 1.69 1.79
EBITACQ $ 4.62 3.44 2.71 2.70
Weighted average number of shares 204,677 210,679 224,386 226,815
Dividends per common share $ .48 .44 .40 .36
-------------------------------------------------------------
Book value per common share $ 12.02 10.06 7.56 6.84
Depreciation and amortization $ 203,384 183,244 167,687 155,204
Capital expenditures $ 197,768 130,112 125,730 122,082
Acquisitions $ 506,251 599,171 556,019 261,460
Cash flow $ 736,591 588,298 494,084 480,118
Number of employees 29,489 26,584 23,314 21,814
Financial position at December 31
=================================================================================================================================
Working capital $ 370,209 285,076 314,777 292,195
Net property, plant and equipment $ 755,548 646,475 571,963 522,344
Total assets $4,892,116 4,131,940 3,382,393 2,898,971
Total debt $1,474,383 905,925 1,043,679 698,747
Common stockholders' equity $2,441,575 2,038,756 1,910,884 1,703,584
Common shares outstanding 203,184 202,629 220,407 222,596
Closing common stock price per share $ 40.56 45.38 36.63 36.13
=================================================================================================================================
"Summary of Operations" represents results from continuing operations; excludes
disposition of Dover Elevator International market segment. See Notes to
Consolidated Financial Statements.
"Return on average equity", "Net earnings before discontinued", "Net earnings
before discontinued & goodwill", "Net earnings before acquisition write-offs"
and "EBITACQ" for 2000, 1999 and 1996 excludes gain from sale of businesses
(Note 2).
"Net earnings before acquisitions write-offs" is equal to net earnings before
acquisition write-offs from continuing operations per weighted #average diluted
common share.
EARNINGS PER SHARE GROWTH (AVERAGE ANNUAL RATE)
FOR 10-YEAR PERIODS ENDING 12/31 OF EACH YEAR SHOWN
YEAR DOVER S & P
---- ----- -------
91 0.051 0
92 0.061 0.04
93 0.098 0.045
94 0.097 0.065
95 0.133 0.090
96* 0.172 0.099
97* 0.152 0.091
98 0.119 0.065
99* 0.128 0.070
00* 0.149 0.085
*Excluding gains on sale of business in 2000, 1999, 1997 and 1996
DOVER LONG TERM INVESTMENT (IN $ MILLIONS)
CAPITAL
YEAR EXPENDITURES STOCK REPURCHASES ACQUISITIONS
---- ------------ ----------------- ------------
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
00 198 6 506
40
45
1996 1995 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------
3,215,573 2,924,361 2,291,972 1,706,220 1,480,481 1,404,386 1,379,756
2,076,921 1,936,944 1,527,442 1,129,127 998,587 976,001 908,925
686,101 599,170 483,414 378,505 339,502 321,644 312,635
41,663 39,586 36,083 21,717 19,257 22,366 29,650
91,221 35,603 23,998 13,753 15,090 61,501 17,691
502,109 384,264 269,030 190,625 138,225 145,877 146,237
165,590 126,696 90,185 66,153 46,851 52,559 50,740
- ----------------------------------------------------------------------------------------------------------------------
336,519 257,568 178,845 124,472 91,374 93,318 95,497
10.5% 8.8% 7.8% 7.3% 6.2% 6.6% 6.9%
24.7% 27.9% 24.4% 20.8% 16.4% 16.7% 17.8%
- ----------------------------------------------------------------------------------------------------------------------
1.24 1.13 .78 .54 .39 .39 .39
.07 .06 .06 .04 .03 .04 .02
- ----------------------------------------------------------------------------------------------------------------------
1.31 1.19 .84 .58 .42 .43 .41
.09 .10 .08 .07 .07 .07 .05
- ----------------------------------------------------------------------------------------------------------------------
1.40 1.29 .92 .65 .49 .50 .46
======================================================================================================================
1.69 1.22 .88 .69 .56 .54 .64
2.16 1.99 1.44 1.00 .75 .80 .74
230,518 227,815 228,740 228,441 231,953 239,000 244,675
.32 .28 .25 .23 .22 .21 .19
- ----------------------------------------------------------------------------------------------------------------------
5.71 4.56 3.56 2.88 2.37 2.44 2.25
110,484 92,186 81,316 62,921 63,773 71,000 64,839
113,679 91,719 72,709 39,420 37,304 36,671 32,931
281,711 323,291 185,324 312,480 100,961 3,315 85,634
447,003 349,754 260,161 187,393 155,147 164,319 160,336
19,213 18,337 15,512 12,941 11,235 11,008 11,567
======================================================================================================================
237,429 209,850 280,797 217,808 111,962 198,869 129,261
454,144 384,981 292,698 235,310 201,046 193,655 209,862
2,602,841 2,303,777 1,721,492 1,406,287 1,051,506 980,104 1,091,599
745,360 675,580 517,647 427,182 225,001 135,319 282,109
1,489,703 1,227,706 1,011,230 883,240 810,026 828,277 787,787
225,060 227,340 226,920 228,652 228,340 235,912 239,884
25.50 18.44 12.91 15.19 11.47 10.44 9.94
======================================================================================================================
"EBITACQ" is equal to earnings before taxes, net interest and acquisition
write-offs from continuing operations per weighted average diluted common share.
"Cash flow" represents net earnings plus depreciation and amortization.
"Net earnings including dispositions" includes the discontinued operations of
the elevator market segment and gains/losses 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 (IN MILLIONS)(a)
YEAR FREE CASH FLOW
---- --------------
1991 $101
92 $ 74
93 $ 86
94 $179
95 $172
96 $250
97 $332
98 $289
99 $272
00 $290
(a) 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 businesses in 2000, 1999 and 1996.
FREE CASH FLOW AS A PERCENTAGE OF SALES (IN PERCENT)(a)
YEAR ANNUAL THREE YEAR MOVING AVERAGE
---- ------ -------------------------
1991 7.2% 8.8%
92 5.0% 6.8%
93 5.0% 5.7%
94 7.8% 5.9%
95 5.9% 6.2%
96 7.8% 7.1%
97 9.0% 7.6%
98 7.3% 8.0%
99 6.1% 7.5%
00 5.4% 6.3%
(a) Free cash flow is operating cash generated after fund working capital, and
dividends but excluding acquisitions dispositions and stock repurchases.
*Excluding sale of businesses in 2000, 1999 and 1996.
41
46
Dover Corporation and Subsidiaries
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
DAVID H. BENSON+
Chairman, Charter European
Trust PLC.
JEAN-PIERRE M. ERGAS*(N)
Chairman and
Chief Executive Officer,
BWAY Corporation
RODERICK J. FLEMING+
Managing Partner, Fleming
Family & Partners.
KRISTIANE C. GRAHAM(N)
Private Investor
JAMES L. KOLEY+*
Chairman, Koley
Jessen, P.C.
RICHARD K. LOCHRIDGE(N)
President,
Lochridge & Company, Inc.
THOMAS L. REECE*
GARY L. ROUBOS+*
Director of various
corporations and former
Chairman of the Board of Dover
MICHAEL B. STUBBS
Private Investor
OFFICERS
THOMAS L. REECE
Chairman, President, and
Chief Executive Officer
DAVID S. SMITH
Vice President, Finance & Chief
Financial Officer
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, Tax
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
* Members of Executive Committee
+ Members of Audit Committee
(N) Members of Compensation Committee
Dover Corporation and Subsidiaries
QUARTERLY DATA
(unaudited) (in thousands except per share figures)
Common Stock
Cash Dividends and Market Prices
----------------------------------
Per Share Market Prices
Net Gross Net ----------------- Dividends
Quarter Sales Profit Earnings Basic Diluted High Low Per Share
- ----------------------------------------------------------------------------------------------------------------
2000
First $1,251,283 $ 457,139 $117,319 $ .58 $ .57 $48.75 $36.06 $.115
Second 1,379,260 507,421 136,733 .67 .67 54.38 40.25 .115
Third 1,390,486 514,243 144,462 .71 .71 51.56 40.69 .125
Fourth 1,379,688 488,419 134,693 .67 .66 47.50 34.13 .125
---------------------------------------------------------------- -----
$5,400,717 $1,967,222 $533,207 $2.63 $2.61 $ .48
===================================================================================================
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
=============================================================================================================
"Net Earnings" and "Per Share" data reflect continuing operations--See Note 2.
"Market Prices"--As reported in the Wall Street Journal.
42
47
[GRAPHIC OF PHOTOGRAPHIC COLLAGE]
STOCKHOLDER INFORMATION
TRANSFER AGENT/REGISTRAR:
MELLON INVESTOR SERVICES
Ridgefield Park, New Jersey
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 Mellon Investor Services at the
following addresses:
SERVICES
REGULAR MAIL
Mellon Investor Services
P.O. Box 3315
South Hackensack, NJ
07606-1915
Phone (888) 567-8341
REGISTERED OR
OVERNIGHT MAIL
Mellon Investor Services
85 Challenger Road
Ridgefield, NJ 07660
Phone (888) 567-8341
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
Design: RWI (rwidesign.com)
Copy: Holcomb Associates
Printing: L.P. Thebault
Printed on recycled paper
48
[DOVER LOGO]
DOVER CORPORATION
280 Park Avenue
New York, NY 10017-1292
www.dovercorporation.com
[GRAPHIC OF PHOTOGRAPHIC COLLAGE]