Dover Reports Second Quarter Results
Dover Reports Second Quarter Results
NEW YORK, July 16 Dover Corporation earned
$.70 per diluted share in the second quarter ended June 30, 2001. Of this
total, the gains on the Donates welding equipment group and AC Compressor
divestitures contributed $.45 per diluted share to the quarter's results.
Excluding these gains, earnings in the quarter were $.25 per diluted share, a
decrease of 63% from the $.67 per diluted share earned in the comparable
quarter last year. Sales in the second quarter were $1.14 billion, a 17%
decline from $1.38 billion last year, and segment earnings for the quarter
were $106.5 million, down 55% or $131.6 million from $238.1 million last year.
Excluding the gains on sales of businesses, net income from continuing
operations for the second quarter was $50.2 million, down 63% or $86.6 million
from $136.7 million last year.
The dominant reason for the sales and earnings decline was the impact of
the downturn in the electronics industry on Dover Technologies, where income
totaled $.5 million, compared to $110.3 million last year, on a 43% or
$225.5 million sales decline. The other three market segments also had
earnings declines due to the weak general economic environment. Dover
Industries and Dover Diversified's earnings declined by 24% and 18%
respectively, on lower sales, and Dover Resources' earnings declined 6% on a
12% sales increase. Except for Technologies, all segments reported higher
sales and earnings than the first quarter.
Commenting on the results and the current outlook, Mr. Thomas L. Reece,
Chairman and CEO said, "The challenges presented by the unexpectedly severe
downturn in the electronics markets served by Dover Technologies, coming so
shortly after a period of unprecedented growth, have had a significant adverse
impact on Dover's earnings so far this year. However, Dover's niche market
positions in this long-term high growth industry remain very strong, and we
expect to come out of this period stronger than we entered it. Dover remains
firmly committed to what has been, and we are confident remains, a very
successful investment for our shareholders. At this point, the electronics
industry is unlikely to recover this year, and weak general economic
conditions are impacting the balance of our industrial manufacturing
businesses. Nevertheless, we are hopeful that Dover's earnings will begin to
recover in the second half as we believe any remaining risk in Technologies is
likely to be offset by improvements in the other segments."
Dover completed one stand-alone and three add-on acquisitions during the
quarter at a combined investment of $156.5 million. The net income impact of
these acquisitions in the second quarter was small due to acquisition-related
amortization and depreciation, which are typically higher in the first year
after acquisition. Acquisitions completed in the last twelve months added
$59 million in sales and $7 million in operating profit in the second quarter.
SEGMENT RESULTS
Dover Technologies' second quarter sales decreased 43% or $225.5 million
to $301.9 million, and earnings were $.5 million compared to $110.3 million in
the same period last year. These results are due to the continued dramatic
decline in the electronics industry served by the Circuit Board Assembly and
Test (CBAT) and Specialty Electronics Components (SEC) businesses.
Acquisitions completed in the last year added approximately $28 million to
sales in the quarter, with no material impact on segment earnings after
acquisition write-offs.
In Technologies' CBAT business, second quarter sales decreased 59% or
$208.7 million to $147.4 million, and for the quarter CBAT reported a loss of
$18.9 million, compared to earnings of $73.6 million in the same period last
year. Bookings, at $128.9 million, were down 67% from the same period last
year and were 31% lower than the first quarter of 2001. The book-to-bill
ratio was .87 for the second quarter. While all CBAT companies (which all
manufacture capital equipment used to build or test circuit boards or
semiconductors) experienced very weak markets after what was clearly a period
of unsustainably robust customer spending last year, the impact at Universal
Instruments, CBAT's largest company, was particularly pronounced. Sales levels
at Universal have declined precipitously to a quarterly level not seen since
the first quarter of 1993. Sales in the second quarter were merely 25% of the
level experienced as recently as the third quarter last year. The magnitude
and speed of this change has driven Universal into a quarterly loss position
for the first time in its history. Though headcount reductions and other
efforts to reduce costs rapidly to restore profitability continue, appropriate
focus is also being given to sustaining the business for the still positive
longer-term future in this market. Universal's book-to-bill ratio for the
quarter was .95 (higher than the CBAT average), and while June was the
strongest bookings month of the quarter, no clear signs of recovery in this
market are yet visible. If the market does not recover this year, Universal
will remain unprofitable for the balance of the year. Declining backlogs in
the rest of CBAT, which was profitable in the quarter, are unlikely to be
sufficient to offset these losses. In total, CBAT losses are currently
expected to be in the same range in the third quarter.
In Technologies' SEC business, sales declined 15% or $18.7 million from
the same period last year to $102.3 million, and earnings declined 52% or
$11.7 million to $10.9 million. Net bookings in the second quarter of
$44.4 million were down 76% from last year, and the book-to-bill ratio was
.43 for the quarter. SEC's customer concentration in the
datacom/telecom/networking markets drove growth last year, but has now
resulted in a dramatic decline in bookings and backlog as those markets
decline. SEC is also responding to the rapid change in market conditions with
appropriate cost reductions, while continuing to invest in product
development linked to specific customer requirements. However, it is unclear
at this time when market demand will improve, and with declining backlogs,
earnings will be lower in the third quarter.
Imaje, the French-based industrial ink-jet printer and ink manufacturing
portion of this segment, with slightly lower earnings on sales approaching
prior year levels, had substantially higher sales, earnings and bookings than
the first quarter.
Dover Industries' second quarter sales declined 8% or $26.9 million to
$299.4 million and segment income declined 24% or $12.1 million to
$39.4 million compared to the same period last year. Segment bookings were
down 2% to $299.7 million and the book-to-bill ratio was 1.00. Acquisitions
completed in the last year added approximately $10 million to sales in the
quarter, with almost no impact on segment earnings after acquisition
write-offs. Most of Industries' companies had lower sales and earnings as
compared to the prior year due to weaker economic conditions in their markets.
However, Industries' combined earnings and margins were slightly higher than
the first quarter, with a majority of Industries' companies contributing to
this favorable comparison.
Heil Environmental's sales and earnings, while not quite as robust as the
very strong prior year, recovered markedly from the first quarter's slow
start. However, the full year will lag last year in a much weaker market. Heil
Trailer's sales, profit and bookings performance compared favorably to both a
weak comparable period last year and the prior quarter, and with this long
awaited favorable trend comparison and a favorable book-to-bill in the quarter
comes guarded optimism that this depressed market may be recovering slightly.
Rotary Lift's performance matched last year's second quarter and the first
quarter this year despite weak markets, with effective new products, marketing
programs and cost reduction, and PDQ outperformed previous periods for the
same reasons. Tipper Tie still suffers from the impact of disease scares on
its primary meat packing markets. Triton's earnings comparisons to the prior
year were very unfavorable, and it is focused on several product, marketing
and manufacturing improvements.
Dover Diversified's second quarter sales declined 5% or $15.5 million from
the prior year to $294.9 million, and segment income decreased 18% or
$7.8 million to $36.4 million compared to the same period last year. Sales
were up 7% from the first quarter and earnings improved more sharply in the
absence of inventory write-offs at Crenlo. Segment bookings in the quarter
were up 10% to $324.3 million and the book-to-bill ratio was favorable at
1.10. Backlog at the end of the quarter, after adjusting for divestitures, was
15% ahead of last year. Acquisitions completed in the last year added
approximately $11 million to sales in the quarter, with almost no impact on
segment earnings after acquisition write-offs. AC Compressor, divested at the
end of May, had recently contributed between 5 and 10% of segment sales with
lower than average margins.
While many of Diversified's companies also experienced difficult
conditions in their markets, most also had higher margins than in the prior
quarter. Hill Phoenix, though operating in a tough market, turned in
favorable sales, earnings and bookings comparisons to both last year and the
prior quarter, and expects an even stronger second half. Waukesha,
Performance Motorsports, Sargent, and SWF again turned in stronger earnings
than the same period last year in satisfactory market environments, with the
latter two of these also showing improvement from more recent trends. Crenlo
reported losses in the quarter compared to strong profits in the prior year
and is realigning its cost structure in the current weak market. Belvac's
market also remains challenging.
Dover Resources' second quarter sales increased 12% or $26.5 million to
$244.0 million, and segment earnings declined 6% or $1.9 million to
$30.1 million, compared to the same period last year. Segment bookings in the
quarter were up 10% to $241.7 million and the book-to-bill ratio was .99.
Acquisitions completed in the last year added approximately $9 million to
sales in the quarter, with almost no impact on segment earnings after
acquisition write-offs.
Those Resources companies serving the energy production markets (Petroleum
Equipment Group, Quartzdyne, and C. Lee Cook), all reported higher sales and
earnings than in the comparable period last year as they continue to benefit
from the strong energy markets they serve. Outside of the "oil patch", OPW
Fueling Components' cost improvement efforts in a still difficult market are
driving favorable comparisons to the prior period, and Tulsa Winch (the winch
industry "roll-up") continues to benefit from acquisition synergies and some
pockets of market strength. The balance of Resources' businesses serving the
process industries, the automotive industry, and general industrial and
transportation markets, were adversely impacted by weak economic conditions.
Dover Corporation also reports its pretax earnings on an EBITACQ basis
(Earnings before Interest, Taxes, and non-cash charges arising from purchase
accounting for Acquisitions). Second quarter EBITACQ of $123 million was 51%
lower than the prior year's second quarter.
The high overall book tax rate for the quarter of 43.0% resulted from the
lack of tax deductibility of a substantial goodwill amount included in the
divestiture transactions. The divestitures resulted in a pre-tax gain of
$172.4 million, tax expense of $79.2 million and a net book gain of
$93.1 million. The after-tax proceeds from the divestitures were
$279.4 million. Dover's tax rate for the second quarter, excluding the impact
of the disposition gains, was 36.7% compared to 30.8% for the first quarter
and 32.5% for the full year 2000. This high tax rate on operating results was
due to losses in low tax rate jurisdictions, primarily in Technologies.
Through the end of the second quarter, Dover invested $239.4 million in
acquisitions compared to the $358.9 million divestiture proceeds. The earnings
per share impact of these acquisitions on the second half of 2001 will not
fully offset the earnings per share contribution that the divested companies
would have made on the second half had they been retained. This difference is
approximately $.05 per diluted share for the second half of 2001. However, the
comparative earnings impact of the acquired businesses is expected to be
substantially accretive to earnings in 2002.
As a result of the favorable impact of the second quarter divestitures on
book equity and the cash proceeds from the sales, which were used to reduce
debt and fund acquisitions, Dover's net debt to capitalization ratio declined
to 29.4%, its lowest level since December 1999. This will provide substantial
flexibility for profitable reinvestment. Repurchases of 192,000 shares in the
open market were completed in the second quarter at an average price of
$35.92.
Additional information on Dover and its operating companies can be found
on the company website. (http://www.dovercorporation.com). In addition to
updates to financial information already posted to the website, additional
information about the performance of Dover Technologies CBAT business compared
to certain available industry data has also been posted for the purpose of
potentially aiding investors studying this business. Dover makes no
representation about the utility of this data or the validity of any
conclusions that might be reached by referring to it. In addition, Dover will
post to the website the segment detail of EBITACQ, as well as supplemental
cash flow disclosure.
The Dover website will host a Webcast of the second quarter conference
call at 9:00 AM Eastern Time on Tuesday, July 17. The conference call will
also be made available for replay on the website.
Dover Corporation makes information available to the public, orally and in
writing, which may use words like "expects" and "believes", which are
"forward-looking statements" under the Private Securities Litigation Reform
Act of 1995. This press release contains forward-looking statements regarding
future events and the performance of Dover Corporation that involve risks and
uncertainties that could cause actual results to differ materially including,
but not limited to, failure to achieve expected synergies, failure to
successfully integrate acquisitions, failure to service debt, failure to sell
non-core properties, including without limitation, as a result of the failure
to obtain regulatory approvals or of conditions to closing to occur, economic
conditions, customer demand, increased competition in the relevant market, and
others. Dover Corporation refers you to the documents that it files from
time to time with the Securities and Exchange Commission, such as the Form
10-K, Form 10-Q and Form 8-K, which contain additional important factors that
could cause its actual results to differ from its current expectations and
from the forward-looking statements contained in this press release.
DOVER CORPORATION CONSOLIDATED
MARKET SEGMENT RESULTS
(unaudited)
Second quarter ended June 30,
Percent
SALES 2001 2000 Change
Dover Technologies $301,850,000 $527,352,000 -43%
Dover Industries 299,383,000 326,289,000 -8%
Dover Diversified 294,865,000 310,412,000 -5%
Dover Resources 243,967,000 217,506,000 12%
Total (after
intramarket
eliminations) $1,138,573,000 $1,379,260,000 -17%
EARNINGS
Dover Technologies $499,000 $110,344,000 -100%
Dover Industries 39,398,000 51,502,000 -24%
Dover Diversified 36,427,000 44,214,000 -18%
Dover Resources 30,146,000 32,012,000 -6%
Subtotal (after
intramarket
eliminations) 106,470,000 238,072,000 -55%
Gain (loss)
on disposition 172,367,000 --
Corporate expense (7,185,000) (6,876,000) 4%
Net interest expense (20,034,000) (21,784,000) -8%
Earnings before
taxes on income 251,618,000 209,412,000 20%
Taxes on income 108,320,000 72,679,000 49%
Net earnings $143,298,000 $136,733,000 5%
Net earnings per
diluted
common share * $0.70 $0.67 4%
Average number of
diluted shares
outstanding 204,353,000 204,683,000
Impact of acquisition
write-offs on diluted EPS:
Diluted EPS * $ $0.70 $0.67 4%
Goodwill write-offs
(net of tax) 0.06 0.05
EPS before goodwill * 0.76 0.72 6%
Other acquisition
write-offs (net of tax) 0.03 0.03
EPS before all
acquisition
write-offs * $0.79 $0.75 5%
* 2001 Includes gain on sale of businesses of $.25.
DOVER CORPORATION CONSOLIDATED
MARKET SEGMENT RESULTS
(unaudited)
Six months ended June 30,
SALES 2001 2000
Dover Technologies $736,280,000 $993,718,000 -26%
Dover Industries 599,090,000 $625,330,000 -4%
Dover Diversified 570,997,000 579,950,000 -2%
Dover Resources 482,691,000 435,662,000 11%
Total (after intramarket
eliminations) $2,386,137,000 $2,630,543,000 -9%
EARNINGS
Dover Technologies $48,725,000 $195,139,000 -75%
Dover Industries 77,392,000 101,917,000 -24%
Dover Diversified 56,945,000 77,679,000 -27%
Dover Resources 61,864,000 65,553,000 -6%
Subtotal (after intramarket
eliminations) 244,926,000 440,288,000 -44%
Gain (loss) on disposition 172,367,000 (1,400,000)
Corporate expense (11,743,000) (13,117,000) -10%
Net interest expense (39,568,000) (37,366,000) 6%
Earnings before taxes on income 365,982,000 388,405,000 -6%
Taxes on Income 143,598,000 134,353,000 7%
Net earnings $222,384,000 $254,052,000
Net earnings per diluted common
share * $1.09 $1.24
Average number of diluted shares
outstanding 204,353,000 204,683,000
Impact of acquisition write-offs on
diluted EPS:
Diluted EPS * $1.09 $1.24 -12%
Goodwill write-offs (net of tax) 0.11 0.10
EPS before goodwill * 1.20 1.34 -10%
Other acquisition write-offs
(net of tax) 0.07 0.07
EPS before all acquisition write-
offs * $1.27 $1.41 -10%
* 2001 Includes gain on sale of businesses of $.25.
DOVER CORPORATION CONSOLIDATED
MARKET SEGMENT RESULTS
June 30, December 31,
BALANCE SHEET ('000) 2001 2000
Assets:
Cash, equivalents and marketable
securities $361,210 $186,740
Receivables, net of allowances for
doubtful accounts 769,302 903,177
Inventories 784,444 783,200
Prepaid expenses 106,888 101,732
Net property, plant & equipment 769,207 755,548
Goodwill, net of amortization 1,879,652 1,896,715
Other intangibles and assets, net 333,398 265,004
$5,004,101 $4,892,116
Liabilities & stockholders' equity:
Short term debt $391,003 $842,537
Payables and accrued expenses 828,272 762,103
Deferred credits 199,191 214,055
Long-term debt 1,032,999 631,846
Stockholders' equity 2,552,636 2,441,575
$5,004,101 $4,892,116
Six Months
CASH FLOWS ('000) 2001 2000
Operating activities:
Net earnings $222,384 $254,052
(Gain) loss on sale of business (172,367) 1,400
Depreciation 73,730 68,462
Amortization of goodwill 26,669 23,612
Amortization - other 8,493 9,027
Working capital changes 150,810 (228,915)
Other, net (38,313) 7,610
Net cash from operating activities 271,406 135,248
Investing activities:
Capital expenditures (103,029) (77,347)
Acquisitions, net of cash and cash
equivalents (236,266) (224,606)
Proceeds from sale of businesses and
equity investments 358,916 14,923
Net cash from (used in) investing
activities 19,621 (287,030)
Financing activities:
Increase (decrease) in notes payable (452,997) 485,097
Increase (decrease) in long-term debt 398,592 16,309
Cash dividends (50,798) (46,691)
Purchase of treasury stock (10,005) (3,906)
Proceeds from exercise of stock
options 2,812 6,697
Net cash from (used in) financing
activities (112,396) 457,506
Discontinued operations - tax
payments -- (308,051)
Net increase (decrease) in cash &
equivalents 178,631 (2,327)
Cash & cash equivalents at beginning
of period 181,399 138,038
Cash & cash equivalents at end of
period $360,030 $135,711
DOVER CORPORATION
ACQUISITIONS - SECOND QUARTER 2001
DATE TYPE ACQUIRED
COMPANIES LOCATION (Near) SEGMENT -
Operating Co.
31-Mar Stock Tisma Machinery
Corporation Elk Grove Village, IL DDI SWF
Manufactures and designs automated packaging machinery used in forming,
packing and sealing of corrugated packages.
31-May Asset Kurz-Kasch, Inc. Dayton, OH DII Stand-
alone
Manufactures coil based electro magnetic switches and sensors that are
encapsulated in thermo set plastic.
31-May Stock Multi-test AG Rosenheim, Germany DTI ECT
Manufactures semiconductor test handling equipment.
20-Jun Stock Markpoint
Holding AB Goteborg, Sweden DTI Imaje
Manufactures and designs marking solutions for packaging industries.