Dover Reports Third Quarter 2013 Results; Updates Full-Year Outlook

News provided by

Oct 17, 2013, 07:00 ET

DOWNERS GROVE, Ill., Oct. 17, 2013 /PRNewswire/ --

Reports quarterly revenue of $2.3 billion, an increase of 7% over the prior year
Delivers quarterly diluted earnings per share from continuing operations of $1.53, an increase of 20% over last year
Achieves adjusted quarterly diluted earnings per share from continuing operations of $1.54, excluding Knowles spin-off costs of $0.06, tax benefits of $0.03, and other one-time gains of $0.02, up 23% from an adjusted prior year
Revises outlook for full year revenue growth to approximately 7%
Narrows the range for diluted earnings per share from continuing operations to $5.57 to $5.64, including one-time items

Dover (NYSE: DOV) announced today that for the third quarter ended September 30, 2013, revenue was $2.3 billion, an increase of 7% over the prior year period. The revenue increase was driven by organic growth of 3% and an increase of 4% from acquisitions. Earnings from continuing operations were $263.7 million, or $1.53 diluted earnings per share ("EPS"), compared to $233.3 million, or $1.27 EPS, in the prior year period, representing increases of 13% and 20%, respectively. EPS from continuing operations includes Knowles spin-off costs of $0.06 EPS, discrete tax benefits of $0.03 EPS, and other one-time gains of $0.02 recognized in the current quarter. Excluding these items, adjusted EPS from continuing operations for the third quarter of 2013 was $1.54, reflecting an increase of 23% over an adjusted EPS of $1.25 in the prior year period.

Revenue for the nine months ended September 30, 2013 was $6.5 billion, an increase of 7% over the prior year, reflecting organic growth of 2% and a 5% increase from acquisitions. Earnings from continuing operations for the nine months ended September 30, 2013 were $755.0 million, or $4.34 EPS, compared to $624.9 million, or $3.37 EPS in the prior year period, representing increases of 21% and 29%, respectively. EPS from continuing operations during this period includes Knowles spin-off costs of $0.08 EPS, discrete tax benefits of $0.41 EPS, and other one-time gains of $0.02 compared to $0.01 EPS of discrete tax benefits in the prior year. Excluding these items, adjusted EPS from continuing operations for the nine months ended September 30, 2013 was $4.00, an increase of 19% over an adjusted EPS of $3.36 in the prior year.

Commenting on the third quarter results, Dover's President and Chief Executive Officer, Robert A. Livingston, said, "I am pleased with our strong third quarter results, which were driven by broad-based organic growth across all segments. These results reflect the impact of our global growth initiatives and our recent acquisitions. Particularly strong were our drilling and downstream markets within Energy, our refrigeration & food equipment markets, and Printing & Identification. Our revenue growth was leveraged by solid execution and cost reduction activities, resulting in a segment margin of 19.4%, representing a 100 basis point improvement over last year."

"Also encouraging, we continued to execute on our global growth strategies and productivity initiatives during the quarter. We have announced several strategic acquisitions since our last quarterly report and expect more activity in the near-term. These deals are highly synergistic and help to broaden our product mix and geographic breadth within our growth spaces. In addition, we continued to execute on several projects that allow us to consolidate our manufacturing footprint and share infrastructure. These actions, taken together with the upcoming spin-off of Knowles, position Dover very well for sustained growth and outstanding performance."

"While our overall third quarter performance was strong, market conditions proved to be softer than anticipated. As a result, we are revising our organic growth expectations to the low-end of our prior range, and now expect full year growth of about 3%. Our acquisition growth remains unchanged at 4%, resulting in total full-year revenue growth of approximately 7%. Based on this revised revenue guidance, we are narrowing our full year EPS guidance to the range of $5.57 to $5.64. This range includes incurred spin-off costs, discrete tax benefits, and one-time gains. This range does not include any prospective Knowles spin off costs in the fourth quarter."

Net earnings for the third quarter of 2013 were $269.1 million or $1.56 EPS, including earnings from discontinued operations of $5.5 million, or $0.03 EPS, compared to net earnings of $241.0 million, or $1.31 EPS, for the same period of 2012, which included earnings from discontinued operations of $7.7 million, or $0.04 EPS.

Net earnings for the nine months ended September 30, 2013 were $809.2 million, or $4.65 EPS, including net earnings from discontinued operations of $54.2 million, or $0.31 EPS, compared to net earnings of $651.2 million, or $3.51 EPS, for the same period of 2012, which included net earnings from discontinued operations of $26.3 million or $0.14 EPS. Reflected within discontinued operations was a goodwill impairment charge of $18.7 million, net of tax, or $0.11 EPS, in connection with the anticipated sale of our electronic test and assembly businesses, and discrete tax benefits of $54.4 million, or $0.31 EPS.

Dover will host a webcast of its third quarter 2013 conference call at 10:00 A.M. Eastern Time (9:00 A.M. Central Time) on Thursday, October 17, 2013. The webcast can be accessed on the Dover website at www.dovercorporation.com. The conference call will also be made available for replay on the website. Additional information on Dover's third quarter results and its operating segments can also be found on the Company's website.

About Dover:

Dover is a diversified global manufacturer with annual revenues of over $8 billion. For over 50 years, Dover has been delivering outstanding products and services that reflect its market leadership and commitment to operational and technical excellence. The Company's entrepreneurial business model encourages, promotes and fosters deep customer engagement that has led to Dover's well-established and valued reputation for providing superior customer service and industry-leading product innovation. Dover focuses on innovative equipment and components, specialty systems and support services through its four major operating segments: Communication Technologies, Energy, Engineered Systems and Printing & Identification. Headquartered in Downers Grove, Illinois, Dover employs 35,000 people worldwide. Dover is traded on the New York Stock Exchange under "DOV." Additional information is available on our website at www.dovercorporation.com.

Forward-Looking Statement:

This press release contains "forward-looking" statements within the meaning of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, operating and strategic plans, income, earnings, cash flows, changes in operations, operating improvements, industries in which Dover businesses operate and the U.S. and global economies. Statements in this press release that are not historical are hereby identified as "forward-looking statements" and may be indicated by words or phrases such as "anticipates," "expects," "believes," "indicates," "suggests," "will," "plans," "supports," "projects," "should," "would," "could," "forecast" and "management is of the opinion," or the use of the future tense and similar words or phrases. Forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from current expectations, including, but not limited to, the state of the worldwide economy and sovereign credit, especially in Europe; political events that could impact the worldwide economy; the impact of natural disasters and their effect on global supply chains and energy markets; current economic conditions and uncertainties in the credit and capital markets; instability in countries where Dover conducts business; the ability of Dover's businesses to expand into new geographic markets and to anticipate and meet customer demands for new products and product enhancements; increased competition and pricing pressures in the markets served by Dover's businesses; the impact of the proposed spin off and our ability to consummate it on the anticipated time line or terms; the terms and timing of the sale of any business in discontinued operations; the impact of loss of a single-source manufacturing facility; changes in customer demand or loss of a significant customer; the relative mix of products and services which impacts margins and operating efficiencies; short-term capacity constraints; increases in the cost of raw materials; domestic and foreign governmental and public policy changes including environmental regulations, conflict minerals disclosure requirements, and tax policies (including domestic and international export subsidy programs, R&E credits and other similar programs); protection and validity of patent and other intellectual property rights; the ability to identify and successfully consummate value-adding acquisition opportunities; Dover's ability to achieve expected savings from integration, synergy and other cost-control initiatives; unforeseen developments in contingencies such as litigation; international economic conditions including interest rate and currency exchange rate fluctuations; possible future terrorist threats and their effect on the worldwide economy; and a downgrade in Dover's credit ratings. Dover refers you to the documents that it files from time to time with the Securities and Exchange Commission, such as its reports on Form 10-K, Form 10-Q and Form 8-K, for a discussion of these and other risks and uncertainties that could cause its actual results to differ materially from its current expectations and from the forward-looking statements contained in this press release. Dover undertakes no obligation to update any forward-looking statement, except as required by law.

INVESTOR SUPPLEMENT - THIRD QUARTER 2013

DOVER CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited) (in thousands, except per share data)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Revenue	$	2,252,349	$	2,097,605	$	6,520,685	$	6,090,508
Cost of goods and services	1,375,699		1,287,466		4,011,461		3,757,187
Gross profit	876,650		810,139		2,509,224		2,333,321
Selling and administrative expenses	482,284		451,943		1,472,333		1,372,021
Operating earnings	394,366		358,196		1,036,891		961,300
Interest expense, net	30,237		30,399		90,761		90,145
Other expense (income), net	970		3,706		(1,206)		5,855
Earnings before provision for income taxes and discontinued operations	363,159		324,091		947,336		865,300
Provision for income taxes	99,507		90,761		192,343		240,405
Earnings from continuing operations	263,652		233,330		754,993		624,895
Earnings from discontinued operations, net	5,462		7,716		54,173		26,315
Net earnings	$	269,114	$	241,046	$	809,166	$	651,210

Basic earnings per common share:
Earnings from continuing operations	$	1.55	$	1.28	$	4.40	$	3.41
Earnings from discontinued operations, net	0.03		0.04		0.32		0.14
Net earnings	1.58		1.33		4.71		3.56

Weighted average shares outstanding	170,544		181,763		171,690		183,000

Diluted earnings per common share:
Earnings from continuing operations	$	1.53	$	1.27	$	4.34	$	3.37
Earnings from discontinued operations, net	0.03		0.04		0.31		0.14
Net earnings	1.56		1.31		4.65		3.51

Weighted average shares outstanding	172,734		183,932		173,870		185,489

Dividends paid per common share	$	0.375	$	0.35	$	1.075	$	0.98

DOVER CORPORATION
QUARTERLY SEGMENT INFORMATION
(unaudited) (in thousands)

	2013
	Q1			Q2			Q3			Q3 YTD			Q1			Q2			Q3			Q3 YTD			Q4			FY 2012
REVENUE
Communication Technologies	$	372,790		$	401,477		$	413,608		$	1,187,875		$	357,575		$	361,689		$	396,470		$	1,115,734		$	400,851		$	1,516,585

Energy	561,198			573,471			577,350			1,712,019			531,570			538,786			562,263			1,632,619			539,985			2,172,604

Engineered Systems
Fluid Solutions	203,991			226,882			227,104			657,977			180,364			211,974			218,324			610,662			206,500			817,162
Refrigeration & Industrial	664,294			777,396			778,336			2,220,026			642,213			674,501			674,116			1,990,830			613,012			2,603,842
Eliminations	(352)			(383)			(485)			(1,220)			(453)			(352)			(319)			(1,124)			(336)			(1,460)
	867,933			1,003,895			1,004,955			2,876,783			822,124			886,123			892,121			2,600,368			819,176			3,419,544

Printing & Identification	237,877			250,646			256,571			745,094			243,570			251,875			246,945			742,390			254,141			996,531

Intra-segment eliminations	(225)			(726)			(135)			(1,086)			(225)			(184)			(194)			(603)			(322)			(925)
Total consolidated revenue	$	2,039,573		$	2,228,763		$	2,252,349		$	6,520,685		$	1,954,614		$	2,038,289		$	2,097,605		$	6,090,508		$	2,013,831		$	8,104,339

NET EARNINGS
Segment Earnings:
Communication Technologies	$	44,208		$	51,789		$	76,076		$	172,073		$	46,556		$	50,322		$	63,706		$	160,584		$	58,376		$	218,960
Energy	139,545			132,926			145,494			417,965			132,115			133,936			139,038			405,089			133,561			538,650
Engineered Systems	117,178			165,440			172,223			454,841			122,092			133,808			144,245			400,145			101,807			501,952
Printing & Identification	29,752			35,967			42,881			108,600			26,089			28,918			39,502			94,509			40,650			135,159
Total Segments	330,683			386,122			436,674			1,153,479			326,852			346,984			386,491			1,060,327			334,394			1,394,721
Corporate expense / other	33,763			38,341			43,278			115,382			36,546			36,335			32,001			104,882			31,127			136,009
Net interest expense	30,244			30,280			30,237			90,761			30,031			29,715			30,399			90,145			30,996			121,141
Earnings from continuing operations before provision for income taxes	266,676			317,501			363,159			947,336			260,275			280,934			324,091			865,300			272,271			1,137,571
Provision for income taxes	69,687			23,149			99,507			192,343			73,866			75,778			90,761			240,405			64,047			304,452
Earnings from continuing operations	196,989			294,352			263,652			754,993			186,409			205,156			233,330			624,895			208,224			833,119
Earnings (loss) from discontinued operations, net	13,014			35,697			5,462			54,173			9,654			8,945			7,716			26,315			(48,364)			(22,049)
Net earnings	$	210,003		$	330,049		$	269,114		$	809,166		$	196,063		$	214,101		$	241,046		$	651,210		$	159,860		$	811,070

SEGMENT OPERATING MARGIN
Communication Technologies	11.9		%	12.9		%	18.4		%	14.5		%	13.0		%	13.9		%	16.1		%	14.4		%	14.6		%	14.4		%
Energy	24.9		%	23.2		%	25.2		%	24.4		%	24.9		%	24.9		%	24.7		%	24.8		%	24.7		%	24.8		%
Engineered Systems	13.5		%	16.5		%	17.1		%	15.8		%	14.9		%	15.1		%	16.2		%	15.4		%	12.4		%	14.7		%
Printing & Identification	12.5		%	14.3		%	16.7		%	14.6		%	10.7		%	11.5		%	16.0		%	12.7		%	16.0		%	13.6		%
Total Segment	16.2		%	17.3		%	19.4		%	17.7		%	16.7		%	17.0		%	18.4		%	17.4		%	16.6		%	17.2		%

DEPRECIATION AND AMORTIZATION EXPENSE
Communication Technologies	$	35,501		$	37,719		$	38,251		$	111,471		$	31,513		$	32,828		$	32,997		$	97,338		$	35,281		$	132,619
Energy	26,298			26,599			26,549			79,446			21,184			23,533			24,639			69,356			25,721			95,077
Engineered Systems	31,551			32,282			32,961			96,794			19,582			23,913			23,060			66,555			27,066			93,621
Printing & Identification	7,630			7,606			7,701			22,937			8,331			8,496			8,777			25,604			7,998			33,602
Corporate	859			1,026			1,032			2,917			700			765			842			2,307			359			2,666
	$	101,839		$	105,232		$	106,494		$	313,565		$	81,310		$	89,535		$	90,315		$	261,160		$	96,425		$	357,585

DOVER CORPORATION
QUARTERLY SEGMENT INFORMATION
(continued)
(unaudited) (in thousands)

	2013
	Q1		Q2		Q3		Q3 YTD		Q1		Q2		Q3		Q3 YTD		Q4		FY 2012
BOOKINGS
Communication Technologies	$	379,122	$	422,293	$	423,662	$	1,225,077	$	347,291	$	387,058	$	411,005	$	1,145,354	$	363,624	$	1,508,978

Energy	620,640		525,612		595,421		1,741,673		585,775		530,352		526,824		1,642,951		550,091		2,193,042

Engineered Systems
Fluid Solutions	223,764		213,359		222,402		659,525		184,711		204,139		197,767		586,617		209,872		796,489
Refrigeration & Industrial	755,026		784,904		662,464		2,202,394		711,911		666,223		600,065		1,978,199		606,931		2,585,130
Eliminations	(373)		(432)		(372)		(1,177)		(408)		(376)		(258)		(1,042)		(399)		(1,441)
	978,417		997,831		884,494		2,860,742		896,214		869,986		797,574		2,563,774		816,404		3,380,178

Printing & Identification	237,217		259,282		256,211		752,710		249,773		251,733		244,611		746,117		252,937		999,054

Intra-segment eliminations	(720)		(137)		(109)		(966)		(609)		(221)		(759)		(1,589)		(1,020)		(2,609)

Total consolidated bookings	$	2,214,676	$	2,204,881	$	2,159,679	$	6,579,236	$	2,078,444	$	2,038,908	$	1,979,255	$	6,096,607	$	1,982,036	$	8,078,643

BACKLOG
Communication Technologies	$	458,765	$	480,426	$	492,583			$	451,110	$	476,745	$	491,041			$	453,172

Energy	311,793		255,544		274,243				296,360		282,364		248,233				256,093

Engineered Systems
Fluid Solutions	178,854		184,142		182,557				191,327		172,300		156,191				160,890
Refrigeration & Industrial	592,922		597,838		482,069				598,910		586,824		515,285				516,559
Eliminations	(178)		(227)		(113)				(132)		(155)		(94)				(157)
	771,598		781,753		664,513				790,105		758,969		671,382				677,292

Printing & Identification	95,353		103,864		105,699				102,117		98,216		98,356				97,857

Intra-segment eliminations	(886)		(578)		(423)				(986)		(648)		(324)				(591)

Total consolidated backlog	$	1,636,623	$	1,621,009	$	1,536,615			$	1,638,706	$	1,615,646	$	1,508,688			$	1,483,823

DOVER CORPORATION
QUARTERLY EARNINGS PER SHARE
(unaudited) (in thousands, except per share data*)

	2013
	Q1		Q2		Q3		Q3 YTD		Q1		Q2		Q3		Q3 YTD		Q4		FY 2012
Basic earnings (loss) per common share:
Continuing operations	$	1.14	$	1.72	$	1.55	$	4.40	$	1.01	$	1.12	$	1.28	$	3.41	$	1.17	$	4.59
Discontinued operations	0.08		0.21		0.03		0.32		0.05		0.05		0.04		0.14		(0.27)		(0.12)
Net earnings	1.21		1.93		1.58		4.71		1.07		1.17		1.33		3.56		0.90		4.47

Diluted earnings (loss) per common share:
Continuing operations	$	1.12	$	1.70	$	1.53	$	4.34	$	1.00	$	1.10	$	1.27	$	3.37	$	1.16	$	4.53
Discontinued operations	0.07		0.21		0.03		0.31		0.05		0.05		0.04		0.14		(0.27)		(0.12)
Net earnings	1.20		1.91		1.56		4.65		1.05		1.15		1.31		3.51		0.89		4.41

Adjusted diluted earnings per common share (calculated below):
Continuing operations	$	1.10	$	1.36	$	1.54	$	4.00	$	1.01	$	1.10	$	1.25	$	3.36	$	1.09	$	4.44

Net earnings (loss) and average shares used in calculated earnings (loss) per share amounts are as follows:

Net earnings (loss):
Continuing operations	$	196,989	$	294,352	$	263,652	$	754,993	$	186,409	$	205,156	$	233,330	$	624,895	$	208,224	$	833,119
Discontinued operations	13,014		35,697		5,462		54,173		9,654		8,945		7,716		26,315		(48,364)		(22,049)
Net earnings	210,003		330,049		269,114		809,166		196,063		214,101		241,046		651,210		159,860		811,070

Average shares outstanding:
Basic	173,448		171,111		170,544		171,690		183,737		183,494		181,763		183,000		177,257		181,551
Diluted	175,567		173,097		172,734		173,870		186,706		185,780		183,932		185,489		179,365		183,993

Note:
Earnings from continuing operations are adjusted by discrete tax items, incurred spin-off costs, and other one-time gains to derive adjusted earnings from continuing operations and adjusted diluted earnings per common share as follows:

	2013
	Q1		Q2		Q3		Q3 YTD		Q1		Q2		Q3		Q3 YTD		Q4		FY 2012
Adjusted earnings from continuing operations:
Earnings from continuing operations	$	196,989	$	294,352	$	263,652	$	754,993	$	186,409	$	205,156	$	233,330	$	624,895	$	208,224	$	833,119
Gains (losses) from discrete and other tax items	4,525		61,477		4,878		70,880		(1,610)		(372)		4,513		2,531		13,606		16,137
Knowles spin-off costs	—		(3,322)		(10,637)		(13,959)		—		—		—		—		—		—
Other one-time gains, net of tax	—		—		2,866		2,866		—		—		—		—		—		—
Adjusted earnings from continuing operations	$	192,464	$	236,197	$	266,545	$	695,206	$	188,019	$	205,528	$	228,817	$	622,364	$	194,618	$	816,982

Adjusted diluted earnings per common share:
Earnings from continuing operations	$	1.12	$	1.70	$	1.53	$	4.34	$	1.00	$	1.10	$	1.27	$	3.37	$	1.16	$	4.53
Gains (losses) from discrete and other tax items	0.02		0.36		0.03		0.41		(0.01)		—		0.02		0.01		0.07		0.09
Knowles spin-off costs	—		(0.02)		(0.06)		(0.08)		—		—		—		—		—		—
Other one-time gains, net of tax	—		—		0.02		0.02		—		—		—		—		—		—
Adjusted earnings from continuing operations	$	1.10	$	1.36	$	1.54	$	4.00	$	1.01	$	1.10	$	1.25	$	3.36	$	1.09	$	4.44

* Per share data may not add due to rounding.

DOVER CORPORATION
QUARTERLY FREE CASH FLOW
(unaudited) (in thousands)

	2013
	Q1			Q2			Q3			Q3 YTD			Q1			Q2			Q3			Q3 YTD			Q4			FY 2012
Cash flow from operating activities	$	78,326		$	304,729		$	340,005		$	723,060		$	161,327		$	243,363		$	285,811		$	690,501		$	570,659		$	1,261,160
Less: Additions to property, plant and equipment	(47,153)			(53,284)			(57,038)			(157,475)			(68,249)			(72,758)			(67,842)			(208,849)			(88,163)			(297,012)
Free cash flow	$	31,173		$	251,445		$	282,967		$	565,585		$	93,078		$	170,605		$	217,969		$	481,652		$	482,496		$	964,148

Free cash flow as a percentage of earnings from continuing operations	15.8		%	85.4		%	107.3		%	74.9		%	49.9		%	83.2		%	93.4		%	77.1		%	231.7		%	115.7		%

Free cash flow as a percentage of revenue	1.5		%	11.3		%	12.6		%	8.7		%	4.8		%	8.4		%	10.4		%	7.9		%	24.0		%	11.9		%