EX-99.2 3 y47508exv99w2.htm EX-99.2: INVESTOR SUPPLEMENT EX-99.2
 

EXHIBIT 99.2
(DOVER CORPORATION LOGO)
INVESTOR SUPPLEMENT
FOURTH QUARTER AND FULL YEAR 2007
Share Repurchase Program
In the fourth quarter of 2007, the Company purchased 4.8 million of its outstanding shares for $222 million under two previously announced programs that collectively authorized the purchase of approximately 20 million shares of Dover common stock. During 2007, the Company purchased a total of 12.4 million shares under the programs for $591 million. In 2008 (through January 29th), the Company purchased an additional one million shares at a cost of $40 million, leaving the balance of the Board's authorization at about $420 million.
Acquisitions and Divestitures
During the fourth quarter of 2007, the Company completed two add-on acquisitions: Camco, formerly Industrial Motion Controls LLC (De-Sta-Co) in the Industrial Products segment and Windrock Inc. (Gas Equipment Group) in the Fluid Management segment, for a total purchase price of $97.1 million. During 2007, Dover made a total of seven add-on acquisitions, totaling $273.6 million, net of cash acquired.
During the fourth quarter of 2007, the Company completed the sale of a previously discontinued business and recorded other adjustments resulting in an after-tax gain of $0.3 million. For 2007, the Company finalized the sales of a total of six businesses resulting in an after-tax loss of $17.1 million. At year end 2007, two businesses remain held for sale.
Growth Factors
                                         
    2007  
Revenue Growth   Q1     Q2     Q3     Q4     YTD  
Organic
    4.0 %     -0.8 %     3.3 %     2.8 %     2.3 %
Acquisitions
    12.8 %     12.0 %     9.7 %     5.0 %     9.7 %
Currency translation
    1.9 %     1.8 %     1.9 %     3.0 %     2.2 %
 
                             
 
    18.7 %     13.0 %     14.9 %     10.8 %     14.2 %
 
                             
Organic Growth less Electronic Technologies segment
    7.3 %     3.1 %     5.8 %     4.6 %     5.2 %
 
                             
Cash Flow
The following table is a reconciliation of free cash flow (a non-GAAP measure) with cash flows from operating activities.
                                 
    Three Months Ended December 31,     Years Ended December 31,  
Free Cash Flow (in thousands)   2007     2006     2007     2006  
Cash flow provided by operating activities
  $ 364,349     $ 289,187     $ 901,941     $ 866,082  
Less: Capital expenditures
    43,565       57,218       174,252       190,732  
 
                       
Free cash flow
  $ 320,784     $ 231,969     $ 727,689     $ 675,350  
 
                       
Free cash flow as a percentage of revenue
    17.2 %     13.8 %     10.1 %     10.7 %
 
                       
Free cash flow as a percentage of earnings from continuing operations
                    111.4 %     114.0 %
 
                       

1


 

The full year increase in free cash flow reflects higher earnings from continuing operations before depreciation and amortization and lower capital expenditures, partially offset by higher tax payments in 2007. In addition, Adjusted Working Capital (a non-GAAP measure calculated as accounts receivable, plus inventory, less accounts payable) increased from the prior year end by $29.1 million, or 2% to $1,363.0 million which reflected an increase in receivables of $57.4 million, a decrease in inventory of $13.0 million and an increase in accounts payable of $15.3 million. Excluding acquisitions and the effects of foreign exchange translation, working capital would have decreased by $50.1 million, or 4%. Average Annual Adjusted Working Capital as a percentage of revenue (a non-GAAP measure calculated as the five-quarter average balance of accounts receivable, plus inventory, less accounts payable divided by the trailing twelve months of revenue) increased to 19.2% at December 31, 2007 from 19.0% at December 31, 2006.
Capitalization
The following table provides a summary reconciliation of total debt and net debt to total capitalization to the most directly comparable GAAP measures:
                 
    At December 31,     At December 31,  
Net Debt to Total Capitalization Ratio (in thousands)   2007     2006  
Current maturities of long-term debt
  $ 33,175     $ 32,267  
Commercial paper and other short-term debt
    605,474       258,282  
Long-term debt
    1,452,003       1,480,491  
 
           
Total debt
    2,090,652       1,771,040  
Less: Cash and cash equivalents
    602,412       374,845  
 
           
Net debt
    1,488,240       1,396,195  
Add: Stockholders’ equity
    3,946,173       3,811,022  
 
           
Total capitalization
  $ 5,434,413     $ 5,207,217  
 
           
Net debt to total capitalization
    27.4 %     26.8 %
 
           
Net debt at December 31, 2007 increased $92 million as a result of increased commercial paper borrowings used primarily to fund the Company’s share repurchase programs during 2007. The percentage increase in net debt to total capital, after $591 million of share repurchases, reflects strong operational free cash flow and net proceeds from dispositions of $91 million.
Tax Rate
The Company’s effective tax rates for the fourth quarter of 2007 and 2006 was 24.1% and 22.9%, respectively. Both periods were favorably impacted by the mix of foreign earnings in low-taxed overseas jurisdictions. The higher rate in the 2007 period was caused by an increase in unrecognized tax benefits as required under FIN 48, while the 2006 period was favorably impacted by the effect of the full year retroactive extension of the U.S. Federal research tax credit.
The 2007 tax rate for continuing operations was 26.4%, reflecting the same factors that affected the fourth quarter 2007 rate. The 2006 tax rate for continuing operations of 26.8% also reflected the same factors that impacted the fourth quarter rate, as well as a lower relative United States federal tax exclusion for foreign sales in 2006.


 

DOVER CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS

(unaudited) (in thousands, except per share data)
                                 
    Three Months Ended December 31     Twelve Months Ended December 31  
    2007     2006     2007     2006  
Revenue
  $ 1,860,021     $ 1,679,173     $ 7,226,089     $ 6,329,279  
Cost of goods and services
    1,187,964       1,082,630       4,604,422       4,020,702  
 
                       
Gross profit
    672,057       596,543       2,621,667       2,308,577  
Selling and administrative expenses
    425,301       375,159       1,640,977       1,410,654  
 
                       
Operating earnings
    246,756       221,384       980,690       897,923  
Interest expense, net
    22,395       19,068       89,008       76,984  
Other expense, net
    1,797       1,795       4,078       11,446  
 
                       
Total interest/other expense, net
    24,192       20,863       93,086       88,430  
 
                       
Earnings before provision for income taxes and discontinued operations
    222,564       200,521       887,604       809,493  
Provision for income taxes
    53,688       45,958       234,331       217,038  
 
                       
Earnings from continuing operations
    168,876       154,563       653,273       592,455  
Earnings (loss) from discontinued operations, net
    16,488       (36,043 )     7,807       (30,673 )
 
                       
Net earnings
  $ 185,364     $ 118,520     $ 661,080     $ 561,782  
 
                       
 
                               
Basic earnings (loss) per common share:
                               
Earnings from continuing operations
  $ 0.86     $ 0.76     $ 3.24     $ 2.91  
Earnings (loss) from discontinued operations
    0.08       (0.18 )     0.04       (0.15 )
Net earnings
    0.95       0.58       3.28       2.76  
 
                               
Weighted average shares outstanding
    195,932       204,182       201,330       203,773  
 
                       
 
                               
Diluted earnings (loss) per common share:
                               
Earnings from continuing operations
  $ 0.86     $ 0.75     $ 3.22       2.88  
Earnings (loss) from discontinued operations
    0.08       (0.18 )     0.04       (0.15 )
Net earnings
    0.94       0.58       3.26       2.73  
 
                               
Weighted average shares outstanding
    197,286       205,978       202,918       205,497  
 
                       
 
                               
Dividends paid per common share
  $ 0.200     $ 0.185     $ 0.770     $ 0.710  
 
                       
The following table is a reconciliation of the share amounts used in computing earnings per share:
                                 
    Three Months Ended December 31     Twelve Months Ended December 31  
    2007     2006     2007     2006  
Weighted average shares outstanding — Basic
    195,932       204,182       201,330       203,773  
Dilutive effect of assumed exercise of employee stock options
    1,354       1,796       1,588       1,724  
 
                       
 
                               
Weighted average shares outstanding — Diluted
    197,286       205,978       202,918       205,497  
 
                       
 
                               
Anti-dilutive shares excluded from diluted EPS computation
    1,635             3,241       1,716  


 

DOVER CORPORATION
QUARTERLY SEGMENT INFORMATION

(unaudited) (in thousands)
                                                                                 
    2006   2007
    Q1     Q2     Q3     Q4     FY 2006     Q1     Q2     Q3     Q4     FY 2007  
         
REVENUE
                                                                               
Industrial Products
                                                                               
Material Handling
  $ 155,581     $ 157,101     $ 175,408     $ 218,409     $ 706,499     $ 243,344     $ 251,679     $ 233,106     $ 230,983     $ 959,112  
Mobile Equipment
    296,492       305,684       307,310       311,232       1,220,718       307,758       315,394       315,920       323,912       1,262,984  
Eliminations
    (187 )     (263 )     (259 )     (219 )     (928 )     (219 )     (220 )     (203 )     (335 )     (977 )
     
 
    451,886       462,522       482,459       529,422       1,926,289       550,883       566,853       548,823       554,560       2,221,119  
     
Engineered Systems
                                                                           
Product Identification
    114,731       137,040       143,482       173,048       568,301       206,625       224,353       227,617       253,985       912,580  
Engineered Products
    239,045       303,325       286,792       276,700       1,105,862       285,108       311,178       333,254       305,169       1,234,709  
     
 
    353,776       440,365       430,274       449,748       1,674,163       491,733       535,531       560,871       559,154       2,147,289  
     
Fluid Management
                                                                           
Energy
    158,495       164,768       178,054       182,861       684,178       189,367       188,690       197,759       199,208       775,024  
Fluid Solutions
    157,455       161,434       159,478       167,032       645,399       169,669       174,579       176,756       186,109       707,113  
Eliminations
    66       (17 )     (20 )     (3 )     26       (40 )     (24 )     (12 )     (53 )     (129 )
         
 
    316,016       326,185       337,512       349,890       1,329,603       358,996       363,245       374,503       385,264       1,482,008  
         
 
                                                                               
Electronic Technologies
    330,019       370,236       358,137       353,172       1,411,564       321,173       340,717       363,002       365,211       1,390,103  
         
 
                                                                               
Intra-segment eliminations
    (2,850 )     (3,296 )     (3,135 )     (3,059 )     (12,340 )     (3,437 )     (3,455 )     (3,370 )     (4,168 )     (14,430 )
         
 
                                                                               
Total consolidated revenue
  $ 1,448,847     $ 1,596,012     $ 1,605,247     $ 1,679,173     $ 6,329,279     $ 1,719,348     $ 1,802,891     $ 1,843,829     $ 1,860,021     $ 7,226,089  
         
NET EARNINGS
                                                                               
Segment Earnings:
                                                                               
Industrial Products
  $ 62,985     $ 65,177     $ 61,858     $ 61,208     $ 251,228     $ 70,148     $ 85,077     $ 75,893     $ 65,933     $ 297,051  
Engineered Systems
    49,995       73,789       62,905       55,041       241,730       50,944       77,318       79,451       74,104       281,817  
Fluid Management
    67,072       66,732       67,297       66,276       267,377       73,842       73,283       79,184       78,267       304,576  
Electronic Technologies
    47,742       60,872       52,658       53,675       214,947       36,949       45,354       50,801       47,233       180,337  
         
Total Segments
    227,794       266,570       244,718       236,200       975,282       231,883       281,032       285,329       265,537       1,063,781  
Corporate expense / other
    (22,563 )     (27,824 )     (21,807 )     (16,611 )     (88,805 )     (22,393 )     (23,106 )     (21,092 )     (20,578 )     (87,169 )
Net interest expense
    (21,484 )     (19,248 )     (17,184 )     (19,068 )     (76,984 )     (21,838 )     (22,449 )     (22,326 )     (22,395 )     (89,008 )
         
Earnings from continuing operations before provision for income taxes
    183,747       219,498       205,727       200,521       809,493       187,652       235,477       241,911       222,564       887,604  
Provision for income taxes
    55,616       65,025       50,439       45,958       217,038       53,161       63,510       63,972       53,688       234,331  
         
Earnings from continuing operations
    128,131       154,473       155,288       154,563       592,455       134,491       171,967       177,939       168,876       653,273  
Earnings (loss) from discontinued operations, net
    75,695       (82,562 )     12,237       (36,043 )     (30,673 )     (5,560 )     227       (3,348 )     16,488       7,807  
         
Net earnings
  $ 203,826     $ 71,911     $ 167,525     $ 118,520     $ 561,782     $ 128,931     $ 172,194     $ 174,591     $ 185,364     $ 661,080  
         
SEGMENT OPERATING MARGIN
                                                                               
Industrial Products
    13.9 %     14.1 %     12.8 %     11.6 %     13.0 %     12.7 %     15.0 %     13.8 %     11.9 %     13.4 %
Engineered Systems
    14.1 %     16.8 %     14.6 %     12.2 %     14.4 %     10.4 %     14.4 %     14.2 %     13.3 %     13.1 %
Fluid Management
    21.2 %     20.5 %     19.9 %     18.9 %     20.1 %     20.6 %     20.2 %     21.1 %     20.3 %     20.6 %
Electronic            Technologies
    14.5 %     16.4 %     14.7 %     15.2 %     15.2 %     11.5 %     13.3 %     14.0 %     12.9 %     13.0 %
Total Segment
    15.7 %     16.7 %     15.2 %     14.1 %     15.4 %     13.5 %     15.6 %     15.5 %     14.3 %     14.7 %


 

DOVER CORPORATION
QUARTERLY SEGMENT INFORMATION

(unaudited) (in thousands)
                                                                                 
    2006   2007
                                                                            Q4  
    Q1     Q2     Q3     Q4     FY 2006     Q1     Q2     Q3     Q4     FY 2007  
         
BOOKINGS
                                                                               
Industrial Products
                                                                               
Material Handling
  $ 176,965     $ 156,684     $ 170,758     $ 208,163     $ 712,570     $ 259,039     $ 246,416     $ 228,085     $ 227,507     $ 961,047  
Mobile Equipment
    302,838       311,496       325,345       311,417       1,251,096       374,845       353,122       298,016       338,357       1,364,340  
Eliminations
    (404 )     (426 )     (1,589 )     (380 )     (2,799 )     (438 )     (445 )     (324 )     (349 )     (1,556 )
         
 
  $ 479,399     $ 467,754     $ 494,514     $ 519,200     $ 1,960,867     $ 633,446     $ 599,093     $ 525,777     $ 565,515     $ 2,323,831  
         
Engineered Systems
                                                                               
Product Identification
  $ 122,201     $ 130,013     $ 145,929     $ 163,953     $ 562,096     $ 215,596     $ 219,111     $ 231,166     $ 253,343     $ 919,216  
Engineered Products
    295,712       305,753       290,647       275,653       1,167,765       322,940       344,559       294,235       247,718       1,209,452  
         
 
  $ 417,913     $ 435,766     $ 436,576     $ 439,606     $ 1,729,861     $ 538,536     $ 563,670     $ 525,401     $ 501,061     $ 2,128,668  
         
Fluid Management
                                                                               
Energy
  $ 170,191     $ 166,628     $ 186,444     $ 170,664     $ 693,927     $ 200,010     $ 187,502     $ 194,733       202,820     $ 785,065  
Fluid Solutions
    160,388       167,631       158,783       167,130       653,932       171,944       180,964       177,021       186,715       716,644  
Eliminations
    (20 )     (11 )     (20 )     (32 )     (83 )     (15 )     (16 )     (12 )     (67 )     (110 )
         
 
  $ 330,559     $ 334,248     $ 345,207     $ 337,762     $ 1,347,776     $ 371,939     $ 368,450     $ 371,742     $ 389,468     $ 1,501,599  
         
 
                                                                               
Electronic Technologies
  $ 382,817     $ 364,096     $ 340,645     $ 322,485     $ 1,410,043     $ 311,840     $ 354,858     $ 381,804     $ 330,049     $ 1,378,551  
         
 
                                                                               
Intra-segment eliminations
    (3,243 )     (3,655 )     (2,030 )     (3,488 )     (12,416 )     (3,041 )     (4,308 )     (4,474 )     (2,837 )     (14,660 )
         
 
                                                                               
Total consolidated bookings
  $ 1,607,445     $ 1,598,209     $ 1,614,912     $ 1,615,565     $ 6,436,131     $ 1,852,720     $ 1,881,763     $ 1,800,250     $ 1,783,256     $ 7,317,989  
         
 
                                                                               
BACKLOG
                                                                               
Industrial Products
                                                                               
Material Handling
  $ 130,621     $ 130,402     $ 156,112     $ 146,614             $ 161,991     $ 157,945     $ 153,245     $ 149,628          
Mobile Equipment
    369,013       385,745       417,467       429,191               501,591       541,683       529,423       543,776          
Eliminations
    (5 )     (4 )     (147 )     (165 )             (207 )     (236 )     (275 )     (195 )        
                         
 
  $ 499,629     $ 516,143     $ 573,432     $ 575,640             $ 663,375     $ 699,392     $ 682,393     $ 693,209          
                         
Engineered Systems
                                                                               
Product Identification
  $ 42,912     $ 43,733     $ 48,042     $ 57,706             $ 66,875     $ 62,216     $ 68,682     $ 68,938          
Engineered Products
    250,996       252,512       256,306       256,200               286,313       327,088       287,901       230,796          
                         
 
  $ 293,908     $ 296,245     $ 304,348     $ 313,906             $ 353,188     $ 389,304     $ 356,583     $ 299,734          
                         
Fluid Management
                                                                               
Energy
  $ 67,711     $ 68,139     $ 88,161     $ 75,449             $ 88,392     $ 89,044     $ 87,105     $ 88,245          
Fluid Solutions
    56,154       62,481       61,794       63,565               65,683       72,028       73,007       73,713          
Eliminations
    (9 )     (3 )     (3 )     (33 )             (8 )                 (14 )        
                         
 
  $ 123,856     $ 130,617     $ 149,952     $ 138,981             $ 154,067     $ 161,072     $ 160,112     $ 161,944          
                         
 
                                                                               
Electronic Technologies
  $ 243,480     $ 242,205     $ 227,528     $ 200,048             $ 229,010     $ 243,996     $ 266,474     $ 232,704          
                         
 
                                                                               
Intra-segment eliminations
    (1,716 )     (2,071 )     (1,197 )     (1,632 )             (1,193 )     (2,110 )     (3,223 )     (1,913 )        
                         
 
                                                                               
Total consolidated backlog
  $ 1,159,157     $ 1,183,139     $ 1,254,063     $ 1,226,943             $ 1,398,447     $ 1,491,654     $ 1,462,339     $ 1,385,678          
                         
 
                                                                               
ACQUISITION RELATED DEPRECIATION AND AMORTIZATION EXPENSE *
 
                                                                               
Industrial Products
  $ 3,718     $ 3,542     $ 6,888     $ 11,065     $ 25,213     $ 6,460     $ 6,417     $ 6,933     $ 6,899     $ 26,709  
Engineered Systems
    1,801       3,431       4,000       5,404       14,636       12,094       5,954       6,257       6,948       31,253  
Fluid Management
    4,487       3,936       3,761       3,999       16,183       3,800       3,812       3,796       4,161       15,569  
Electronic Technologies
    8,135       8,709       7,976       8,094       32,914       8,756       10,319       9,957       9,264       38,296  
         
 
  $ 18,141     $ 19,618     $ 22,625     $ 28,562     $ 88,946     $ 31,110     $ 26,502     $ 26,943     $ 27,272     $ 111,827  
         
* Represents the pre-tax impact on earnings from the depreciation and amortization of acquisition accounting write-ups to reflect the fair value of inventory, property, plant and equipment, and intangible assets.
                                                                                 
    2006   2007
    Q1     Q2     Q3     Q4     FY 2006     Q1     Q2     Q3     Q4     FY 2007  
         
 
                                                                               
Basic earnings (loss) per common share:
Continuing operations
  $ 0.63     $ 0.76     $ 0.76     $ 0.76     $ 2.91     $ 0.66     $ 0.84     $ 0.89     $ 0.86     $ 3.24  
Discontinued operations
    0.37       (0.40 )     0.06       (0.18 )     (0.15 )     (0.03 )     0.00       (0.02 )     0.08       0.04  
Net earnings
    1.00       0.35       0.82       0.58       2.76       0.63       0.84       0.87       0.95       3.28  
 
                                                                               
Diluted earnings (loss) per common share:
Continuing operations
  $ 0.63     $ 0.75     $ 0.76     $ 0.75     $ 2.88     $ 0.65     $ 0.83     $ 0.88     $ 0.86     $ 3.22  
Discontinued operations
    0.37       (0.40 )     0.06       (0.18 )     (0.15 )     (0.03 )     0.00       (0.02 )     0.08       0.04  
Net earnings
    0.99       0.35       0.82       0.58       2.73       0.63       0.84       0.86       0.94       3.26  


 

DOVER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF CASH FLOWS

(unaudited) (in thousands)
BALANCE SHEET
                 
    At December 31, 2007     At December 31, 2006  
 
               
Assets:
               
Cash and cash equivalents
  $ 602,412     $ 374,845  
Receivables, net of allowances
    1,097,697       1,040,286  
Inventories, net
    681,600       694,631  
Deferred tax and other current assets
    158,790       130,349  
Property , plant and equipment, net
    885,145       815,188  
Goodwill
    3,293,986       3,143,034  
Intangible assets, net
    1,070,574       1,065,382  
Other assets
    169,185       122,842  
Assets of discontinued operations
    106,642       240,101  
 
           
 
  $ 8,066,031     $ 7,626,658  
 
           
Liabilities and Stockholders’ Equity
               
Notes payable and current maturities of long-term debt
  $ 638,649     $ 290,549  
Payables and accrued expenses
    1,024,405       977,884  
Taxes payable and other deferrals
    933,308       918,563  
Long-term debt
    1,452,003       1,480,491  
Liabilities of discontinued operations
    71,493       148,149  
 
           
Stockholders’ equity
    3,946,173       3,811,022  
 
           
 
  $ 8,066,031     $ 7,626,658  
 
           
CASH FLOWS
                 
    Twelve Months Ended December 31,  
    2007     2006  
 
               
Operating activities:
               
Net earnings
  $ 661,080     $ 561,782  
Loss (earnings) from discontinued operations, net of tax
    (7,807 )     30,672  
Depreciation and amortization
    245,028       195,633  
Stock-based compensation
    25,706       25,982  
Contributions to defined benefit plans
    (8,700 )     (3,004 )
Net change in assets and liabilities
    (13,366 )     55,017  
 
           
Net cash provided by operating activities
    901,941       866,082  
 
           
Investing activities:
               
Proceeds from the sale of property and equipment
    24,485       19,007  
Additions to property, plant and equipment
    (174,252 )     (190,732 )
Proceeds from sale of discontinued businesses
    90,966       445,905  
Acquisitions (net of cash and cash equivalents acquired)
    (273,610 )     (1,116,780 )
 
           
Net cash used in investing activities
    (332,411 )     (842,600 )
 
           
 
               
Financing activities:
               
Increase in debt, net
    317,609       228,107  
Purchase of treasury stock
    (596,009 )     (48,329 )
Proceeds from exercise of stock options, including tax benefits
    87,117       93,311  
Dividends to stockholders
    (154,390 )     (144,799 )
 
           
Net cash provided by (used in) financing activities
    (345,673 )     128,290  
 
           
 
               
Effect of exchange rate changes on cash
    34,356       19,816  
 
               
Net cash provided by (used in) discontinued operations
    (30,646 )     16,314  
 
               
Net increase in cash and cash equivalents
    227,567       187,902  
Cash and cash equivalents at beginning of period
    374,845       186,943  
 
           
Cash and cash equivalents at end of period
  $ 602,412     $ 374,845