How did Dover perform financially in 1993?

Dover posted record earnings of $2.77 per share, up 24% from $2.24 in 1992. Net sales rose 9% to $2.48 billion and pretax earnings rose 23% to $245.5 million. Return on average equity was 18.9%, up from 15.9%. Excluding unusual items in both years, the EPS gain was about 16%.

What drove the 1993 acquisition spending, and how is it expected to affect earnings?

Dover spent about $321 million on 13 acquisitions, a record, because the deal climate allowed it to invest more than its internal cash flow. The acquired companies had about $393 million in full-year 1993 sales, but only $0.05 per share of 1993 EPS contribution because of partial-year ownership, financing costs, and first-year premium write-offs. Management expects these companies to add about $0.30 per share in 1994 at 1993 operating levels.

Is Dover's balance sheet under pressure from the acquisitions?

Leverage increased but remains manageable. Net debt rose to $331 million, about 30% of total capital, and the net debt to equity ratio rose from 15.5% to 38.1%. Dover has $419.1 million of unused bank lines and the highest commercial paper rating, and the company describes its financial condition as excellent. The stock buyback was suspended in 1993.

What are the main risks disclosed in the filing?

The main risks are the continued weakness in North American and U.K. elevator construction, an IRS dispute over proposed additional taxes of $55.8 million plus interest for 1982-1989 that Dover is contesting, and the impact of lower oil prices on the oilfield equipment businesses. Environmental matters and Universal Instruments' GSM-1 surface-mount margins were also flagged as ongoing issues.

What is the outlook for 1994?

Management expects 1994 to produce a new earnings record by a substantial margin, though the percentage gain is likely to be smaller than 1993's. Growth is expected from the full-year contribution of 1993 acquisitions, internal growth at most companies, and recovery in Dover Diversified and Dover Industries. Elevator profits are expected to improve only modestly.

DOV 10-K FY1993 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 30, 1994. Cited figures are marked; the original filing is the authoritative source.

Dover Corporation's 1993 10-K shows a record year: earnings per share rose 24% to $2.77^a on sales of $2.484 billion (up 9%), with net earnings of $158.3 million.

Excluding unusual items in both years, EPS growth was about 16%^b. Results were driven by Dover Resources (profits up 20%), Dover Industries (up 58%, boosted by the Heil and B&S acquisitions), and Dover Technologies (up 40%). Dover Elevator International was the weak spot, with sales down 2% and profits down 5% amid a depressed North American new-construction market.

Dover spent a record $321 million^c on 13 acquisitions in 1993, more than its internal cash flow. This pushed net debt up to $331 million (about 30% of total capital), and the company suspended its stock buyback program. Management says the acquisitions will add roughly $0.30 per share to 1994 earnings from a full year of ownership, and it expects 1994 to set a new earnings record, though with a smaller percentage gain than 1993.

Acquisition-premium amortization cost $0.56^d per share in 1993 and is scheduled to fall to $0.48 in 1994. The balance sheet remains strong, with a $419 million undrawn bank credit line and top-rated commercial paper.

Risks include an unresolved IRS challenge covering $55.8 million in proposed additional taxes plus interest, the weak elevator market, and the lower oil price affecting oilfield equipment businesses. Dover also spun off DOVatron International in 1993.

02—Key points

Key Highlights

Record 1993 EPS of $2.77, up 24% from $2.24; net earnings of $158.3 million on net sales of $2.48 billion (up 9%)
Record acquisition program: 13 acquisitions for about $321 million in 1993, adding roughly $393 million in annualized sales (Heil, Belvac, Thermal Equipment, Phoenix Refrigeration, B&S, Dynapert, and others)
Net debt rose to $331 million, about 30% of total capital; $250 million of commercial paper was reclassified as long-term debt, and the stock buyback was suspended
Dover Resources became the largest earnings contributor, with profits up 20% on sales up 8%, driven by vapor recovery products at OPW and Blackmer
Dover Industries profits rose 58% to a record, with Heil becoming the segment's largest company
Dover Elevator International profits fell 5% on a 2% sales decline, as North American new-construction markets stayed depressed
Management guides for 1994: acquisitions add about $0.30 per share from full-year ownership, and the company expects a new earnings record

03—Questions

Frequently Asked Questions

How did Dover perform financially in 1993?
Dover posted record earnings of $2.77 per share, up 24% from $2.24 in 1992. Net sales rose 9% to $2.48 billion and pretax earnings rose 23% to $245.5 million. Return on average equity was 18.9%, up from 15.9%. Excluding unusual items in both years, the EPS gain was about 16%.
What drove the 1993 acquisition spending, and how is it expected to affect earnings?
Dover spent about $321 million on 13 acquisitions, a record, because the deal climate allowed it to invest more than its internal cash flow. The acquired companies had about $393 million in full-year 1993 sales, but only $0.05 per share of 1993 EPS contribution because of partial-year ownership, financing costs, and first-year premium write-offs. Management expects these companies to add about $0.30 per share in 1994 at 1993 operating levels.
Is Dover's balance sheet under pressure from the acquisitions?
Leverage increased but remains manageable. Net debt rose to $331 million, about 30% of total capital, and the net debt to equity ratio rose from 15.5% to 38.1%. Dover has $419.1 million of unused bank lines and the highest commercial paper rating, and the company describes its financial condition as excellent. The stock buyback was suspended in 1993.
What are the main risks disclosed in the filing?
The main risks are the continued weakness in North American and U.K. elevator construction, an IRS dispute over proposed additional taxes of $55.8 million plus interest for 1982-1989 that Dover is contesting, and the impact of lower oil prices on the oilfield equipment businesses. Environmental matters and Universal Instruments' GSM-1 surface-mount margins were also flagged as ongoing issues.
What is the outlook for 1994?
Management expects 1994 to produce a new earnings record by a substantial margin, though the percentage gain is likely to be smaller than 1993's. Growth is expected from the full-year contribution of 1993 acquisitions, internal growth at most companies, and recovery in Dover Diversified and Dover Industries. Elevator profits are expected to improve only modestly.

04—Continue

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