10-QPeriod: Q3 FY2009

DOVER Corp Quarterly Report for Q3 Ended Sep 30, 2009

Filed October 23, 2009For Securities:DOV

Summary

Dover Corporation reported a challenging third quarter of 2009, with consolidated revenue declining by 23.7% year-over-year to $1.5 billion, reflecting broad-based weakness across all segments due to the prevailing economic conditions. This revenue decline translated into a significant drop in earnings from continuing operations, with diluted EPS falling to $0.58 from $1.01 in the prior year period. Despite the top-line pressure, the company demonstrated some cost management capabilities, with selling and administrative expenses decreasing by 13.1%. The company also highlighted a reduction in its net debt to total capitalization ratio to 18.7% from 24.9% at year-end 2008, indicating improved financial leverage. For the nine-month period ended September 30, 2009, revenue decreased by 26.9% to $4.27 billion, and diluted EPS from continuing operations was $1.45, down from $2.76 in the prior year. The company is actively managing its working capital, which improved, and has implemented significant restructuring efforts, including facility closures and headcount reductions, aiming to achieve substantial cost savings. While facing a difficult economic environment, Dover remains committed to maintaining margin levels through operational improvements and pricing discipline.

Financial Highlights

44 data points
Beta

Revenue

$1.50B

37.2% Gross Margin

Net Income

$106.88M

7.1% Net Margin

EPS (Diluted)

$0.57

Total Assets

$7.77B

Cash & Equivalents

$597.50M

Free Cash Flow

$222.01M

Financial Statements
Beta
Revenue$1.50B
Cost of Revenue$941.35M
Gross Profit$558.27M
SG&A Expenses$378.13M
Operating Income$180.14M
Net Income$106.88M
EPS (Basic)$0.57
EPS (Diluted)$0.57
Shares Outstanding (Basic)186.15M
Shares Outstanding (Diluted)186.36M

Key Highlights

  • 1Consolidated revenue for Q3 2009 decreased 23.7% year-over-year to $1,499.6 million, with all segments experiencing declines due to economic weakness.
  • 2Diluted Earnings Per Share (EPS) from continuing operations for Q3 2009 was $0.58, a significant decrease from $1.01 in Q3 2008.
  • 3Net debt to total capitalization improved to 18.7% as of September 30, 2009, down from 24.9% at December 31, 2008, indicating deleveraging.
  • 4The company reported a substantial year-over-year decrease in cash flow from operating activities, falling from $740.1 million to $554.1 million for the nine months ended September 30, 2009, largely due to lower earnings.
  • 5Selling and administrative expenses were reduced by 13.1% in Q3 2009 compared to the prior year, demonstrating cost control efforts amidst lower revenue.
  • 6Significant restructuring efforts were undertaken, with 6,000 employees reduced and 25 facilities closed by September 30, 2009, aiming for substantial cost savings.
  • 7Loss from discontinued operations narrowed to $0.6 million in Q3 2009 from $2.7 million in the prior year quarter.

Frequently Asked Questions

The primary driver for the decline in revenue and earnings is the broad-based economic downturn affecting all of Dover Corporation's end markets. This has led to lower demand, reduced bookings, and consequently, lower sales across all its operating segments.

Dover Corporation is actively managing its financial leverage. The company's net debt to total capitalization ratio improved significantly, decreasing to 18.7% at the end of Q3 2009 from 24.9% at the end of 2008. This improvement is attributed to reduced debt levels and continued cash generation from operations.

Dover Corporation is implementing significant cost-saving measures, including restructuring programs that involve facility closures and headcount reductions. Selling and administrative expenses have been reduced, and the company is focused on improving working capital management and maintaining pricing discipline to offset the impact of lower volumes and the economic downturn.

For the full year 2009, Dover Corporation anticipates revenue to be 24% to 26% lower than 2008 levels and expects diluted EPS to be around the midpoint of $1.75 to $2.00. The company's outlook is subject to the risk of further deterioration in global or domestic economic conditions, which could negatively impact operating results.