10-QPeriod: Q2 FY2011

DOVER Corp Quarterly Report for Q2 Ended Jun 30, 2011

Filed July 22, 2011For Securities:DOV

Summary

Dover Corporation (DOV) reported a strong financial performance for the second quarter and first half of 2011, driven by robust revenue and earnings growth across all segments. Total revenue increased by 21% in Q2 and 22% year-to-date, fueled by significant organic growth, strategic acquisitions, and a favorable foreign exchange impact. The company's profitability also saw substantial improvement, with diluted earnings per share (EPS) reaching $1.32 for the quarter and $2.34 year-to-date, marking considerable year-over-year increases. The company made significant strategic moves, including substantial acquisitions within the Fluid Management segment, which contributed to a higher net debt to net capitalization ratio but were funded effectively through a combination of cash on hand and debt issuance. Despite increased investments in capital expenditures and acquisitions, Dover maintained a healthy free cash flow generation. The company also provided an optimistic outlook, projecting full-year organic revenue growth between 12-14% and diluted EPS in the range of $4.50 to $4.60.

Financial Highlights

47 data points
Beta

Revenue

$1.82B

39.2% Gross Margin

Net Income

$249.77M

13.7% Net Margin

EPS (Diluted)

$1.32

Total Assets

$9.48B

Cash & Equivalents

$1.40B

Free Cash Flow

$132.92M

Financial Statements
Beta
Revenue$1.82B
Cost of Revenue$1.22B
Gross Profit$712.73M
SG&A Expenses$448.40M
Operating Income$327.60M
Net Income$249.77M
EPS (Basic)$1.34
EPS (Diluted)$1.32
Shares Outstanding (Basic)186.44M
Shares Outstanding (Diluted)189.71M

Key Highlights

  • 1Significant revenue growth of 21% in Q2 2011 ($2.16 billion) and 22% year-to-date ($4.12 billion), driven by strong organic demand across all segments.
  • 2Earnings from continuing operations saw a substantial increase of 45% in Q2 2011 to $249.1 million and 47% year-to-date to $432.4 million.
  • 3Diluted EPS rose to $1.32 in Q2 2011 and $2.34 for the first six months, reflecting strong operational leverage and favorable tax impacts.
  • 4Strategic acquisitions, particularly in the Fluid Management segment, contributed to growth, with four businesses acquired in the first half of 2011 for $424.6 million.
  • 5The company's balance sheet reflects increased debt, with the net debt to net capitalization ratio rising to 14.6% due to acquisitions and new debt issuance.
  • 6Despite increased capital expenditures and acquisitions, the company generated $215.5 million in free cash flow for the first six months of 2011.
  • 7Dover provided an optimistic full-year 2011 outlook, projecting 12-14% organic revenue growth and diluted EPS between $4.50 and $4.60.

Frequently Asked Questions

Dover's revenue growth in the second quarter of 2011 was primarily driven by strong organic volume increases across all segments, particularly in the energy market and end-markets served by material handling industrial products. Acquisitions and a favorable foreign exchange impact also contributed to the overall revenue increase.

The company made significant acquisitions, notably four businesses in the Fluid Management segment for $424.6 million in the first half of 2011. These acquisitions contributed to revenue growth but also led to an increase in total debt and a rise in the net debt to net capitalization ratio to 14.6% by June 30, 2011.

Dover anticipates continued strength in most of its end-markets, projecting full-year organic revenue growth between 12% and 14% and diluted earnings per share (EPS) in the range of $4.50 to $4.60. However, the company noted that certain areas like refrigeration case sales and solar equipment sales are expected to soften.

Yes, the effective tax rates for continuing operations in the second quarter and first half of 2011 were favorably impacted by net discrete tax items totaling $30.3 million. This included $22.3 million from U.S. federal tax settlements in Q2 and $8.0 million from state tax settlements in Q1, which significantly reduced the effective tax rate.