10-QPeriod: Q3 FY2014

DOVER Corp Quarterly Report for Q3 Ended Sep 30, 2014

Filed October 16, 2014For Securities:DOV

Summary

Dover Corporation (DOV) reported its third quarter and year-to-date results for the period ending September 30, 2014. The company demonstrated revenue growth across its segments, driven by both organic expansion and strategic acquisitions. Revenue for the third quarter of 2014 increased by 7.8% to $2.1 billion, compared to the prior year quarter, with organic revenue up 4.0% and acquisition-related revenue contributing another 4.0%. This growth was supported by strong bookings, particularly in the Fluids, Energy, and Engineered Systems segments. Despite the revenue growth, gross profit margin saw a slight decrease due to higher labor costs and an unfavorable product mix. The company also continued its strategic acquisition activity, completing six businesses in the first nine months of 2014 for $365.6 million, with a significant additional acquisition of Accelerated Companies LLC for approximately $430 million announced shortly after the quarter's end. The spin-off of Knowles Corporation earlier in the year significantly impacted the balance sheet and cash flows, with net proceeds used to reduce debt and repurchase shares.

Financial Highlights

46 data points
Beta

Revenue

$2.01B

38.5% Gross Margin

Net Income

$231.84M

11.5% Net Margin

EPS (Diluted)

$1.38

Total Assets

$8.96B

Cash & Equivalents

$706.23M

Free Cash Flow

$258.48M

Financial Statements
Beta
Revenue$2.01B
Cost of Revenue$1.24B
Gross Profit$774.42M
SG&A Expenses$426.16M
Operating Income$348.26M
Net Income$231.84M
EPS (Basic)$1.40
EPS (Diluted)$1.38
Shares Outstanding (Basic)166.02M
Shares Outstanding (Diluted)168.34M

Key Highlights

  • 1Total revenue for the third quarter of 2014 reached $2.1 billion, a 7.8% increase year-over-year, with organic growth at 4.0%.
  • 2For the nine months ended September 30, 2014, revenue grew 6.9% to $6.0 billion, with 3.6% organic growth.
  • 3Gross profit margin for Q3 2014 decreased slightly to 38.3% from 39.0% in the prior year quarter, attributed to increased labor costs and unfavorable product mix.
  • 4The company completed six acquisitions totaling $365.6 million in the first nine months of 2014, enhancing its Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment segments.
  • 5Earnings from continuing operations for the nine months ended September 30, 2014 were $626.6 million, a decrease of 3.8% from the prior year, impacted by the recognition of discrete tax benefits in the prior year.
  • 6Free cash flow for the nine months ended September 30, 2014 was $419.5 million, a decrease from $490.5 million in the prior year, primarily due to higher investments in working capital and capital expenditures.
  • 7The net debt to net capitalization ratio increased to 34.0% at September 30, 2014, from 27.4% at December 31, 2013, largely due to the spin-off of Knowles, share repurchases, and dividends, partially offset by earnings.

Frequently Asked Questions

Revenue growth in the third quarter of 2014 was driven by a combination of organic growth (4.0%) and contributions from recent acquisitions (4.0%). Key segments contributing to this growth included Fluids, Energy, and Engineered Systems, with strong bookings across most segments.

The spin-off of Knowles Corporation, completed in February 2014, resulted in its historical results being reclassified to discontinued operations for all periods presented. Dover received net cash proceeds of approximately $359.8 million from the separation, which was used to pay down commercial paper and repurchase shares. This event also impacted the balance sheet, contributing to an increase in the net debt to net capitalization ratio.

Dover anticipated ongoing solid performance in its Energy segment, continued organic growth in Engineered Systems, strong results in Fluids due to regulatory activity and market conditions, and a slightly stronger seasonal pattern in Refrigeration & Food Equipment reflecting the recovery of third quarter shipment push-outs.

Dover has been actively pursuing acquisitions to complement and expand its operations, completing six businesses for $365.6 million in the first nine months of 2014 and announcing another significant acquisition post-quarter end. While these acquisitions are expected to have a dilutive impact in 2014, they are projected to be accretive in 2015. The company expects full-year revenue growth of approximately 8.0%, with completed acquisitions contributing about 4.0%.