10-QPeriod: Q1 FY2017

DOVER Corp Quarterly Report for Q1 Ended Mar 31, 2017

Filed April 20, 2017For Securities:DOV

Summary

Dover Corporation (DOV) reported a significant increase in net earnings for the first quarter of 2017 compared to the prior year, driven by a substantial gain on the sale of its Performance Motorsports International (PMI) business and an overall improvement in revenue. Total revenue grew by 11.8%, supported by organic growth of 3.8% and contributions from recent acquisitions. The Energy segment showed strong organic growth, benefiting from improved oil and gas market conditions, while the Fluids segment experienced significant growth due to acquisitions. The company also raised its full-year revenue and earnings per share expectations, reflecting positive momentum and the net benefit from asset disposals. Despite the strong net earnings growth, free cash flow for the quarter decreased year-over-year, primarily due to higher working capital and capital expenditures. However, the company maintained a strong liquidity position and saw a reduction in its net debt to net capitalization ratio. The company's strategic focus on organic growth, coupled with disciplined capital allocation, positions it to navigate the current market environment and pursue future opportunities. Investors should note the significant impact of the PMI divestiture on the quarter's earnings.

Financial Highlights

47 data points
Beta

Revenue

$1.58B

36.4% Gross Margin

Net Income

$172.25M

10.9% Net Margin

EPS (Diluted)

$1.09

Total Assets

$10.24B

Cash & Equivalents

$415.53M

Free Cash Flow

$35.81M

Financial Statements
Beta
Revenue$1.58B
Cost of Revenue$1.15B
Gross Profit$575.85M
SG&A Expenses$486.26M
Operating Income$174.91M
Interest Expense$36.41M
Net Income$172.25M
EPS (Basic)$1.11
EPS (Diluted)$1.09
Shares Outstanding (Basic)155.54M
Shares Outstanding (Diluted)157.40M

Key Highlights

  • 1Net earnings surged by 73.4% to $172.2 million, or $1.09 per diluted share, compared to $99.4 million, or $0.64 per diluted share, in the prior year period.
  • 2Total revenue increased by 11.8% to $1.81 billion, driven by organic growth of 3.8% and acquisition contributions, while the Energy segment saw a notable 14.4% revenue increase.
  • 3A significant gain of $90.1 million on the sale of businesses, primarily from the divestiture of Performance Motorsports International (PMI), substantially boosted net earnings.
  • 4The company raised its full-year revenue guidance to an increase of approximately 11% to 13% and full-year EPS expectations to a range of $4.05 to $4.20.
  • 5Free cash flow decreased by $60.4 million to $35.8 million, impacted by higher working capital (particularly inventory) and increased capital expenditures.
  • 6Operating cash flow decreased to $78.1 million from $133.4 million due to increased working capital.
  • 7The net debt to net capitalization ratio improved, decreasing to 44.9% from 46.3% at the end of the previous year.

Frequently Asked Questions

The primary drivers of the significant increase in net earnings were a substantial gain of $90.1 million from the sale of businesses, most notably the Performance Motorsports International (PMI) divestiture, and an overall improvement in revenue, which grew by 11.8%. The Energy segment's strong organic growth, benefiting from improved oil and gas market conditions, also contributed positively.

Revenue growth was uneven across segments. The Energy segment experienced robust organic growth of 14.9%, driven by improved oil and gas markets. The Fluids segment saw substantial overall growth of 31.6%, largely due to acquisitions. The Engineered Systems segment grew 5.3%, supported by organic growth and acquisitions, while the Refrigeration & Food Equipment segment declined 1.8%, primarily due to the disposition of a business.

Dover Corporation has increased its full-year expectations. It now anticipates full-year revenue to increase approximately 11% to 13%, including expected organic revenue growth of 4% to 6%. The company also projects full-year earnings per share to be in the range of $4.05 to $4.20.

For the first quarter of 2017, cash provided by operating activities decreased to $78.1 million from $133.4 million in the prior year, mainly due to higher working capital and inventory levels. Consequently, free cash flow decreased to $35.8 million from $96.2 million in the prior year. The company expects to generate free cash flow of approximately 11% of revenue for the full year.