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Press release from PR Newswire

Dover Reports Fourth Quarter And Full Year 2013 Results; Provides 2014 Guidance On A Pro Forma Basis

Thursday, January 30, 2014

Dover Reports Fourth Quarter And Full Year 2013 Results; Provides 2014 Guidance On A Pro Forma Basis

07:00 EST Thursday, January 30, 2014

-- Reports quarterly revenue of $2.2 billion, an increase of 10% over the prior year
-- Delivers quarterly diluted earnings per share from continuing operations of $1.22, an increase of 5% over last year
-- Achieves adjusted quarterly diluted earnings per share from continuing operations of $1.28, excluding Knowles spin-off costs of $0.09 and tax benefits of $0.03, up 17% from an adjusted prior year
-- Expects 2014 full year revenue growth of 5% to 6% and pro forma diluted earnings per share of $4.60 to $4.80, excluding Knowles and related spin-off costs
-- Remains on track to complete the spin-off of Knowles before the end of the first quarter 2014

DOWNERS GROVE, Ill., Jan. 30, 2014 /PRNewswire/ -- Dover (NYSE: DOV) today announced financial results for the fourth quarter and full year ended December 31, 2013.  In addition, the Company is providing pro forma unaudited financial data for Dover, excluding Knowles and related spin-off costs, for the full year ended December 31, 2013.  The planned spin-off of Knowles remains on track and is expected to be finalized before the end of the first quarter 2014.

Dover Results (including Knowles)

Revenue for the fourth quarter ended December 31, 2013 was $2.2 billion, an increase of 10% over the prior year period. The revenue increase was driven by organic growth of 5% and a 5% increase from acquisitions. Earnings from continuing operations were $210.8 million, or $1.22 diluted earnings per share ("EPS"), compared to $208.2 million, or $1.16 EPS, in the prior year period, representing increases of 1% and 5%, respectively. EPS from continuing operations includes Knowles spin-off costs of $0.09 EPS and discrete tax benefits of $0.03 recognized in the current quarter. Excluding these items and a $0.07 EPS tax benefit recognized in the prior year period, adjusted EPS from continuing operations for the fourth quarter of 2013 was $1.28, reflecting an increase of 17% over an adjusted EPS of $1.09 in the prior year period.

Revenue for the year ended December 31, 2013, was $8.7 billion, an increase of 8% over the prior year, reflecting organic growth of 3% and a 5% increase from acquisitions. Earnings from continuing operations for the year ended December 31, 2013, were $965.8 million, or $5.57 EPS, compared to $833.1 million, or $4.53 EPS in the prior year period, representing increases of 16% and 23%, respectively.  EPS from continuing operations for the year includes Knowles spin-off costs of $0.17 EPS, discrete tax benefits of $0.44 EPS, and other one-time gains of $0.02 compared to $0.09 EPS of discrete tax benefits in the prior year. Excluding these items, adjusted EPS from continuing operations for the year ended December 31, 2013 was $5.28, an increase of 19% over an adjusted EPS of $4.44 in the prior year.

Commenting on the fourth quarter results, Dover's President and Chief Executive Officer, Robert A. Livingston, said, "I am very pleased with our fourth quarter results as we achieved solid organic growth in all segments.  Our broad-based order and shipment activity was particularly strong at our businesses serving the refrigeration and food equipment, fast moving consumer goods, fluids, drilling and downstream energy markets. In the consumer electronics market, our strong position with a key OEM allowed us to grow nicely despite continuing headwinds at two other customers.  Additionally, we closed on several acquisitions in the quarter, notably in the fluids and downstream energy spaces, and raised ?300 million in the debt market.  These actions have positioned us well as we move into 2014."

"For the year, we generated over $940 million in free cash flow. We continued to make significant internal and acquisition investments in our key growth spaces, increased the dividend for the 58th consecutive year, and progressed as planned on our $1 billion share repurchase program."

Net earnings for the fourth quarter of 2013 were $194.0 million or $1.13 EPS, including a loss from discontinued operations of $16.8 million, or $0.10 EPS, compared to net earnings of $159.9 million, or $0.89 EPS, for the same period of 2012, which included a loss from discontinued operations of $48.4 million, or $0.27 EPS. Reflected within discontinued operations were impairment charges of $14.0 million, or $0.08 EPS, in 2013 and $51.9 million, or $0.29 EPS, in 2012, connected with the anticipated sale of our electronic test and assembly businesses.

Net earnings for the year ended December 31, 2013 were $1.0 billion, or $5.78 EPS, including net earnings from discontinued operations of $37.3 million, or $0.22 EPS, compared to net earnings of $811.1 million, or $4.41 EPS, for the same period of 2012, which included a net loss from discontinued operations of $22.0 million or $0.12 EPS. Reflected within discontinued operations were impairment charges connected with the anticipated sale of our electronic test and assembly businesses of $32.7 million, net of tax, or $0.19 EPS in 2013, and $51.9 million, net of tax, or $0.28 EPS in 2012, and discrete tax benefits of $54.8 million, or $0.32 EPS in 2013.

Dover Results (excluding Knowles) Pro Forma

In connection with the spin-off, certain pro forma unaudited financial data is being provided for Dover, excluding Knowles and related spin-off costs, for the year ending December 31, 2013.  Effective with the anticipated first quarter spin-off, it is expected that Knowles will be accounted for as a discontinued operation in the Company's financial statements.

Revenue for the year ended December 31, 2013 was $7.5 billion, an increase of 8% over the prior year. Earnings from continuing operations for the year ended December 31, 2013, were $832 million, or $4.79 EPS, increases of 21% and 28% over the prior year, respectively.  Adjusted EPS from continuing operations for the year ended December 31, 2013 was $4.31, representing an increase of 18% over an adjusted prior year period.

Dover Outlook (excluding Knowles) Pro Forma

Mr. Livingston continued, "We are very excited about the strength and positioning of Dover.  Our markets are improving and our team is executing at a high level, as evidenced by our second half growth rates.  Accordingly, we expect the strong performance we saw in the fast moving consumer goods and refrigeration markets to continue into 2014.  We also expect the solid market conditions for our fluids and downstream energy businesses to carryover from the fourth quarter.  Finally, within Energy we anticipate improved North American markets for our drilling and artificial lift businesses, along with continued geographic expansion. In all, excluding Knowles, we expect full year organic growth of 3% to 4% complemented by acquisition growth of 2%, resulting in revenue growth of 5% to 6%.  The benefits of our lean and productivity initiatives, leverage on volume, and a lower share count from our ongoing repurchase program will drive solid EPS growth.  As a result, we anticipate full year diluted EPS from continuing operations to be in the range of $4.60 - $4.80 on a pro forma basis excluding Knowles and related spin-off costs. At the mid-point, our guidance represents a 9% increase."

Dover will host a webcast of its fourth quarter 2013 conference call at 10:00 A.M. Eastern Time (9:00 A.M. Central Time) on Thursday, January 30, 2014. The webcast can be accessed on the Dover website at www.dovercorporation.com. The conference call will also be made available for replay on the website. Additional information on Dover's fourth quarter results and its operating segments can also be found on the Company's website.

About Dover:

Dover is a diversified global manufacturer with annual revenues approaching $8 billion.  For over 50 years, Dover has been delivering outstanding products and services that reflect its market leadership and commitment to operational and technical excellence. The Company's entrepreneurial business model encourages, promotes and fosters deep customer engagement which has led to Dover's well-established and valued reputation for providing superior customer service and industry-leading product innovation. Dover focuses on innovative equipment and components, specialty systems and support services through its four major operating segments: Communication Technologies, Energy, Engineered Systems and Printing & Identification. Headquartered in Downers Grove, Illinois, Dover is traded on the New York Stock Exchange under "DOV." Additional information is available on our website at www.dovercorporation.com.

Forward-Looking Statement:

This press release contains "forward-looking" statements within the meaning of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, 2014 revenue growth and earnings per share, expected performance following the completion of the planned spin-off of Knowles, anticipated market conditions and our positioning, expected contributions from acquisitions, as well as productivity initiatives, leverage on increased sales and share repurchase activities, operating and strategic plans, cash flows, industries in which Dover businesses operate and the U.S. and global economies.  The forward-looking statements in this release may be indicated by words or phrases such as "anticipate," "expect," "believe," "indicate," "suggests," "will," "plans," "supports," "projects," "should," "would," "could," "forecast" and "management is of the opinion," or the use of the future tense. Forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from current expectations, including, but not limited to, the state of the worldwide economy and sovereign credit; political events; the impact of natural disasters and their effect on global supply chains and energy markets; current economic conditions and uncertainties in the credit and capital markets; instability in countries where we conduct business; our ability to expand into new geographic markets and to anticipate and meet customer demands for new products; increased competition and pricing pressures in our markets; the impact of the proposed spin-off and our ability to consummate it as anticipated; the terms and timing of the sale of any business in discontinued operations; the impact of loss of a single-source manufacturing facility; changes in customer demand or loss of a significant customer; the relative mix of products and services which impacts margins and operating efficiencies; short-term capacity constraints; increases in the cost of raw materials; domestic and foreign governmental and public policy changes including environmental regulations, conflict minerals disclosure requirements, and tax policies (including domestic and international export subsidy programs, R&E credits and other similar programs); protection and validity of patent and other intellectual property rights; our ability to identify and successfully consummate value-adding acquisition opportunities;  our ability to achieve expected savings from integration, synergy and other cost-control initiatives; unforeseen developments in contingencies such as litigation; international economic conditions including interest rate and currency exchange rate fluctuations; possible future terrorist threats and their effect on the worldwide economy; and a downgrade in our credit ratings. It also contains unaudited pro forma financial information for Dover excluding Knowles, which is not necessarily indicative of Dover's operating results for any future period. We refer you to the documents we file from time to time with the Securities and Exchange Commission, such as our reports on Form 10-K, Form 10-Q and Form 8-K, for a discussion of these and other risks and uncertainties that could cause our actual results to differ materially from our current expectations and from the forward-looking statements contained in this press release. We undertake no obligation to update any forward-looking statement, except as required by law.

 

INVESTOR SUPPLEMENT - FOURTH QUARTER AND FULL YEAR 2013

DOVER CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(unaudited)(in thousands, except per share data)

Three Months Ended

December 31,

Years Ended

December 31,

2013

2012

2013

2012

Revenue

$

2,209,128

$

2,013,831

$

8,729,813

$

8,104,339

Cost of goods and services

1,378,571

1,240,087

5,390,032

4,997,274

Gross profit

830,557

773,744

3,339,781

3,107,065

Selling and administrative expenses

513,516

469,668

1,985,849

1,841,688

Operating earnings

317,041

304,076

1,353,932

1,265,377

Interest expense, net

29,981

30,996

120,742

121,141

Other (income) expense, net

(3,016)

809

(4,222)

6,665

Earnings before provision for income taxes and discontinued operations

290,076

272,271

1,237,412

1,137,571

Provision for income taxes

79,264

64,047

271,607

304,452

Earnings from continuing operations

210,812

208,224

965,805

833,119

Earnings (loss) from discontinued operations, net

(16,849)

(48,364)

37,324

(22,049)

Net earnings

$

193,963

$

159,860

$

1,003,129

$

811,070

Basic earnings per common share:

Earnings from continuing operations

$

1.24

$

1.17

$

5.64

$

4.59

Earnings (loss) from discontinued operations, net

(0.10)

(0.27)

0.22

(0.12)

Net earnings

1.14

0.90

5.86

4.47

Weighted average shares outstanding

170,027

177,257

171,271

181,551

Diluted earnings per common share:

Earnings from continuing operations

$

1.22

$

1.16

$

5.57

$

4.53

Earnings (loss) from discontinued operations, net

(0.10)

(0.27)

0.22

(0.12)

Net earnings

1.13

0.89

5.78

4.41

Weighted average shares outstanding

172,265

179,365

173,547

183,993

Dividends paid per common share

$

0.375

$

0.350

$

1.450

$

1.330

 

DOVER CORPORATION

QUARTERLY SEGMENT INFORMATION

(unaudited)(in thousands)

2013

2012

Q1

Q2

Q3

Q4

FY 2013

Q1

Q2

Q3

Q4

FY 2012

REVENUE

Communication Technologies

$

372,790

$

401,477

$

413,608

$

428,392

$

1,616,267

$

357,575

$

361,689

$

396,470

$

400,851

$

1,516,585

Energy

561,198

573,471

577,350

584,435

2,296,454

531,570

538,786

562,263

539,985

2,172,604

Engineered Systems

Fluid Solutions

203,991

226,882

227,104

243,816

901,793

180,364

211,974

218,324

206,500

817,162

Refrigeration & Industrial

664,294

777,396

778,336

676,582

2,896,608

642,213

674,501

674,116

613,012

2,603,842

Eliminations

(352)

(383)

(485)

(472)

(1,692)

(453)

(352)

(319)

(336)

(1,460)

867,933

1,003,895

1,004,955

919,926

3,796,709

822,124

886,123

892,121

819,176

3,419,544

Printing & Identification

237,877

250,646

256,571

276,681

1,021,775

243,570

251,875

246,945

254,141

996,531

Intra-segment eliminations

(225)

(726)

(135)

(306)

(1,392)

(225)

(184)

(194)

(322)

(925)

Total consolidated revenue

$

2,039,573

$

2,228,763

$

2,252,349

$

2,209,128

$

8,729,813

$

1,954,614

$

2,038,289

$

2,097,605

$

2,013,831

$

8,104,339

NET EARNINGS

Segment Earnings:

Communication Technologies

$

44,208

$

51,789

$

76,076

$

65,626

$

237,699

$

46,556

$

50,322

$

63,706

$

58,376

$

218,960

Energy

139,545

132,926

145,494

134,835

552,800

132,115

133,936

139,038

133,561

538,650

Engineered Systems

117,178

165,440

172,223

121,057

575,898

122,092

133,808

144,245

101,807

501,952

Printing & Identification

29,752

35,967

42,881

44,018

152,618

26,089

28,918

39,502

40,650

135,159

Total Segments

330,683

386,122

436,674

365,536

1,519,015

326,852

346,984

386,491

334,394

1,394,721

Corporate expense / other

33,763

38,341

43,278

45,479

160,861

36,546

36,335

32,001

31,127

136,009

Net interest expense

30,244

30,280

30,237

29,981

120,742

30,031

29,715

30,399

30,996

121,141

Earnings from continuing operations before provision for income taxes

266,676

317,501

363,159

290,076

1,237,412

260,275

280,934

324,091

272,271

1,137,571

Provision for income taxes

69,687

23,149

99,507

79,264

271,607

73,866

75,778

90,761

64,047

304,452

Earnings from continuing operations

196,989

294,352

263,652

210,812

965,805

186,409

205,156

233,330

208,224

833,119

Earnings (loss) from discontinued operations, net

13,014

35,697

5,462

(16,849)

37,324

9,654

8,945

7,716

(48,364)

(22,049)

Net earnings

$

210,003

$

330,049

$

269,114

$

193,963

$

1,003,129

$

196,063

$

214,101

$

241,046

$

159,860

$

811,070

SEGMENT OPERATING MARGIN

Communication Technologies

11.9

%

12.9

%

18.4

%

15.3

%

14.7

%

13.0

%

13.9

%

16.1

%

14.6

%

14.4

%

Energy

24.9

%

23.2

%

25.2

%

23.1

%

24.1

%

24.9

%

24.9

%

24.7

%

24.7

%

24.8

%

Engineered Systems

13.5

%

16.5

%

17.1

%

13.2

%

15.2

%

14.9

%

15.1

%

16.2

%

12.4

%

14.7

%

Printing & Identification

12.5

%

14.3

%

16.7

%

15.9

%

14.9

%

10.7

%

11.5

%

16.0

%

16.0

%

13.6

%

Total Segment

16.2

%

17.3

%

19.4

%

16.5

%

17.4

%

16.7

%

17.0

%

18.4

%

16.6

%

17.2

%

DEPRECIATION AND AMORTIZATION EXPENSE

Communication Technologies

$

35,501

$

37,719

$

38,251

$

37,004

$

148,475

$

31,513

$

32,828

$

32,997

$

35,281

$

132,619

Energy

26,298

26,599

26,549

27,898

107,344

21,184

23,533

24,639

25,721

95,077

Engineered Systems

31,551

32,282

32,961

34,360

131,154

19,582

23,913

23,060

27,066

93,621

Printing & Identification

7,630

7,606

7,701

7,845

30,782

8,331

8,496

8,777

7,998

33,602

Corporate

859

1,026

1,032

944

3,861

700

765

842

359

2,666

$

101,839

$

105,232

$

106,494

$

108,051

$

421,616

$

81,310

$

89,535

$

90,315

$

96,425

$

357,585

 

DOVER CORPORATION

QUARTERLY SEGMENT INFORMATION

(continued)

(unaudited)(in thousands)

2013

2012

Q1

Q2

Q3

Q4

FY 2013

Q1

Q2

Q3

Q4

FY 2012

BOOKINGS

Communication Technologies

$

379,122

$

422,293

$

423,662

$

372,901

$

1,597,978

$

347,291

$

387,058

$

411,005

$

363,624

$

1,508,978

Energy

620,640

525,612

595,421

571,459

2,313,132

585,775

530,352

526,824

550,091

2,193,042

Engineered Systems

Fluid Solutions

223,764

213,359

222,402

248,079

907,604

184,711

204,139

197,767

209,872

796,489

Refrigeration & Industrial

755,026

784,904

662,464

701,928

2,904,322

711,911

666,223

600,065

606,931

2,585,130

Eliminations

(373)

(432)

(372)

(504)

(1,681)

(408)

(376)

(258)

(399)

(1,441)

978,417

997,831

884,494

949,503

3,810,245

896,214

869,986

797,574

816,404

3,380,178

Printing & Identification

237,217

259,282

256,211

270,680

1,023,390

249,773

251,733

244,611

252,937

999,054

Intra-segment eliminations

(720)

(137)

(109)

(393)

(1,359)

(609)

(221)

(759)

(1,020)

(2,609)

Total consolidated bookings

$

2,214,676

$

2,204,881

$

2,159,679

$

2,164,150

$

8,743,386

$

2,078,444

$

2,038,908

$

1,979,255

$

1,982,036

$

8,078,643

BACKLOG

Communication Technologies

$

458,765

$

480,426

$

492,583

$

436,437

$

451,110

$

476,745

$

491,041

$

453,172

Energy

311,793

255,544

274,243

254,898

296,360

282,364

248,233

256,093

Engineered Systems

Fluid Solutions

178,854

184,142

182,557

255,871

191,327

172,300

156,191

160,890

Refrigeration & Industrial

592,922

597,838

482,069

506,069

598,910

586,824

515,285

516,559

Eliminations

(178)

(227)

(113)

(147)

(132)

(155)

(94)

(157)

771,598

781,753

664,513

761,793

790,105

758,969

671,382

677,292

Printing & Identification

95,353

103,864

105,699

100,032

102,117

98,216

98,356

97,857

Intra-segment eliminations

(886)

(578)

(423)

(670)

(986)

(648)

(324)

(591)

Total consolidated backlog

$

1,636,623

$

1,621,009

$

1,536,615

$

1,552,490

$

1,638,706

$

1,615,646

$

1,508,688

$

1,483,823

 

DOVER CORPORATION

QUARTERLY EARNINGS PER SHARE

(unaudited)(in thousands, except per share data*)

2013

2012

Q1

Q2

Q3

Q4

FY 2013

Q1

Q2

Q3

Q4

FY 2012

Basic earnings (loss) per common share:

Continuing operations

$

1.14

$

1.72

$

1.55

$

1.24

$

5.64

$

1.01

$

1.12

$

1.28

$

1.17

$

4.59

Discontinued operations

0.08

0.21

0.03

(0.10)

0.22

0.05

0.05

0.04

(0.27)

(0.12)

Net earnings

1.21

1.93

1.58

1.14

5.86

1.07

1.17

1.33

0.90

4.47

Diluted earnings (loss) per common share:

Continuing operations

$

1.12

$

1.70

$

1.53

$

1.22

$

5.57

$

1.00

$

1.10

$

1.27

$

1.16

$

4.53

Discontinued operations

0.07

0.21

0.03

(0.10)

0.22

0.05

0.05

0.04

(0.27)

(0.12)

Net earnings

1.20

1.91

1.56

1.13

5.78

1.05

1.15

1.31

0.89

4.41

Adjusted diluted earnings per common share (calculated below):

Continuing operations

$

1.10

$

1.36

$

1.54

$

1.28

$

5.28

$

1.01

$

1.10

$

1.25

$

1.09

$

4.44

Net earnings (loss) and average shares used in calculated earnings (loss) per share amounts are as follows:

Net earnings (loss):

Continuing operations

$

196,989

$

294,352

$

263,652

$

210,812

$

965,805

$

186,409

$

205,156

$

233,330

$

208,224

$

833,119

Discontinued operations

13,014

35,697

5,462

(16,849)

37,324

9,654

8,945

7,716

(48,364)

(22,049)

Net earnings

210,003

330,049

269,114

193,963

1,003,129

196,063

214,101

241,046

159,860

811,070

Average shares outstanding:

Basic

173,448

171,111

170,544

170,027

171,271

183,737

183,494

181,763

177,257

181,551

Diluted

175,567

173,097

172,734

172,265

173,547

186,706

185,780

183,932

179,365

183,993

 

Note:

Earnings from continuing operations are adjusted by discrete tax items, incurred spin-off costs, and other one-time gains to derive adjusted earnings from continuing operations and adjusted diluted earnings per common share as follows:

2013

2012

Q1

Q2

Q3

Q4

FY 2013

Q1

Q2

Q3

Q4

FY 2012

Adjusted earnings from continuing operations:

Earnings from continuing operations

$

196,989

$

294,352

$

263,652

$

210,812

$

965,805

$

186,409

$

205,156

$

233,330

$

208,224

$

833,119

Gains (losses) from discrete and other tax items

4,525

61,477

4,878

6,085

76,965

(1,610)

(372)

4,513

13,606

16,137

Knowles spin-off costs

?

(3,322)

(10,637)

(16,134)

(30,093)

?

?

?

?

?

Other one-time gains, net of tax

?

?

2,866

?

2,866

?

?

?

?

?

Adjusted earnings from continuing operations

$

192,464

$

236,197

$

266,545

$

220,861

$

916,067

$

188,019

$

205,528

$

228,817

$

194,618

$

816,982

Adjusted diluted earnings per common share:

Earnings from continuing operations

$

1.12

$

1.70

$

1.53

$

1.22

$

5.57

$

1.00

$

1.10

$

1.27

$

1.16

$

4.53

Gains (losses) from discrete and other tax items

0.02

0.36

0.03

0.03

0.44

(0.01)

?

0.02

0.07

0.09

Knowles spin-off costs

?

(0.02)

(0.06)

(0.09)

(0.17)

?

?

?

?

?

Other one-time gains, net of tax

?

?

0.02

?

0.02

?

?

?

?

?

Adjusted earnings from continuing operations

$

1.10

$

1.36

$

1.54

$

1.28

$

5.28

$

1.01

$

1.10

$

1.25

$

1.09

$

4.44

* Per share data may not add due to rounding.

 

DOVER CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(unaudited)(in thousands)

December 31, 2013

December 31, 2012

Assets:

Cash and cash equivalents

$

803,882

$

800,076

Receivables, net of allowances

1,359,101

1,225,898

Inventories, net

926,998

872,841

Deferred tax and other current assets

150,181

129,029

Property, plant and equipment, net

1,182,982

1,167,052

Goodwill

4,242,909

4,114,650

Intangible assets, net

1,612,487

1,625,420

Other assets

238,910

111,432

Assets of discontinued operations

244,279

397,545

Total assets

$

10,761,729

$

10,443,943

Liabilities and Stockholders' Equity:

Notes payable and current maturities of long-term debt

$

229,278

$

610,766

Payables and accrued expenses

1,386,302

1,375,862

Deferred taxes and other non-current liabilities

 

1,063,369

1,139,777

Long-term debt

2,599,201

2,189,350

Liabilities of discontinued operations

106,183

208,958

Stockholders' equity

5,377,396

4,919,230

Total liabilities and stockholders' equity

$

10,761,729

$

10,443,943

 

DOVER CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)(in thousands)

Years Ended December 31,

2013

2012

Operating activities:

Net earnings

$

1,003,129

$

811,070

Loss (gain) from discontinued operations, net

(37,324)

22,049

Depreciation and amortization

421,616

357,585

Stock-based compensation

30,480

30,884

Contributions to employee benefit plans

(41,760)

(48,576)

Net change in assets and liabilities

(197,456)

88,148

Net cash provided by operating activities of continuing operations

1,178,685

1,261,160

Investing activities:

Additions to property, plant and equipment

(236,833)

(297,012)

Acquisitions (net of cash and cash equivalents acquired)

(322,838)

(1,035,433)

Proceeds from the sale of businesses

76,457

?

Other

20,163

(13,443)

Net cash used in investing activities of continuing operations

(463,051)

(1,345,888)

Financing activities:

Net increase in debt and notes payable

19,530

603,918

Purchase of common stock

(457,871)

(748,955)

Proceeds from exercise of stock options and SARs, including tax benefits

7,619

43,054

Dividends to stockholders

(247,820)

(240,959)

Net cash used in financing activities of continuing operations

(678,542)

(342,942)

Net cash (used in) provided by discontinued operations

(29,985)

4,879

Effect of exchange rate changes on cash

(3,301)

16,112

Net (decrease) increase in cash and cash equivalents

3,806

(406,679)

Cash and cash equivalents at beginning of period

800,076

1,206,755

Cash and cash equivalents at end of period

$

803,882

$

800,076

 

DOVER CORPORATION

QUARTERLY FREE CASH FLOW

(unaudited)(in thousands)

2013

2012

Q1

Q2

Q3

Q4

FY 2013

Q1

Q2

Q3

Q4

FY 2012

Cash flow from operating activities (1)

$

78,326

$

304,729

$

340,005

$

455,625

$

1,178,685

$

161,327

$

243,363

$

285,811

$

570,659

$

1,261,160

Less: Additions to property, plant and equipment

(47,153)

(53,284)

(57,038)

(79,358)

(236,833)

(68,249)

(72,758)

(67,842)

(88,163)

(297,012)

Free cash flow

$

31,173

$

251,445

$

282,967

$

376,267

$

941,852

$

93,078

$

170,605

$

217,969

$

482,496

$

964,148

Free cash flow as a percentage of earnings from continuing operations

15.8

%

85.4

%

107.3

%

178.5

%

97.5

%

49.9

%

83.2

%

93.4

%

231.7

%

115.7

%

Free cash flow as a percentage of revenue

1.5

%

11.3

%

12.6

%

17.0

%

10.8

%

4.8

%

8.4

%

10.4

%

24.0

%

11.9

%

(1) Includes one-time spin-off costs of $3,322, $10,637, and $16,134 for the second, third, and fourth quarters of 2013, respectively, and $30,093 for the full year.

 

ADDITIONAL INFORMATIONFOURTH QUARTER AND FULL YEAR 2013

Acquisitions

During the fourth quarter of 2013, the Company completed four acquisitions, three in the Energy segment and one in the Engineered Systems segment.  For the full year 2013, Dover made a total of ten acquisitions for consideration totaling $323 million.

Discontinued Operations

In the fourth quarter of 2013, the Company completed the sale of Everett Charles Technologies ("ECT"), resulting in an after-tax loss of $0.02 diluted earnings per share ("EPS"). The fourth quarter net loss from discontinued operations was $0.10 EPS, which includes income from the operations of DEK and ECT prior to sale, as well as adjustments to other discontinued assets and liabilities, including an $0.11 EPS impact related to tax obligations in foreign jurisdictions. In addition, the Company recorded an impairment charge of $0.08 for DEK in connection with the planned divestiture of this business in 2014.

On a full-year basis, the Company generated net earnings of $0.22 EPS, which includes the $0.02 EPS loss on sale of ECT, as well as total impairment charges of $0.19 EPS connected with the anticipated sale of our electronic test and assembly businesses and net discrete tax benefits of $0.21 EPS.

Tax Rate

The effective tax rate on continuing operations was 27.3% and 23.5% for the fourth quarters of 2013 and 2012, respectively. On a full year basis, the effective tax rates on continuing operations for 2013 and 2012 were 21.9% and 26.8%, respectively.  The 2013 and 2012 rates were favorably impacted by discrete and other items, as shown in the reconciliation for quarterly earnings per share included herein.  After adjusting for discrete and other items, the fourth quarter effective tax rates were 29.4% and 28.5% for 2013 and 2012, respectively, and the full year rates were 28.2% for both 2013 and 2012.  The higher rates for the quarter reflect the impact of a higher proportion of U.S. earnings, partly offset by lower effective tax rates in foreign jurisdictions.

Revenue Growth Factors

2013

Q1

Q2

Q3

Q4

Full Year

Organic

(1)%

5

%

3

%

5

%

3

%

Acquisitions

6

%

4

%

4

%

5

%

5

%

Currency translation

(1)%

?

%

?

%

?

%

?

%

4

%

9

%

7

%

10

%

8

%

 

Free Cash Flow

The following table is a reconciliation of free cash flow (a non-GAAP measure) from cash flow provided by operating activities:

Three Months Ended

December 31,

Years Ended

December 31,

2013

2012

2013

2012

Free Cash Flow (dollars in thousands)

Cash flow provided by operating activities

$

455,625

$

570,659

$

1,178,685

$

1,261,160

Less: Capital expenditures

(79,358)

(88,163)

(236,833)

(297,012)

Free cash flow

$

376,267

$

482,496

$

941,852

$

964,148

Free cash flow as a percentage of revenue

17.0

%

24.0

%

10.8

%

11.9

%

Free cash flow as a percentage of earnings from continuing operations

 

97.5

%

115.7

%

 

The full year decrease in 2013 free cash flow reflects a higher investment in working capital year over year, offset by higher earnings from continuing operations before depreciation and amortization and lower capital expenditures.

Share Repurchases

During the year ended December 31, 2013, the Company purchased approximately 6.0 million shares of its common stock in the open market at an average price of $76.17 per share.  These repurchases were made pursuant to the share repurchase program approved in November 2012, which authorized $1 billion for share repurchases over the next 12 to 18 months.  At December 31, 2013, approximately $293 million remains available for repurchases under this program.

Capitalization

The following table provides a summary reconciliation of total debt and net debt to net capitalization to the most directly comparable GAAP measures:

Net Debt to Net Capitalization Ratio (in thousands)

December 31, 2013

December 31, 2012

Current maturities of long-term debt

$

2,778

$

3,266

Commercial paper

226,500

607,500

Long-term debt

2,599,201

2,189,350

Total debt

2,828,479

2,800,116

Less: Cash and cash equivalents

(803,882)

(800,076)

Net debt

2,024,597

2,000,040

Add: Stockholders' equity

5,377,396

4,919,230

Net capitalization

$

7,401,993

$

6,919,270

Net debt to net capitalization

27.4

%

28.9

%

 

Non-GAAP Information:

These Investor Supplement tables contain non-GAAP measures of adjusted earnings from continuing operations used in calculating adjusted diluted earnings per common share, as management believes this information is useful to investors to better understand the company's ongoing profitability and facilitates easier comparisons of the company's profitability to prior and future periods and to its peers. The company has also disclosed herein a number of non-GAAP measures related to free cash flow and the ratio of net debt to net capitalization.  Management believes these metrics are important measures of the company's operating performance and liquidity.  Free cash flow information provides both management and investors a measurement of cash generated from operations that is available to fund acquisitions, pay dividends, repay debt and repurchase common stock, while the net debt to net capitalization ratio is helpful in evaluating the company's capital structure and the amount of leverage employed.

Pro Forma Information:

The Investor Supplement tables contain pro forma financial information that reflects the operations of Knowles as a discontinued operation. Upon completion of the spin, Knowles' results will be reclassified to discontinued operations for reporting purposes in accordance with GAAP. The unaudited pro forma consolidated financial statements are presented for informational purposes only and are subject to a number of estimates, assumptions and uncertainties and does not purport to represent what our results of operations would have been if the spin-off of Knowles Corporation had occurred as of the dates indicated, what such results will be for any future periods, or what the historical results of Dover will be upon classifying Knowles as a discontinued operation as of the effective date of the spin-off of Knowles.

 

DOVER CORPORATION

PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS

(unaudited)(in thousands, except per share data)

Year Ended December 31, 2013

Year Ended December 31, 2012

As Reported

Pro forma

As Reported

Pro forma

Revenue

$

8,729,813

$

7,520,635

$

8,104,339

$

6,994,480

Cost of goods and services

5,390,032

4,612,769

4,997,274

4,291,602

Gross profit

3,339,781

2,907,866

3,107,065

2,702,878

Selling and administrative expenses

1,985,849

1,692,444

1,841,688

1,590,217

Operating earnings

1,353,932

1,215,422

1,265,377

1,112,661

Interest expense, net

120,742

120,672

121,141

121,263

Other (income) expense, net

(4,222)

(4,458)

6,665

7,127

Earnings before provision for income taxes and discontinued operations

1,237,412

1,099,208

1,137,571

984,271

Provision for income taxes

271,607

267,635

304,452

298,339

Earnings from continuing operations

965,805

831,573

833,119

685,932

Earnings (loss) from discontinued operations, net (1)

37,324

171,556

(22,049)

125,138

Net earnings

$

1,003,129

$

1,003,129

$

811,070

$

811,070

Basic earnings per common share:

Earnings from continuing operations

$

5.64

$

4.86

$

4.59

$

3.78

Earnings (loss) from discontinued operations, net (1)

0.22

1.00

(0.12)

0.69

Net earnings

5.86

5.86

4.47

4.47

Weighted average shares outstanding

171,271

171,271

181,551

181,551

Diluted earnings per common share:

Earnings from continuing operations

$

5.57

$

4.79

$

4.53

$

3.73

Earnings (loss) from discontinued operations, net (1)

0.22

0.99

(0.12)

0.68

Net earnings

5.78

5.78

4.41

4.41

Weighted average shares outstanding

173,547

173,547

183,993

183,993

Adjusted diluted earnings per share from continuing operations (2)

$

5.28

$

4.31

$

4.44

$

3.64

(1) Reflects the impact of discontinuing Knowles upon spin-off, which results in a reclassification of $134.2 million, inclusive of $30 million of spin-off costs, or $0.78 diluted EPS in 2013 and $147.2 million or $0.80 diluted EPS in 2012 to earnings from discontinued operations.

(2) Adjusted for gains from discrete and other tax items of $0.46 and $0.09 in 2013 and 2012, respectively, and other one-time gains, net of tax, of $0.02 in 2013.

 

SOURCE Dover

For further information: Paul Goldberg, Vice President - Investor Relations, (212) 922-1640

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