FORM 10-K
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2007
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File
No. 1-4018
Dover Corporation
(Exact name of Registrant as
specified in its charter)
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Delaware
(State of
Incorporation)
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53-0257888
(I.R.S. Employer
Identification)
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280 Park Avenue
New York, NY
(Address of principal
executive offices)
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10017
(Zip Code)
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(Registrants telephone number)
(212) 922-1640
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, par value $1
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject
to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined by
Rule 12b-2
of the Securities Exchange
Act). Yes o
No þ
TABLE OF CONTENTS
The aggregate market value of the voting and non-voting common
stock held by non-affiliates of the registrant as of the close
of business June 30, 2007 was $10,396,916,874. The
registrants closing price as reported on the New York
Stock Exchange-Composite Transactions for June 30, 2007 was
$51.15 per share.
The number of outstanding shares of the registrants common
stock as of February 22, 2008 was 191,926,458.
Documents Incorporated by Reference:
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Part III |
Certain Portions of the Proxy Statement for Annual Meeting of
Shareholders to be Held on May 1, 2008 (the 2008
Proxy Statement).
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Special
Notes Regarding
Forward-Looking
Statements
This Annual Report on
Form 10-K,
especially Managements Discussion and
Analysis, and other written and oral statements the
Company makes from time to time contain
forward-looking statements within the meaning of the
Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, and the Private Securities Litigation
Reform Act of 1995. Such statements relate to, among other
things, income, earnings, cash flows, changes in operations,
operating improvements, industries in which Dover companies
operate and the U.S. and global economies. Statements in
this 10-K
that are not historical are hereby identified as
forward-looking statements and may be indicated by
words or phrases such as anticipates,
supports, plans, projects,
expects, believes, should,
would, could, hope,
forecast, management is of the opinion,
use of the future tense and similar words or phrases.
Forward-looking statements are subject to inherent uncertainties
and risks, including among others: increasing price and
product/service competition by international and domestic
competitors including new entrants; the impact of technological
developments and changes on Dover companies, particularly
companies in the Electronic Technologies segment; the ability to
continue to introduce competitive new products and services on a
timely, cost-effective basis; changes in the cost or
availability of energy or raw materials; changes in customer
demand; the extent to which Dover companies are successful in
expanding into new geographic markets, particularly outside of
North America; the relative mix of products and services which
impacts margins and operating efficiencies; short-term capacity
restraints; the achievement of lower costs and expenses;
domestic and foreign governmental and public policy changes
including environmental regulations and tax policies (including
domestic and international export subsidy programs, R&E
credits and other similar programs); unforeseen developments in
contingencies such as litigation; protection and validity of
patent and other intellectual property rights; the success of
the Companys acquisition program; the cyclical nature of
some of Dovers companies; the impact of natural disasters,
such as hurricanes, and their effect on global energy markets;
domestic housing industry weakness and related credit market
challenges; and continued events in the Middle East and possible
future terrorist threats and their effect on the worldwide
economy. In addition, such statements could be affected by
general industry and market conditions and growth rates, and
general domestic and international economic conditions including
interest rate and currency exchange rate fluctuations. In light
of these risks and uncertainties, actual events and results may
vary significantly from those included in or contemplated or
implied by such statements. Readers are cautioned not to place
undue reliance on such forward-looking statements. These
forward-looking statements speak only as of the date made. The
Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
law.
The Company may, from time to time, post financial or other
information on its Internet website, www.dovercorporation.com.
The Internet address is for informational purposes only and is
not intended for use as a hyperlink. The Company is not
incorporating any material on its website into this report.
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PART I
Overview
Dover Corporation (Dover or the
Company), incorporated in 1947 in the State of
Delaware, became a publicly traded company in 1955. The Company
owns and operates a global portfolio of manufacturing companies
providing innovative components and equipment, specialty systems
and support services for a variety of applications in the
industrial products, engineered systems, fluid management and
electronic technologies markets. Additional information is
contained in Items 7 and 8.
Recent
Events
In the fall of 2004, the Company embarked on a strategic
portfolio review, looking at all of its companies to determine
whether every company warranted continued ownership and
investment. As part of that process, the Company elected to
expand its executive management team and changed its operating
structure to accommodate both the strategic review and expanded
leadership. This resulted in the creation of six segments and 13
platforms effective October 1, 2004. Over the next three
years, as a result of the strategic review, Dover decided to
discontinue and sell 22 businesses with annual revenue of
approximately $1.3 billion and aggregate operating margins
of 5%, generating net proceeds of $696 million. At the same
time, the Company spent $2.5 billion acquiring 24
businesses with expected annual revenue of $1.4 billion and
projected operating margins of 15%.
As a result of these actions, in the third quarter of 2007, the
Company elected to change its operating structure to more
logically align its businesses with respect to end markets,
resulting in the creation of four segments and six platforms,
which is expected to be the ongoing operating structure for the
foreseeable future.
Operating
Structure
The Company reports its results in four business
segments Industrial Products, Engineered Systems,
Fluid Management and Electronic Technologies. Dover discusses
its operations at the platform level within the Industrial
Products, Engineered Systems, and Fluid Management segments,
each of which contains two platforms. Electronic
Technologies results are discussed at the segment level.
Dover companies within its business segments and platforms
design, manufacture, assemble
and/or
service the following:
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Material handling equipment such as industrial and recreational
winches, utility, construction and demolition machinery
attachments, hydraulic parts, industrial automation tools,
four-wheel-drive (4WD) and all-wheel drive
(AWD) powertrain systems and other accessories for
off-road vehicles.
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Mobile equipment related products primarily refuse truck bodies,
tank trailers, compactors, balers, vehicle service lifts, car
wash systems, internal engine components, fluid control
assemblies and various aerospace components.
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Engineered products such as refrigeration systems, refrigeration
display cases, walk-in coolers, foodservice equipment,
commercial kitchen air and ventilation systems, heat transfer
equipment, food and beverage packaging machines and ATM machines.
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Product identification related products such as industrial
marking and coding systems used to code information (i.e. dates
and serial numbers) on consumer products, printing products for
cartons used in warehouse logistics operations, bar code
printers and portable printers.
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Energy market production and distribution products such as
sucker rods, drill bit inserts for oil and gas exploration, gas
well production control devices, control valves, piston and seal
rings, control instrumentation, remote data collection and
transfer devices, and components for compressors, turbo
machinery, motors and generators.
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Fluid solution products including nozzles, swivels and
breakaways used to deliver various types of fuel, suction system
equipment, unattended fuel management systems, integrated tank
monitoring, pumps used in
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fluid transfer applications, quick disconnect couplings used in
a wide variety of biomedical and commercial applications, and
chemical proportioning and dispensing systems.
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Electronic technology equipment and devices/components such as
advanced micro-component products for the hearing aid and
consumer electronics industries, high frequency capacitors,
microwave electro-magnetic switches, radio frequency and
microwave filters, electromagnetic products, frequency
control/select components and sophisticated automated assembly
and testing equipment.
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Business
Strategy
The Company operates with certain fundamental business
strategies. First, it seeks to acquire and own businesses which
manufacture proprietary engineered industrial products which are
leaders in four broad markets: Industrial Products, Engineered
Systems, Fluid Management and Electronic Technologies. To ensure
success, Dover companies place strong emphasis on new product
development to better serve customers and expand into new
product and geographic markets. Second, the Company drives its
businesses to be committed to operational excellence, and to be
market leaders as measured by market share, customer service,
innovation, profitability and return on invested capital. Third,
the Company is committed to an operating culture with high
ethical standards, trust, respect and open communication, to
allow individual growth and operational effectiveness. Fourth,
the Company seeks to utilize its strong free cash flow in a
balanced manner to grow its businesses and to increase
shareholder value.
Management
Philosophy
The Companys operating structure of four defined industry
segments and six core business platforms drives focused
acquisition activity, accelerates opportunities to identify and
capture operating synergies, including global sourcing and
supply chain integration, and advances the development of
Dovers executive talent. The presidents of Dovers
operating companies and groups have responsibility for their
businesses performance as they are able to serve customers
by focusing closely on their products and markets, and by
reacting quickly to customer needs. The Companys platform,
segment and executive management sets strategic direction,
provides oversight, allocates and manages capital, assists in
major acquisitions and provides other services.
Portfolio
Development
Acquisitions
Dovers acquisition program has two elements. First, it
seeks to acquire value creating add-on businesses that broaden
its existing platforms and global reach, manufacture innovative
components and equipment, specialty systems
and/or
support services, and sell to industrial or commercial users.
Second, it will strategically pursue larger, stand-alone
businesses that have the potential to either complement our
existing companies or allow Dover to pursue a new platform.
During the period from 2005 through 2007, the Company
significantly increased the level of acquisition spending,
buying 24 businesses with an aggregate cost of
$2.5 billion. Annualized revenue of these companies was
approximately $1.4 billion as of their date of acquisition
with projected operating margins in the range of 15%.
In 2007, the Company acquired seven businesses, all of which
were add-on businesses, for an aggregate cost of
$273.6 million. In 2006, Dover acquired seven companies
(five add-ons) for an aggregate cost of $1,116.8 million,
the highest annual acquisition investment level in its history.
During 2005, the Company acquired a total of ten businesses
(eight add-ons) for an aggregate cost of $1,089.7 million.
For more details regarding acquisitions completed over the past
two years, see Note 3 to the Consolidated Financial
Statements in Item 8. The Companys future growth
depends in large part on finding and acquiring successful
businesses, as a substantial number of the Companys
current businesses operate in relatively mature markets. While
the Company expects all of its businesses to generate annual
organic growth of 5 7% over a business cycle,
sustained organic growth at these levels is difficult to achieve
consistently each year.
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Divestitures
While the Company generally expects to hold businesses that it
buys, during the past three years (2005
2007) the Company engaged in a thorough review of its
portfolio of businesses to verify that those businesses continue
to be essential contributors to Dovers long-term growth
strategy. Based on that review, the Company has over the past
three years discontinued 22 and sold 20 operations for an
aggregate consideration of approximately $696 million. In
addition, there are occasionally situations in which one of
Dovers companies is a very attractive acquisition for
another company based on specific market conditions. In those
circumstances, Dover might make an opportunistic sale. For more
details, see the Discontinued Operations discussion
below and Note 8 to the Consolidated Financial Statements
in Item 8.
Reportable
Segments
Below is a description of Dovers reportable segments and
related platforms. For additional financial information about
Dovers reportable segments, see Note 14 to the
Consolidated Financial Statements in Item 8 of this
Form 10-K.
Industrial
Products
The Industrial Products segment provides products and services
that improve its customers productivity as well as
products used in various mobile equipment applications primarily
in the transportation equipment, vehicle service and solid waste
management markets. The segment manages and sells its products
and services through two business platforms described below.
Material
Handling
The Material Handling platform primarily serves two global
markets infrastructure and industrial automation.
The companies in this platform develop and manufacture branded
customer productivity enhancing systems. These products are
produced in the United States, Mexico, Germany, Belgium,
Thailand, India, China, Brazil and France and are marketed
globally on a direct basis to original equipment manufacturers
(OEMs) and through a global dealer and distribution network to
industrial end users.
The Material Handling platform companies in the infrastructure
market sell to broad segments of the construction, utility,
demolition, recycling, scrap processing, material handling,
forestry, energy, military, marine, towing/recovery, refuse and
automotive OEM markets. Major products include mobile shears,
concrete demolition tools, buckets, backhoes, trenchers, augers,
worm gear and planetary winches, and hydraulic lift and
electronic control/monitoring systems for mobile and structural
cranes, 4WD and AWD powertrain systems and other accessories for
off-road vehicles. These products are sold to OEMs and extensive
dealer networks primarily in North America.
The Material Handling platform companies in the industrial
automation market provide a wide range of modular automation
components including manual clamps, power clamps, rotary and
linear mechanical indexers, conveyors, pick and place units, as
well as
end-of-arm
robotic grippers, slides and end effectors. These products serve
a very broad market including food processing, packaging, paper
processing, medical, electronic, automotive, nuclear, and
general industrial products. These businesses generate almost
half of their revenues outside the U.S.
Mobile
Equipment
The Mobile Equipment platform serves three primary
markets transportation equipment, solid waste
management and vehicle service. The companies in this platform
manufacture tank trailers, specialty trailers, refuse collection
bodies (garbage trucks), container lifts,
on-site
waste management and recycling systems, vehicle service lifts,
touch-free and friction vehicle wash systems, vehicle collision
measuring and repair systems, aerospace and submarine related
fluid control assemblies, fasteners and bearings, internal
engine components and other engine accessories. The businesses
also provide components for off-road sports vehicles and high
performance autos. The platform has manufacturing operations in
North and South America, Asia and Europe.
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The businesses in the transportation equipment market
manufacture and sell aluminum, stainless steel and steel tank
trailers that carry petroleum products, chemical, edible and dry
bulk products, as well as specialty trailers focused on the
heavy haul, oil field and recovery markets. Trailers are
marketed both directly and indirectly through distributors to
customers in the construction, trucking, railroad, oilfield and
heavy haul industries. These products are also sold to
government agencies in the U.S. and globally.
The businesses in the solid waste management market provide
products and services for the refuse collection industry and for
on-site
processing and compaction of trash and recyclable materials.
Products are sold to municipal customers, national accounts and
independent waste haulers through a network of distributors and
directly in certain geographic areas. The
on-site
waste management and recycling systems include a variety of
stationery compactors, wire processing and separation machines,
and balers that are manufactured and sold primarily in the
U.S. to distribution centers, malls, stadiums, arenas,
office complexes, retail stores and recycling centers.
The businesses in the vehicle service market provide a wide
range of products and services that are utilized in vehicle
services, maintenance, repair and modification. Vehicle lifts
and collision equipment are sold through equipment distribution
and directly to a wide variety of markets, including independent
service and repair shops, collision repair shops, national
chains and franchised service facilities, new vehicle dealers,
and governments. Car wash suppliers, both touch-free
and friction are sold primarily in the U.S. and
Canada to major oil companies, convenience store chains and
individual investors. These products are sold through a
distribution network that installs the equipment and provides
after sale service and support. High performance internal
combustion engine components, including pistons, connecting rods
and accessories, are designed to meet customer specifications
for the racing and enthusiast markets in both the motor sports
and automotive market segments. These products are sold directly
and through distribution networks on a global basis.
Engineered
Systems
The Engineered Systems segment provides products and services
for the refrigeration, storage, packaging and preparation of
food products, as well as industrial marking and coding systems
for various markets and ATM machines used by retailers. The
segment serves its markets by managing these products and
services through two business platforms which are described
below.
Product
Identification
The Product Identification platform (PI) is a
worldwide supplier of industrial marking and coding systems that
serves the food, beverage, cosmetic, pharmaceutical, electronic,
automotive and other markets where variable marking is required.
Its primary printing products are used for marking variable
information (such as date codes or serial numbers) on consumer
products. PI provides solutions for product marking on primary
packaging, secondary packaging such as cartons, and pallet
marking for use in warehouse logistics operations. PI also
manufactures bar code printers and portable printers used where
on demand labels/receipts are required. The PI principal
manufacturing facilities are in the United States, France and
China with sales operations globally.
Engineered
Products
The Engineered Products platform manufactures refrigeration
systems, refrigeration display cases, walk-in coolers and
freezers, electrical distribution products and engineering
services, commercial foodservice equipment, cook-chill
production systems, custom food storage and preparation
products, kitchen ventilation systems, conveyer systems,
beverage can-making machinery, and packaging machines used for
meat, poultry and other food products. In addition, the platform
manufactures copper-brazed compact heat exchangers, designs
software for heating and cooling substations, and also
manufactures ATM machines. The platforms manufacturing
facilities and distributing operations are in North America and
Europe with additional distribution facilities in South America
and Asia.
The majority of the systems and machinery that are manufactured
or serviced by the Engineered Products platform is used by the
supermarket industry, big-box retail and convenience
stores, the commercial/industrial refrigeration industry,
institutional and commercial foodservice markets, and beverage
can-making industries. The commercial foodservice cooking
equipment products serve their markets worldwide through a
network of dealers,
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distributors, national chain accounts, manufacturer
representatives, and a direct sales force with the primary
market being North America.
The heat exchangers are sold via a direct sales force throughout
the world for various applications in a wide variety of
industries. The ATM hardware, software and services are provided
to retail and financial institutions and are found in numerous
major retail chains, convenience stores, airports, hotels,
office buildings, restaurants, shopping centers, supermarkets
and casinos.
Fluid
Management
The Fluid Management segment provides products and services for
end-to-end
stewardship of its customers critical fluids including
liquids, gases, powders and other solutions that are hazardous,
valuable or process-critical. The segment provides highly
engineered, cost-saving technologies that help contain, control,
move, measure and monitor these critical fluids. To better serve
its end-markets, these products and services are channeled
through two business platforms described below.
Energy
The Energy platform serves the oil, gas and power generation
industries. Its products promote the efficient and
cost-effective extraction, storage and movement of oil and gas
products, or constitute critical components for power generation
equipment. Major products manufactured by companies within this
platform include polycrystalline diamond cutters (PDCs) used in
drill bits for oil and gas wells; steel sucker rods and
accessories used in on-shore oil and gas production; pressure,
temperature and flow monitoring equipment used in oil and gas
exploration and production applications; and control valves and
instrumentation for oil and gas production. In addition, these
companies manufacture various compressor parts that are used in
the natural gas production, distribution and oil refining
markets, as well as, bearings and remote condition monitoring
systems that are used for rotating machinery applications such
as turbo machinery, motors, generators and compressors used in
energy, utility, marine and other industries. Sales are made
directly to customers and through various distribution channels.
Sales are predominantly in North America with international
sales directed largely to Europe and South America.
Fluid
Solutions
The Fluid Solutions platform manufactures pumps, compressors,
vehicle fuel dispensing products, and products for the transfer,
monitoring, measuring and protection of hazardous, liquid and
dry bulk commodities. In addition, these companies manufacture
quick disconnect couplings and chemical proportioning and
dispensing products. The products are manufactured in the United
States, South America, Asia and Europe and marketed globally
through a network of distributors or via direct channels.
Vehicle fuel dispensing products include conventional, vapor
recovery, and clean energy (LPG, CNG, and Hydrogen) nozzles,
swivels and breakaways, as well as tank pressure management
systems. Products manufactured for the transportation, storage
and processing of hazardous liquid and dry-bulk commodities
include relief valves, loading/unloading angle valves, rupture
disc devices, actuator systems, level measurement gauges, swivel
joints, butterfly valves, lined ball valves, actuators, aeration
systems, industrial access ports, manholes, hatches, coamings,
collars, weld rings and fill covers.
This platforms pumps and compressors are used to transfer
liquid and bulk products and are sold to a wide variety of
markets, including the refined fuels, LPG, pulp and paper,
wastewater, food/sanitary, military, transportation and chemical
process industries. These companies manufacture centrifugal,
reciprocating (double diaphragm) and rotary pumps that are used
in demanding and specialized fluid transfer process applications.
The quick disconnect couplings provide fluid control solutions
to the industrial, food handling, life sciences and chemical
handling markets. The chemical portioning and dispensing systems
are used to dilute and dispense concentrated cleaning chemicals
and are sold to the food service, health care, supermarket,
institutional, school, building service contractor and
industrial markets.
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Electronic
Technologies
The Electronic Technologies segment designs and manufactures
electronic test, material deposition and manual soldering
equipment, advanced micro-acoustic components, and specialty
electronic components. The products are manufactured primarily
in North America, Europe and Asia and are sold throughout the
world directly and through a network of distributors.
The test equipment products include machines, test fixtures and
related products used in testing bare and
loaded electronic circuit boards and semiconductors.
In addition, the segment manufactures high-speed precision
material deposition machines and other related tools used in the
assembly process for printed circuit boards and other specialty
applications as well as precision manual soldering, de-soldering
and other hand tools.
The micro-acoustic components manufactured include audio
communications components, primarily miniaturized microphones,
receivers and electromechanical components for use in hearing
aids as well as high performance transducers for use in
pro-audio devices, high-end headsets, medical devices, military
headsets and far field arrays. The platform also designs,
manufactures and assembles microphones for use in the personal
mobile device and communications markets including mobile
phones, PDAs,
Bluetooth®
headsets and laptop computers.
The specialty electronic components include frequency
control/select components and modules employing quartz
technologies, microwave electro-mechanical switches, radio
frequency and microwave filters, and integrated assemblies,
multi-layer ceramic capacitors and high frequency capacitors.
These components are sold to communication, medical, defense,
aerospace and automotive manufacturers worldwide.
Discontinued
Operations
Companies that are considered discontinued operations in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, are presented
separately in the consolidated statements of operations, balance
sheets, and cash flows and are not included in continuing
operations. Earnings from discontinued operations include
charges, when necessary, to reduce these businesses to estimated
fair value less costs to sell. Fair value is determined by using
quoted market prices, when available, or other accepted
valuation techniques. All interim and full year reporting
periods presented reflect the continuing operations on a
comparable basis. Please refer to Note 8 to the
Consolidated Financial Statements in Item 8 of this
Form 10-K
for additional information on discontinued operations.
Raw
Materials
Dovers operating companies use a wide variety of raw
materials, primarily metals and semi-processed or finished
components, which are generally available from a number of
sources. As a result, shortages or the loss of any single
supplier have not had, and are not likely to have, a material
impact on operating profits. While generally available,
commodity pricing has trended upward over the past few years,
particularly for various grades of steel, copper, aluminum and
select other commodities, the Company has generally kept pace,
or exceeded raw material cost increases, using pricing
strategies.
Research
and Development
Dovers operating companies are encouraged to develop new
products as well as to upgrade and improve existing products to
satisfy customer needs, expand revenue opportunities
domestically and internationally, maintain or extend competitive
advantages, improve product reliability and reduce production
costs. During 2007, $212.6 million was spent on research
and development, including qualified engineering costs, compared
with $155.0 million and $144.7 million in 2006 and
2005, respectively.
For the Product Identification and Electronic Technologies
companies, efforts in these areas tend to be particularly
significant because the rate of product development by their
customers is often quite high. The companies that develop
product identification equipment and specialty electronic
components for the life sciences, datacom and telecom commercial
markets believe that their customers expect a continuing rate of
product performance improvement and reduced costs. The result
has been that product life cycles in these markets generally
average less than five years with meaningful sales price
reductions over that time period.
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Dovers other segments contain many businesses that are
also involved in important product improvement initiatives.
These businesses also concentrate on working closely with
customers on specific applications, expanding product lines and
market applications, and continuously improving manufacturing
processes. Most of these businesses experience a much more
moderate rate of change in their markets and products than is
generally experienced by the Product Identification platform and
the Electronic Technologies segment.
Intellectual
Property and Intangible Assets
Dover companies own many patents, trademarks, licenses and other
forms of intellectual property, which have been acquired over a
number of years and, to the extent relevant, expire at various
times over a number of years. A large portion of the Dover
companies intellectual property consists of patents,
unpatented technology and proprietary information constituting
trade secrets that the companies seek to protect in various
ways, including confidentiality agreements with employees and
suppliers where appropriate. In addition, a significant portion
of the Companys intangible assets relate to customer
relationships. While the Dover companies intellectual
property and customer relationships are important to their
success, the loss or expiration of any of these rights or
relationships, or any groups of related rights or relationships,
is not likely to materially affect the Company on a consolidated
basis. The Company believes that its companies commitment
to continuous engineering improvements, new product development
and improved manufacturing techniques, as well as strong sales,
marketing and service efforts, are significant to their general
leadership position in the niche markets that they serve.
Seasonality
In general, Dover companies, while not seasonal, tend to have
stronger revenue in the second and third quarters, particularly
companies serving the consumer electronics, transportation,
construction, waste hauling, petroleum, commercial refrigeration
and food service markets. Companies serving the major equipment
markets, such as power generation, chemical and processing
industries, have long lead times geared to seasonal, commercial
or consumer demands, and tend to delay or accelerate product
ordering and delivery to coincide with those market trends.
Customers
Dovers companies serve thousands of customers, no one of
which accounted for more than 10% of the Companys
consolidated revenue in 2007. Within each of the four segments,
no customer accounted for more than 10% of that segments
revenue in 2007.
With respect to the Engineered Systems, Fluid Management and
Industrial Products segments, customer concentrations are quite
varied. Companies supplying the waste handling, construction,
agricultural, defense, energy, automotive and commercial
refrigeration industries tend to deal with a few large customers
that are significant within those industries. This also tends to
be true for companies supplying the power generation, aerospace
and chemical industries. In the other markets served, there is
usually a much lower concentration of customers, particularly
where the companies provide a substantial number of products as
well as services applicable to a broad range of end use
applications.
Certain companies within the Electronic Technologies segment
serve the military, space, aerospace, commercial and
datacom/telecom infrastructure markets. Their customers include
some of the largest operators in these markets. In addition,
many of the OEM customers of these companies within the
Electronic Technologies segment outsource their manufacturing to
Electronic Manufacturing Services (EMS) companies.
Other customers include global cell phone and hearing aid
manufacturers, many of the largest global EMS companies,
particularly in China, and major printed circuit board and
semi-conductor manufacturers.
Backlog
Backlog generally is not a significant long-term success factor
in most of Dovers businesses, as most of the products of
Dover companies have relatively short
order-to-delivery
periods. It is more relevant to those businesses that produce
larger and more sophisticated machines or have long-term
government contracts, primarily in the Mobile Equipment platform
within the Industrial Products segment, and in the testing
equipment and components business in the Electronic Technologies
segment. Total Company backlog as of December 31, 2007 and
2006 was $1,385.7 million and $1,227.0 million,
respectively.
8
Competition
Dovers competitive environment is complex because of the
wide diversity of the products its companies manufacture and the
markets they serve. In general, most Dover companies are market
leaders that compete with only a few companies and the key
competitive factors are customer service, product quality and
innovation. Dover companies usually have more significant
competitors domestically, where their principal markets are,
than in
non-U.S. markets;
however, Dover companies are becoming increasingly global where
more competitors exist.
Certain companies in the Electronic Technologies and Engineered
Systems segments compete globally against a variety of
companies, primarily operating in Europe and the Far East.
International
For
non-U.S. revenue
and an allocation of the assets of the Companys continuing
operations, see Note 14 to the Consolidated Financial
Statements in Item 8 of this
Form 10-K.
Although international operations are subject to certain risks,
such as price and exchange rate fluctuations and
non-U.S. governmental
restrictions, Dover continues to increase its expansion into
international markets, including South America, Asia and Eastern
Europe.
Most of Dovers
non-U.S. subsidiaries
and affiliates are based in France, Germany, the United Kingdom,
the Netherlands, Sweden, Switzerland and, with increased
emphasis, China, Malaysia, India, Mexico, Brazil and Eastern
Europe.
Environmental
Matters
Dover believes its companies operations generally are in
substantial compliance with applicable regulations. In a few
instances, particular plants and businesses have been the
subject of administrative and legal proceedings with
governmental agencies or private parties relating to the
discharge or potential discharge of regulated substances. Where
necessary, these matters have been addressed with specific
consent orders to achieve compliance. Dover believes that
continued compliance will not have a material impact on the
Companys financial position and will not require
significant expenditures or adjustments to reserves.
Employees
The Company had approximately 33,400 employees in
continuing operations as of December 31, 2007.
Other
Information
Dover makes available through the Financial Reports
link on its Internet website,
http://www.dovercorporation.com,
the Companys annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and any amendments to these reports. Dover posts each of these
reports on the website as soon as reasonably practicable after
the report is filed with the Securities and Exchange Commission.
The information on the Companys Internet website is not
incorporated into this
Form 10-K.
Dovers business, financial condition, operating results
and cash flows can be impacted by a number of factors, including
but not limited to those set forth below, any one of which could
cause our actual results to vary materially from recent results
or from anticipated future results. For a discussion identifying
additional risk factors and important factors that could cause
actual results to differ materially from those anticipated, see
the discussion in SPECIAL NOTES REGARDING
FORWARD-LOOKING STATEMENTS included in this Annual Report
on
Form 10-K.
Cyclical
Economic Conditions May Affect the Companys Financial
Performance
A meaningful portion of the Companys revenue, most notably
that from the Electronic Technologies segment, is derived from
companies that serve the global electronics markets, which are
subject to unpredictable short-term business cycles. As a
result, the revenue and operating performance of these companies
in any one period are not
9
necessarily predictive of their revenue and operating
performance in other periods, and could have a material impact
on Dovers consolidated financial position.
The Energy platform in the Fluid Management segment is subject
to risk due to the volatility of energy prices, although overall
demand is more directly related to depletion rates and rig
counts.
In addition, Dover is subject to substantially the same risk
factors as other
U.S.-based
industrial manufacturers. However, except as noted above, the
structure of Dover and the many different markets its companies
serve mitigates the possibility that any of these risk factors
will materially impact Dovers consolidated financial
position.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
Not Applicable.
The number, type, location and size of the Companys
properties as of December 31, 2007 are shown on the
following charts, by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number and Nature of Facilities
|
|
|
Square Footage (000s)
|
|
Segment
|
|
Mfg.
|
|
|
Warehouse
|
|
|
Sales/ Service
|
|
|
Owned
|
|
|
Leased
|
|
|
Industrial Products
|
|
|
80
|
|
|
|
12
|
|
|
|
27
|
|
|
|
4,300
|
|
|
|
2,000
|
|
Engineered Systems
|
|
|
36
|
|
|
|
44
|
|
|
|
136
|
|
|
|
2,700
|
|
|
|
1,600
|
|
Fluid Management
|
|
|
64
|
|
|
|
13
|
|
|
|
37
|
|
|
|
2,700
|
|
|
|
1,100
|
|
Electronic Technologies
|
|
|
58
|
|
|
|
8
|
|
|
|
49
|
|
|
|
1,300
|
|
|
|
1,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Locations
|
|
|
Leased Facilities
|
|
|
|
North
|
|
|
|
|
|
|
|
|
|
|
|
Expiration Dates (Years)
|
|
|
|
America
|
|
|
Europe
|
|
|
Asia
|
|
|
Other
|
|
|
Minimum
|
|
|
Maximum
|
|
|
Industrial Products
|
|
|
96
|
|
|
|
12
|
|
|
|
7
|
|
|
|
4
|
|
|
|
1
|
|
|
|
11
|
|
Engineered Systems
|
|
|
40
|
|
|
|
56
|
|
|
|
46
|
|
|
|
13
|
|
|
|
1
|
|
|
|
18
|
|
Fluid Management
|
|
|
79
|
|
|
|
14
|
|
|
|
5
|
|
|
|
3
|
|
|
|
1
|
|
|
|
5
|
|
Electronic Technologies
|
|
|
38
|
|
|
|
24
|
|
|
|
40
|
|
|
|
1
|
|
|
|
1
|
|
|
|
13
|
|
The facilities are generally well maintained and suitable for
the operations conducted.
|
|
Item 3.
|
Legal
Proceedings
|
A few of the Companys subsidiaries are involved in legal
proceedings relating to the cleanup of waste disposal sites
identified under federal and state statutes which provide for
the allocation of such costs among potentially responsible
parties. In each instance, the extent of the
subsidiarys liability appears to be very small in relation
to the total projected expenditures and the number of other
potentially responsible parties involved and is
anticipated to be immaterial to the Company. In addition, a few
of the Companys subsidiaries are involved in ongoing
remedial activities at certain plant sites, in cooperation with
regulatory agencies, and appropriate reserves have been
established.
The Company and certain of its subsidiaries are, and from time
to time may become, parties to a number of other legal
proceedings incidental to their businesses. These proceedings
primarily involve claims by private parties alleging injury
arising out of use of products of Dover companies, exposure to
hazardous substances or patent infringement, employment matters
and commercial disputes. Management and legal counsel
periodically review the probable outcome of such proceedings,
the costs and expenses reasonably expected to be incurred, the
availability and extent of insurance coverage, and established
reserves. While it is not possible to predict the outcome of
these legal actions or any need for additional reserves, in the
opinion of management, based on these reviews, it is unlikely
that the disposition of the lawsuits and the other matters
mentioned above will have a material adverse effect on the
Companys financial position, results of operations, cash
flows or competitive position.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
No matter was submitted to a vote of the Companys security
holders in the last quarter of 2007.
10
Executive
Officers of the Registrant
All officers are elected annually at the first meeting of the
Board of Directors and are subject to removal at any time by the
Board of Directors. The executive officers of Dover as of
February 28, 2008, and their positions with the Company
(and, where relevant, prior business experience) for the past
five years, are as follows:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Positions Held and Prior Business Experience
|
|
Ronald L. Hoffman
|
|
|
59
|
|
|
Chief Executive Officer (since January 2005), President (since
July 2003) and Chief Operating Officer (from
July 2003 December 2004) of Dover; President
and Chief Executive Officer of Dover Resources, Inc. (from
January 2002 to July 2003).
|
Ralph S. Coppola
|
|
|
63
|
|
|
Vice President of Dover and President of Engineered Products
Platform (since July 2007); prior thereto Vice President of
Dover and President and Chief Executive Officer of Dover
Systems, Inc. (since October 2004); prior thereto for more than
five years President of Hill Phoenix, Inc.
|
Thomas W. Giacomini
|
|
|
42
|
|
|
Vice President of Dover and President of Material Handling
Platform (since October 2007); prior thereto President of Warn
Industries, Inc. (since July 2005); prior thereto Chief
Operating Officer of Warn Industries, Inc. (from 2000 to
July 2005).
|
Paul E. Goldberg
|
|
|
44
|
|
|
Treasurer and Director of Investor Relations of Dover (since
February 2006); prior thereto Assistant Treasurer of Dover
(since July 2002).
|
Robert G. Kuhbach
|
|
|
60
|
|
|
Vice President, Finance and Chief Financial Officer (since
November 2002).
|
Robert A. Livingston
|
|
|
54
|
|
|
Vice President of Dover and President and Chief Executive
Officer of Dover Engineered Systems, Inc. (since July 2007);
prior thereto Vice President of Dover and President and Chief
Executive Officer of Dover Electronics, Inc. (since October 1,
2004); prior thereto President of Vectron International, Inc.
(since January 2002).
|
Raymond T. McKay, Jr.
|
|
|
54
|
|
|
Vice President of Dover (since February 2004), Controller of
Dover (since November 2002).
|
George Pompetzki
|
|
|
55
|
|
|
Vice President, Taxation of Dover (since May 2003); prior
thereto for more than five years Senior Vice President of Taxes,
Siemens Corporation (a manufacturer of diversified industrial
products).
|
David J. Ropp
|
|
|
62
|
|
|
Vice President of Dover and President and Chief Executive
Officer of Dover Industrial Products, Inc. (since July 2007);
prior thereto Vice President of Dover and President and Chief
Executive Officer of Dover Resources, Inc. (since July 2003);
prior thereto, Executive Vice President of Dover Resources, Inc.
(since February 2003); prior thereto, President of OPW Fueling
Components (since February 1998).
|
Timothy J. Sandker
|
|
|
59
|
|
|
Vice President of Dover; prior thereto, Vice President of Dover
and President and Chief Executive Officer of Dover Industries,
Inc. (July 2003 through June 2007); prior thereto Executive Vice
President Dover Industries (since April 2000).
|
Joseph W. Schmidt
|
|
|
61
|
|
|
Vice President, General Counsel and Secretary of Dover (since
January 2003); prior thereto for more than five years partner in
Coudert Brothers LLP (a multi-national law firm).
|
11
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Positions Held and Prior Business Experience
|
|
Sivasankaran Somasundaram
|
|
|
42
|
|
|
Vice President of Dover and President of Fluid Solutions
Platform (since January 2008); prior thereto President of Gas
Equipment Group (since May 2006); prior thereto President of RPA
Process Technologies (since March 2004); prior thereto Vice
President of Dorr-Oliver Eimco (supplier of solid/liquid
separation equipment and wholly-owned subsidiary of GLV Inc.)
(from November 2002 through February 2004).
|
William W. Spurgeon
|
|
|
49
|
|
|
Vice President of Dover and President and Chief Executive
Officer of Dover Fluid Management, Inc. (since July 2007); prior
thereto Vice President of Dover and President and Chief
Executive Officer of Dover Diversified, Inc. (since October 1,
2004); prior thereto Executive Vice President of Dover
Diversified, Inc. (since March 2004); prior thereto President of
Sargent Controls & Aerospace (since October 2001).
|
Robert A. Tyre
|
|
|
63
|
|
|
Vice President, Corporate Development of Dover.
|
David Van Loan
|
|
|
59
|
|
|
Vice President of Dover and President and Chief Executive
Officer of Dover Electronic Technologies, Inc. (since
July 2007); prior thereto Vice President of Dover and
President and Chief Executive Officer of Dover Technologies
International, Inc. (since January 2006) and President and
Chief Executive Officer of Dover Technologies International,
Inc. (since May 2005); prior thereto for more than eight
years, President and Chief Executive Officer of Everett Charles
Technologies Inc.
|
12
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Market
Information and Dividends
The principal market in which the Companys common stock is
traded is the New York Stock Exchange. Information on the high
and low sales prices of such stock, and the frequency and the
amount of dividends paid during the last two years, is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Market Prices
|
|
|
Dividends
|
|
|
Market Prices
|
|
|
Dividends
|
|
|
|
High
|
|
|
Low
|
|
|
Per Share
|
|
|
High
|
|
|
Low
|
|
|
Per Share
|
|
|
First Quarter
|
|
$
|
50.92
|
|
|
$
|
46.07
|
|
|
$
|
0.185
|
|
|
$
|
49.55
|
|
|
$
|
40.30
|
|
|
$
|
0.170
|
|
Second Quarter
|
|
|
53.75
|
|
|
|
47.41
|
|
|
|
0.185
|
|
|
|
51.92
|
|
|
|
44.22
|
|
|
|
0.170
|
|
Third Quarter
|
|
|
54.59
|
|
|
|
47.16
|
|
|
|
0.200
|
|
|
|
50.23
|
|
|
|
45.12
|
|
|
|
0.185
|
|
Fourth Quarter
|
|
|
51.58
|
|
|
|
44.34
|
|
|
|
0.200
|
|
|
|
51.50
|
|
|
|
46.83
|
|
|
|
0.185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.770
|
|
|
|
|
|
|
|
|
|
|
$
|
0.710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holders
The number of holders of record of the Companys Common
Stock as of January 31, 2008 was approximately 16,282. This
figure includes participants in the Companys 401(k)
program.
Securities
Authorized for Issuance Under Equity Compensation
Plans
Information regarding securities authorized for issuance under
the Companys equity compensation plans is contained in
Part III, Item 12 of this
Form 10-K.
Recent
Sales of Unregistered Securities
None.
Issuer
Purchases of Equity Securities
The table below presents shares of the Companys stock
which were acquired by the Company during the fourth quarter.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Number
|
|
|
|
|
|
|
|
|
|
Total Number
|
|
|
(or Approximate Dollar
|
|
|
|
|
|
|
|
|
|
of Shares Purchased
|
|
|
Value) of Shares that
|
|
|
|
Total Number
|
|
|
Average
|
|
|
as Part of Publicly
|
|
|
May Yet Be Purchased
|
|
|
|
of Shares
|
|
|
Price Paid
|
|
|
Announced Plans
|
|
|
under the Plans
|
|
Period
|
|
Purchased
|
|
|
Per Share
|
|
|
or Programs
|
|
|
or Programs(2)
|
|
|
October 1 to October 31
|
|
|
1,505,038
|
|
|
$
|
46.11
|
|
|
|
1,500,000
|
|
|
|
2,500,000
|
|
November 1 to November 30
|
|
|
3,252,006
|
|
|
|
45.77
|
|
|
|
3,250,000
|
|
|
|
9,250,000
|
|
December 1 to December 31
|
|
|
106,987
|
|
|
|
47.00
|
|
|
|
89,500
|
|
|
|
9,160,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fourth Quarter 2007
|
|
|
4,864,031
|
(1)
|
|
|
45.90
|
|
|
|
4,839,500
|
|
|
|
9,160,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
5,038, 2,006 and 17,487 of these shares were acquired by the
Company in October, November and December, respectively, from
the holders of its employee stock options when they tendered
shares as full or partial payment of the exercise price of such
options. These shares are applied against the exercise price at
the market price on the date of exercise. The remainder of the
shares were purchased in open market transactions. |
|
(2) |
|
As of October 31, 2007, 2,500,000 shares were still
available for repurchase under the 10,000,000 share
repurchase program announced in the third quarter of 2007. In
November 2007, the Board of Directors announced an additional
program authorizing repurchases of additional shares at an
aggregate price of up to $500 million. |
13
Performance
Graph
This performance graph does not constitute soliciting material,
is not deemed filed with the SEC and is not incorporated by
reference in any of the Companys filings under the
Securities Act of 1933 or the Exchange Act of 1934, whether made
before or after the date of this Annual Report on
Form 10-K
and irrespective of any general incorporation language in any
such filing, except to the extent the Company specifically
incorporates this performance graph by reference therein.
Comparison
Of Five Year Cumulative Total Return*
Dover Corporation, S&P 500 Index & Peer Group
Index
Total Stockholder Returns
Data Source: Hemscott, Inc.
This graph assumes $100 invested on December 31, 2002 in
Dover Corporation common stock, the S&P 500 index and a
peer group index. The peer index consists of the following
public companies selected by the Company based on its assessment
of businesses with similar industrial characteristics: Actuant
Corp., Ametek Inc., Carlisle Cos. Inc., Cooper Industries Inc.,
Crane Co., Danaher Corp., Eaton Corp., Emerson Electric Co.,
Federal Signal Corp., Honeywell International, Inc., Hubbell
Incorporated, Illinois Tool Works, Ingersoll-Rand Company
Limited, ITT Industries Inc., 3M Co. (formerly Minnesota
Mining & Mfg.), Parker-Hannifin Corp., Pentair Inc.,
Perkinelmer Inc., Tecumseh Products CL A., Tyco International
Ltd. And United Technologies Corp.
|
|
|
* |
|
Total return assumes reinvestment of dividends. |
14
|
|
Item 6.
|
Selected
Financial Data
|
Selected Dover Corporation financial information for the years
2003 through 2007 is set forth in the following
5-year
Consolidated Table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(In thousands, except per share figures)
|
|
|
Revenue
|
|
$
|
7,226,089
|
|
|
$
|
6,329,279
|
|
|
$
|
5,134,828
|
|
|
$
|
4,311,596
|
|
|
$
|
3,497,568
|
|
Earnings from continuing operations
|
|
|
653,273
|
|
|
|
592,455
|
|
|
|
432,503
|
|
|
|
351,518
|
|
|
|
252,463
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
3.24
|
|
|
$
|
2.91
|
|
|
$
|
2.13
|
|
|
$
|
1.73
|
|
|
$
|
1.25
|
|
Discontinued operations
|
|
|
0.04
|
|
|
|
(0.15
|
)
|
|
|
0.38
|
|
|
|
0.30
|
|
|
|
0.20
|
|
Net earnings
|
|
|
3.28
|
|
|
|
2.76
|
|
|
|
2.51
|
|
|
|
2.03
|
|
|
|
1.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
201,330
|
|
|
|
203,773
|
|
|
|
202,979
|
|
|
|
203,275
|
|
|
|
202,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
3.22
|
|
|
$
|
2.88
|
|
|
$
|
2.12
|
|
|
$
|
1.72
|
|
|
$
|
1.24
|
|
Discontinued operations
|
|
|
0.04
|
|
|
|
(0.15
|
)
|
|
|
0.38
|
|
|
|
0.30
|
|
|
|
0.20
|
|
Net earnings
|
|
|
3.26
|
|
|
|
2.73
|
|
|
|
2.50
|
|
|
|
2.02
|
|
|
|
1.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
202,918
|
|
|
|
205,497
|
|
|
|
204,177
|
|
|
|
204,786
|
|
|
|
203,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per common share
|
|
$
|
0.77
|
|
|
$
|
0.71
|
|
|
$
|
0.66
|
|
|
$
|
0.62
|
|
|
$
|
0.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
$
|
174,252
|
|
|
$
|
190,732
|
|
|
$
|
126,395
|
|
|
$
|
82,293
|
|
|
$
|
71,938
|
|
Depreciation and amortization
|
|
|
245,028
|
|
|
|
195,633
|
|
|
|
148,538
|
|
|
|
127,934
|
|
|
|
120,444
|
|
Total assets
|
|
|
8,069,770
|
|
|
|
7,626,657
|
|
|
|
6,580,492
|
|
|
|
5,777,853
|
|
|
|
5,151,398
|
|
Total debt
|
|
|
2,090,652
|
|
|
|
1,771,040
|
|
|
|
1,538,335
|
|
|
|
1,090,393
|
|
|
|
1,066,071
|
|
All results and data in the table above reflect continuing
operations, unless otherwise noted.
15
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operation
|
Special
Note Regarding Forward-Looking Statements
This Annual Report on
Form 10-K,
especially this Item 7, contains forward-looking statements
within the meaning of applicable law. Forward-looking statements
are subject to inherent uncertainties and risks. It is important
that you read SPECIAL NOTES REGARDING FORWARD-LOOKING
STATEMENTS inside the front cover of this Annual Report on
Form 10-K
for more information about these forward-looking statements and
their inherent uncertainties and risks.
Liquidity
and Capital Resources
Management assesses the Companys liquidity in terms of its
ability to generate cash to fund its operating, investing and
financing activities. Significant factors affecting liquidity
are: cash flows generated from operating activities, capital
expenditures, acquisitions, dispositions, dividends, repurchases
of outstanding shares, adequacy of available commercial paper
and bank lines of credit, and the ability to attract long-term
capital with satisfactory terms. The Company generates
substantial cash from operations and remains in a strong
financial position, with sufficient liquidity available for
reinvestment in existing businesses and strategic acquisitions
while managing its capital structure on a short and long-term
basis.
The following table is derived from the Consolidated Statements
of Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
Cash Flows from Continuing Operations
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Net Cash Flows Provided By (Used In):
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
901,941
|
|
|
$
|
866,082
|
|
Investing activities
|
|
|
(332,411
|
)
|
|
|
(842,600
|
)
|
Financing activities
|
|
|
(345,673
|
)
|
|
|
128,290
|
|
Cash flows provided by operating activities during 2007
increased $35.9 million over the prior year primarily
reflecting higher earnings from continuing operations before
depreciation and amortization partially offset by higher
incentive compensation, interest and tax payments.
Cash used in investing activities during 2007 decreased
$510.2 million compared to 2006, reflecting lower
acquisition spending and capital expenditures, partially offset
by lower proceeds from the disposition of businesses during 2007
compared to 2006. Acquisition expenditures in 2007 were
$273.6 million compared to $1,116.8 million in 2006,
while proceeds from the disposition of businesses were
$91.0 million, down $354.9 million from
$445.9 million in 2006. Capital expenditures of
$174.3 million decreased from $190.7 million in the
prior year, and primarily funded investments in plant
expansions, plant machinery and information systems. The Company
currently anticipates that any acquisitions made during 2008
will be funded from available cash and internally generated
funds and, if necessary, through the issuance of commercial
paper, established lines of credit or public debt markets.
Capital expenditures for 2008 are generally expected to be at or
below 2007 levels.
Cash used in financing activities during 2007 totaled
$345.7 million compared to cash provided by financing
activities of $128.3 million in the 2006 period. The change
in financing activity during 2007 primarily reflected cash used
to purchase 12.4 million shares of Dover common stock on
the open market, under its share repurchase program, throughout
2007 for a total of $591 million. A portion of these shares
were acquired through an accelerated share repurchase agreement
(ASR) under which the Company, during the third
quarter of 2007, purchased 6 million shares of its common
stock at an initial purchase price of $51.64 per share. Upon
settlement of this ASR in the fourth quarter of 2007, the final
economic purchase price was $48.36 per share, representing an
average of the volume weighted average price of the
Companys common stock during the outstanding period less a
negotiated discount amount. The 2007 share repurchases were
funded through cash from operations, proceeds from the
disposition of businesses and an increase in outstanding
commercial paper borrowings.
16
Adjusted working capital (a non-GAAP measure calculated as
accounts receivable, plus inventory, less accounts payable)
increased from the prior year end by $29.1 million, or 2%,
to $1,363.0 million which reflected an increase in
receivables of $57.4 million, a decrease in inventory of
$13.0 million and an increase in accounts payable of
$15.3 million. Excluding acquisitions and the effects of
foreign exchange translation, adjusted working capital would
have decreased by $50.1 million, or 4%. Average annual
adjusted working capital as a percentage of revenue (a non-GAAP
measure calculated as the five-quarter average balance of
accounts receivable, plus inventory, less accounts payable
divided by the trailing twelve months of revenue) increased
slightly to 19.2% at December 31, 2007 from 19.0% at
December 31, 2006.
In addition to measuring its cash flow generation and usage
based upon the operating, investing and financing
classifications included in the Consolidated Statements of Cash
Flows, the Company also measures free cash flow (a non-GAAP
measure). Management believes that free cash flow is an
important measure of operating performance because it provides
both management and investors a measurement of cash generated
from operations that is available to fund acquisitions, pay
dividends, repay debt and repurchase Dovers common stock.
For further information, see Non-GAAP Disclosures at the
end of this Item 7.
Free cash flow for the year ended December 31, 2007 was
$727.7 million or 10.1% of revenue compared to
$675.4 million or 10.7% of revenue in the prior year. The
2007 increase in free cash flow reflected higher earnings from
continuing operations before depreciation and amortization and
lower capital expenditures, partially offset by higher tax
payments in 2007. The following table is a reconciliation of
free cash flow to cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
Free Cash Flow
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Cash flow provided by operating activities
|
|
$
|
901,941
|
|
|
$
|
866,082
|
|
Less: Capital expenditures
|
|
|
174,252
|
|
|
|
190,732
|
|
|
|
|
|
|
|
|
|
|
Free cash flow
|
|
$
|
727,689
|
|
|
$
|
675,350
|
|
|
|
|
|
|
|
|
|
|
Free cash flow as a percentage of revenue
|
|
|
10.1
|
%
|
|
|
10.7
|
%
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, the Companys net property,
plant, and equipment totaled $885.1 million compared to
$815.2 million at the end of 2006. The increase in net
property, plant and equipment reflected capital expenditures of
$174.3 million, acquisitions of $27.0 million and
$25.0 million related to foreign currency fluctuations,
partially offset by depreciation and disposals.
The aggregate of current and deferred income tax assets and
liabilities decreased from a $268.5 million net liability
at the beginning of the year to a net liability of
$238.6 million at year-end 2007. This resulted primarily
from an increase in deferred tax assets arising from accrued
expenses, principally for state income taxes, and a decrease in
deferred tax liabilities related to intangible assets.
Dovers consolidated benefit obligation related to defined
and supplemental retirement benefits decreased by
$31.0 million in 2007. The decrease was due primarily to
actuarial gains, benefits paid and plan amendments, offset by
benefits earned, interest cost and currency rate changes. In
2007, plan assets increased $18.8 million primarily due to
gains on plan investments during the year and company
contributions, partially offset by benefits paid. It is
estimated that the Companys defined and supplemental
retirement benefits expense will decrease from
$49.5 million in 2007 to approximately $38.3 million
in 2008.
The Company utilizes the net debt to total capitalization
calculation (a non-GAAP measure) to assess its overall financial
leverage and capacity and believes the calculation is useful to
investors for the same reason. The
17
following table provides a reconciliation of net debt to total
capitalization to the most directly comparable GAAP measures:
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
At December 31,
|
|
Net Debt to Total Capitalization Ratio
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Current maturities of long-term debt
|
|
$
|
33,175
|
|
|
$
|
32,267
|
|
Commercial paper and other short-term debt
|
|
|
605,474
|
|
|
|
258,282
|
|
Long-term debt
|
|
|
1,452,003
|
|
|
|
1,480,491
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
2,090,652
|
|
|
|
1,771,040
|
|
Less: Cash and cash equivalents
|
|
|
602,412
|
|
|
|
374,845
|
|
|
|
|
|
|
|
|
|
|
Net debt
|
|
|
1,488,240
|
|
|
|
1,396,195
|
|
|
|
|
|
|
|
|
|
|
Add: Stockholders equity
|
|
|
3,946,173
|
|
|
|
3,811,022
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
5,434,413
|
|
|
$
|
5,207,217
|
|
|
|
|
|
|
|
|
|
|
Net debt to total capitalization
|
|
|
27.4
|
%
|
|
|
26.8
|
%
|
|
|
|
|
|
|
|
|
|
The total debt level of $2,090.7 million at
December 31, 2007 increased $319.6 million from
December 31, 2006 due to increased commercial paper
borrowings used to fund the Companys ASR program and other
open market purchases of its common stock. Net debt at
December 31, 2007 increased $92 million as a result of
the total debt increase, partially offset by an increase in cash
generated from operations. The percentage increase in net debt
to total capital, after $591 million of share repurchases,
reflects strong operational free cash flow and proceeds from
dispositions of $91 million.
Dovers long-term debt instruments had a book value of
$1,485.2 million on December 31, 2007 and a fair value
of approximately $1,496.0 million. On December 31,
2006, the Companys long-term debt instruments had a book
value of $1,512.8 million and a fair value of approximately
$1,502.9 million.
The Company believes that existing sources of liquidity are
adequate to meet anticipated funding needs at comparable
risk-based interest rates for the foreseeable future.
Acquisition spending
and/or share
repurchases could potentially increase Company debt. However,
management anticipates that the net debt to total capitalization
ratio will remain generally consistent with historical levels.
Operating cash flow and access to capital markets are expected
to satisfy the Companys various cash flow requirements,
including acquisitions and capital expenditures.
Management is not aware of any potential impairment to the
Companys liquidity, and the Company is in compliance with
all of its long-term debt covenants. It is anticipated that in
2008 any funding requirements above cash generated from
operations will be met through the issuance of commercial paper
and, depending upon market conditions, through the issuance of
long-term debt.
As of December 31, 2007, there were two interest rate swap
agreements outstanding for a total notional amount of
$100.0 million designated as fair value hedges on part of
the Companys $400.0 million 6.50% Notes due on
February 15, 2011. One $50 million interest rate swap
exchanges fixed-rate interest for variable-rate interest. The
other $50 million swap is designated in foreign currency
and exchanges fixed-rate interest for variable-rate interest,
and also hedges a portion of the Companys net investment
in international operations. The swap agreements have reduced
the effective interest rate on the notes to 6.43%. There is no
hedge ineffectiveness, and the fair value of the interest rate
swaps outstanding as of December 31, 2007 was determined
through market quotation.
18
At December 31, 2007, the Company had open foreign exchange
forward purchase contracts expiring through February 2008
related to fair value hedges of foreign currency exposures as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies Sold
|
|
|
|
U.S.
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Swiss Franc
|
|
|
Average
|
|
|
|
Dollar
|
|
|
Contract
|
|
|
Euro
|
|
|
Contract
|
|
|
Dollar
|
|
|
Contract
|
|
Currencies Purchased
|
|
Value
|
|
|
Rate
|
|
|
Value
|
|
|
Rate
|
|
|
Value
|
|
|
Rate
|
|
|
|
(In thousands)
|
|
|
Euro
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
|
1.6379
|
|
Swiss Franc
|
|
|
11,000
|
|
|
|
0.8812
|
|
|
|
4,000
|
|
|
|
0.6038
|
|
|
|
|
|
|
|
|
|
The Companys credit ratings, which are independently
developed by the respective rating agencies, are as follows for
the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Short term
|
|
|
Long term
|
|
|
Short term
|
|
|
Long term
|
|
|
Moodys
|
|
|
P-1
|
|
|
|
A2
|
|
|
|
P-1
|
|
|
|
A2
|
|
Standard & Poors
|
|
|
A-1
|
|
|
|
A
|
|
|
|
A-1
|
|
|
|
A
|
|
Fitch
|
|
|
F1
|
|
|
|
A
|
|
|
|
F1
|
|
|
|
A
|
|
Contractual
Obligations Table
A summary of the Companys undiscounted long-term debt,
commitments and obligations as of December 31, 2007 and the
years when these obligations are expected to be due is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less than 1
|
|
|
|
|
|
|
|
|
More than
|
|
|
|
|
|
|
Total
|
|
|
Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
5 Years
|
|
|
Other(A)
|
|
|
|
(In thousands)
|
|
|
Long-term debt
|
|
$
|
1,485,178
|
|
|
|
$183,175
|
(B)
|
|
$
|
73,904
|
|
|
$
|
434,372
|
|
|
$
|
793,727
|
|
|
$
|
|
|
Interest expense
|
|
|
905,424
|
|
|
|
73,966
|
|
|
|
140,120
|
|
|
|
91,370
|
|
|
|
599,968
|
|
|
|
|
|
Rental commitments
|
|
|
185,561
|
|
|
|
45,493
|
|
|
|
61,100
|
|
|
|
34,007
|
|
|
|
44,961
|
|
|
|
|
|
Purchase obligations
|
|
|
19,937
|
|
|
|
19,327
|
|
|
|
610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital leases
|
|
|
15,921
|
|
|
|
2,300
|
|
|
|
3,232
|
|
|
|
2,573
|
|
|
|
7,816
|
|
|
|
|
|
Supplemental & post-
retirement benefits
|
|
|
174,000
|
|
|
|
9,000
|
|
|
|
46,000
|
|
|
|
29,000
|
|
|
|
90,000
|
|
|
|
|
|
Uncertain tax positions(A)
|
|
|
238,168
|
|
|
|
19,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
218,417
|
|
Other long-term obligations
|
|
|
4,054
|
|
|
|
917
|
|
|
|
1,321
|
|
|
|
868
|
|
|
|
948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total obligations
|
|
$
|
3,028,243
|
|
|
|
$353,929
|
|
|
$
|
326,287
|
|
|
$
|
592,190
|
|
|
$
|
1,537,420
|
|
|
$
|
218,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
Due to the uncertainty of the potential settlement of future
uncertain tax positions, management is unable to estimate the
timing of the related payments, if any, that will be made
subsequent to 2008. These amounts do not include the potential
indirect benefits resulting from deductions or credits for
payments made to other jurisdictions. |
|
(B) |
|
Includes $150 million Note due June 2008, which the Company
has the intent and ability to refinance for a period of greater
than one year. |
Severance
and Exit Reserves
From time to time, the Company will initiate various
restructuring programs at its operating companies or record
severance and exit costs in connection with purchase accounting
for acquisitions. At December 31, 2007 and 2006, the
Company had reserves related to severance and exit activities of
$28.4 million and $23.3 million, respectively. During
2007, the Company recorded $12.8 million in purchase
accounting reserves related to acquisitions, made
$9.7 million in payments and recorded additional charges of
$1.9 million.
19
|
|
(2)
|
RESULTS
OF OPERATIONS:
|
2007
COMPARED TO 2006
Consolidated
Results of Operations
Revenue for the year ended December 31, 2007 increased 14%
over 2006, due to increases of $473.1 million at Engineered
Systems, $294.8 million at Industrial Products and
$152.4 million at Fluid Management. These revenue increases
were due to positive market fundamentals and acquisitions, while
Electronic Technologies revenue decreased
$21.5 million due to weakness in its markets. Overall,
Dovers organic revenue growth was 2.3%, acquisition growth
was 9.7% and the impact from foreign exchange was 2.1%. Gross
profit increased 14% to $2,621.7 million from 2006 while
the gross profit margin remained essentially flat at 36.3% and
36.5%, respectively.
Selling and administrative expenses of $1,641.0 million for
the year ended December 31, 2007 increased
$230.3 million over the comparable 2006 period, primarily
due to increased revenue activity and increases in compensation
and pension benefit costs.
Interest expense, net, increased 16% to $89.0 million for
2007, compared to $77.0 million for 2006 due to higher
average outstanding borrowings used to fund purchases of the
Companys common stock and average commercial paper rates.
Other expense (income), net for 2007 and 2006 of
$4.1 million and $11.4 million, respectively, was
driven primarily by foreign exchange losses, partially offset by
other miscellaneous income.
The 2007 and 2006 tax rates for continuing operations were
26.4%, and 26.8%, respectively. Both periods were favorably
impacted by the mix of
non-U.S. earnings
in low-taxed overseas jurisdictions.
Earnings from continuing operations for 2007 were
$653.3 million or $3.22 per diluted share compared to
$592.5 million or $2.88 per diluted share in 2006. For
2007, net earnings were $661.1 million, or $3.26 per
diluted share, which included $7.8 million, or $0.04 per
diluted share, of income from discontinued operations, compared
to $561.8 million, or $2.73 per diluted share for 2006,
which included a $30.7 million, or $0.15 per diluted share,
loss from discontinued operations. Refer to Note 8 in the
Consolidated Financial Statements for additional information on
discontinued operations.
20
Segment
Results of Operations
Industrial
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
% Change
|
|
|
|
(In thousands)
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Material Handling
|
|
$
|
959,112
|
|
|
$
|
706,499
|
|
|
|
36
|
%
|
Mobile Equipment
|
|
|
1,262,984
|
|
|
|
1,220,718
|
|
|
|
3
|
%
|
Eliminations
|
|
|
(977
|
)
|
|
|
(928
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,221,119
|
|
|
$
|
1,926,289
|
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment earnings
|
|
$
|
297,051
|
|
|
$
|
251,228
|
|
|
|
18
|
%
|
Operating margin
|
|
|
13.4
|
%
|
|
|
13.0
|
%
|
|
|
|
|
Acquisition related depreciation and amortization expense*
|
|
$
|
26,709
|
|
|
$
|
25,213
|
|
|
|
6
|
%
|
Bookings
|
|
|
|
|
|
|
|
|
|
|
|
|
Material Handling
|
|
$
|
961,047
|
|
|
$
|
712,570
|
|
|
|
35
|
%
|
Mobile Equipment
|
|
|
1,364,340
|
|
|
|
1,251,096
|
|
|
|
9
|
%
|
Eliminations
|
|
|
(1,556
|
)
|
|
|
(2,799
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,323,831
|
|
|
$
|
1,960,867
|
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog
|
|
|
|
|
|
|
|
|
|
|
|
|
Material Handling
|
|
$
|
149,628
|
|
|
$
|
146,614
|
|
|
|
2
|
%
|
Mobile Equipment
|
|
|
543,776
|
|
|
|
429,191
|
|
|
|
27
|
%
|
Eliminations
|
|
|
(195
|
)
|
|
|
(165
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
693,209
|
|
|
$
|
575,640
|
|
|
|
20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Represents the pre-tax impact on earnings from the depreciation
and amortization of acquisition accounting
write-ups to
reflect the fair value of inventory, property, plant and
equipment, and intangible assets. |
Industrial Products revenue and earnings increases over
the prior year were primarily the result of the acquisition of
Paladin in August 2006 and the July 2007 acquisition of
Hanmecson International, a Chinese manufacturer of vehicle
lifts. For the year, the segment achieved 2% organic growth,
while growth from acquisitions and the impact of foreign
exchange accounted for 12% and 1%, respectively.
Material Handling revenue increased 36% while earnings increased
28% compared to the prior year. The increases were primarily due
to the Paladin acquisition and improvements in the heavy winch,
recreational vehicle and industrial automation businesses.
Margin was impacted by the slowdown in the heavy construction
business producing attachments and cylinders. In addition, the
platform benefited from new product introductions, plant
rationalization and global sourcing during 2007.
Mobile Equipment revenue and earnings increased 3% and 8%,
respectively, over the prior year. The platforms results
benefited from the Hanmecson acquisition and core growth at
businesses in the petroleum, crude oil and military markets, as
well as a $5.3 million net pre-tax gain on the sale of a
facility in the second quarter of 2007. However, softness
experienced in the automotive service industry and the aerospace
service business partially offset these gains.
21
Engineered
Systems
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
% Change
|
|
|
|
(In thousands)
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered Products
|
|
$
|
1,234,709
|
|
|
$
|
1,105,862
|
|
|
|
12
|
%
|
Product Identification
|
|
|
912,580
|
|
|
|
568,301
|
|
|
|
61
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,147,289
|
|
|
$
|
1,674,163
|
|
|
|
28
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment earnings
|
|
$
|
281,817
|
|
|
$
|
241,730
|
|
|
|
17
|
%
|
Operating margin
|
|
|
13.1
|
%
|
|
|
14.4
|
%
|
|
|
|
|
Acquisition related depreciation and amortization expense*
|
|
$
|
31,253
|
|
|
$
|
14,636
|
|
|
|
114
|
%
|
Bookings
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered Products
|
|
$
|
1,209,452
|
|
|
$
|
1,167,765
|
|
|
|
4
|
%
|
Product Identification
|
|
|
919,216
|
|
|
|
562,096
|
|
|
|
64
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,128,668
|
|
|
$
|
1,729,861
|
|
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered Products
|
|
$
|
230,796
|
|
|
$
|
256,200
|
|
|
|
(10
|
)%
|
Product Identification
|
|
|
68,938
|
|
|
|
57,706
|
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
299,734
|
|
|
$
|
313,906
|
|
|
|
(5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Represents the pre-tax impact on earnings from the depreciation
and amortization of acquisition accounting
write-ups to
reflect the fair value of inventory, property, plant and
equipment, and intangible assets. |
Engineered Systems revenue and earnings increases over the
prior year reflect the December 2006 acquisition of Markem and
the May 2006 acquisition of ONeil. Revenue growth due to
acquisitions was 19%. However, most core businesses also
improved as the segment achieved organic revenue growth of 7%,
with the remainder due to the impact of foreign exchange. The
decrease in operating margin was due to weakness in the ATM
business.
Engineered Products revenue and earnings increased 12% and
5%, respectively, over the prior year due to strong supermarket
and heat exchanger markets; offset by weakness in the ATM
business which negatively impacted the revenue and earnings
increases. Sequentially, revenue and earnings in the fourth
quarter of 2007 were down 8% and 19%, respectively, reflecting
normal seasonality and a slowdown in retail food equipment
demand, along with reduced orders tied to high customer
inventory levels in the heat exchanger business.
The Product Identification platform had revenue and earnings
increases of 61% and 41%, respectively, during 2007 mostly
reflecting the 2006 acquisitions of Markem and ONeil.
Overall, the revenue growth due to the 2006 acquisitions was
55%, while organic growth was 3% due to growth in the core
direct coding business with the remainder due to foreign
exchange.
22
Fluid
Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
% Change
|
|
|
|
(In thousands)
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
$
|
775,024
|
|
|
$
|
684,178
|
|
|
|
13
|
%
|
Fluid Solutions
|
|
|
707,113
|
|
|
|
645,399
|
|
|
|
10
|
%
|
Eliminations
|
|
|
(129
|
)
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,482,008
|
|
|
$
|
1,329,603
|
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment earnings
|
|
$
|
304,576
|
|
|
$
|
267,377
|
|
|
|
14
|
%
|
Operating margin
|
|
|
20.6
|
%
|
|
|
20.1
|
%
|
|
|
|
|
Acquisition related depreciation and amortization expense*
|
|
$
|
15,569
|
|
|
$
|
16,183
|
|
|
|
(4
|
)%
|
Bookings
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
$
|
785,065
|
|
|
$
|
693,927
|
|
|
|
13
|
%
|
Fluid Solutions
|
|
|
716,644
|
|
|
|
653,932
|
|
|
|
10
|
%
|
Eliminations
|
|
|
(110
|
)
|
|
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,501,599
|
|
|
$
|
1,347,776
|
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
$
|
88,245
|
|
|
$
|
75,449
|
|
|
|
17
|
%
|
Fluid Solutions
|
|
|
73,713
|
|
|
|
63,565
|
|
|
|
16
|
%
|
Eliminations
|
|
|
(14
|
)
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
161,944
|
|
|
$
|
138,981
|
|
|
|
17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Represents the pre-tax impact on earnings from the depreciation
and amortization of acquisition accounting
write-ups to
reflect the fair value of inventory, property, plant and
equipment, and intangible assets. |
Fluid Managements revenue and earnings increases were the
result of strength at all businesses in the segment. The segment
continued to benefit from strong results from the Energy
platform which serves the oil, gas and power generation markets.
As a result, the segment achieved organic growth of 9%, with the
remainder primarily from foreign exchange.
The Energy platforms revenue and earnings increased 13%
and 15%, respectively, primarily due to strong oil and gas
markets and increased power generation demand throughout 2007.
The platforms earnings growth further benefited from
higher volume, productivity gains and operational improvements.
Fluid Solutions revenue and earnings both increased 10% when
compared to the prior year due to improvements at all core
businesses in the platform. Throughout 2007, the platform
experienced strong demand in the chemical and rail markets.
Overall, the platform had organic revenue growth of 6%, growth
from acquisitions of 2%, with the reminder due to foreign
exchange.
23
Electronic
Technologies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
% Change
|
|
|
|
(In thousands)
|
|
|
Revenue
|
|
$
|
1,390,103
|
|
|
$
|
1,411,564
|
|
|
|
(2
|
)%
|
Segment earnings
|
|
$
|
180,337
|
|
|
$
|
214,947
|
|
|
|
(16
|
)%
|
Operating margin
|
|
|
13.0
|
%
|
|
|
15.2
|
%
|
|
|
|
|
Acquisition related depreciation and amortization expense*
|
|
$
|
38,296
|
|
|
$
|
32,914
|
|
|
|
16
|
%
|
Bookings
|
|
|
1,378,551
|
|
|
|
1,410,043
|
|
|
|
(2
|
)%
|
Backlog
|
|
|
232,704
|
|
|
|
200,048
|
|
|
|
16
|
%
|
|
|
|
* |
|
Represents the pre-tax impact on earnings from the depreciation
and amortization of acquisition accounting
write-ups to
reflect the fair value of inventory, property, plant and
equipment, and intangible assets. |
Electronic Technologies
year-over-year
decreases in revenue and earnings were primarily due to softness
in the semi-conductor end markets throughout 2007 compared to
strong markets experienced in the prior year. The medical and
military/space markets were strong throughout the year, while
telecom markets remained flat. Overall, the increase in revenue
due to acquisitions and foreign exchange were each 3%, while
organic revenue decreased 8%.
2006
COMPARED TO 2005
Consolidated
Results of Operations
Revenue for the year ended December 31, 2006 increased 23%
over 2005 due to increases at all four segments led by increases
of $470.1 million at Electronic Technologies and
$269.4 million at Engineered Systems. The Electronic
Technologies and Engineered Systems revenue
increased due to acquisitions and strong organic growth.
Overall, Dovers organic revenue growth was 14%,
acquisition growth was 9% and the impact from foreign exchange
was negligible. Gross profit increased 26% to
$2,308.6 million while the gross profit margin increased
80 basis points to 36.5%.
Selling and administrative expenses of $1,410.7 million for
the year ended December 31, 2006 increased
$227.0 million over the comparable 2005 period, primarily
due to increased revenue activity and $26.1 million of
equity compensation expense related to the adoption of Statement
of Financial Accounting Standard 123(R), Share Based
Payment (SFAS No. 123(R)), which
requires companies to expense the fair value of equity
compensation, such as stock options and stock appreciation
rights (SARs), primarily over the related vesting
period. The Company used the modified prospective method to
adopt SFAS No. 123(R), which did not require the
restatement of prior periods. Selling and administrative
expenses as a percentage of revenue decreased to 22.3% from
23.1% in 2005. Excluding the effect of
SFAS No. 123(R), selling and administrative expenses
during the year ended December 31, 2006 would have been
$1,384.6 million or 21.9% of revenue.
Interest expense, net, increased 7% to $77.0 million for
2006, compared to $72.2 million for 2005 due to higher
average outstanding borrowings and average commercial paper
rates.
Other expense (income), net for 2006 of $11.4 million was
driven primarily by foreign exchange losses. Other expense
(income), net of ($12.7) million for 2005 included foreign
exchange gains of $7.8 million.
The 2006 tax rate for continuing operations was 26.8%,
reflecting the effect of the full year retroactive extension of
the U.S. federal research credit, a favorable mix of
non-U.S. earnings
in low-taxed overseas jurisdictions, a lower relative
U.S. federal tax exclusion for
non-U.S. sales
in 2006 and the inclusion of a $7.8 million net benefit
primarily related to the resolution of a state income tax issue.
The 2005 tax rate for continuing operations of 26.5% included a
$9.5 million provision related to the repatriation of
$373.7 million of dividends and a $25.5 million
benefit primarily related to the resolution of U.S. tax
issues and a $5.5 million benefit related to a favorable
federal tax court decision. Excluding the repatriation
provision, the full year 2005 tax rate for continuing operations
was 24.9%.
24
Earnings from continuing operations for 2006 were
$592.5 million or $2.88 per diluted share, compared to
$432.5 million or $2.12 per diluted share in 2005. For
2006, net earnings were $561.8 million, or $2.73 diluted
share, which included a $30.7 million, or $0.15 per diluted
share, loss from discontinued operations, compared to
$510.1 million, or $2.50 per diluted share for 2005, which
included $77.6 million, or $0.38 per diluted share, in
earnings from discontinued operations. Refer to Note 8 in
the Consolidated Financial Statements for additional information
on discontinued operations.
Segment
Results of Operations
Industrial
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
% Change
|
|
|
|
(In thousands)
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Material Handling
|
|
$
|
706,499
|
|
|
$
|
586,713
|
|
|
|
20
|
%
|
Mobile Equipment
|
|
|
1,220,718
|
|
|
|
1,144,444
|
|
|
|
7
|
%
|
Eliminations
|
|
|
(928
|
)
|
|
|
(1,207
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,926,289
|
|
|
$
|
1,729,950
|
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment earnings
|
|
$
|
251,228
|
|
|
$
|
233,860
|
|
|
|
7
|
%
|
Operating margin
|
|
|
13.0
|
%
|
|
|
13.5
|
%
|
|
|
|
|
Acquisition related depreciation and amortization expense*
|
|
$
|
25,213
|
|
|
$
|
16,602
|
|
|
|
52
|
%
|
Bookings
|
|
|
|
|
|
|
|
|
|
|
|
|
Material Handling
|
|
$
|
712,570
|
|
|
$
|
606,085
|
|
|
|
18
|
%
|
Mobile Equipment
|
|
|
1,251,096
|
|
|
|
1,159,069
|
|
|
|
8
|
%
|
Eliminations
|
|
|
(2,799
|
)
|
|
|
(1,718
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,960,867
|
|
|
$
|
1,763,436
|
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog
|
|
|
|
|
|
|
|
|
|
|
|
|
Material Handling
|
|
$
|
146,614
|
|
|
$
|
109,400
|
|
|
|
34
|
%
|
Mobile Equipment
|
|
|
429,191
|
|
|
|
352,096
|
|
|
|
22
|
%
|
Eliminations
|
|
|
(165
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
575,640
|
|
|
$
|
461,491
|
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Represents the pre-tax impact on earnings from the depreciation
and amortization of acquisition accounting
write-ups to
reflect the fair value of inventory, property, plant and
equipment, and intangible assets. |
Industrial Products revenue and earnings increased over the
prior year as a result of the August 2006 acquisition of Paladin
and strength in the energy, military and commercial
transportation markets as well as in the heavy winch business.
Margin declined due to purchase accounting amortization related
to the Paladin acquisition. Overall, the segment had organic
revenue growth of 5% during the year, with the remainder
primarily from acquisitions.
Material Handling revenue increased primarily due to the Paladin
acquisition and continued growth in the heavy winch business,
partially offset by softness in the automotive and recreational
vehicle markets. Earnings increased 12% as the margin was
impacted by the weak automotive, light construction and
recreational vehicle markets.
Mobile Equipment revenue increased reflecting strength in the
commercial transportation market. However, these improvements
were negatively impacted by weakness in the North American
automotive service industry.
25
Earnings increased 11% driven by volume and improved leverage.
In addition, prior year earnings were positively impacted by a
gain of approximately $1 million on the sale of a facility.
Engineered
Systems
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
% Change
|
|
|
|
(In thousands)
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered Products
|
|
$
|
1,105,862
|
|
|
$
|
933,174
|
|
|
|
19
|
%
|
Product Identification
|
|
|
568,301
|
|
|
|
471,618
|
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,674,163
|
|
|
$
|
1,404,792
|
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment earnings
|
|
$
|
241,730
|
|
|
$
|
205,494
|
|
|
|
18
|
%
|
Operating margin
|
|
|
14.4
|
%
|
|
|
14.6
|
%
|
|
|
|
|
Acquisition related depreciation and amortization expense*
|
|
$
|
14,636
|
|
|
$
|
8,421
|
|
|
|
74
|
%
|
Bookings
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered Products
|
|
$
|
1,167,765
|
|
|
$
|
983,939
|
|
|
|
19
|
%
|
Product Identification
|
|
|
562,096
|
|
|
|
475,719
|
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,729,861
|
|
|
$
|
1,459,658
|
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered Products
|
|
$
|
256,200
|
|
|
$
|
194,719
|
|
|
|
32
|
%
|
Product Identification
|
|
|
57,706
|
|
|
|
35,234
|
|
|
|
64
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
313,906
|
|
|
$
|
229,953
|
|
|
|
37
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Represents the pre-tax impact on earnings from the depreciation
and amortization of acquisition accounting
write-ups to
reflect the fair value of inventory, property, plant and
equipment, and intangible assets. |
Engineered Systems revenue and earnings increases over the prior
year reflect the relative strength of the segments markets
during 2006. The slight decrease in operating margin was due to
higher costs in the Engineered Products platform. The segment
achieved organic growth of 14% with the remainder primarily from
acquisitions.
Engineered Products revenue and earnings increased 19% and 17%,
respectively, over the prior year due to the robust heat
exchanger market and positive demand for supermarket,
foodservice, can necking, and packaging closure equipment. These
improvements were partially offset by weakness in the ATM
business. The platforms margins were impacted by increased
commodity costs and temporary cost inefficiencies related to
higher production levels in the food equipment business.
Product Identification revenue increased 21% and earnings
increased 37% over the prior year, reflecting successful results
from all product lines and regions as well as the impact of the
Markem and ONeil acquisitions which contributed 12% to the
groups revenue growth for the year.
26
Fluid
Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
% Change
|
|
|
|
(In thousands)
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
$
|
684,178
|
|
|
$
|
506,844
|
|
|
|
35
|
%
|
Fluid Solutions
|
|
|
645,399
|
|
|
|
561,236
|
|
|
|
15
|
%
|
Eliminations
|
|
|
26
|
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,329,603
|
|
|
$
|
1,068,048
|
|
|
|
24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment earnings
|
|
$
|
267,377
|
|
|
$
|
198,344
|
|
|
|
35
|
%
|
Operating margin
|
|
|
20.1
|
%
|
|
|
18.6
|
%
|
|
|
|
|
Acquisition related depreciation and amortization expense*
|
|
$
|
16,183
|
|
|
$
|
14,593
|
|
|
|
11
|
%
|
Bookings
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
$
|
693,927
|
|
|
$
|
535,022
|
|
|
|
30
|
%
|
Fluid Solutions
|
|
|
653,932
|
|
|
|
566,350
|
|
|
|
15
|
%
|
Eliminations
|
|
|
(83
|
)
|
|
|
(197
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,347,776
|
|
|
$
|
1,101,175
|
|
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
$
|
75,449
|
|
|
$
|
58,348
|
|
|
|
29
|
%
|
Fluid Solutions
|
|
|
63,565
|
|
|
|
53,218
|
|
|
|
19
|
%
|
Eliminations
|
|
|
(33
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
138,981
|
|
|
$
|
111,560
|
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Represents the pre-tax impact on earnings from the depreciation
and amortization of acquisition accounting
write-ups to
reflect the fair value of inventory, property, plant and
equipment, and intangible assets. |
Fluid Management revenue, earnings and bookings increased
primarily as a result of improvements in the Energy platform and
the third quarter 2005 acquisition of Colder Products. Strong
results in the Energy platform contributed to the margin
increase, partially offset by slightly weaker margins in the
Fluid Solutions platform. Overall, the segment had organic
revenue growth of 19% during the year with the remainder
primarily from acquisitions.
The Energy platform delivered strong results throughout 2006
with revenue and earnings increases of 35% and 50%,
respectively, over the prior year. Commodity pricing for oil and
gas began moderating in the second quarter of 2006; however,
strong activity in exploration, production and drilling
continued to drive the positive 2006 results. The group
continued to add capacity judiciously to meet increasing levels
of demand.
Fluid Solutions revenue and earnings increased 15% and 12%,
respectively, due to improvements in mobile transport equipment,
global demand for retail petroleum equipment and support
equipment for the growing ethanol business and the acquisition
of Colder Products. Product mix had a negative impact on
earnings.
27
Electronic
Technologies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
% Change
|
|
|
|
(In thousands)
|
|
|
Revenue
|
|
$
|
1,411,564
|
|
|
$
|
941,416
|
|
|
|
50
|
%
|
Segment earnings
|
|
$
|
214,947
|
|
|
$
|
88,022
|
|
|
|
144
|
%
|
Operating margin
|
|
|
15.2
|
%
|
|
|
9.3
|
%
|
|
|
|
|
Acquisition related depreciation and amortization expense*
|
|
$
|
32,914
|
|
|
$
|
24,931
|
|
|
|
32
|
%
|
Bookings
|
|
|
1,410,043
|
|
|
|
986,633
|
|
|
|
43
|
%
|
Backlog
|
|
|
200,048
|
|
|
|
189,133
|
|
|
|
6
|
%
|
|
|
|
* |
|
Represents the pre-tax impact on earnings from the depreciation
and amortization of acquisition accounting
write-ups to
reflect the fair value of inventory, property, plant and
equipment, and intangible assets. |
The increases in revenue and earnings in the Electronic
Technologies segment compared to the prior year were due to the
third quarter 2005 acquisition of Knowles Electronics and
organic growth of 26% for the year. Although the semiconductor
market moderated in the fourth quarter of 2006, the segment
continued to exhibit strong fundamentals based on levels of
recurring revenue and the overall strength of the consumer
electronics industry. In addition, the core components business
showed strength in the frequency control and micro acoustics
markets.
Critical
Accounting Policies
The Companys consolidated financial statements and related
public financial information are based on the application of
generally accepted accounting principles in the United States of
America (GAAP). GAAP requires the use of estimates,
assumptions, judgments and subjective interpretations of
accounting principles that have an impact on the assets,
liabilities, revenue and expense amounts reported. These
estimates can also affect supplemental information contained in
the public disclosures of the Company, including information
regarding contingencies, risk and its financial condition. The
Company believes its use of estimates and underlying accounting
assumptions conform to GAAP and are consistently applied.
Valuations based on estimates are reviewed for reasonableness on
a consistent basis throughout the Company. Primary areas where
the financial information of Dover is subject to the use of
estimates, assumptions and the application of judgment include
the following areas:
|
|
|
|
|
Revenue is recognized when all of the following circumstances
are satisfied: a) persuasive evidence of an arrangement
exists, b) price is fixed or determinable,
c) collectability is reasonably assured, and
d) delivery has occurred. In revenue transactions where
installation is required, revenue can be recognized when the
installation obligation is not essential to the functionality of
the delivered products. Revenue transactions involving
non-essential installation obligations are those which can
generally be completed in a short period of time at
insignificant cost and the skills required to complete these
installations are not unique to the Company and in many cases
can be provided by third parties or the customers. If the
installation obligation is essential to the functionality of the
delivered product, revenue recognition is deferred until
installation is complete. In addition, when it is determined
that there are multiple deliverables to a sales arrangement, the
Company will allocate consideration received to the separate
deliverables based on their relative fair values and recognize
revenue based on the appropriate criteria for each deliverable
identified. In a limited number of revenue transactions, other
post shipment obligations such as training and customer
acceptance are required and, accordingly, revenue recognition is
deferred until the customer is obligated to pay, or acceptance
has been confirmed. Service revenue is recognized and earned
when services are performed.
|
|
|
|
Allowances for doubtful accounts are estimated at the individual
operating companies based on estimates of losses related to
customer receivable balances. Estimates are developed by using
standard quantitative measures based on historical losses,
adjusting for current economic conditions and, in some cases,
evaluating specific customer accounts for risk of loss. The
establishment of reserves requires the use of judgment and
assumptions regarding the potential for losses on receivable
balances. Due to the fact that Dover operates in many different
markets, changes in economic conditions in specific markets
generally should not have a material effect on reserve balances
required.
|
28
|
|
|
|
|
Inventory for the majority of the Companys subsidiaries,
including all international subsidiaries are stated at the lower
of cost, determined on the
first-in,
first-out (FIFO) basis, or market. Other domestic inventory is
stated at cost, determined on the
last-in,
first-out (LIFO) basis, which is less than market value. Under
certain market conditions, estimates and judgments regarding the
valuation of inventory are employed by the Company to properly
value inventory. The Electronic Technologies companies tend to
experience higher levels of inventory value fluctuations,
particularly given the relatively high rate of product
obsolescence over relatively short periods of time.
|
|
|
|
Occasionally, the Company will establish restructuring reserves
at an operation in accordance with appropriate accounting
principles. These reserves, for both severance and exit costs,
require the use of estimates. Though Dover believes that these
estimates accurately reflect the anticipated costs, actual
results may be different than the estimated amounts.
|
|
|
|
Dover has significant tangible and intangible assets on its
balance sheet that include goodwill and other intangibles
related to acquisitions. The valuation and classification of
these assets and the assignment of useful depreciation and
amortization lives involve significant judgments and the use of
estimates. The testing of these intangibles under established
accounting guidelines (including
SFAS No. 142) for impairment also requires
significant use of judgment and assumptions, particularly as it
relates to the identification of reporting units and the
determination of fair market value. Dovers assets and
reporting units are tested and reviewed for impairment on an
annual basis during the fourth quarter or when indicators of
impairment exist. The Company believes that its use of estimates
and assumptions are reasonable and comply with generally
accepted accounting principles. Changes in business conditions
could potentially require adjustments to the valuations.
|
|
|
|
The valuation of Dovers pension and other post-retirement
plans requires the use of assumptions and estimates that are
used to develop actuarial valuations of expenses and
assets/liabilities. These assumptions include discount rates,
investment returns, projected salary increases and benefits, and
mortality rates. The actuarial assumptions used in Dovers
pension reporting are reviewed annually and are compared with
external benchmarks to assure that they accurately account for
Dovers future pension obligations. Changes in assumptions
and future investment returns could potentially have a material
impact on Dovers pension expenses and related funding
requirements. Dovers expected long-term rate of return on
plan assets is reviewed annually based on actual returns,
economic trends and portfolio allocation. Dovers discount
rate assumption is determined by constructing a portfolio of
bonds to match the expected benefit stream to be paid from the
Companys pension plans. The benefit payment stream is
assumed to be funded from bond coupons and maturities, as well
as interest on the excess cash flows from the bond portfolio.
|
|
|
|
Dover has significant amounts of deferred tax assets that are
reviewed for recoverability and valued accordingly. These assets
are evaluated by using estimates of future taxable income
streams and the impact of tax planning strategies. Reserves are
also estimated, using a more likely than not criteria, for
ongoing audits regarding federal, state and international issues
that are currently unresolved. The Company routinely monitors
the potential impact of these situations and believes that it is
properly reserved. Valuations related to tax accruals and assets
can be impacted by changes in accounting regulations, changes in
tax codes and rulings, changes in statutory tax rates, and the
Companys future taxable income levels.
|
|
|
|
Dover has significant accruals and reserves related to the self
insured portion of its risk management program. These accruals
require the use of estimates and judgment with regard to risk
exposure and ultimate liability. The Company estimates losses
under these programs using actuarial assumptions, Dovers
experience, and relevant industry data. Dover reviews these
factors quarterly and considers the current level of accruals
and reserves adequate relative to current market conditions and
Company experience.
|
|
|
|
Dover has established reserves for environmental and legal
contingencies at both the operating company and corporate
levels. A significant amount of judgment and use of estimates is
required to quantify Dovers ultimate exposure in these
matters. The valuation of reserves for contingencies is reviewed
on a quarterly basis at the operating and corporate levels to
assure that Dover is properly reserved. Reserve balances are
adjusted to account for changes in circumstances for ongoing
issues and the establishment of additional
|
29
reserves for emerging issues. While Dover believes that the
current level of reserves is adequate, future changes in
circumstances could impact these determinations.
|
|
|
|
|
The Company from time to time will discontinue certain
operations for various reasons. Estimates are used to adjust, if
necessary, the assets and liabilities of discontinued operations
to their estimated fair market value less costs to sell. These
estimates include assumptions relating to the proceeds
anticipated as a result of the sale. The adjustments to fair
market value of these operations provide the basis for the gain
or loss when sold. Changes in business conditions or the
inability to sell an operation could potentially require future
adjustments to these estimates.
|
|
|
|
The Company uses the Black-Scholes valuation model to estimate
the fair value of its Stock Appreciation Rights (SARs) and stock
options that are granted to employees. The model requires
management to estimate the expected life of the SAR or option,
expected forfeitures and the volatility of Dovers stock
using historical data. For additional information related to the
assumptions used, see Note 10 to the Consolidated Financial
Statements in Item 8 of this
Form 10-K.
|
New
Accounting Standards
Effective December 31, 2006, Dover adopted
SFAS No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans, an
Amendment of Financial Accounting Standards Board
(FASB) Statements No. 87, 88, 106, and
132(R) (SFAS No. 158).
SFAS No. 158 requires companies to report the funded
status of their defined benefit pension and other postretirement
benefit plans on their balance sheets as a net liability or
asset. Upon adoption at December 31, 2006, Dover recorded a
net reduction to stockholders equity of
$123.5 million, net of tax. In addition, effective for
fiscal years ending after December 15, 2008, the new
standard will require companies to measure benefit obligations
and plan assets as of a Companys fiscal year end
(December 31, 2008 for Dover), using one of the methods
prescribed in the standard. Dover expects to adopt the new
valuation date requirements using the
15-month
alternative, as prescribed in the standard, which will result in
a charge of approximately $10.0 million to retained
earnings in the fourth quarter of 2008.
Effective January 1, 2007, Dover adopted FASB
Interpretation No. 48, Accounting for Uncertainty in
Income Taxes (FIN 48). See Note 2 to
the Consolidated Financial Statements in Item 8 of this
Form 10-K
for additional information on the adoption of this standard.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements
(SFAS No. 157), which defines fair value,
establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. For financial assets and
liabilities, this statement is effective for fiscal periods
beginning after November 15, 2007 and does not require any
new fair value measurements. In February 2008, the FASB Staff
Position
No. 157-2
was issued which delayed the effective date of FASB Statement
No. 157 to fiscal years ending after November 15, 2008
for nonfinancial assets and liabilities, except for items that
are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). The Company
does not expect the adoption of SFAS No. 157 to have a
material effect on its consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities including an amendment of FASB Statement
No. 115. This statement permits entities to choose to
measure many financial instruments and certain other items at
fair value. This statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007,
including interim periods within that fiscal year. The Company
will not elect the fair value option for any of its existing
financial instruments as of January 1, 2008 and the Company
has not determined whether or not it will elect this option for
financial instruments it may acquire in the future.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51
(SFAS 160). SFAS 160 requires that a
noncontrolling interest in a subsidiary be reported as equity
and the amount of consolidated net income specifically
attributable to the noncontrolling interest be identified in the
consolidated financial statements. It also requires consistency
in the manner of reporting changes in the parents
ownership interest and requires fair value measurement of any
30
noncontrolling equity investment retained in a deconsolidation.
The Company will apply the provisions of this statement
prospectively, as required, beginning on January 1, 2009
and does not expect the adoption of SFAS 160 to have a
material effect on its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations
(SFAS 141(R)). SFAS 141(R) retains the
fundamental requirements in Statement 141 that the acquisition
method of accounting (which Statement 141 called the purchase
method) be used for all business combinations and for an
acquirer to be identified for each business combination. In
general, the statement (1) broadens the guidance of
SFAS 141, extending its applicability to all events where
one entity obtains control over one or more other businesses,
(2) broadens the use of fair value measurements used to
recognize the assets acquired and liabilities assumed,
(3) changes the accounting for acquisition related fees and
restructuring costs incurred in connection with an acquisition
and (4) increases required disclosures. The Company will
apply the provisions of this statement prospectively to business
combinations for which the acquisition date is on or after
January 1, 2009 and is currently assessing the impact of
adoption of SFAS 141(R) on its consolidated financial
statements.
Non-GAAP Disclosures
In an effort to provide investors with additional information
regarding the Companys results as determined by generally
accepted accounting principles (GAAP), the Company also
discloses non-GAAP information which management believes
provides useful information to investors. Free cash flow, net
debt, total debt, total capitalization, adjusted working
capital, average annual adjusted working capital, revenues
excluding the impact of changes in foreign currency exchange
rates and organic revenue growth are not financial measures
under GAAP and should not be considered as a substitute for cash
flows from operating activities, debt or equity, revenue and
working capital as determined in accordance with GAAP, and they
may not be comparable to similarly titled measures reported by
other companies. Management believes the (1) net debt to
total capitalization ratio and (2) free cash flow are
important measures of operating performance and liquidity. Net
debt to total capitalization is helpful in evaluating the
Companys capital structure and the amount of leverage it
employs. Free cash flow provides both management and investors a
measurement of cash generated from operations that is available
to fund acquisitions, pay dividends, repay debt and repurchase
the Companys common stock. Reconciliations of free cash
flow, total debt and net debt can be found above in this
Item 7, Managements Discussion and Analysis.
Management believes that reporting adjusted working capital
(also sometimes called working capital), which is
calculated as accounts receivable, plus inventory, less accounts
payable, provides a meaningful measure of the Companys
operational results by showing the changes caused solely by
revenue. Management believes that reporting adjusted working
capital and revenues at constant currency, which excludes the
positive or negative impact of fluctuations in foreign currency
exchange rates, provides a meaningful measure of the
Companys operational changes, given the global nature of
Dovers businesses. Management believes that reporting
organic revenue growth, which excludes the impact of foreign
currency exchange rates and the impact of acquisitions, provides
a useful comparison of the Companys revenue performance
and trends between periods.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Interest
Rates
The Companys exposure to market risk for changes in
interest rates relates primarily to the fair value of long-term
fixed interest rate debt, interest rate swaps attached thereto,
commercial paper borrowings and investments in cash equivalents.
Generally, the fair market value of fixed-interest rate debt
will increase as interest rates fall and decrease as interest
rates rise. A 54 basis point increase or decrease in
interest rates (10% of the Companys weighted average
long-term debt interest rate) would have an immaterial effect on
the fair value of the Companys long-term debt. Commercial
paper borrowings are at variable interest rates, and have
maturities of three months or less. A 51 basis point
increase or decrease in the interest rates (10% of the
Companys weighted average commercial paper interest rate)
on commercial paper borrowings would have an immaterial impact
on the Companys pre-tax earnings. All highly liquid
investments, including highly liquid debt instruments purchased
with an original maturity of three months or less, are
considered cash equivalents. The Company places its investments
in cash equivalents with high credit quality issuers and limits
the amount of exposure to any one issuer. A 50 basis point
decrease or increase in interest rates (10% of the
Companys weighted average interest rate) would have an
31
immaterial impact on the Companys pre-tax income. As of
December 31, 2007, the Company had two interest rate swaps
outstanding, as discussed in Note 9 to the Consolidated
Financial Statements. The Company does not enter into derivative
financial or derivative commodity instruments for trading or
speculative purposes.
Foreign
Exchange
The Company conducts business in various
non-U.S. countries,
primarily in Canada, Mexico, substantially all of the European
countries, Brazil, Argentina, Malaysia, China, India and other
Asian countries. Therefore, changes in the value of the
currencies of these countries affect the Companys
financial position and cash flows when translated into
U.S. Dollars. The Company has generally accepted the
exposure to exchange rate movements relative to its investment
in
non-U.S. operations.
The Company may, from time to time, for a specific exposure,
enter into fair value hedges. Certain individual operating
companies that have foreign exchange exposure have established
formal policies to mitigate risk in this area by using fair
value and/or
cash flow hedging. The Company has mitigated and will continue
to mitigate a portion of its currency exposure through operation
of
non-U.S. operating
companies in which the majority of all costs are local-currency
based. A change of 10% or less in the value of all foreign
currencies would not have a material effect on the
Companys financial position and cash flows.
32
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
|
|
|
Page
|
|
|
|
|
|
|
34
|
|
Managements Report on Internal Control Over Financial
Reporting
|
35
|
|
Report of Independent Registered Public Accounting Firm
|
37
|
|
Consolidated Statements of Operations (For the years ended
December 31, 2007, 2006 and 2005)
|
38
|
|
Consolidated Balance Sheets (At December 31, 2007 and 2006)
|
39
|
|
Consolidated Statements of Stockholders Equity and
Comprehensive Earnings (For the years ended December 31, 2007,
2006 and 2005)
|
40
|
|
Consolidated Statements of Cash Flows (For the years ended
December 31, 2007, 2006 and 2005)
|
41-70
|
|
Notes to Consolidated Financial Statements
|
71
|
|
Financial Statement Schedule Schedule II, Valuation
and Qualifying Accounts
|
(All
other schedules are not required and have been
omitted)
33
MANAGEMENTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of the Company is responsible for establishing
and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act
Rule 13a-15(f).
The Companys management assessed the effectiveness of the
Companys internal control over financial reporting as of
December 31, 2007. In making this assessment, the
Companys management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework.
Based on its assessment under the criteria set forth in
Internal Control Integrated Framework,
management concluded that, as of December 31, 2007, the
Companys internal control over financial reporting was
effective to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles.
In making its assessment of internal control over financial
reporting as of December 31, 2007, management has excluded
those companies acquired in purchase business combinations
during 2007, which included Biode, Pole/Zero Corporation, Theta
Oilfield Services, Hanmecson International, Griswold Pump,
Windrock Inc. and Industrial Motion Control LLC. These companies
are wholly-owned by the Company and their total revenue for the
year ended December 31, 2007 represents approximately 1% of
the Companys consolidated total revenue for the same
period and their assets represent approximately 4% of the
Companys consolidated assets as of December 31, 2007.
The effectiveness of the Companys internal control over
financial reporting as of December 31, 2007 has been
audited by PricewaterhouseCoopers LLP, an independent registered
public accounting firm, as stated in their report which appears
herein.
34
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Dover Corporation:
In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of Dover Corporation and its subsidiaries
at December 31, 2007 and 2006, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2007 in conformity with
accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedule listed in the accompanying index presents fairly, in
all material respects, the information set forth therein when
read in conjunction with the related consolidated financial
statements. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2007 based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for these financial
statements and financial statement schedule, for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in Managements Report
on Internal Control Over Financial Reporting, appearing
under Item 8. Our responsibility is to express opinions on
these financial statements, on the financial statement schedule,
and on the Companys internal control over financial
reporting based on our integrated audits. We conducted our
audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of
material misstatement and whether effective internal control
over financial reporting was maintained in all material
respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our
opinions.
As discussed in Note 1 to the consolidated financial
statements, the Company changed the manner in which it accounts
for uncertain income tax positions in 2007 and share-based
compensation and defined benefit pension and other
postretirement obligations in 2006.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
35
As described in Managements Report of Internal
Control Over Financial Reporting, management has excluded
Biode, Pole/Zero Corporation, Theta Oilfield Services, Hanmecson
International, Griswold Pump, Windrock Inc. and Industrial
Motion Control LLC from its assessment of internal control over
financial reporting as of December 31, 2007 because they
were acquired by the Company in purchase business combinations
during 2007. We have also excluded Biode, Pole/Zero Corporation,
Theta Oilfield Services, Hanmecson International, Griswold Pump,
Windrock Inc. and Industrial Motion Control LLC from our audit
of internal control over financial reporting. These companies
are wholly owned by the Company and their total revenue and
assets represent approximately 1% and 4% of the Companys
consolidated total revenue and assets, respectively, as
reflected in its financial statements as of and for the year
ended December 31, 2007.
/s/ PricewaterhouseCoopers
LLP
New York, New York
February 28, 2008
36
DOVER
CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands, except per share figures)
|
|
|
Revenue
|
|
$
|
7,226,089
|
|
|
$
|
6,329,279
|
|
|
$
|
5,134,828
|
|
Cost of goods and services
|
|
|
4,604,422
|
|
|
|
4,020,702
|
|
|
|
3,303,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
2,621,667
|
|
|
|
2,308,577
|
|
|
|
1,831,654
|
|
Selling and administrative expenses
|
|
|
1,640,977
|
|
|
|
1,410,654
|
|
|
|
1,183,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
980,690
|
|
|
|
897,923
|
|
|
|
647,943
|
|
Interest expense, net
|
|
|
89,008
|
|
|
|
76,984
|
|
|
|
72,243
|
|
Other expense (income), net
|
|
|
4,078
|
|
|
|
11,446
|
|
|
|
(12,736
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest/other expense, net
|
|
|
93,086
|
|
|
|
88,430
|
|
|
|
59,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before provision for income taxes and discontinued
operations
|
|
|
887,604
|
|
|
|
809,493
|
|
|
|
588,436
|
|
Provision for income taxes
|
|
|
234,331
|
|
|
|
217,038
|
|
|
|
155,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
|
653,273
|
|
|
|
592,455
|
|
|
|
432,503
|
|
Earnings (loss) from discontinued operations, net
|
|
|
7,807
|
|
|
|
(30,673
|
)
|
|
|
77,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
661,080
|
|
|
$
|
561,782
|
|
|
$
|
510,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
3.24
|
|
|
$
|
2.91
|
|
|
$
|
2.13
|
|
Earnings (loss) from discontinued operations
|
|
|
0.04
|
|
|
|
(0.15
|
)
|
|
|
0.38
|
|
Net earnings
|
|
|
3.28
|
|
|
|
2.76
|
|
|
|
2.51
|
|
Weighted average shares outstanding
|
|
|
201,330
|
|
|
|
203,773
|
|
|
|
202,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
3.22
|
|
|
|
2.88
|
|
|
$
|
2.12
|
|
Earnings (loss) from discontinued operations
|
|
|
0.04
|
|
|
|
(0.15
|
)
|
|
|
0.38
|
|
Net earnings
|
|
|
3.26
|
|
|
|
2.73
|
|
|
|
2.50
|
|
Weighted average shares outstanding
|
|
|
202,918
|
|
|
|
205,497
|
|
|
|
204,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid per common share
|
|
$
|
0.77
|
|
|
$
|
0.71
|
|
|
$
|
0.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table is a reconciliation of the share amounts
used in computing earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Weighted average shares outstanding Basic
|
|
|
201,330
|
|
|
|
203,773
|
|
|
|
202,979
|
|
Dilutive effect of assumed exercise of employee stock options
|
|
|
1,588
|
|
|
|
1,724
|
|
|
|
1,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding Diluted
|
|
|
202,918
|
|
|
|
205,497
|
|
|
|
204,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares excluded from diluted EPS computation
|
|
|
3,241
|
|
|
|
1,716
|
|
|
|
4,339
|
|
See Notes Consolidated Financial Statements.
37
DOVER
CORPORATION
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
At December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
602,412
|
|
|
$
|
374,845
|
|
Receivables, net of allowances of $32,471 and $28,070
|
|
|
1,097,697
|
|
|
|
1,040,286
|
|
Inventories, net
|
|
|
681,600
|
|
|
|
694,631
|
|
Prepaid and other current assets
|
|
|
85,052
|
|
|
|
64,580
|
|
Deferred tax asset
|
|
|
77,477
|
|
|
|
64,369
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
2,544,238
|
|
|
|
2,238,711
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
885,145
|
|
|
|
815,188
|
|
Goodwill
|
|
|
3,293,986
|
|
|
|
3,143,034
|
|
Intangible assets, net
|
|
|
1,070,574
|
|
|
|
1,065,382
|
|
Other assets and deferred charges
|
|
|
169,185
|
|
|
|
122,841
|
|
Assets of discontinued operations
|
|
|
106,642
|
|
|
|
241,501
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
8,069,770
|
|
|
$
|
7,626,657
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Notes payable and current maturities of long-term debt
|
|
$
|
638,649
|
|
|
$
|
290,549
|
|
Accounts payable
|
|
|
416,388
|
|
|
|
401,137
|
|
Accrued compensation and employee benefits
|
|
|
304,390
|
|
|
|
273,493
|
|
Accrued insurance
|
|
|
116,687
|
|
|
|
121,375
|
|
Other accrued expenses
|
|
|
186,940
|
|
|
|
181,878
|
|
Federal and other taxes on income
|
|
|
18,138
|
|
|
|
179,596
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,681,192
|
|
|
|
1,448,028
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
1,452,003
|
|
|
|
1,480,491
|
|
Deferred income taxes
|
|
|
316,069
|
|
|
|
332,846
|
|
Other deferrals
|
|
|
602,840
|
|
|
|
404,721
|
|
Liabilities of discontinued operations
|
|
|
71,493
|
|
|
|
149,549
|
|
Commitments and contingent liabilities
|
|
|
|
|
|
|
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
244,548
|
|
|
|
242,293
|
|
Additional paid-in capital
|
|
|
353,031
|
|
|
|
241,455
|
|
Accumulated other comprehensive earnings
|
|
|
217,648
|
|
|
|
48,852
|
|
Retained earnings
|
|
|
4,870,460
|
|
|
|
4,421,927
|
|
Common stock in treasury
|
|
|
(1,739,514
|
)
|
|
|
(1,143,505
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
3,946,173
|
|
|
|
3,811,022
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
8,069,770
|
|
|
$
|
7,626,657
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
38
DOVER
CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND
COMPREHENSIVE EARNINGS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Comprehensive
|
|
|
|
Stock
|
|
|
Paid-In
|
|
|
Comprehensive
|
|
|
Retained
|
|
|
Treasury
|
|
|
Stockholders
|
|
|
|
Earnings
|
|
|
|
$1 Par Value
|
|
|
Capital
|
|
|
Earnings (Loss)
|
|
|
Earnings
|
|
|
Stock
|
|
|
Equity
|
|
|
|
(Loss)
|
|
|
|
(In thousands, except per share figures)
|
|
Balance at 12/31/2004
|
|
$
|
239 ,015
|
|
|
$
|
98,979
|
|
|
$
|
195,220
|
|
|
$
|
3,628,715
|
|
|
$
|
(1,043,247
|
)
|
|
$
|
3,118,682
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
510,142
|
|
|
|
|
|
|
|
510,142
|
|
|
|
$
|
510,142
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(133,913
|
)
|
|
|
|
|
|
|
(133,913
|
)
|
|
|
|
|
|
Common stock issued for options exercised
|
|
|
762
|
|
|
|
18,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,220
|
|
|
|
|
|
|
Tax benefit from the exercise of stock options
|
|
|
|
|
|
|
3,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,628
|
|
|
|
|
|
|
Common stock issued, net of cancellations
|
|
|
19
|
|
|
|
1,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,135
|
|
|
|
|
|
|
Common stock acquired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51,929
|
)
|
|
|
(51,929
|
)
|
|
|
|
|
|
Translation of foreign financial statements
|
|
|
|
|
|
|
|
|
|
|
(134,540
|
)
|
|
|
|
|
|
|
|
|
|
|
(134,540
|
)
|
|
|
|
(134,540
|
)
|
Unrealized holding gains, net of tax
|
|
|
|
|
|
|
|
|
|
|
3,014
|
|
|
|
|
|
|
|
|
|
|
|
3,014
|
|
|
|
|
3,014
|
|
Minimum pension liability adjustment (SFAS No. 87)
|
|
|
|
|
|
|
|
|
|
|
(5,916
|
)
|
|
|
|
|
|
|
|
|
|
|
(5,916
|
)
|
|
|
|
(5,916
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 12/31/2005
|
|
|
239,796
|
|
|
|
122,181
|
|
|
|
57,778
|
|
|
|
4,004,944
|
|
|
|
(1,095,176
|
)
|
|
|
3,329,523
|
|
|
|
$
|
372,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
561,782
|
|
|
|
|
|
|
|
561,782
|
|
|
|
$
|
561,782
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(144,799
|
)
|
|
|
|
|
|
|
(144,799
|
)
|
|
|
|
|
|
Common stock issued for options exercised
|
|
|
2,486
|
|
|
|
74,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,427
|
|
|
|
|
|
|
Tax benefit from the exercise of stock options
|
|
|
|
|
|
|
15,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,316
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
28,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,460
|
|
|
|
|
|
|
Common stock issued, net of cancellations
|
|
|
11
|
|
|
|
557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
568
|
|
|
|
|
|
|
Common stock acquired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48,329
|
)
|
|
|
(48,329
|
)
|
|
|
|
|
|
Translation of foreign financial statements
|
|
|
|
|
|
|
|
|
|
|
113,282
|
|
|
|
|
|
|
|
|
|
|
|
113,282
|
|
|
|
|
113,282
|
|
Unrealized holding losses, net of tax
|
|
|
|
|
|
|
|
|
|
|
(364
|
)
|
|
|
|
|
|
|
|
|
|
|
(364
|
)
|
|
|
|
(364
|
)
|
Minimum pension liability adjustment (SFAS No. 87)
|
|
|
|
|
|
|
|
|
|
|
1,660
|
|
|
|
|
|
|
|
|
|
|
|
1,660
|
|
|
|
|
1,660
|
|
Adjustment related to adoption of SFAS No. 158
|
|
|
|
|
|
|
|
|
|
|
(123,504
|
)
|
|
|
|
|
|
|
|
|
|
|
(123,504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 12/31/2006
|
|
|
242,293
|
|
|
|
241,455
|
|
|
|
48,852
|
|
|
|
4,421,927
|
|
|
|
(1,143,505
|
)
|
|
|
3,811,022
|
|
|
|
$
|
676,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of adoption of FIN 48 (See Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58,157
|
)
|
|
|
|
|
|
|
(58,157
|
)
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
661,080
|
|
|
|
|
|
|
|
661,080
|
|
|
|
$
|
661,080
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(154,390
|
)
|
|
|
|
|
|
|
(154,390
|
)
|
|
|
|
|
|
Common stock issued for options exercised
|
|
|
2,241
|
|
|
|
73,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,138
|
|
|
|
|
|
|
Tax benefit from the exercise of stock options
|
|
|
|
|
|
|
10,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,319
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
26,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,714
|
|
|
|
|
|
|
Common stock issued, net of cancellations
|
|
|
14
|
|
|
|
646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
660
|
|
|
|
|
|
|
Common stock acquired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(596,009
|
)
|
|
|
(596,009
|
)
|
|
|
|
|
|
Translation of foreign financial statements
|
|
|
|
|
|
|
|
|
|
|
116,933
|
|
|
|
|
|
|
|
|
|
|
|
116,933
|
|
|
|
|
116,933
|
|
Unrealized holding gains, net of tax
|
|
|
|
|
|
|
|
|
|
|
561
|
|
|
|
|
|
|
|
|
|
|
|
561
|
|
|
|
|
561
|
|
SFAS No. 158 amortization and adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
51,302
|
|
|
|
|
|
|
|
|
|
|
|
51,302
|
|
|
|
|
12,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 12/31/2007
|
|
$
|
244,548
|
|
|
$
|
353,031
|
|
|
$
|
217,648
|
|
|
$
|
4,870,460
|
|
|
$
|
(1,739,514
|
)
|
|
$
|
3,946,173
|
|
|
|
$
|
790,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, par value $100 per share. 100,000 shares
authorized; none issued.
|
|
|
Common Stock, par value $1 per share. 500,000,000 shares
authorized; 244,547,336 and 242,292,767 shares issued at
December 31, 2007 and 2006, respectively.
|
|
|
Treasury Stock, at cost; 50,508,428 and 37,976,618 shares
at December 31, 2007 and 2006, respectively.
|
|
|
Unrealized holding gains (losses), net of tax provision
(benefit) of $302, ($127) and $1,085 in 2007, 2006 and 2005,
respectively.
|
See Notes to Consolidated Financial Statements.
39
DOVER
CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Operating Activities of Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
661,080
|
|
|
$
|
561,782
|
|
|
$
|
510,142
|
|
Adjustments to reconcile net earnings to net cash from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss (earnings) from discontinued operations
|
|
|
(7,807
|
)
|
|
|
30,673
|
|
|
|
(77,639
|
)
|
Depreciation and amortization
|
|
|
245,028
|
|
|
|
195,633
|
|
|
|
148,538
|
|
Stock-based compensation
|
|
|
25,706
|
|
|
|
25,982
|
|
|
|
|
|
Provision for losses on accounts receivable
|
|
|
6,018
|
|
|
|
6,368
|
|
|
|
8,092
|
|
Deferred income taxes
|
|
|
(33,269
|
)
|
|
|
(15,004
|
)
|
|
|
17,742
|
|
Employee retirement benefits
|
|
|
50,657
|
|
|
|
43,580
|
|
|
|
27,418
|
|
Other non-current, net
|
|
|
(56,885
|
)
|
|
|
9,207
|
|
|
|
(50,339
|
)
|
Changes in current assets and liabilities (excluding effects of
acquisitions, dispositions and foreign exchange):
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in accounts receivable
|
|
|
5,109
|
|
|
|
(50,874
|
)
|
|
|
(112,223
|
)
|
Decrease (increase) in inventories
|
|
|
59,190
|
|
|
|
(6,648
|
)
|
|
|
51,840
|
|
Decrease (increase) in prepaid expenses and other assets
|
|
|
(15,475
|
)
|
|
|
(6,668
|
)
|
|
|
712
|
|
Increase (decrease) in accounts payable
|
|
|
(20,266
|
)
|
|
|
6,972
|
|
|
|
34,139
|
|
Increase in accrued expenses
|
|
|
2,077
|
|
|
|
31,257
|
|
|
|
85,428
|
|
Increase (decrease) in accrued taxes
|
|
|
3,315
|
|
|
|
45,903
|
|
|
|
(52,902
|
)
|
Contributions to defined benefit pension plan
|
|
|
(22,537
|
)
|
|
|
(12,081
|
)
|
|
|
(41,280
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities of continuing
operations
|
|
|
901,941
|
|
|
|
866,082
|
|
|
|
549,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities of Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the sale of property and equipment
|
|
|
24,485
|
|
|
|
19,007
|
|
|
|
11,789
|
|
Additions to property, plant and equipment
|
|
|
(174,252
|
)
|
|
|
(190,732
|
)
|
|
|
(126,395
|
)
|
Proceeds from sales of discontinued businesses
|
|
|
90,966
|
|
|
|
445,905
|
|
|
|
159,278
|
|
Acquisitions (net of cash and cash equivalents acquired)
|
|
|
(273,610
|
)
|
|
|
(1,116,780
|
)
|
|
|
(1,089,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities of continuing
operations
|
|
|
(332,411
|
)
|
|
|
(842,600
|
)
|
|
|
(1,044,978
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities of Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in notes payable, net
|
|
|
347,192
|
|
|
|
65,321
|
|
|
|
106,871
|
|
Reduction of long-term debt
|
|
|
(33,478
|
)
|
|
|
(811
|
)
|
|
|
(256,303
|
)
|
Proceeds from long-term-debt
|
|
|
3,895
|
|
|
|
163,597
|
|
|
|
590,658
|
|
Purchase of treasury stock
|
|
|
(596,009
|
)
|
|
|
(48,329
|
)
|
|
|
(51,929
|
)
|
Proceeds from exercise of stock options, including tax benefits
|
|
|
87,117
|
|
|
|
93,311
|
|
|
|
19,220
|
|
Dividends to stockholders
|
|
|
(154,390
|
)
|
|
|
(144,799
|
)
|
|
|
(133,913
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities of
continuing operations
|
|
|
(345,673
|
)
|
|
|
128,290
|
|
|
|
274,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities of
discontinued operations
|
|
|
(26,994
|
)
|
|
|
28,757
|
|
|
|
144,666
|
|
Net cash used in investing activities of discontinued operations
|
|
|
(3,652
|
)
|
|
|
(12,443
|
)
|
|
|
(29,271
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) discontinued operations
|
|
|
(30,646
|
)
|
|
|
16,314
|
|
|
|
115,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
34,356
|
|
|
|
19,816
|
|
|
|
(17,238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
227,567
|
|
|
|
187,902
|
|
|
|
(122,549
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
374,845
|
|
|
|
186,943
|
|
|
|
309,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
602,412
|
|
|
$
|
374,845
|
|
|
$
|
186,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental information cash paid during the
year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
276,404
|
|
|
$
|
159,232
|
|
|
$
|
190,395
|
|
Interest
|
|
|
112,243
|
|
|
|
95,717
|
|
|
|
76,659
|
|
See Notes to Consolidated Financial Statements.
40
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
1.
|
Description
of Business and Summary of Significant Accounting
Policies
|
Description
of Business
Dover Corporation (Dover or the Company)
is a diversified, multinational manufacturing corporation
comprised of operating companies which manufacture a broad range
of specialized industrial products and components as well as
related services and consumables. The Company also provides
engineering, testing and other similar services, which are not
significant in relation to consolidated revenue. Dovers
operating companies are based primarily in the United States of
America and Europe with manufacturing and other operations
throughout the world. The Company reports its results in four
segments, Industrial Products, Engineered Systems, Fluid
Management and Electronic Technologies. For additional
information on Dovers segments, see Note 14.
Consolidation
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. Intercompany
accounts and transactions have been eliminated in consolidation.
The results of operations of purchased businesses are included
from the dates of acquisitions. The assets, liabilities, results
of operations and cash flows of all discontinued operations have
been separately reported as discontinued operations for all
periods presented. Certain amounts in prior years have been
reclassified to conform to the current year presentation.
Use of
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenue
and expenses during the reporting period. Actual results could
differ from those estimates. Significant estimates include
allowances for doubtful accounts receivable, net realizable
value of inventories, restructuring charges, valuation of
goodwill and intangible assets, pension and post retirement
assumptions, useful lives associated with amortization and
depreciation of intangibles and fixed assets, warranty reserves,
income taxes and tax valuation reserves, environmental reserves,
legal reserves, insurance reserves and the valuations of
discontinued assets and liabilities.
Cash
and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits
and short-term investments which are highly liquid in nature and
have original maturities at the time of purchase of three months
or less.
Accounts
Receivable and Allowance for Doubtful Accounts
Accounts receivable is composed principally of trade accounts
receivable that arise primarily from the sale of goods or
services on account and are stated at historical cost.
Management at each operating company evaluates accounts
receivable to estimate the amount of accounts receivable that
will not be collected in the future and records the appropriate
provision. The provision for doubtful accounts is recorded as a
charge to operating expense and reduces accounts receivable. The
estimated allowance for doubtful accounts is based primarily on
managements evaluation of the aging of the accounts
receivable balance, the financial condition of its customers,
historical trends and the time outstanding of specific balances.
Actual collections of accounts receivable could differ from
managements estimates due to changes in future economic,
industry or customers financial conditions.
Fair
Value of Financial Instruments
The carrying amount of cash and cash equivalents, trade
receivables, accounts payable, notes payable and accrued
expenses approximates fair value due to the short maturity, less
than one year, of these instruments.
41
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Inventories
Inventories for the majority of the Companys subsidiaries,
including all international subsidiaries, are stated at the
lower of cost, determined on the
first-in,
first-out (FIFO) basis, or market. Other domestic inventory is
stated at cost, determined on the
last-in,
first-out (LIFO) basis, which is less than market value.
Property,
Plant and Equipment
Property, plant and equipment includes the historic cost of
land, buildings, equipment and significant improvements to
existing plant and equipment or in the case of acquisitions, a
fair market value appraisal of such assets completed at the time
of acquisition. Expenditures for maintenance, repairs and minor
renewals are expensed as incurred. When property or equipment is
sold or otherwise disposed of, the related cost and accumulated
depreciation is removed from the respective accounts and the
gain or loss realized on disposition is reflected in earnings.
Depreciation expense was $150.4 million in 2007,
$126.8 million in 2006, and $106.6 million in 2005 and
was calculated on a straight-line basis for all periods
presented. The Company depreciates its assets over their
estimated useful lives as follows: buildings, 5 to
31.5 years; machinery and equipment 3 to 7 years;
furniture and fixtures 3 to 7 years; and vehicles
3 years.
Derivative
Instruments
The Company periodically enters into fair value and cash flow
hedge transactions specifically to hedge its exposures to
various items, including but not limited to interest rate and
foreign exchange rate risk. The Company does not enter into
derivative financial instruments for speculative purposes and
does not have a material portfolio of derivative financial
instruments.
In accordance with Statement of Financial Accounting Standards
(SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities and related amendments
and interpretations, the Company recognizes all derivatives as
either assets or liabilities on the balance sheet and measures
those instruments at fair value. If the derivative is designated
as a fair value hedge and is effective, the changes in the fair
value of the derivative and of the hedged item attributable to
the hedged risk are recognized in earnings in the same period.
If the derivative is designated as a cash flow hedge, the
effective portions of changes in the fair value of the
derivative are recorded in other comprehensive earnings and are
recognized in the statement of operations when the hedged item
affects income. Ineffective portions of changes in the fair
value of cash flow hedges are recognized in earnings.
Tests for hedge ineffectiveness are conducted periodically and
any ineffectiveness found is recognized in the statement of
operations. The fair market value of all outstanding
transactions is recorded in the Other assets and deferred
charges, or Other deferrals section of the balance sheet, as
applicable. The corresponding change in value of the hedged
assets/liabilities is recorded directly in that section of the
balance sheet.
During 2006, the Company entered into derivative contracts to
hedge potential foreign currency exposure on current assets and
liabilities. The contracts were designated as fair value hedges
and were considered by management to be highly effective. The
derivative foreign exchange contracts settled during 2006 and
resulted in a gain of approximately $0.6 million, which is
recognized in Revenue and Other Expense (Income), net.
42
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At December 31, 2007, the Company had open foreign exchange
forward purchase contracts, expiring through February, 2008,
related to fair value hedges of foreign currency exposures, as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currencies Sold
|
|
|
U.S.
|
|
Average
|
|
|
|
Average
|
|
Swiss Franc
|
|
Average
|
|
|
Dollar
|
|
Contract
|
|
Euro
|
|
Contract
|
|
Dollar
|
|
Contract
|
Currencies Purchased
|
|
Value
|
|
Rate
|
|
Value
|
|
Rate
|
|
Value
|
|
Rate
|
|
|
(In thousands)
|
|
Euro
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
|
1.6379
|
|
Swiss Franc
|
|
|
11,000
|
|
|
|
0.8812
|
|
|
|
4,000
|
|
|
|
0.6038
|
|
|
|
|
|
|
|
|
|
Goodwill
and Other Intangible Assets
Goodwill is the excess of the acquisition cost of businesses
over the fair value of the identifiable net assets acquired. In
accordance with SFAS No. 142, Goodwill and Other
Intangible Assets, the Company does not amortize goodwill
and indefinite-lived intangible assets. Instead, these assets
are tested for impairment annually unless indicators of
impairment exist during the interim periods. For 2007 and 2006,
the Company identified 11 and 16 reporting units, respectively,
for testing purposes. Step one of the test compared the fair
value of the reporting unit (using a discounted cash flow
method) to its book value. Step two, which compares the book
value of the goodwill to its implied fair value, was not
necessary since there were no indicators of potential impairment
from step one. For information related to the amount of the
Companys goodwill by segment and intangible asset classes,
see Note 7.
Long-Lived
Assets
In accordance with SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, long
-lived assets (including intangible assets that are amortized)
are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. If an indicator of impairment exists for any
grouping of assets, an estimate of undiscounted future cash
flows is produced and compared to its carrying value. If an
asset is determined to be impaired, the loss is measured by the
excess of the carrying amount of the asset over its fair value
as determined by an estimate of discounted future cash flows.
Foreign
Currency
Assets and liabilities of
non-U.S. subsidiaries,
where the functional currency is not the U.S. dollar, have
been translated at year-end exchange rates and profit and loss
accounts have been translated using weighted average yearly
exchange rates. Adjustments resulting from translation have been
recorded in the equity section of the balance sheet as
cumulative translation adjustments. Assets and liabilities of an
entity that are denominated in currencies other than an
entitys functional currency are remeasured into the
functional currency using end of period exchange rates or
historical rates where applicable to certain balances. Gains and
losses related to these remeasurements are recorded within the
Statement of Operations as a component of Other Expense
(Income), net.
Revenue
Recognition
Revenue is recognized when all of the following circumstances
are satisfied: a) persuasive evidence of an arrangement
exists, b) price is fixed or determinable,
c) collectability is reasonably assured, and
d) delivery has occurred. In revenue transactions where
installation is required, revenue can be recognized when the
installation obligation is not essential to the functionality of
the delivered products. Revenue transactions involving
non-essential installation obligations are those which can
generally be completed in a short period of time at
insignificant cost and the skills required to complete these
installations are not unique to the Company and in many cases
can be provided by third parties or the customers. If the
installation obligation is essential to the functionality of the
delivered product, revenue recognition is deferred until
installation is complete. In addition, when it is determined
that there are multiple deliverables to a sales arrangement, the
Company will allocate
43
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
consideration received to the separate deliverables based on
their relative fair values and recognize revenue based on the
appropriate criteria for each deliverable identified. In a
limited number of revenue transactions, other post-shipment
obligations such as training and customer acceptance are
required and, accordingly, revenue recognition is deferred until
the customer is obligated to pay, or acceptance has been
confirmed. Service revenue is recognized and earned when
services are performed and is not significant to any period
presented.
Stock-Based
Compensation
Prior to 2006, Dover accounted for stock-based compensation in
accordance with Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to
Employees, and followed the disclosure only provisions of
SFAS No. 123 Accounting for Stock-Based
Compensation. Accordingly, no compensation expense was
recognized in the Companys 2005 Statement of Operations in
connection with stock-based compensation granted to employees.
Effective January 1, 2006, Dover adopted Statement of
Financial Accounting Standard No. 123(R), Share Based
Payment (SFAS No. 123(R)), which no
longer permits the use of the intrinsic value method under APB
No. 25. The Company used the modified prospective method to
adopt SFAS No. 123(R), which requires compensation
expense to be recorded for all stock-based compensation granted
on or after January 1, 2006, as well as the unvested
portion of previously granted options. The Company is recording
the compensation expense on a straight-line basis, generally
over the explicit service period of three years (except for
retirement eligible employees and retirees). Prior to adoption,
the Company calculated its pro-forma footnote disclosure related
to stock-based compensation using the explicit service period
for all employees, and will continue to vest those awards over
their explicit service period. Concurrent with the adoption of
SFAS No. 123(R), the Company changed its accounting
policy for awards granted after January 1, 2006 to expense
immediately awards granted to retirement eligible employees and
to shorten the vesting period for any employee who will become
eligible to retire within the three-year explicit service
period. Expense for these employees will be recorded over the
period from the date of grant through the date the employee
first becomes eligible to retire and is no longer required to
provide service.
For additional information related to stock-based compensation,
including activity for 2007, 2006 and 2005, see Note 10.
Income
Taxes
The provision for income taxes on continuing operations includes
federal, state, local and
non-U.S. taxes.
Tax credits, primarily for research and experimentation and
non-U.S. earnings
and export programs, are recognized as a reduction of the
provision for income taxes on continuing operations in the year
in which they are available for tax purposes. Deferred taxes are
provided on temporary differences between assets and liabilities
for financial and tax reporting purposes as measured by enacted
tax rates expected to apply when temporary differences are
settled or realized. Future tax benefits are recognized to the
extent that realization of those benefits is considered to be
more likely than not. A valuation allowance is established for
deferred tax assets for which realization is not assured. The
Company has not provided for any residual U.S. income taxes
on unremitted earnings of
non-U.S. subsidiaries
as such earnings are currently intended to be indefinitely
reinvested.
During 2005, the Company recorded a net U.S. tax provision
of $9.5 million related to the repatriation of
$373.7 million of
non-U.S. dividends
under the provisions of the American Jobs Creation Act of 2004,
which provides for a favorable income tax rate on repatriated
earnings, provided the criteria of the law are met.
See Note 2 below for a discussion of the impact of
Financial Accounting Standards Board (FASB)
Interpretation No. 48, Accounting for Uncertainty in
Income Taxes (FIN 48).
Research
and Development Costs
Research and development expenditures, including qualifying
engineering costs, are expensed when incurred and amounted to
$212.6 million in 2007, $155.0 million in 2006 and
$144.7 million in 2005.
44
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Risk,
Retention, Insurance
The Companys property and casualty insurance programs
contain various deductibles that, based on the Companys
experience, are typical and customary for a company of its size
and risk profile. The Company does not consider any of the
deductibles to represent a material risk to the Company. The
Company generally maintains deductibles for claims and
liabilities related primarily to workers compensation,
health and welfare claims, general commercial, product and
automobile liability and property damage, and business
interruption resulting from certain events. The Company accrues
for claim exposures that are probable of occurrence and can be
reasonably estimated. As part of the Companys risk
management program, insurance is maintained to transfer risk
beyond the level of self-retention and provides protection on
both an individual claim and annual aggregate basis. The Company
currently self-insures its product and commercial general
liability claims up to $5.0 million per occurrence, its
workers compensation claims up to $0.5 million per
occurrence, and automobile liability claims up to
$1.0 million per occurrence. Third-party insurance provides
primary level coverage in excess of these amounts up to certain
specified limits. In addition, the Company has excess liability
insurance from third-party insurers on both an aggregate and an
individual occurrence basis well in excess of the limits of the
primary coverage. A worldwide program of property insurance
covers the Companys owned and leased property and any
business interruptions that may occur due to an insured hazard
affecting those properties, subject to reasonable deductibles
and aggregate limits.
Employee
Benefit Plans
Effective December 31, 2006, Dover adopted
SFAS No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans, an
Amendment of FASB Statements No. 87, 88, 106, and
132(R) (SFAS No. 158). For
additional information on Dovers employee benefit plans,
see Recent Accounting Standards below and
Note 13.
Recent
Accounting Standards
Effective December 31, 2006, Dover adopted
SFAS No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans, an
Amendment of Financial Accounting Standards Board
(FASB) Statements No. 87, 88, 106, and
132(R) (SFAS No. 158).
SFAS No. 158 required companies to report the funded
status of their defined benefit pension and other postretirement
benefit plans on their balance sheets as a net liability or
asset. Upon adoption at December 31, 2006, Dover recorded a
net reduction to stockholders equity of
$123.5 million, net of tax. In addition, effective for
fiscal years ending after December 15, 2008, the new
standard will require companies to measure benefit obligations
and plan assets as of a Companys fiscal year end
(December 31, 2008 for Dover), using one of the methods
prescribed in the standard. Dover expects to adopt the new
valuation date requirements using the
15-month
alternative, as prescribed in the standard, which will result in
a charge of approximately $10.0 million to retained
earnings in 2008.
Effective January 1, 2007, Dover adopted FIN 48. See
Note 2 for additional information on the adoption of this
standard.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements
(SFAS No. 157), which defines fair value,
establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. For financial assets and
liabilities, this statement is effective for fiscal periods
beginning after November 15, 2007 and does not require any
new fair value measurements. In February 2008, the FASB Staff
Position
No. 157-2
was issued which delayed the effective date of FASB Statement
No. 157 to fiscal years ending after November 15, 2008
for nonfinancial assets and liabilities, except for items that
are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). The Company
does not expect the adoption of SFAS No. 157 to have a
material effect on its consolidated financial statements.
45
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities including an amendment of FASB Statement
No. 115. This statement permits entities to choose to
measure many financial instruments and certain other items at
fair value. This statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007,
including interim periods within that fiscal year. The Company
did not elect the fair value option for any of its existing
financial instruments as of January 1, 2008 and the Company
has not determined whether or not it will elect this option for
financial instruments it may acquire in the future.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51
(SFAS 160). SFAS 160 requires that a
noncontrolling interest in a subsidiary be reported as equity
and the amount of consolidated net income specifically
attributable to the noncontrolling interest be identified in the
consolidated financial statements. It also requires consistency
in the manner of reporting changes in the parents
ownership interest and requires fair value measurement of any
noncontrolling equity investment retained in a deconsolidation.
The Company will apply the provisions of this statement
prospectively, as required, beginning on January 1, 2009
and does not expect the adoption of SFAS 160 to have a
material effect on its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations
(SFAS 141(R)). SFAS 141(R) retains the
fundamental requirements in Statement 141 that the acquisition
method of accounting (which Statement 141 called the purchase
method) be used for all business combinations and for an
acquirer to be identified for each business combination. In
general, the statement 1) broadens the guidance of
SFAS 141, extending its applicability to all events where
one entity obtains control over one or more other businesses,
2) broadens the use of fair value measurements used to
recognize the assets acquired and liabilities assumed,
3) changes the accounting for acquisition related fees and
restructuring costs incurred in connection with an acquisition
and 4) increases required disclosures. The Company will
apply the provisions of this statement prospectively to business
combinations for which the acquisition date is on or after
January 1, 2009 and is currently assessing the impact of
adoption of SFAS 141(R) on its consolidated financial
statements.
2. New
Accounting Pronouncements
FIN 48
Effective January 1, 2007, the Company adopted FIN 48
which specifies the way companies are to account for uncertainty
in income tax reporting, and prescribes a methodology for
recognizing, reversing and measuring the tax benefits of a tax
position taken, or expected to be taken, in a tax return. As a
result of adopting the new standard, the Company recorded a
$58.2 million increase to reserves as a cumulative
effect decrease to opening retained earnings as of
January 1, 2007, of which $53.4 million is included in
continuing operations. Including this cumulative
effect adjustment, the Company had unrecognized tax
benefits, net of indirect benefits and deposits, of
$190.5 million at January 1, 2007, of which
$35.4 million related to accrued interest and penalties.
The portion of the unrecognized tax benefits at January 1,
2007 included in continuing operations totaled
$147.6 million, of which $28.0 million related to
accrued interest and penalties. For additional information on
the Companys income taxes and unrecognized tax benefits
see Note 11.
Stock-Based
Compensation
As discussed in Note 1, the Company adopted
SFAS No. 123(R) on January 1, 2006. The following
table illustrates the effect on net earnings and basic and
diluted earnings per share if the Company had recognized
46
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
compensation expense for stock options granted in prior years.
The 2005 pro forma amount in this table was based on the
explicit service periods (three years) of the options granted
without consideration of retirement eligibility:
|
|
|
|
|
|
|
For the Year Ended
|
|
|
|
December 31, 2005
|
|
|
|
(In thousands,
|
|
|
|
except per
|
|
|
|
share figures)
|
|
|
Net earnings, as reported
|
|
$
|
510,142
|
|
Deduct:
|
|
|
|
|
Total stock based employee compensation expense determined under
fair value based method for all awards, net of tax effects
|
|
|
20,033
|
(A)
|
|
|
|
|
|
Pro forma net earnings
|
|
$
|
490,109
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
Basic-as reported
|
|
$
|
2.51
|
|
Basic-pro forma
|
|
|
2.41
|
|
Diluted-as reported
|
|
|
2.50
|
|
Diluted-pro forma
|
|
|
2.40
|
|
|
|
|
(A) |
|
Had the Company applied the new accounting treatment for
retirement eligible employees to grants made prior to 2006,
stock-based compensation expense, net of tax benefits, would
have been $18.0 million in 2005. |
All of the Companys acquisitions have been accounted for
under SFAS No. 141, Business Combinations.
Accordingly, the accounts of the acquired companies, after
adjustments to reflect fair market values assigned to assets and
liabilities, have been included in the consolidated financial
statements from their respective dates of acquisition.
The 2007 acquisitions (see list below) are wholly-owned and had
an aggregate cost of $273.6 million, net of cash acquired,
at the date of acquisition. There is no material contingent
consideration related to the acquisitions at December 31,
2007. In connection with certain acquisitions, at
December 31, 2007 and 2006, the Company had reserves
related to severance and facility closings of $26.8 million
and $17.9 million, respectively. During 2007, the Company
recorded purchase accounting reserves related to acquisitions of
$12.8 million and paid $3.9 million. The reserves were
recorded as of the date of acquisition and in accordance with
the provisions of Emerging Issues Task Force Issue
No. 95-3,
Recognition of Liabilities in Connection with a Purchase
Business Combination.
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
|
Type
|
|
Acquired Companies
|
|
Location (Near)
|
|
Segment
|
|
Platform
|
|
Operating Company
|
|
31-Jan
|
|
Stock
|
|
Biode
|
|
Westbrook, ME
|
|
Electronic Technologies
|
|
N/A
|
|
Vectron
|
Designer and manufacturer of fluid viscosity sensors and
viscometer readers.
|
28-Feb
|
|
Asset
|
|
Pole/Zero Corporation
|
|
West Chester, OH
|
|
Electronic Technologies
|
|
N/A
|
|
MPG
|
Designer and manufacturer of radio frequency filters that
resolve wireless communication interference issues.
|
31-Mar
|
|
Asset
|
|
Theta Oilfield Services
|
|
Brea, CA
|
|
Fluid Management
|
|
Energy
|
|
EPG
|
Provider of oilwell optimization software
|
31-Jul
|
|
Asset
|
|
Hanmecson International
|
|
Haimen, China
|
|
Industrial Products
|
|
Mobile Equipment
|
|
Rotary Lift
|
Manufacturer of vehicle lifts including lifts for residential
and car enthusiast markets.
|
18-Sep
|
|
Stock
|
|
Griswold Pump
|
|
Thomasville, GA
|
|
Fluid Management
|
|
Fluid Solutions
|
|
Wilden
|
Manufacturer of centrifugal pumps and peripheral products.
|
1-Nov
|
|
Stock
|
|
Windrock Inc.
|
|
Knoxville, TN
|
|
Fluid Management
|
|
Energy
|
|
GEG
|
Manufacturer of portable and online monitoring and diagnostic
equipment used in the gas, oil, petrochemical, marine and power
generation industries.
|
18-Dec
|
|
Asset
|
|
Industrial Motion Control LLC
|
|
Wheeling, IL
|
|
Industrial Products
|
|
Material Handling
|
|
DE-STA-CO
|
Industrial automation manufacturer of mechanical motion control
products.
|
47
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For certain acquisitions that occurred in 2007, the Company is
in the process of obtaining or finalizing appraisals of tangible
and intangible assets and it is continuing to evaluate the
initial purchase price allocations, as of the acquisition date,
which will be adjusted as additional information relative to the
fair values of the assets and liabilities of the businesses
becomes known. Accordingly, management has used their best
estimate in the initial purchase price allocation as of the date
of these financial statements.
The following table summarizes the estimated fair values of the
assets acquired and liabilities assumed as of the dates of the
2007 acquisitions and the amounts assigned to goodwill and
intangible asset classifications:
|
|
|
|
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Current assets, net of cash acquired
|
|
$
|
39,865
|
|
PP&E
|
|
|
27,043
|
|
Goodwill
|
|
|
111,272
|
|
Intangibles
|
|
|
112,519
|
|
Other assets
|
|
|
4,522
|
|
|
|
|
|
|
Total assets acquired
|
|
|
295,221
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
(21,611
|
)
|
|
|
|
|
|
Net assets acquired
|
|
$
|
273,610
|
|
|
|
|
|
|
The amounts assigned to goodwill and major intangible asset
classifications by segment for the 2007 acquisitions are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
Electronic
|
|
|
Fluid
|
|
|
Industrial
|
|
|
|
|
|
Amortization
|
|
|
|
Technologies
|
|
|
Management
|
|
|
Products
|
|
|
Total
|
|
|
Period (Years)
|
|
|
|
(dollar amounts in thousands)
|
|
|
Goodwill Tax deductible
|
|
$
|
50,075
|
|
|
$
|
19,623
|
|
|
$
|
32,368
|
|
|
$
|
102,066
|
|
|
|
N/A
|
|
Goodwill Non-tax deductible
|
|
|
1,194
|
|
|
|
8,012
|
|
|
|
|
|
|
|
9,206
|
|
|
|
N/A
|
|
Trademarks
|
|
|
7,000
|
|
|
|
2,250
|
|
|
|
8,400
|
|
|
|
17,650
|
|
|
|
29
|
|
Patents
|
|
|
12,830
|
|
|
|
|
|
|
|
|
|
|
|
12,830
|
|
|
|
13
|
|
Customer intangibles
|
|
|
30,850
|
|
|
|
7,640
|
|
|
|
37,051
|
|
|
|
75,541
|
|
|
|
9
|
|
Unpatented technologies
|
|
|
|
|
|
|
1,390
|
|
|
|
|
|
|
|
1,390
|
|
|
|
9
|
|
Other intangibles
|
|
|
1,100
|
|
|
|
2,459
|
|
|
|
1,549
|
|
|
|
5,108
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
103,049
|
|
|
$
|
41,374
|
|
|
$
|
79,368
|
|
|
$
|
223,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
2006
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
|
Type
|
|
|
Acquired Companies
|
|
|
Location (Near)
|
|
|
Segment
|
|
|
Platform
|
|
|
Operating Company
|
|
|
27-Dec
|
|
|
Asset
|
|
|
|
Magnum Systems Inc.
|
|
|
|
Tampa, FL
|
|
|
|
Industrial Products
|
|
|
|
Material Handling
|
|
|
|
Paladin
|
|
Manufacturer of mulching attachments for use in land clearing,
right-of-way
clearing and site development
|
6-Dec
|
|
|
Stock
|
|
|
|
Markem Corp.
|
|
|
|
Keene, N.H.
|
|
|
|
Engineered Systems
|
|
|
|
Product Identification
|
|
|
|
N/A
|
|
Provides printing solutions, including equipment, software,
supplies and services for the food and beverage, cosmetics,
pharmaceutical and electronics industries
|
6-Oct
|
|
|
Asset
|
|
|
|
Environ Holdings
|
|
|
|
Smithfield, North Carol
|
|
|
|
Fluid Management
|
|
|
|
Fluid Solutions
|
|
|
|
OPW FC
|
|
Manufacturer of environmentally safe underground piping
components used in fuel delivery systems
|
30-Aug
|
|
|
Stock
|
|
|
|
Paladin Brands Holding Inc.
|
|
|
|
Cedar Rapids, Iowa
|
|
|
|
Industrial Products
|
|
|
|
Material Handling
|
|
|
|
N/A
|
|
Manufacturer of attachments and tools used in heavy and light
mobile equipment
|
12-May
|
|
|
Stock
|
|
|
|
ONeil Product Development Inc.
|
|
|
|
Irvine, CA
|
|
|
|
Engineered Systems
|
|
|
|
Product Identification
|
|
|
|
PI Group
|
|
Manufacturer of portable printers and related media consumables
sold under the ONeil brand and to various OEM partners
|
28-Feb
|
|
|
Stock
|
|
|
|
Cash Point Machines PLC
|
|
|
|
Barnstaple, U.K.
|
|
|
|
Engineered Systems
|
|
|
|
Engineered Products
|
|
|
|
Triton
|
|
Deployer of ATMs and ATM service management
|
27-Feb
|
|
|
Stock
|
|
|
|
Infocash/Cash Services Limited
|
|
|
|
Abingdon, U.K.
|
|
|
|
Engineered Systems
|
|
|
|
Engineered Products
|
|
|
|
Triton
|
|
Deployer of Automated Teller Machines (ATMs), and provider
of ATM field maintenance/repair and finance services
|
Pro
Forma Information
The following unaudited pro forma information illustrates the
effect on Dovers revenue and net earnings for the
twelve-month periods ended December 31, 2007 and 2006,
assuming that the 2007 and 2006 acquisitions had all taken place
on January 1, 2006.
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except per share figures)
|
|
|
Revenue from continuing operations:
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
7,226,089
|
|
|
$
|
6,329,279
|
|
Pro forma
|
|
|
7,323,528
|
|
|
|
6,993,291
|
|
Net earnings from continuing operations:
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
653,273
|
|
|
$
|
592,455
|
|
Pro forma
|
|
|
664,425
|
|
|
|
624,364
|
|
Basic earnings per share from continuing operations:
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
3.24
|
|
|
$
|
2.91
|
|
Pro forma
|
|
|
3.30
|
|
|
|
3.06
|
|
Diluted earnings per share from continuing operations:
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
3.22
|
|
|
$
|
2.88
|
|
Pro forma
|
|
|
3.27
|
|
|
|
3.04
|
|
These pro forma results of operations have been prepared for
comparative purposes only and include certain adjustments to
actual financial results for the relevant periods, such as
imputed financing costs, and estimated additional amortization
and depreciation expense as a result of intangibles and fixed
assets acquired. They do not purport to be indicative of the
results of operations that actually would have resulted had the
acquisitions occurred on the date indicated or that may result
in the future.
49
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
4. Inventories
The following table displays the components of inventory:
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
At December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Raw materials
|
|
$
|
321,034
|
|
|
$
|
322,630
|
|
Work in progress
|
|
|
158,565
|
|
|
|
165,993
|
|
Finished goods
|
|
|
253,989
|
|
|
|
254,256
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
733,588
|
|
|
|
742,879
|
|
Less LIFO reserve
|
|
|
51,988
|
|
|
|
48,248
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
681,600
|
|
|
$
|
694,631
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007 and 2006, domestic inventories, net
determined by the LIFO inventory method amounted to
$66.7 million and $92.2 million, respectively.
5. Property,
Plant & Equipment
The following table details the components of property,
plant & equipment, net:
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
At December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Land
|
|
$
|
53,447
|
|
|
$
|
50,881
|
|
Buildings and improvements
|
|
|
517,354
|
|
|
|
472,776
|
|
Machinery, equipment and other
|
|
|
1,745,234
|
|
|
|
1,555,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,316,035
|
|
|
|
2,079,623
|
|
Accumulated depreciation
|
|
|
(1,430,890
|
)
|
|
|
(1,264,435
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
885,145
|
|
|
$
|
815,188
|
|
|
|
|
|
|
|
|
|
|
6. Accrued
Expenses
The following table details the major components of other
current accrued expenses:
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
At December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Warranty
|
|
$
|
47,776
|
|
|
$
|
40,321
|
|
Taxes other than income
|
|
|
22,545
|
|
|
|
23,248
|
|
Unearned revenue
|
|
|
15,283
|
|
|
|
13,264
|
|
Accrued interest
|
|
|
19,491
|
|
|
|
19,306
|
|
Legal and environmental
|
|
|
5,639
|
|
|
|
7,578
|
|
Restructuring and exit
|
|
|
4,337
|
|
|
|
13,622
|
|
Other
|
|
|
71,869
|
|
|
|
64,539
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
186,940
|
|
|
$
|
181,878
|
|
|
|
|
|
|
|
|
|
|
50
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
From time to time, the Company will initiate various
restructuring programs at its operating companies or record
severance and exit costs in connection with purchase accounting
for acquisitions (see Note 3 for additional detail). The
following table details the Companys severance and exit
reserve activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
Exit
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
At December 31, 2006(A)
|
|
$
|
4,597
|
|
|
$
|
18,684
|
|
|
$
|
23,281
|
|
Provision
|
|
|
761
|
|
|
|
1,155
|
|
|
|
1,916
|
|
Purchase accounting
|
|
|
3,878
|
|
|
|
8,965
|
|
|
|
12,843
|
|
Payments
|
|
|
(3,515
|
)
|
|
|
(6,145
|
)
|
|
|
(9,660
|
)
|
Other
|
|
|
41
|
|
|
|
9
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007(B)
|
|
$
|
5,762
|
|
|
$
|
22,668
|
|
|
$
|
28,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
Includes $17.9 million related to purchase accounting
accruals recorded in 2006. |
|
(B) |
|
Includes $26.8 million related to purchase accounting
accruals. |
7. Goodwill
and Other Intangible Assets
The changes in the carrying value of goodwill by segment through
the year ended December 31, 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Primarily
|
|
|
|
|
|
|
|
|
Primarily
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
Currency
|
|
|
|
|
|
2007
|
|
|
Currency
|
|
|
|
|
|
|
12/31/05
|
|
|
Acquisitions
|
|
|
Translations
|
|
|
12/31/06
|
|
|
Acquisitions
|
|
|
Translations
|
|
|
12/31/07
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Technologies
|
|
$
|
965,269
|
|
|
$
|
|
|
|
$
|
(2,251
|
)(A)
|
|
$
|
963,018
|
|
|
$
|
51,269
|
|
|
$
|
10,570
|
|
|
$
|
1,024,857
|
|
Industrial Products
|
|
|
664,493
|
|
|
|
173,274
|
|
|
|
(3,874
|
)
|
|
|
833,893
|
|
|
|
32,368
|
|
|
|
852
|
|
|
|
867,113
|
|
Fluid Management
|
|
|
497,063
|
|
|
|
|
|
|
|
4,801
|
|
|
|
501,864
|
|
|
|
27,635
|
|
|
|
6,664
|
|
|
|
536,163
|
|
Engineered Systems
|
|
|
369,821
|
|
|
|
462,825
|
|
|
|
11,613
|
|
|
|
844,259
|
|
|
|
|
|
|
|
21,594
|
(B)
|
|
|
865,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,496,646
|
|
|
$
|
636,099
|
|
|
$
|
10,289
|
|
|
$
|
3,143,034
|
|
|
$
|
111,272
|
|
|
$
|
39,680
|
|
|
$
|
3,293,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
Includes a reclass from goodwill to customer-related intangibles
of $23.0 million in the first quarter of 2006 related to
the September 2005 acquisition of Knowles Electronics Holdings,
Inc., partially offset by an increase due to currency
translation. |
|
(B) |
|
Increase includes final purchase accounting adjustments of
$18.0 million related to the December 2006 acquisition of
Markem Corp., with the remainder due to currency translation. |
51
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table provides the gross carrying value and
accumulated amortization for each major class of intangible
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007
|
|
|
|
|
|
At December 31, 2006
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
Average
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Life (years)
|
|
|
Amount
|
|
|
Amortization
|
|
|
|
(dollar amounts
|
|
|
|
in thousands)
|
|
|
Amortized Intangible Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
$
|
47,943
|
|
|
$
|
13,684
|
|
|
|
29
|
|
|
$
|
29,865
|
|
|
$
|
11,848
|
|
Patents
|
|
|
131,106
|
|
|
|
74,153
|
|
|
|
13
|
|
|
|
116,128
|
|
|
|
64,833
|
|
Customer Intangibles
|
|
|
698,192
|
|
|
|
144,036
|
|
|
|
9
|
|
|
|
648,283
|
|
|
|
80,794
|
|
Unpatented Technologies
|
|
|
153,364
|
|
|
|
55,984
|
|
|
|
9
|
|
|
|
135,449
|
|
|
|
40,196
|
|
Non-Compete Agreements
|
|
|
6,327
|
|
|
|
5,127
|
|
|
|
5
|
|
|
|
6,146
|
|
|
|
4,421
|
|
Drawings & Manuals
|
|
|
13,597
|
|
|
|
4,368
|
|
|
|
5
|
|
|
|
15,765
|
|
|
|
4,479
|
|
Distributor Relationships
|
|
|
72,444
|
|
|
|
13,302
|
|
|
|
20
|
|
|
|
72,374
|
|
|
|
9,235
|
|
Other
|
|
|
21,653
|
|
|
|
9,888
|
|
|
|
14
|
|
|
|
29,217
|
|
|
|
8,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,144,626
|
|
|
|
320,542
|
|
|
|
11
|
|
|
|
1,053,227
|
|
|
|
223,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized Intangible Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
|
246,490
|
|
|
|
|
|
|
|
|
|
|
|
235,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Intangible Assets
|
|
$
|
1,391,116
|
|
|
$
|
320,542
|
|
|
|
|
|
|
$
|
1,289,226
|
|
|
$
|
223,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible amortization expense for the twelve months
ended December 31, 2007, 2006 and 2005 was
$94.6 million, $68.9 million and $41.9 million,
respectively. Amortization expense, based on current intangible
balances, is estimated to be $90.2 million in 2008,
$90.1 million in 2009, $89.5 million in 2010,
$87.6 million in 2011 and $72.6 million in 2012.
8. Discontinued
Operations
During 2007, the Company discontinued 2 businesses, of which 1
was sold during the year. In addition, the Company sold 5
businesses that were previously discontinued. At
December 31, 2007, assets and liabilities of discontinued
operations primarily represent amounts related to two remaining
unsold businesses.
The major classes of discontinued assets and liabilities
included in the Consolidated Balance Sheets are as follows:
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
At December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Assets of Discontinued Operations
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
40,115
|
|
|
$
|
102,565
|
|
Non-current assets
|
|
|
66,527
|
|
|
|
138,936
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
106,642
|
|
|
$
|
241,501
|
|
|
|
|
|
|
|
|
|
|
Liabilities of Discontinued Operations
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
38,899
|
|
|
$
|
118,703
|
|
Non-current liabilities
|
|
|
32,594
|
|
|
|
30,846
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
71,493
|
|
|
$
|
149,549
|
|
|
|
|
|
|
|
|
|
|
52
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In addition to the entities currently held for sale in
discontinued operations, the assets and liabilities of
discontinued operations include residual amounts related to
businesses previously sold. These residual amounts include
property, plant and equipment, deferred tax assets, short and
long-term reserves, and contingencies.
Summarized results of the Companys discontinued operations
are detailed in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Revenue
|
|
$
|
261,106
|
|
|
$
|
870,209
|
|
|
$
|
1,216,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on sale, net of taxes(1)
|
|
$
|
(4,086
|
)
|
|
$
|
(37,362
|
)
|
|
$
|
31,583
|
|
Earnings from operations before taxes
|
|
|
10,145
|
|
|
|
9,955
|
|
|
|
63,694
|
|
Benefit (provision) for income taxes related to operations
|
|
|
1,748
|
|
|
|
(3,266
|
)
|
|
|
(17,638
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from discontinued operations, net of tax
|
|
$
|
7,807
|
|
|
$
|
(30,673
|
)
|
|
$
|
77,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes impairments. |
Additional information related to operations that were
discontinued
and/or sold
in 2007 is as follows:
|
|
|
|
|
During the fourth quarter of 2007, the Company completed the
sale of Graphics Microsystems and recorded other adjustments for
an after-tax gain of $13.3 million.
|
|
|
|
During the third quarter of 2007, the Company discontinued two
businesses, Crenlo and Graphics Microsystems. In addition,
during the third quarter of 2007, the Company finalized the sale
of two previously discontinued businesses and recorded other
adjustments resulting in a net after-tax loss of
$1.6 million.
|
|
|
|
During the second quarter of 2007, the Company completed the
sale of a previously discontinued business and recorded other
adjustments for businesses still held for sale, resulting in a
net loss of approximately $5.0 million ($8.3 million
after-tax).
|
|
|
|
During the first quarter of 2007, the Company completed the
sales of Kurz Kasch, discontinued in 2006, and SWF, discontinued
in 2005, and recorded other adjustments for businesses still
held for sale and to reserves related to completed sales,
resulting in a net loss of approximately $9.6 million
($7.5 million after-tax).
|
During 2006, the Company discontinued thirteen businesses, of
which eight were sold during 2006. In addition, the Company sold
two businesses that were previously discontinued in 2005.
Additional information follows:
|
|
|
|
|
During the fourth quarter of 2006, the Company finalized the
sales of five previously discontinued businesses, including
Alphasem, Vitronics Soltec, Universal Instruments, and Hover
Davis. In addition, the Company discontinued three small
businesses and adjusted the carrying value of a previously
discontinued business resulting in a net loss of
$38.9 million ($27.0 million after-tax).
|
|
|
|
During the third quarter of 2006, the Company finalized the
sales of four previously discontinued businesses, including Mark
Andy, RPA Process Technologies and Heil Truck. As a result of
the gains on the sales ($27.2 million net of tax) and
adjustments to the carrying value of other previously
discontinued businesses ($21.6 million net of tax), the
Company recorded a $5.6 million gain, net of tax.
|
|
|
|
During the second quarter of 2006, the Company discontinued
seven businesses, including Universal Instruments, Alphasem,
Vitronics Soltec, Mark Andy, Kurz Kasch and Heil Truck, and as a
result, recorded a $106.5 million write-down
($87.9 million after-tax) of the carrying values of these
businesses to their estimated fair market value.
|
53
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
During the first quarter of 2006, Dover completed the sale of
Tranter PHE, a business discontinued in the fourth quarter of
2005, resulting in a pre-tax gain of approximately
$109.0 million ($85.5 million after-tax). In addition,
during the first quarter of 2006, the Company discontinued and
sold a business for a loss of $2.5 million
($2.2 million after-tax). Also, during the first quarter of
2006, the Company discontinued an operating company, comprised
of two businesses, resulting in an impairment of approximately
$15.4 million ($14.4 million after-tax).
|
During 2005, the Company discontinued seven businesses, of which
four were sold during 2005 for a net after-tax gain of
$63.9 million.
9. Lines
of Credit and Debt
On November 9, 2007, the Company entered into a
$1 billion
5-year
unsecured revolving credit facility with a syndicate of banks
(the Credit Agreement) that replaced a facility with
substantially similar terms. At the Companys election,
loans under the Credit Agreement will bear interest at a
Eurodollar or Sterling rate based on LIBOR, plus an applicable
margin ranging from 0.130% to 0.35% (subject to adjustment based
on the rating accorded the Companys senior unsecured debt
by S&P and Moodys), or at a base rate pursuant to a
formula defined in the Credit Agreement. In addition, the Credit
Agreement requires the Company to pay a facility fee and a
utilization fee in certain circumstances and imposes various
restrictions on the Company such as, among other things, the
requirement for the Company to maintain an interest coverage
ratio of EBITDA to consolidated net interest expense of not less
than 3.5 to 1. The Company primarily uses this facility as
liquidity
back-up for
its commercial paper program and has not drawn down any loans
under the $1 billion facility and does not anticipate doing
so. As of December 31, 2007, the Company had commercial
paper outstanding in the principal amount of $600.7 million.
During the third quarter of 2006, the Company closed a
structured five-year, non-interest bearing, $165.1 million
amortizing loan with a non-US lender, which also included a
participation fee received by the Company of $9.9 million.
The loan was recorded at face value. The Company also expects to
incur a total of $5.7 million in debt related issuance
costs over the course of the loan. Beginning in April 2007, the
repayment schedule requires payments every April and September
with the final payment to be made in July 2011. The
participation fee will be amortized ratably into Other Expense
(income), net over the term of the loan and is recorded in Other
Deferrals in the Consolidated Balance Sheet. The loan agreement
includes a put and call provision that can be exercised starting
in June 2008 though the end of the loan term.
The Company renewed its Canadian Dollar Credit Facility in
November 2007, which will expire on November 18, 2008, with
the Bank of Nova Scotia. The new agreement replaced the previous
$30 million Canadian (CAD) agreement and provides
$15 million (CAD) bank credit availability in either
Canadian Dollars or U.S. Dollars (USD), at the
Companys option. The outstanding borrowings at
December 31, 2007 and 2006 under the current and previous
facilities were approximately $3 million (CAD) and
$21 million (CAD), respectively. The covenants and interest
rates under this facility match those of the $1 billion
Credit Agreement.
On October 13, 2005, Dover issued $300 million of
4.875% Notes due 2015 and $300 million of
5.375% debentures due 2035. The net proceeds of
$588.6 million from the notes and debentures were used to
repay borrowings under Dovers commercial paper program.
The notes and debentures are redeemable at the option of Dover
in whole or in part at any time at a redemption price that
includes a make-whole premium, with accrued interest to the
redemption date. In November 2005, the Company retired its
6.45% Notes due November 15, 2005 with a face amount
of $250.0 million.
On November 25, 2005, the Company established a
75 million credit facility with Credit Lyonnais. The
interest rate on outstanding balances is 15 basis points
over the Euribor rate and the annual commitment fee is
5 basis points on unborrowed amounts. The facility has no
material covenants. At December 31, 2007, 2006 and 2005
there was no outstanding balance under this facility.
54
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Notes payable shown on the consolidated balance sheets for 2007
and 2006 principally represented commercial paper issued in the
U.S. The weighted average interest for short-term
borrowings for the years 2007 and 2006 was 5.1% and 4.9%,
respectively.
Dovers long-term debt instruments had a book value of
$1,485.2 million on December 31, 2007 and a fair value
of approximately $1,496.0 million. On December 31,
2006, the Companys long-term debt instruments had a book
value of $1,512.8 million and a fair value of approximately
$1,502.9 million.
A summary of the Companys long-term debt is as follows for
the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average Effective
|
|
|
|
|
|
|
|
|
|
Maturities
|
|
|
Interest Rate
|
|
|
Interest Rate
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Notes*
|
|
|
2008 to 2015
|
|
|
|
5.08
|
%
|
|
|
5.46
|
%
|
|
$
|
981,780
|
|
|
$
|
1,012,984
|
|
Debentures **
|
|
|
2028 to 2035
|
|
|
|
5.89
|
%
|
|
|
5.95
|
%
|
|
|
494,843
|
|
|
|
494,649
|
|
Other long-term debt, including capital leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,555
|
|
|
|
5,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,485,178
|
|
|
|
1,512,758
|
|
Less current installments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,175
|
|
|
|
32,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, excluding current installments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,452,003
|
|
|
$
|
1,480,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes unamortized discount of $1.8 million and
$2.1 million in 2007 and 2006, respectively. Also includes
a $150 million note due June 2008 as the Company has the
intent and ability to refinance this note for a period greater
than 1 year. |
|
** |
|
Includes unamortized discount of $5.2 million and
$5.4 million in 2007 and 2006, respectively. |
Annual repayments of long-term debt are $183.2 million in
2008, $38.4 million in 2009, $35.5 million in 2010,
$434.2 million in 2011, $0.1 million in 2012 and
$793.7 million thereafter.
The Company may, from time to time, enter into interest rate
swap agreements to manage its exposure to interest rate changes.
Interest rate swaps are agreements to exchange fixed and
variable rate payments based on notional principal amounts.
During the third quarter of 2005, Dover entered into several
treasury rate locks related to the notes and debentures that
were issued on October 13, 2005. The contracts were settled
on October 13, 2005 and the resulting gain of
$3.0 million is being deferred in Accumulated Other
Comprehensive Earnings (Loss) and amortized over the life of the
related notes and debentures.
As of December 31, 2007, there were two interest rate swap
agreements outstanding for a total notional amount of
$100.0 million, designated as fair value hedges on part of
the Companys $400.0 million 6.50% Notes due
February 15, 2011. One $50 million interest rate swap
exchanges fixed-rate interest for variable-rate interest. The
other $50 million swap is designated in foreign currency
and exchanges fixed-rate interest for variable-rate interest,
and also hedges a portion of the Companys net investment
in
non-U.S. operations.
The swap agreements have reduced the effective interest rate on
the notes to 6.43%. There is no hedge ineffectiveness. The fair
value of the interest rate swaps outstanding as of
December 31, 2007 was determined through market quotation.
55
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
10. Equity
and Cash Incentive Program
2005
Equity and Cash Incentive Plan
On April 20, 2004, the stockholders approved the Dover
Corporation 2005 Equity and Cash Incentive Plan (the 2005
Plan) to replace the 1995 Incentive Stock Option Plan and
1995 Cash Performance Program (the 1995 Plan), which
expired on January 30, 2005. Under the 2005 Plan, a maximum
aggregate of 20 million shares are reserved for grants
(non-qualified and incentive stock options, stock appreciation
rights (SARs), and restricted stock) to key
personnel between February 1, 2005 and January 31,
2015, provided that no incentive stock options shall be granted
under the plan after February 11, 2014 and a maximum of one
million shares may be granted as restricted stock. The exercise
price of options and SARs may not be less than the fair market
value of the stock at the time the awards are granted. The
period during which these options and SARs are exercisable is
fixed by the Companys Compensation Committee at the time
of grant, but generally may not commence sooner than three years
after the date of grant, and may not exceed ten years from the
date of grant. All stock options or SARs issued under the 1995
Plan or the 2005 Plan vest after three years of service and
expire at the end of ten years. All stock options and SARs are
granted at regularly scheduled quarterly Compensation Committee
meetings (usually only at the meeting during the first quarter)
and have an exercise price equal to the fair market value of
Dover stock on that day. New common shares are issued when
options or SARs are exercised.
In 2007, the Company issued 1,731,882 SARs under the 2005 Plan.
No stock options were issued in 2007 and the Company does not
anticipate issuing stock options in the future. The fair value
of each grant was estimated on the date of grant using a
Black-Scholes option-pricing model with the following
assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 Grant
|
|
|
2006 Grant
|
|
|
2005 Grant
|
|
|
|
SARs
|
|
|
SARs
|
|
|
Options
|
|
|
Risk-free interest rate
|
|
|
4.84
|
%
|
|
|
4.63
|
%
|
|
|
3.97
|
%
|
Dividend yield
|
|
|
1.43
|
%
|
|
|
1.52
|
%
|
|
|
1.70
|
%
|
Expected life (years)
|
|
|
6.5
|
|
|
|
8
|
|
|
|
8
|
|
Volatility
|
|
|
28.25
|
%
|
|
|
30.73
|
%
|
|
|
31.15
|
%
|
Option grant price
|
|
$
|
50.60
|
|
|
$
|
46.00
|
|
|
$
|
38.00
|
|
Fair value of options granted
|
|
$
|
16.65
|
|
|
$
|
17.01
|
|
|
$
|
13.24
|
|
56
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of activity for SARs and stock options for the years
ended December 31, 2007, 2006, and 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SARs
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
Average
|
|
|
Aggregate
|
|
|
Contractual
|
|
|
|
|
|
Average
|
|
|
|
|
|
Contractual
|
|
|
|
|
|
|
Exercise
|
|
|
Intrinsic
|
|
|
Term
|
|
|
|
|
|
Exercise
|
|
|
Aggregate
|
|
|
Term
|
|
|
|
Shares
|
|
|
Price
|
|
|
Value
|
|
|
(Years)
|
|
|
Shares
|
|
|
Price
|
|
|
Intrinsic Value
|
|
|
(Years)
|
|
|
Outstanding at 1/1/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,614,744
|
|
|
$
|
33.45
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,519,736
|
|
|
|
38.00
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(761,408
|
)
|
|
|
25.26
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(774,239
|
)
|
|
|
35.53
|
|
|
$
|
10,446,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at 12/31/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,598,833
|
|
|
|
34.61
|
|
|
|
59,389,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2005 through February 14,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,093,240
|
|
|
$
|
36.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at 1/1/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,598,833
|
|
|
|
34.61
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,886,989
|
|
|
$
|
46.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(171,479
|
)
|
|
|
46.00
|
|
|
|
|
|
|
|
|
|
|
|
(336,319
|
)
|
|
|
38.73
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
(2,485,219
|
)
|
|
|
30.71
|
|
|
$
|
42,055,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at 12/31/2006
|
|
|
1,715,510
|
|
|
|
46.00
|
|
|
|
5,524,224
|
|
|
|
9.10
|
|
|
|
10,777,295
|
|
|
|
35.38
|
|
|
|
149,127,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
through February 14, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,708,069
|
|
|
$
|
32.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at 1/1/2007
|
|
|
1,715,510
|
|
|
$
|
46.00
|
|
|
|
|
|
|
|
|
|
|
|
10,777,295
|
|
|
$
|
35.38
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,731,882
|
|
|
|
50.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(206,166
|
)
|
|
|
48.11
|
|
|
|
|
|
|
|
|
|
|
|
(276,125
|
)
|
|
|
37.02
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
(2,240,440
|
)
|
|
|
33.74
|
|
|
$
|
34,095,507
|
(A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at 12/31/2007
|
|
|
3,241,226
|
|
|
|
48.32
|
|
|
|
2,072,808
|
|
|
|
8.61
|
|
|
|
8,260,730
|
|
|
|
35.77
|
|
|
|
108,935,136
|
|
|
|
5.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
through:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
132,567
|
|
|
$
|
35.00
|
|
|
$
|
1,850,635
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
315,926
|
|
|
|
31.00
|
|
|
|
5,674,031
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
380,737
|
|
|
|
39.05
|
|
|
|
3,771,341
|
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
904,887
|
|
|
|
41.00
|
|
|
|
7,207,301
|
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,096,471
|
|
|
|
37.95
|
|
|
|
12,071,522
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,799,689
|
|
|
|
24.60
|
|
|
|
43,844,547
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,623,033
|
|
|
|
41.25
|
|
|
|
12,516,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,253,310
|
|
|
|
35.06
|
|
|
|
86,936,193
|
|
|
|
4.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
Cash received by the Company for stock options exercised during
the year ended December 31, 2007 totaled $76.1 million. |
Unrecognized compensation expense related to non-vested shares
was $24.9 million at December 31, 2007. This cost is
expected to be recognized over a weighted average period of
1.7 years. The fair value of options vested during the
years ended December 31, 2007, 2006 and 2005 were
$28.5 million, $27.2 million and $27.4 million,
respectively.
57
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Additional
Detail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SARs Outstanding
|
|
SARs Exercisable
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
Weighted Average
|
|
Remaining Life
|
|
|
|
Weighted Average
|
|
Remaining Life
|
Range of Exercise Prices
|
|
Number
|
|
Exercise Price
|
|
in Years
|
|
Number
|
|
Exercise Price
|
|
in Years
|
|
$46.00-$50.60
|
|
|
3,241,226
|
|
|
$
|
48.32
|
|
|
|
8.61
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
Weighted Average
|
|
|
Remaining Life
|
|
|
|
|
|
Weighted Average
|
|
|
Remaining Life
|
|
Range of Exercise Prices
|
|
Number
|
|
|
Exercise Price
|
|
|
in Years
|
|
|
Number
|
|
|
Exercise Price
|
|
|
in Years
|
|
|
$24.50-$31.00
|
|
|
2,115,315
|
|
|
$
|
25.53
|
|
|
|
4.52
|
|
|
|
2,115,315
|
|
|
$
|
25.53
|
|
|
|
4.52
|
|
$33.00-$39.00
|
|
|
3,609,995
|
|
|
|
37.99
|
|
|
|
5.43
|
|
|
|
1,604,275
|
|
|
|
37.98
|
|
|
|
3.32
|
|
$39.40-$43.00
|
|
|
2,535,420
|
|
|
|
41.16
|
|
|
|
5.04
|
|
|
|
2,533,720
|
|
|
|
41.16
|
|
|
|
4.76
|
|
The Company also has a restricted stock program (as part of the
2005 Plan), under which common stock of the Company may be
granted at no cost to certain officers and key employees. In
general, restrictions limit the sale or transfer of these shares
during a two or three year period, and restrictions lapse
proportionately over the two or three year period. The Company
did not grant any restricted shares in 2007 or 2006. Restricted
shares granted in 2005 were 6,000.
In addition, the Company has a stock compensation plan under
which non-employee directors are granted shares of Dovers
common stock each year as more than half of their compensation
for serving as directors. During 2007, the Company issued an
aggregate of 14,129 shares, net, of its common stock to
twelve outside directors (after withholding 6,056 additional
shares to satisfy tax obligations) as partial compensation for
serving as directors of the Company during 2007. During 2006,
the Company issued an aggregate of 11,004 shares of its
common stock, net, to ten outside directors (after withholding
an aggregate of 3,958 additional shares to satisfy tax
obligations), as partial compensation for serving as directors
of the Company during 2006. During 2005, the Company issued an
aggregate of 12,860 shares, net, of its common stock to
eight outside directors (after withholding an aggregate of 3,790
additional shares to satisfy tax obligations), as partial
compensation for serving as directors of the Company during 2005.
During the third and fourth quarters of 2007, the Board of
Directors approved two separate share repurchase programs
authorizing repurchases of approximately 20,000,000 common
shares through the end of 2008. The Company entered into an
accelerated share repurchase agreement on August 2, 2007
(ASR) under which it purchased 6,000,000 shares
of its common stock at an initial purchase price of $51.64 per
share. Upon final settlement of this ASR in the fourth quarter
of 2007, the final economic purchase price was $48.36 per share,
representing an average of the volume weighted average price of
the Companys common stock during the outstanding period
less a negotiated discount amount. In addition, during 2007, the
Company made other open market purchases of its common stock
totaling 6.4 million shares at an average price of $46.78
per share.
11. Income
Taxes
Income taxes have been based on the following components of
Earnings Before Provision for Income Taxes and
Discontinued Operations in the Consolidated Statements of
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Domestic
|
|
$
|
521,266
|
|
|
$
|
475,994
|
|
|
$
|
378,186
|
|
Foreign
|
|
|
366,338
|
|
|
|
333,499
|
|
|
|
210,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
887,604
|
|
|
$
|
809,493
|
|
|
$
|
588,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
DOVER
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Total income taxes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Taxes on income from continuing operations
|
|
$
|
234,331
|
|
|
$
|
217,038
|
|
|
$
|
155,933
|
|
Credit to Stockholders equity for tax benefit related to
stock option exercises
|
|
|
(10,319
|
)
|
|
|
(15,316
|
)
|
|
|
(3,628
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
224,012
|
|
|
$
|
201,722
|
|
|
$
|
152,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) for the years ended
December 31, 2007, 2006 and 2005 is comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
170,530
|
|
|
$
|
153,016
|
|
|
$
|
85,343
|
|
State and local
|
|
|
19,351
|
|
|
|
10,494
|
|
|
|
14,992
|
|
Foreign
|
|
|
77,719
|
|
|
|
68,532
|
|
|
|
37,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current continuing
|
|
|
267,600
|
|
|
|
232,042
|
|
|
|
138,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
|
(27,176
|
)
|
|
|
(16,147
|
)
|
|
|
16,202
|
|
State and local
|
|
|
5,075
|
|
|
|
2,631
|
|
|
|
(1,929
|
)
|
Foreign
|
|
|
(11,168
|
)
|
|
|
(1,488
|
)
|
|
|
3,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred continuing
|
|
|
(33,269
|
)
|
|
|
(15,004
|
)
|
|
|
17,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense continuing
|
|
$
|
234,331
|
|
|
$
|
217,038
|
|
|
$
|
155,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Differences between the effective income tax rate and the
U.S. Federal income statutory rate are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
U.S. Federal income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State and local taxes, net of Federal income tax benefit
|
|
|
1.9
|
|
|
|
1.1
|
|
|
|
1.4
|
|
Foreign operations tax effect
|
|
|
(6.9
|
)
|
|
|
(7.0
|
)
|
|
|
(5.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
(5.0
|
)
|
|
|
(5.9
|
)
|
|
|
(4.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R&E tax credits
|
|
|
(0.5
|
)
|
|
|
(0.6
|
)
|
|
|
(0.5
|
)
|
Foreign export program benefits
|
|
|
|
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
Domestic manufacturing deduction
|
|
|
(1.0
|
)
|
|
|
(0.4
|
)
|
|
|
(0.6
|
)
|
Foreign tax credits
|
|
|
(0.1
|
)
|
|
|
(0.2
|
)
|
|
|
(0.3
|
)
|
Branch losses
|
|
|
(0.3
|
)
|
|
|
(0.5
|
)
|
|
|
(1.1
|
)
|
Settlement of tax contingencies
|
|
|
(1.8
|
)
|
|
|
(1.3
|
)
|
|
|
(4.6
|
)
|
Repatriation of foreign earnings
|
|
|
|
|
|
|
|
|
|
|
1.7
|
|
Other, principally non-tax deductible items
|
|
|
0.1
|
|
|
|
1.0
|
|
|
  |