Dover Reports Fourth Quarter and Full Year 2012 Results; Reaffirms 2013 Guidance

Jan 24, 2013, 07:00 ET from Dover

DOWNERS GROVE, Ill., Jan. 24, 2013 /PRNewswire-FirstCall/ --

  • Reports quarterly revenue of $2.0 billion, an increase of 6% over the prior year
  • Delivers quarterly diluted earnings per share from continuing operations of $1.16, an increase of 10% over last year
  • Achieves adjusted quarterly diluted earnings per share from continuing operations of $1.09, excluding tax benefits of $0.07, up 7% from an adjusted prior year
  • Reaffirms 2013 full year revenue growth of 7% to 9% and diluted earnings per share from continuing operations in the range of $5.05 to $5.35

Dover (NYSE: DOV) announced today that for the fourth quarter ended December 31, 2012, revenue was $2.0 billion, an increase of 6% over the prior year period. The revenue increase was driven by organic growth of 2% and a 5% increase from acquisitions, offset in part by a 1% unfavorable impact from foreign exchange. Earnings from continuing operations were $208.2 million, or $1.16 diluted earnings per share ("EPS"), compared to $197.3 million, or $1.05 EPS, in the prior year period, representing increases in earnings from continuing operations and EPS of 6% and 10%, respectively.  Excluding the impact of tax benefits of $0.07 EPS recognized in the current quarter and $0.03 EPS recognized in the prior year period, adjusted EPS from continuing operations for the fourth quarter of 2012 was $1.09, reflecting an increase of 7% over an adjusted EPS of $1.02 in the prior year period.  

Revenue for the year ended December 31, 2012 was $8.1 billion, an increase of 10% over the prior year, reflecting organic growth of 5%, a 6% increase from acquisitions and a 1% unfavorable impact from foreign exchange. Earnings from continuing operations for the year ended December 31, 2012 were $833.1 million, or $4.53 EPS, compared to $773.2 million, or $4.09 EPS in the prior year period, representing an increase in earnings from continuing operations of 8% and an increase in EPS of 11%.  Excluding the impact of tax benefits of $0.09 EPS in the current year and $0.22 EPS in the prior year, adjusted EPS from continuing operations for the year ended December 31, 2012 was $4.44, an increase of 15% over an adjusted EPS of $3.87 in the prior year.

Commenting on the fourth quarter results, Dover's President and Chief Executive Officer, Robert A. Livingston, said, "I am pleased with our fourth quarter results as all our segments recorded organic growth, and the majority of our end-markets continued to show strength in orders, despite uncertain economic conditions.  Within Communication Technologies, we saw the continuation of a strong smart phone market and we achieved improved sequential performance at Sound Solutions.  Our Energy segment demonstrated its resiliency by posting modest organic growth despite a lower North American rig count.  Engineered Systems continued to see a very active refrigeration and food equipment market, while Printing & Identification's fast moving consumer goods market continued to expand.  We also closed several acquisitions in the quarter, most notably Anthony, which will strengthen our refrigeration product offering and expand our markets and channels."

"For the year, we generated nearly $1 billion in free cash flow, supported by strong cash conversion in the fourth quarter. Our solid cash flow is a key element in the continued execution of our capital allocation strategy. Specifically, we made significant internal and acquisition investments in our five key growth spaces, we returned cash in the form of expanded dividends and began execution on our $1 billion share repurchase program announced in November." 

"Looking ahead, our full year view of 2013 is unchanged from our December 10, 2012 investor day guidance.  We expect full year organic growth of 3% to 5% complemented by acquisition growth of 4%, resulting in revenue growth of 7% to 9%.  The benefits of leverage on volume coupled with a lower share count from our repurchase program will help us deliver solid earnings growth.  Accordingly, we are reaffirming full year diluted EPS from continuing operations in the range of $5.05 - $5.35."

Net earnings for the fourth quarter of 2012 were $159.9 million or $0.89 EPS, including a net loss from discontinued operations of $48.4 million, or $0.27 EPS, compared to net earnings of $278.3 million, or $1.49 EPS, for the same period of 2011, which included net income from discontinued operations of $81.0 million, or $0.43 EPS.  As previously announced, two non-core businesses serving the electronic assembly and test markets were reclassified to discontinued operations during the fourth quarter, with the intent to divest these businesses in 2013.  In connection with the plan to divest, a goodwill impairment charge of $51.9 million, net of tax, or $0.29 EPS was recognized, which is reflected within discontinued operations in the fourth quarter and full year periods.  Net earnings for the year ended December 31, 2012 were $811.1 million, or $4.41 EPS, including a net loss from discontinued operations of $22.0 million, or $0.12 EPS, compared to net earnings of $895.2 million, or $4.74 EPS for the same period of 2011, which included net income from discontinued operations of $122.1 million or $0.65 EPS.

Dover will host a webcast of its fourth quarter 2012 conference call at 10:00 A.M. Eastern Time (9:00 A.M. Central Time) on Thursday, January 24, 2013. The webcast can be accessed on the Dover website at www.dovercorporation.com. The conference call will also be made available for replay on the website. Additional information on Dover's fourth quarter results and its operating segments can also be found on the Company's website.

About Dover: Dover is a diversified global manufacturer with annual revenues of over $8 billion.  For over 50 years, Dover has been delivering outstanding products and services that reflect its market leadership and commitment to operational and technical excellence. The Company's entrepreneurial business model encourages, promotes and fosters deep customer engagement which has led to Dover's well-established and valued reputation for providing superior customer service and industry-leading product innovation. Dover focuses on innovative equipment and components, specialty systems and support services through its four major operating segments: Communication Technologies, Energy, Engineered Systems and Printing & Identification. Headquartered in Downers Grove, Illinois, Dover employs 35,000 people worldwide. Dover is traded on the New York Stock Exchange under "DOV." Additional information is available on our website at www.dovercorporation.com.

Forward-Looking Statement: This press release contains "forward-looking" statements within the meaning of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, operating and strategic plans, 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 press release that are not historical may be indicated by words or phrases such as "anticipates," "expects," "believes," "indicates," "suggests," "will," "plans," "supports," "projects," "should," "would," "could," "hope," "forecast" and "management is of the opinion," use of future tense and similar words or phrases. Forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from current expectations, including, but not limited to, uncertainties in the credit and capital markets, interest rates, currency exchange rates, the world economy and sovereign credit, especially in Europe; political events and possible future terrorist threats that could impact countries where Dover does business or the worldwide economy; the impact of natural disasters and their effect on global supply chains and energy markets; increases in the cost of raw materials; the Company's ability to achieve expected savings from integration, synergy and other cost-control initiatives; the ability to identify and successfully consummate value-adding acquisition opportunities; increased competition and pricing pressures in the markets served by Dover's operating companies; the ability of Dover's companies to expand into new geographic markets and to anticipate and meet customer demands for new products and product enhancements; the impact of loss of a single-source manufacturing facility; changes in customer demand; a downgrade in Dover's credit ratings; the relative mix of products and services which impacts margins and operating efficiencies; short-term capacity constraints; domestic and foreign governmental and public policy changes including environmental regulations, tax policies, 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; and the cyclical nature of some of Dover's companies. Dover refers you to the documents that it files from time to time with the Securities and Exchange Commission, such as its reports on Form 10-K, Form 10-Q and Form 8-K, for a discussion of these and other risks and uncertainties that could cause its actual results to differ materially from its current expectations and from the forward-looking statements contained in this press release. Dover undertakes no obligation to update any forward-looking statement.

INVESTOR SUPPLEMENT - FOURTH QUARTER AND FULL YEAR 2012

DOVER CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)(in thousands, except per share data)

Three Months Ended

December 31,

Years Ended December 31,

2012

2011

2012

2011

Revenue

$

2,013,831

$

1,890,962

$

8,104,339

$

7,369,154

Cost of goods and services

1,240,087

1,172,629

4,997,274

4,524,351

Gross profit

773,744

718,333

3,107,065

2,844,803

Selling and administrative expenses

469,668

434,732

1,841,688

1,720,954

Operating earnings

304,076

283,601

1,265,377

1,123,849

Interest expense, net

30,996

29,057

121,141

115,525

Other expense (income), net

809

(3,265)

6,665

(1,938)

Earnings before provision for income taxes and

discontinued operations

272,271

257,809

1,137,571

1,010,262

Provision for income taxes

64,047

60,542

304,452

237,076

Earnings from continuing operations

208,224

197,267

833,119

773,186

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

(48,364)

81,022

(22,049)

122,057

Net earnings

$

159,860

$

278,289

$

811,070

$

895,243

Basic earnings per common share:

Earnings from continuing operations

$

1.17

$

1.07

$

4.59

$

4.16

Earnings (loss) from discontinued operations,

net (1)

(0.27)

0.44

(0.12)

0.66

Net earnings

0.90

1.51

4.47

4.82

Weighted average shares outstanding

177,257

184,686

181,551

185,882

Diluted earnings per common share:

Earnings from continuing operations

$

1.16

$

1.05

$

4.53

$

4.09

Earnings (loss) from discontinued operations,

net (1)

(0.27)

0.43

(0.12)

0.65

Net earnings

0.89

1.49

4.41

4.74

Weighted average shares outstanding

179,365

187,208

183,993

188,887

Dividends paid per common share

$

0.35

$

0.315

$

1.33

$

1.18

(1)   For the three months and year ended December 31, 2012, the loss from discontinued operations, net reflects a goodwill impairment charge of approximately $64 million ($52 million, net of tax) recognized in connection with the reclassification of Everett Charles Technologies and DEK to discontinued operations. 

DOVER CORPORATION QUARTERLY SEGMENT INFORMATION (unaudited)(in thousands)

2012

2011

Q1

Q2

Q3

Q4

FY 2012

Q1

Q2

Q3

Q4

FY 2011

REVENUE

Communication Technologies

$

357,575

$

361,689

$

396,470

$

400,851

$

1,516,585

$

269,582

$

288,843

$

405,357

$

396,295

$

1,360,077

Energy

531,570

538,786

562,263

539,985

2,172,604

425,424

454,327

510,608

510,390

1,900,749

Engineered Systems

Fluid Solutions

180,364

211,974

218,324

206,500

817,162

163,196

178,031

173,804

162,590

677,621

Refrigeration &

Industrial

642,213

674,501

674,116

613,012

2,603,842

560,453

645,573

649,768

568,844

2,424,638

Eliminations

(453)

(352)

(319)

(336)

(1,460)

(382)

(424)

(431)

(287)

(1,524)

822,124

886,123

892,121

819,176

3,419,544

723,267

823,180

823,141

731,147

3,100,735

Printing & Identification

243,570

251,875

246,945

254,141

996,531

240,775

253,226

260,546

253,689

1,008,236

Intra-segment eliminations

(225)

(184)

(194)

(322)

(925)

18

(102)

(559)

(643)

Total consolidated revenue

$

1,954,614

$

2,038,289

$

2,097,605

$

2,013,831

$

8,104,339

$

1,659,048

$

1,819,594

$

1,999,550

$

1,890,962

$

7,369,154

NET EARNINGS

Segment Earnings:

Communication

Technologies

$

46,556

$

50,322

$

63,706

$

58,376

$

218,960

$

47,325

$

54,527

$

53,433

$

71,097

$

226,382

Energy

132,115

133,936

139,038

133,561

538,650

93,051

110,447

125,268

121,871

450,637

Engineered

Systems

122,092

133,808

144,245

101,807

501,952

98,235

128,570

125,529

92,852

445,186

Printing & Identification

26,089

28,918

39,502

40,650

135,159

31,985

35,294

40,843

33,439

141,561

Total Segments

326,852

346,984

386,491

334,394

1,394,721

270,596

328,838

345,073

319,259

1,263,766

Corporate expense / other

36,546

36,335

32,001

31,127

136,009

36,112

35,391

34,083

32,393

137,979

Net interest expense

30,031

29,715

30,399

30,996

121,141

28,319

28,093

30,056

29,057

115,525

Earnings from continuing operations before provision for income taxes

260,275

280,934

324,091

272,271

1,137,571

206,165

265,354

280,934

257,809

1,010,262

Provision for income taxes

73,866

75,778

90,761

64,047

304,452

51,020

52,095

73,419

60,542

237,076

Earnings from continuing operations

186,409

205,156

233,330

208,224

833,119

155,145

213,259

207,515

197,267

773,186

Earnings (loss) from discontinued operations, net

9,654

8,945

7,716

(48,364)

(22,049)

39,760

36,510

(35,235)

81,022

122,057

Net earnings

$

196,063

$

214,101

$

241,046

$

159,860

$

811,070

$

194,905

$

249,769

$

172,280

$      278,289

$

895,243

SEGMENT OPERATING MARGIN

Communication

Technologies

13.0%

13.9%

16.1%

14.6%

14.4%

17.6%

18.9%

13.2%

17.9%

16.6%

Energy

24.9%

24.9%

24.7%

24.7%

24.8%

21.9%

24.3%

24.5%

23.9%

23.7%

Engineered

Systems

14.9%

15.1%

16.2%

12.4%

14.7%

13.6%

15.6%

15.2%

12.7%

14.4%

Printing &

Identification

10.7%

11.5%

16.0%

16.0%

13.6%

13.3%

13.9%

15.7%

13.2%

14.0%

Total Segment

16.7%

17.0%

18.4%

16.6%

17.2%

16.3%

18.1%

17.3%

16.9%

17.1%

DEPRECIATION AND AMORTIZATION EXPENSE

Communication Technologies

$

31,513

$

32,828

$

32,997

$

35,281

$

132,619

$

18,685

$

18,533

$

34,360

$

30,261

$

101,839

Energy

21,184

23,533

24,639

25,721

95,077

18,573

18,765

19,399

21,082

77,819

Engineered Systems

19,582

23,913

23,060

27,066

93,621

18,415

18,816

18,332

19,213

74,776

Printing & Identification

8,331

8,496

8,777

7,998

33,602

8,163

8,476

8,364

8,479

33,482

Corporate

700

765

842

359

2,666

586

626

636

713

2,561

$

81,310

$

89,535

$

90,315

$

96,425

$

357,585

$

64,422

$

65,216

$

81,091

$

79,748

$

290,477

DOVER CORPORATION QUARTERLY SEGMENT INFORMATION (continued) (unaudited)(in thousands)

 

2012

2011

Q1

Q2

Q3

Q4

FY 2012

Q1

Q2

Q3

Q4

FY 2011

BOOKINGS

Communication Technologies

$

356,386

$

383,135

$

412,092

$

352,629

$

1,504,242

$           274,611

$           309,734

$             410,616

$              349,579

$           1,344,540

Energy

585,775

530,352

526,824

550,091

2,193,042

495,125

472,543

498,212

519,525

1,985,405

Engineered Systems

Fluid

Solutions

184,711

204,139

197,767

209,872

796,489

173,626

175,539

174,772

158,895

682,832

Refrigeration

& Industrial

711,911

666,223

600,065

606,931

2,585,130

660,449

623,929

602,488

625,840

2,512,706

Eliminations

(408)

(376)

(258)

(399)

(1,441)

(733)

(884)

179

(1,378)

(2,816)

896,214

869,986

797,574

816,404

3,380,178

833,342

798,584

777,439

783,357

3,192,722

Printing & Identification

249,773

251,733

244,611

252,937

999,054

247,812

254,226

262,685

253,632

1,018,355

Intra-segment eliminations

(609)

(222)

(760)

(1,017)

(2,608)

(2,736)

(3,370)

(2,453)

(3,153)

(11,712)

Total consolidated bookings

$

2,087,539

$

2,034,984

$

1,980,341

$

1,971,044

$

8,073,908

$        1,848,154

$        1,831,717

$          1,946,499

$            1,902,940

$         7,529,310

BACKLOG

Communication Technologies

$

435,912

$

457,624

$

473,007

$

424,144

$           410,843

$           431,558

$             483,512

$               437,320

Energy

296,360

282,364

248,233

256,093

240,198

255,889

243,401

246,351

Engineered Systems

Fluid

Solutions

191,327

172,300

156,191

160,890

57,357

54,945

55,230

54,194

Refrigeration

& Industrial

598,910

586,824

515,285

516,559

544,995

523,011

469,876

528,118

Eliminations

(132)

(155)

(94)

(157)

(339)

(526)

(94)

(177)

790,105

758,969

671,382

677,292

602,013

577,430

525,012

582,135

Printing & Identification

102,117

98,216

98,356

97,857

100,231

101,426

97,405

94,557

Intra-segment eliminations

(986)

(647)

(324)

$

(590)

(704)

(1,177)

(890)

(193)

Total consolidated backlog

$

1,623,508

$

1,596,526

$

1,490,654

$

1,454,796

$        1,352,581

$          1,365,126

$         1,348,440

$        1,360,170

 

DOVER CORPORATION QUARTERLY EARNINGS PER SHARE (unaudited)(in thousands, except per share data*)

2012

2011

Q1

Q2

Q3

Q4

FY 2012

Q1

Q2

Q3

Q4

FY 2011

Basic earnings (loss) per common share:

Continuing operations

$

1.01

$

1.12

$

1.28

$

1.17

$

4.59

$

0.83

$

1.14

$

1.12

$

1.07

$

4.16

Discontinued operations

0.05

0.05

0.04

(0.27)

(0.12)

0.21

0.20

(0.19)

0.44

0.66

Net earnings

1.07

1.17

1.33

0.90

4.47

1.04

1.34

0.93

1.51

4.82

Diluted earnings (loss) per common share:

Continuing operations

$

1.00

$

1.10

$

1.27

$

1.16

$

4.53

$

0.82

$

1.12

$

1.10

$

1.05

$

4.09

Discontinued operations

0.05

0.05

0.04

(0.27)

(0.12)

0.21

0.19

(0.19)

0.43

0.65

Net earnings

1.05

1.15

1.31

0.89

4.41

1.03

1.32

0.91

1.49

4.74

Adjusted diluted earnings per common share (calculated below):

Continuing operations

$

1.01

$

1.10

$

1.25

$

1.09

$

4.44

$

0.78

$

0.99

$

1.08

$

1.02

$

3.87

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

Net earnings (loss):

Continuing operations

$

186,409

$

205,156

$

233,330

$

208,224

$

833,119

$

155,145

$

213,259

$

207,515

$

197,267

$

773,186

Discontinued operations

9,654

8,945

7,716

(48,364)

(22,049)

39,760

36,510

(35,235)

81,022

122,057

Net earnings

196,063

214,101

241,046

159,860

811,070

194,905

249,769

172,280

278,289

895,243

Average shares outstanding:

Basic

183,737

183,494

181,763

177,257

181,551

186,659

186,443

185,770

184,686

185,882

Diluted

186,706

185,780

183,932

179,365

183,993

190,090

189,705

188,436

187,208

188,887

Note:

Earnings from continuing operations are adjusted by discrete and other tax items to derive adjusted earnings from continuing operations and adjusted diluted earnings per common share as follows:

2012

2011

Q1

Q2

Q3

Q4

FY 2012

Q1

Q2

Q3

Q4

FY 2011

Adjusted earnings from continuing operations:

Earnings from continuing operations

$

186,409

$

205,156

$

233,330

$

208,224

$

833,119

$

155,145

$

213,259

$

207,515

$

197,267

$

773,186

Gains (losses) from discrete and other tax items

(1,610)

(372)

4,513

13,606

16,137

8,016

24,983

2,777

4,967

40,743

Adjusted earnings from continuing operations

$

188,019

$

205,528

$

228,817

$

194,618

$

816,982

$

147,129

$

188,276

$

204,738

$

192,300

$

732,443

Adjusted diluted earnings per common share:

Earnings from continuing operations

$

1.00

$

1.10

$

1.27

$

1.16

$

4.53

$

0.82

$

1.12

$

1.10

$

1.05

$

4.09

Gains (losses) from discrete and other tax items

(0.01)

0.02

0.07

0.09

0.04

0.13

0.02

0.03

0.22

Adjusted earnings from continuing operations

$

1.01

$

1.10

$

1.25

$

1.09

$

4.44

$

0.78

$

0.99

$

1.08

$

1.02

$

3.87

* Per share data may not add due to rounding.

 

DOVER CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)(in thousands)

December 31, 2012

December 31, 2011

Assets:

Cash and cash equivalents

$

800,076

$

1,206,755

Receivables, net of allowances

1,225,898

1,118,848

Inventories, net

872,841

733,807

Deferred tax and other current assets

129,029

188,768

Property, plant and equipment, net

1,167,052

970,703

Goodwill

4,094,650

3,506,975

Intangible assets, net

1,645,420

1,184,505

Other assets

111,432

103,331

Assets of discontinued operations

397,545

486,860

Total assets

$

10,443,943

$

9,500,552

Liabilities and Stockholders' Equity:

Notes payable and current maturities of long-term debt

$

610,766

$

1,022

Payables and accrued expenses

1,375,862

1,148,500

Deferred taxes and other noncurrent liabilities

 

1,139,777

958,341

Long-term debt

2,189,350

2,186,230

Liabilities of discontinued operations

208,958

275,904

Stockholders' equity

4,919,230

4,930,555

Total liabilities and stockholders' equity

$

10,443,943

$

9,500,552

 

DOVER CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)(in thousands)

Years Ended December 31,

2012

2011

Operating activities:

Net earnings

$

811,070

$

895,243

Loss (gain) from discontinued operations, net

22,049

(122,057)

Depreciation and amortization

357,585

290,477

Stock-based compensation

30,884

25,130

Contributions to employee benefit plans

(48,576)

(63,567)

Net change in assets and liabilities

88,148

(76,362)

Net cash provided by operating activities of continuing

operations

1,261,160

948,864

Investing activities:

Additions to property, plant and equipment

(297,012)

(262,676)

Acquisitions, including adjustment for prior year acquisition

purchase price (net of cash and cash equivalents acquired)

(1,035,433)

(1,382,217)

Proceeds from sale of short-term investments

124,410

Proceeds from the sale of businesses

516,901

Other

(13,443)

(8,848)

Net cash used in investing activities of continuing

operations

(1,345,888)

(1,012,430)

Financing activities:

Net increase in debt and notes payable

603,918

371,315

Purchase of common stock

(748,955)

(242,488)

Proceeds from exercise of stock options and SARs, including

tax benefits

43,054

39,826

Dividends to stockholders

(240,959)

(219,154)

Net cash used in financing activities of continuing

operations

(342,942)

(50,501)

Net cash provided by discontinued operations

 

4,879

117,311

Effect of exchange rate changes on cash

 

16,112

16,150

Net (decrease) increase in cash and cash equivalents

 

(406,679)

19,394

Cash and cash equivalents at beginning of period

 

1,206,755

1,187,361

Cash and cash equivalents at end of period

 

$

800,076

$

1,206,755

 

DOVER CORPORATION QUARTERLY FREE CASH FLOW (unaudited)(in thousands)

 

2012

2011

Q1

Q2

Q3

Q4

FY 2012

Q1

Q2

Q3

Q4

FY 2011

Cash flow from operating activities

$

161,327

$

243,363

$

285,811

$

570,659

$

1,261,160

$

100,153

$

195,250

$

323,355

$

330,106

$

948,864

Less: Additions to property, plant and equipment

(68,249)

(72,758)

(67,842)

(88,163)

(297,012)

(49,528)

(71,106)

(63,741)

(78,301)

(262,676)

Free cash flow

$

93,078

$

170,605

$

217,969

$

482,496

$

964,148

$

50,625

$

124,144

$

259,614

$

251,805

$

686,188

Free cash flow as a percentage of earnings from continuing operations

49.9%

83.2%

93.4%

231.7%

115.7%

32.6%

58.2%

125.1%

127.6%

88.7%

Free cash flow as a percentage of revenue

4.8%

8.4%

10.4%

24.0%

11.9%

3.1%

6.8%

13.0%

13.3%

9.3%

 

ADDITIONAL INFORMATION

FOURTH QUARTER AND FULL YEAR 2012

 

Acquisitions During the fourth quarter of 2012, the Company completed four acquisitions, three in the Engineered Systems segment and one in the Energy segment.  The fourth quarter acquisitions were largely funded with commercial paper borrowings.  For the full year 2012, Dover made a total of seven acquisitions for consideration totaling $1.2 billion. This included the Engineered Systems' acquisitions of Maag Pump Systems in the first quarter and Anthony International in the fourth quarter.

Discontinued Operations The Company did not dispose of any businesses in 2012. However, in the fourth quarter, the Company announced its intent to divest  Everett Charles Technologies and DEK, two non-core businesses serving the electronic assembly and test markets. The results of operations and cash flows of these businesses have been reclassified to discontinued operations and the assets and liabilities of these businesses have been segregated within assets and liabilities of discontinued operations for all periods presented herein.  In the fourth quarter of 2012, the Company recognized a goodwill impairment charge of $63.8 million ($51.9 million, net of tax) in connection with the intended divestiture.  As a result, for the fourth quarter and full year periods of 2012, the Company generated  net after-tax losses from discontinued operations of $0.27 diluted earnings per share ("EPS") and $0.12 EPS, respectively, reflecting the earnings from discontinued operations, offset by the fourth quarter goodwill impairment charge. 

Tax Rate The effective tax rate on continuing operations was 23.5% for the fourth quarters of 2012 and 2011.   On a full year basis, the effective tax rates on continuing operations for 2012 and 2011 were 26.8% and 23.5%, respectively.  The 2012 and 2011 rates were favorably impacted by discrete and other items, as shown in the reconciliation for quarterly earnings per share included herein.  After adjusting for discrete and other items, the fourth quarter effective tax rates were 28.5% and 25.4% for 2012 for 2011, respectively, and the full year rates were 28.2% and 27.5% for 2012 and 2011, respectively.  The higher rates for the quarter and full year of 2012 reflect the impact of a higher proportion of U.S. earnings, partly offset by lower effective tax rates in foreign jurisdictions.

Revenue Growth Factors

2012

Q1

Q2

Q3

Q4

Full Year

Organic

12.6

%

6.1

%

2.3

%

2.1

%

5.5

%

Acquisitions

5.9

%

7.8

%

4.8

%

4.8

%

5.8

%

Currency translation

(0.7)

%

(1.9)

%

(2.2)

%

(0.4)

%

(1.3)

%

17.8

%

12.0

%

4.9

%

6.5

%

10.0

%

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

Three Months Ended

December 31,

Years Ended December 31,

2012

2011

2012

2011

Free Cash Flow (dollars in thousands)

Cash flow provided by operating activities

$

570,659

$

330,106

$

1,261,160

$

948,864

Less: Capital expenditures

(88,163)

(78,301)

(297,012)

(262,676)

Free cash flow

$

482,496

$

251,805

$

964,148

$

686,188

Free cash flow as a percentage of revenue

24.0

%

13.3

%

11.9

%

9.3

%

Free cash flow as a percentage of earnings from continuing operations

115.7

%

88.7

%

 

The full year increase in 2012 free cash flow reflects higher earnings from continuing operations before depreciation and amortization and a $129 million positive change in working capital year-over-year, offset in part by higher capital expenditures in 2012 necessary to fund expansion in the Company's high-growth businesses.

Share Repurchases During the year ended December 31, 2012, the Company purchased approximately 12.3 million shares of its common stock in the open market at an average price of $60.36 per share.  The repurchases through November 1 were made pursuant to the Company's standing five-year authorization, which was renewed in May of 2012.  At December 31, 2012, approximately 3.9 million shares remain authorized for repurchase under the current authorization, which expires in May of 2017.  Repurchases subsequent to November 1 were made pursuant to an additional share repurchase program approved in November 2012, which authorized $1 billion for share repurchases over the next 12 to 18 months.  At December 31, 2012, approximately $750 million remains available for repurchases under this program.

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

 

Net Debt to Net Capitalization Ratio (in thousands)

December 31, 2012

December 31, 2011

Current maturities of long-term debt

$

3,266

$

1,022

Commercial paper

607,500

Long-term debt

2,189,350

2,186,230

Total debt

2,800,116

2,187,252

Less: Cash and cash equivalents

(800,076)

(1,206,755)

Net debt

2,000,040

980,497

Add: Stockholders' equity

4,919,230

4,930,555

Net capitalization

$

6,919,270

$

5,911,052

Net debt to net capitalization

28.9

%

16.6

%

 

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

SOURCE Dover



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