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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 1998
OR
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________________ to ______________.
Commission File No. 1-4018
DOVER CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 53-0257888
(State or other jurisdiction of Incorporation (I.R.S. Employer
or organization) Identification No.)
280 Park Avenue, New York, NY 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(212) 922-1640
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Common Stock, par value $1. New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of class
--------------
None
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 ninety days. Yes |X| No |_|
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's 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. |_|
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of the close of business March 1, 1999 was $6,858,775,697.
Registrant's closing price as reported on the New York Stock Exchange-Composite
Transactions for March 1, 1999 was $34.1250 per share.
The number of outstanding shares of the Registrant's common stock as of March 1,
1999 was 215,894,434.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II - Certain portions of the Annual Report to Stockholders
for Fiscal Year Ended December 31, 1998 (the "1998
Annual Report").
Part III - Certain portions of the Proxy Statement for Annual
Meeting of Stockholders to be held on April 27, 1999
(the "1999 Proxy Statement").
Special Notes Regarding Forward Looking Statements
This Annual Report on Form 10-, cash flow and operating improvements
and may be indicated by words or phrases such as "anticipates," "supports,"
"plans," "projects," "expects," "should," "hope," "forecast," "Dover believes,"
"management is of the opinion" and similar words or phrases. Such statements may
also be made by management orally. Forward-looking statements are subject to
inherent uncertainties and risks, including among others: increasing price and
product/service competition by foreign and domestic competitors, including new
entrants; technological developments and changes; the ability to continue to
introduce competitive new products and services on a timely, cost effective
basis; the mix of products/services; the achievement of lower costs and
expenses; domestic and foreign governmental and public policy changes including
environmental regulations; protection and validity of patent and other
intellectual property rights; the continued success of the Company's acquisition
program; the cyclical nature of the Company's business; and the outcome of
pending and future litigation and governmental proceedings. 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.
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.
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PART I
Item 1. BUSINESS
General
Dover Corporation ("Dover" or the "Company"), originally
incorporated in 1947 in the State of Delaware, is a diversified industrial
manufacturing corporation encompass-ing over 45 operating companies which
manufacture a broad range of specialized industrial products and sophisticated
manufacturing equipment.
The Company's businesses are divided into four business segments.
Dover Diversified builds assembly and production machines, heat transfer
equipment, food refrigeration and display cases, and specialized compressors, as
well as sophisticated products for use in the defense, aerospace and other
industries. Dover Industries makes products for use in the waste handling, bulk
transport, automotive service, commercial food service and machine tool
industries. Dover Resources manufactures products primarily for the automotive,
fluid handling, petroleum and chemical industries. Dover Technologies builds
sophisticated automated assembly and testing equipment for the electronics
industry, industrial printers for coding and marking and, specialized electronic
components. Dover Elevator, which was the Company's fifth business segment for
all of 1998, was sold to Thyssen Industrie AG on January 5, 1999. Dover Elevator
manufactures, installs and services elevators primarily in North America and is
accounted for as a discontinued operation in the Company's Consolidated
Financial Statements.
The Company emphasizes growth and strong internal cash flow. It has
a long-standing and successful acquisition program pursuant to which, from
January 1, 1994 through December 31, 1998, the Company made 57 acquisitions at a
total acquisition cost of $1,608,000,000. For more detail regarding acquisitions
over the past several years, see page 4 of the 1998 Annual Report as well as
Note 2 to the Consolidated Financial Statements on pages 27-28 of the 1998
Annual Report, which are hereby incorporated by reference. These acquisitions
have had a substantial impact on the Company's increase in sales and earnings
since 1994. The Company's acquisition program traditionally focused on acquiring
new or stand-alone businesses. However, since 1994, increased emphasis has been
placed on acquiring businesses that can be added on to existing operations. In
1998, the Company completed 4 stand-alone and 10 add-on acquisitions at a total
cost of about $556 million. The Company aims to be in businesses marked by
growth, innovation and higher than average profit margins. It seeks to have each
of its businesses be a leader in its market as measured by market share,
innovation, profitability and return on assets.
The Company practices a highly decentralized management style. The
presidents of operating companies are very autonomous and have a high level of
independent responsibility for their businesses and their performance. This is
in keeping with the Company's operating philosophy that small independent
operations are better able to serve customers by focusing closely on their
products and reacting quickly to customer needs. The Company's executive
management becomes involved only to guide and manage capital, assist in major
acquisitions, evaluate, motivate and, if necessary, replace operating
management, and provide selected other services.
Dover Diversified manufactures equipment and components for
industrial, commercial, and defense applications. The largest operations are
Belvac, acquired in 1993 (can-making machinery), Tranter (process industry heat
exchangers), A-C Compressor, acquired in 1992, and expanded in 1997 with the
acquisitions of Preco and Conmec (process industry compressors), and Hill
Phoenix, acquired in 1993-94 (refrigeration cases and systems for supermarkets).
Other Dover Diversified businesses produce such products as fluid film and
self-lubricating bearings, metal and fabric expansion joints, submarine and
aircraft hydraulic controls, remote manipulators and industrial cleaning
equipment, engineered high-performance racing products and packaging machinery.
In 1998, Dover Diversified companies completed four "add-ons": Ing Mas, Prox
International, Sonic Industries and ThermoFluid International.
Dover Industries manufactures a diverse mix of equipment and
components for use in the waste handling, bulk transport, automotive service,
commercial food service, machine tool and other industries. The largest
operations are Heil, acquired in 1993 (trailerized tanks and refuse collecting
vehicles),
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Rotary Lift (automotive lifts), Tipper Tie (clip closures for food packaging),
Marathon (solid waste compaction, transporting and recycling equipment) and
DovaTech (welding, cutting and laser equipment and supplies). Other Dover
Industries operations produce auto collision measuring and repair systems,
touchless car washing equipment, food service equipment, commercial
refrigeration equipment and screw machines. In 1998, Dover Industries companies
acquired three "add-on" businesses: Avtec Industries, Koolant Koolers and
Thompson Carmichael Holdings, Inc.
Dover Resources manufactures components and equipment primarily for
the automotive, fluid handling, petroleum and chemical industries. Its largest
businesses are De-Sta-Co (compressor valves and workholding devices), OPW
Fueling Components (gasoline nozzles and related service station equipment),
Wilden Pump (air operated double diaphram pumps, acquired in 1998) and Blackmer
(rotary vein and progressive cavity pumps and gas compressors). In addition to
the Wilden purchase, in 1998 Dover Resources acquired Quartzdyne, a manufacturer
of high-pressure quartz transducers used in the petroleum industry. In late
1996, Dover Resources acquired Tulsa Winch, a producer of winches and speed
reducers and in 1997 Hydro Systems (cleaning chemical dispensing equipment).
Other Dover Resources companies produce liquid monitoring, filtration and
control systems, oil and gas production equipment, and other valve,
instrumentation and control systems and products. During 1998, two Dover
Resources companies made two "add-on" acquisitions: Hydro Systems acquired Nova
Controls and De-Sta-Co acquired CCMOP.
Dover Technologies sells assembly and testing equipment, screen
printers, and soldering machines for the printed circuit board industry, as well
as components for communications (including wireless) and military applications.
The most significant business in this segment is Universal Instruments which, in
1998, suffered an operating profit decline of nearly 50% on about a 25% revenue
decrease, substantially accounting for Technologies' lower performance. This
overall decline reflects the periodic cyclical downturn in the electronics
assembly and test equipment business. Universal Instruments is the world's
largest producer of thru-hole printed circuit board assembly equipment, as well
as a significant manufacturer of surface mount printed circuit board assembly
equipment. For 1998, Dover Technologies' most profitable business was Imaje, a
manufacturer of continuous inkjet marking systems, which was acquired in 1995.
During 1996, Dover Technologies sold Measurement Systems, Inc., a manufacturer
of manual positioning controls. In the third quarter of 1996, Quadrant, which
is part of Dover Technologies, acquired KVG, a manufacturer of high frequency
crystals and oscillators. In November 1996, Dover Technologies acquired Everett
Charles Technologies, based in Pomona, California. Everett Charles is the
leading producer of machines for the testing of circuitry on printed circuit
boards before the boards are populated with components. In addition, it is the
leader in design and manufacture of test fixtures for populated boards and the
largest producer of spring-loaded test probes, which are used in both
bare-board and populated-board testing. Late in 1997, Soltec acquired
Vitronics, a U.S. based manufacturer of reflow soldering ovens. In 1998, Dover
Technologies made one add-on acquisition, atg test services, GmbH.
Dover sells its products and services both directly and through
various distributors, sales and commission agents and manufacturers
representatives, in all cases consistent generally with the custom of the
industry and market being served. For more information on these segments and
their products, sales, markets served, earnings before tax and total assets for
the six years ended December 31, 1998, see pages 10-22 and 33-34 of the 1998
Annual Report, which are hereby incorporated by reference.
Discontinued Operation
Dover Elevator, which was the Company's fifth business segment for all of
1998, was sold to Thyssen Industrie AG on January 5, 1999 for $1.1 billion plus
the sharing of certain expenses arising out of the transaction. The Company had
earlier decided in May 1998 to spin-off Dover Elevator in a tax-free
distribution to its stockholders to resolve management, operational and
financial differences which resulted from operating dissimilar businesses within
the same corporate group. The sale to Thyssen Industrie AG replaced the planned
spin-off.
Dover Elevator's business, principally the installation and service of a
product based on largely mature technology, was seen as fundamentally different
from Dover's other businesses which focused on manufacturing a variety of
products based on sophisticated and developing technology. Dover Elevator's
business was conducted by service employees at thousands of construction sites
and buildings
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around the country, while Dover's other businesses are conducted largely by
manufacturing employees centered in factories. As a result, Dover found that its
experience in managing its other businesses, while transferable among those
businesses, was not equally applicable to the elevator business, which
consequently required a disproportionate amount of management attention.
At the time of sale, Dover Elevator was the nation's largest
manufacturer and installer, and one of the largest servicers of elevators for
low and mid-rise buildings. Dover Elevator also participated in the high-rise
market for new equipment and service and sold and serviced elevators in foreign
markets, principally in Canada and Asia. Somewhat less than half of Dover
Elevator's sales and almost all of its profits in 1998 were generated by the
service business. In 1997, Dover Elevator sold its German and U.K. operations
for a pre-tax gain of $32 million, based upon its analysis that they did not
represent a sufficiently strong base for developing a meaningful position in
Europe. For more information with respect to the operating results of Dover
Elevator, see pages 2 and 28 of the 1998 Annual Report, which are hereby
incorporated by reference.
Although there is no fixed schedule for doing so, Dover intends to
invest the after-tax proceeds from the sale (approximately $800 million) in
stock repurchases and in acquisitions of existing companies that fit the
Company's growth model.
Raw Materials
Dover's 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. Temporary shortages may occur occasionally,
but have not resulted in business interruptions or major problems, nor are any
such problems anticipated. To date, fluctuations in the cost of raw materials
have not had a material impact on operating profits.
Research and Development
Dover's operating companies are encouraged to develop new products
as well as upgrade and improve existing products to satisfy customer needs,
expand sales opportunities, improve product reliability and reduce production
costs. During 1998, approximately $131.3 million was spent on research and
development, compared with $106.7 million and $93.7 million in 1997 and 1996,
respectively, excluding spending by Dover Elevator.
Intellectual Property
Dover holds or is licensed to use a substantial number of U.S.
patents covering a number of its product lines, and to a far lesser degree
patents in certain foreign countries where it conducts business. Dover licenses
some of its patents to other companies for which it collects royalties which are
not significant. These patents have been obtained over a number of years and
expire at various times. Although patents in the aggregate are important to
Dover, the loss or expiration of any one patent or group of patents would not
materially affect Dover or any of its segments. Where patents have expired,
Dover believes that its commitment to leadership in continuous engineering
improvements, manufacturing techniques, and other sales, service and marketing
efforts are significant to maintaining its general market leadership position.
From time to time Dover has had disputes regarding its alleged use of other
patented technology, most recently regarding claims by the Lemelson Foundation
relating to vision systems and bar-coding technology. Dover expects to resolve
any such matters without any material impact on its businesses.
Many of the Company's products are sold under various registered and
unregistered trademarks and tradenames owned or licensed by the Company. Among
the most significant are: A-C Compressor, Belvac, Blackmer, De-Sta-Co,
Davenport, DEK, Dover, Duncan, Everett Charles, Groen, Heil, Imaje, Marathon,
Midland, Norris, OPW, Quadrant, Rotary Lift, Sargent, SWEP, Tipper Tie, Tranter,
Universal, Wiseco and Wilden.
In connection with the sale of Dover Elevator, which closed on
January 5, 1999, the Company transferred all its intellectual property used by
Dover Elevator to the buyers, with the exception
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of the Dover name and logo and certain patents in the United States, Australia,
Canada and Great Britain which were used by Dover Elevator and other Dover
segments. The Company granted the buyers a 3 1/2 year royalty-free license to
use the Dover name and logo on Dover Elevator products made in the ordinary
course of business within the territories in which Dover Elevator operated as of
the sale. The buyers were granted an exclusive, paid-up irrevocable, worldwide
license to use the 25 patents used by Dover Elevator and other Dover segments
within the conduct of Dover Elevator's business after the sale, but only to the
extent such business was conducted as of the sale.
Seasonality
Dover's operations are generally not seasonal, although performance
tends to be stronger in the second and fourth quarters of the year.
Customers
Dover's businesses serve thousands of customers, no one of which
accounted for more than 10% of the Company's consolidated revenues in 1998.
Within each of the four segments, no customer accounted for more than 10% of
that segment's sales in 1998.
Backlog
Backlog generally is not a significant factor in Dover's businesses,
as most of Dover's products have relatively short delivery periods. It is more
relevant to those businesses in the segments, which produce larger and more
sophisticated machines, or have long-term government contracts, primarily A-C
Compressor, Belvac, Heil Trailer, Mark Andy, Sargent Controls and Universal.
Total Company backlog as of December 31, 1998 and 1997 was $726
million and $796 million, respectively, excluding that backlog relating to the
elevator business. The Company believes that this backlog may reasonably be
filled during the fiscal year 1999.
Competition
Dover's competitive environment is complex because of the wide
diversity of products manufactured and markets served. In general, Dover
companies are market leaders which compete with only a few companies where the
key competitive factors are customer service, product quality and innovation. In
addition, since most of Dover's manufacturing operations are in the United
States, Dover usually is a more significant competitor domestically than in
foreign markets.
In the Technologies segment, Dover competes globally against a few
very large companies, primarily based in Japan or Europe. Its primary
competitors are Japanese producers, including Fuji Machine, Panasonic and TDK.
Within the other segments, competition is primarily domestic,
although an increasing number of Dover subsidiaries see more international
competitors and several serve markets which are predominatly international,
particularly A-C Compressor, Alberta Oil Tool, Belvac, Civacon, CRL, De-Sta-Co,
Duncan, Norris, OPW Fueling Components, Ronningen-Petter, Tipper Tie Technopak,
Tranter, Wilden and Wittemann.
In the Elevator segment, Dover competed for the manufacture and
installation of elevators with a few generally large multinational competitors
and maintained a strong domestic position. Its primary competitors were Otis,
Westinghouse/Schindler and Montgomery/Kone. For service work, there were
numerous local, regional and national competitors.
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International
For foreign sales, export sales and an allocation of the assets of
the Company's continuing operations, see Note 14 to the Consolidated Financial
Statements on page 32 of the 1998 Annual Report, which is incorporated herein by
reference.
Although international operations are subject to certain risks, such
as price and exchange rate fluctuations and foreign governmental restrictions,
Dover intends to increase its expansion into foreign markets as domestic markets
mature.
The countries where most of Dover's foreign subsidiaries and
affiliates are based are Canada, France, Great Britain, Germany and Sweden.
Environmental Matters
Dover believes its operations generally are in substantial
compliance with applicable regulations. In some instances, particular plants and
businesses have been the subject of administrative and legal proceedings with
governmental agencies relating to the discharge or potential discharge of
substances. Where necessary, these matters have been addressed with specific
consent orders to achieve compliance. Dover believes that continued compliance
will not have any material impact on the Company's financial position going
forward and will not require significant capital expenditures.
Employees
The Company had about 23,350 employees as of December 31, 1998,
excluding employees of Dover Elevator.
Item 2. PROPERTIES
The number, type, location and size of the Company's properties as of December
31, 1998 are shown on the following charts, by segment.
Number and Nature of Square Footage
Facilities(1) (000's)
------------------------ ------------------
Ware- Sales/
Segment Mfg. house Service Owned Leased
------- ---- ----- ------- ----- ------
Diversified 32 9 51 2,428 716
Industries 43 11 31 3,193 804
Resources 61 13 32 2,540 512
Technologies 53 12 114 1,194 1,139
Locations Leased Facilities
------------------------- ------------------------
expiration dates (years)
North
Segment American Europe Other Minimum Maximum
------- -------- ------ ----- ------- -------
Diversified 51 26 3 1 12
Industries 62 11 1 1 15
Resources 79 16 3 1 16
Technologies 65 53 52 1 20
(1) Does not include properties owned by Dover Elevator, all of which were
transferred to Thyssen Industrie AG and its direct and indirect
subsidiaries on January 5.
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The facilities are generally well maintained and suitable for the
operations conducted. The productive capacity of its plants is generally
adequate for current needs.
Item 3. LEGAL PROCEEDINGS
Dover is party to a number of legal proceedings arising out of the
normal course of its businesses. In general, most claims arose in connection
with activities of its Elevator segment operations and certain of its other
businesses which make products used by the public. In connection with the sale
of Dover Elevator, which closed on January 5, 1999, all liabilities of Dover
Elevator were transferred to the buyers who have given the Company an
appropriate indemnity.
Dover is continuously involved with an examination by the Internal
Revenue Service (the "IRS") of the Company's Federal income tax returns. The
Company and the IRS have settled tax years through 1993, and during 1998, the
IRS completed its examination of the Company's 1994 and 1995 Federal income tax
returns. The Company expects to resolve these years in the near future, all
within the amounts paid and/or reserved for these liabilities. The IRS is
currently examining the Company's 1996 and 1997 Federal income tax returns. In
addition, matters have arisen under various environmental laws, as well as under
local regulatory compliance agencies. For a further description of such matters,
see Note 10 to the Consolidated Financial Statements on page 30 of the 1998
Annual Report, which is incorporated herein by reference.
The Company has also reviewed its exposure with respect to "Year
2000" issues, which is discussed in detail on pages 33-34 of the 1998 Annual
Report, which are incorporated herein by reference.
Based on insurance availability, established reserves and periodic
reviews of those matters, management is of the opinion that the ultimate
resolution of current pending claims and known contingencies should not have a
material adverse effect on Dover's financial position, results of operations or
cash flows, taken as a whole.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to the vote of the Company's security
holders in the last quarter of 1998.
EXECUTIVE OFFICERS OF THE REGISTRANT
All officers are elected annually at the first meeting of the Board
of Directors following the annual meeting of stockholders and are subject to
removal at any time by the Board of Directors. The executive officers of Dover
as of March 1, 1999, 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
- ---- --- --------------------------------------------
Thomas L. Reece 56 Director, President and (since May 1994)
Chief Executive Officer.
John F. McNiff 56 Director (since May 1996); Vice
President-Finance and Treasurer.
Robert G. Kuhbach 51 Vice President, General Counsel and
Secretary.
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Robert A. Tyre 54 Vice President-Corporate Development (since
February 1995); prior thereto President, Rye
Transaction Consultants, Inc. (acquisition
consultants), from February 1993 to January
1995.
George F. Meserole 53 Vice President, Controller (since August,
1998); prior thereto Assistant Controller.
Charles R. Goulding 49 Vice President, Taxation (since August,
1998); prior thereto Director of Taxation.
Lewis E. Burns 60 Vice President and President of Dover
Industries, Inc.
Rudolf J. Herrmann 48 Vice President and President of Dover
Resources, Inc.
John E. Pomeroy 57 Director (since May 1998); Vice President
and President of Dover Technologies
International, Inc.
Jerry W. Yochum 60 Vice President and President of Dover
Diversified, Inc.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The principal market in which the Company's 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 set forth on Page 35 of the 1998 Annual Report and incorporated
herein by reference. The Company's Common Stock is also listed on the London
Stock Exchange.
The number of holders of record of the Company's Common Stock as of
March 1, 1999, as shown by the records of the Company's transfer agent was
13,000. This figure includes participants in the Company's 401(K) program.
On December 16, 1998, pursuant to the 1996 Non-Employee Directors'
Stock Compensation Plan, the Company issued 1,400 shares of its Common Stock to
each of its three U.S. resident outside directors as compensation for serving as
a director of the Company during 1998. At that time, the Company issued 2,000
shares of its Common Stock to each of its two non-U.S. residents outside
directors who are not subject to U.S. withholding tax, as compensation for
serving as a director of the Company during 1998. In addition, the Company
issued 500 shares of its Common Stock to Mr. Anthony Ormsby, a non-U.S. resident
outside director who retired from the Board in April, 1998.
Item 6. SELECTED FINANCIAL DATA
The information for the years 1988 through 1998 is set forth in the
table "11-Year Consolidated Summary of Selected Financial Data" in the 1998
Annual Report on pages 36 and 37 and is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth in the 1998 Annual Report on pages 33 and
34 is incorporated herein by reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
INTEREST RATES
The Company's exposure to market risk for changes in interest rates
relates primarily to the fair value of long-term fixed interest rate debt,
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 65 basis point increase in interest
rates (10% of the Company's long-term debt interest rate) would have an
immaterial effect on the fair value of the Company's long-term debt. Commercial
paper borrowings under revolving credit facilities are at variable interest
rates, and have maturities of three months or less. A 55 basis point increase in
the interest rates (10% of the Company's weighted average commercial paper
interest rate) on commercial paper borrowings would have an immaterial impact
on the Company's 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 54 basis point decrease in interest
rates (10% of the Company's weighted average interest rate) would have an
immaterial impact on the Company's pre-tax earnings. The Company does not enter
into derivative financial or derivative commodity instruments for trading or
speculative purposes.
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FOREIGN EXCHANGE
The Company conducts business in various foreign currencies,
primarily in Canada, Europe, Japan and other Asian countries. Therefore, changes
in the value of the currencies of these countries affect the Company's financial
position and cash flows when translated into U.S. Dollars. As of December 31,
1998 the Company had not established a foreign currency-hedging program. The
Company has mitigated and will continue to mitigate a portion of its currency
exposure through decentralized operating companies in which all costs are
local-currency based. A 10% change in the value of all foreign currencies would
have an immaterial effect on the Company's financial position and cash flows.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth in the 1998 Annual Report on pages 22
through 32 is incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Ms. Magalen O. Bryant, Director of Carlisle Companies Incorporated
and O'Sullivan Corp., has been a director of the Company since 1979 and will
retire in April 1999. Mr. John F. Fort, a director of the Company from 1989
until his resignation on January 29, 1999, was Consultant, Full Circle
Investments; Director of Tyco International Ltd. and formerly Chairman and Chief
Executive Officer; and Director, Roper Industries. Mr. Anthony J. Ormsby, a
private investor, was a director of the Company from 1971 until his retirement
in April 1998. The information with respect to the continuing directors of the
Company required to be included pursuant to this Item 10 is included under the
caption "1. Election of Directors" in the 1999 Proxy Statement relating to the
1999 Annual Meeting of Stockholders filed with the Securities and Exchange
Commission (the "Commission") pursuant to Rule 14a-6 under the Securities
Exchange Act of 1934, as amended, and is incorporated in this Item 10 by
reference. The information with respect to the executive officers of the Company
required to be included pursuant to this Item 10 is included under the caption
"Executive Officers of the Registrant" in Part I of this Annual Report on Form
10-K and is incorporated in this Item 10 by reference. The information with
respect to Section 16(a) reporting compliance required to be included in this
Item 10 is included under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the 1999 Proxy Statement and is incorporated in this
Item 10 by reference.
Item 11. EXECUTIVE COMPENSATION
The information with respect to executive compensation required to
be included pursuant to this Item 11 is included under the caption "Executive
Compensation" in the 1999 Proxy Statement and is incorporated in this Item 11 by
reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information regarding security ownership of certain beneficial
owners and management that is required to be included pursuant to this Item 12
is included under the captions "General" and "Security Ownership" in the 1999
Proxy Statement and is incorporated in this Item 12 by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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The information with respect to any reportable transaction, business
relationship or indebtedness between the Company and the beneficial owners of
more than 5% of the Common Stock, the directors or nominees for director of the
Company, the executive officers of the Company or the members of the immediate
families of such individuals that is required to be included pursuant to this
Item 13 is included under the caption "1. Election of Directors-Directors'
Compensation" in the 1999 Proxy Statement and is incorporated in this Item 13 by
reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The following consolidated financial statements of Dover Corporation
and its subsidiaries are set forth in the 1998 Annual Report, which
financial statements are incorporated herein by reference:
(A) Report of Independent Accountants.
(B) Consolidated balance sheets as of December 31, 1998 and 1997.
(C) Consolidated statements of earnings, accumulated comprehensive
earnings and retained earnings for the years ended December
31, 1998, 1997 and 1996.
(D) Consolidated statements of cash flows for the years ended
December 31, 1998, 1997 and 1996.
(E) Notes to consolidated financial statements.
(2) Financial Statement Schedule
The following financial statement schedule is attached to Part IV of
this report on form 10-K:
Schedule II -- Valuation and Qualifying Accounts
Report of Independent Accountants.
All other schedules are not required and have been omitted.
(3) See (c) below.
(b) Current Reports on Form 8-K:
On December 8, 1998, the Company filed with the Securities and
Exchange Commision a required report on Form 8-K, with respect to
the sale of its elevator business operations which contained
unaudited pro-forma condensed consolidation financial information
reflecting such sale.
(c) Exhibits:
(2) Purchase Agreement dated as of November 23, 1998 by and
among Thyssen Industrie AG, Thyssen Elevator Holding
Corporation, as buyers, and Dover Corporation, as seller,
filed as Exhibit 2.1 to the Company's Current Report on
Form 8-K filed December 8, 1998, is incorporated by
reference. Schedules relating to Purchase Price Allocation,
U.S. Federal Income Taxes, Elevator Financial
12
13
Statements and Executive Employment Arrangements have been
omitted, but will be furnished supplementally to the
Securities and Exchange Commission upon request.
(3)(i) Restated Certificate of Incorporation, filed as Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the
Period Ended June 30, 1998, is incorporated by reference.
(3)(ii) By-Laws of the Company filed as Exhibit 3.1 to Quarterly
Report on Form 10-Q for Period Ended June 30, 1998, are
incorporated by reference.
(4.1) Amended and Restated Rights Agreement, dated as of November
15, 1996, between Dover Corporation and Harris Trust
Company of New York, filed as Exhibit 1 to Form 8-A/A dated
November 15, 1996, is incorporated by reference.
(4.2) Indenture, dated as of June 8, 1998 between Dover
Corporation and The First national Bank Chicago, as
Trustee, filed as Exhibit 4.1 to the Company's Current
Report on Form 8-K filed June 12, 1998, is incorporated by
reference.
(4.3) Form of 6.25% Note due June 1, 2008 ($150,000,000 aggregate
principal amount), filed as Exhibit 4.3 to the company's
Current Report on Form 8-K filed June 12, 1998, is
incorporated by reference.
(4.4) Form of 6.65% Note due June 1, 2028 ($200,000,000 aggregate
principal amount), filed as Exhibit 4.4 to the Company's
Current Report on Form 8-K filed June 12, 1998, is
incorporated by reference.
(4.5) Form of Indenture between the Company and The First
National Bank of Chicago, as Trustee, relating to the 6.45%
Notes due November 15, 2005 (including the form of the
note), filed as Exhibit 4 to the Company's Registration
Statement on Form S-3 (Reg. No. 33-63713) filed under the
Securities Act of 1933, is incorporated by reference.
(4.6) The Company agrees to furnish to the Securities and
Exchange Commission. Upon request, a copy of any instrument
with respect to long-term debt under which the total amount
of securities authorized does not exceed 10 percent of the
total consolidated assets of the Company.
(10.1) 1984 Incentive Stock Option and Cash Performance Program,
filed as Exhibit 10(a) to Annual Report on Form 10-K for
year ended December 31, 1984, is incorporated by
reference.*
(10.2) Employee Savings and Investment Plan, filed as Exhibit 99
to Registration Statement on Form S-8 filed under
Securities Act of 1933 (Reg. No.33-01419), is incorporated
by reference.*
(10.3) 1995 Incentive Stock Option and 1995 Cash Performance
Program, as amended.*
(10.4) 1996 Non-Employee Directors' Stock Compensation Plan,
included as Exhibit A to the Proxy Statement, dated March
16, 1998 is incorporated by reference.*
(10.5) Executive Officer Annual Incentive Plan, included as
Exhibit A to the Proxy Statement dated, March 16, 1998, is
incorporated by reference.*
(10.6) Form of Executive Severance Agreement.*
(13) Incorporated portions of Dover's Annual Report to
Stockholders for its fiscal year ended December 31, 1998
as filed with the Commission by EDGAR on March 23, 1999;
are incorporated by reference.
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(21) Subsidiaries of Dover.
(23.1) Consent of PricewaterhouseCoopers LLP.
(24) Form of Power of Attrorney.
(27) Financial Data Schedule (in EDGAR filing only).
* Executive compensation plan or arrangement.
(d) Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly caused this Report
to be signed on its behalf by the undersigned thereto duly authorized.
DOVER CORPORATION
By: /s/ Thomas L. Reece
-------------------------------------
Thomas L. Reece
President and Chief Executive Officer
Date: March 29, 1999
Pursuant to the requirements of the Securities and Exchange Act of
1934, this Report to be signed below on behalf of the Registrant in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Thomas L. Reece
- ---------------------------
Thomas L. Reece President and Chief Executive
Officer and Director
(Principal Executive Officer) March 29, 1999
/s/ John F. McNiff
- ---------------------------
John F. McNiff Treasurer and Director
(Principal Financial Officer) March 29, 1999
/s/ George F. Meserole
- ---------------------------
George F. Meserole Controller March 29, 1999
(Principal Accounting Officer)
/s/ Gary L. Roubos
- ---------------------------
Gary L. Roubos Chairman and Director* March 29, 1999
/s/ David H. Benson
- ---------------------------
David H. Benson Director* March 29, 1999
/s/ Magalen O. Bryant
- ---------------------------
Magalen O. Bryant Director* March 29, 1999
/s/ Jean-Pierre M. Ergas
- ---------------------------
Jean-Pierre M. Ergas Director* March 29, 1999
/s/ Roderick J. Fleming
- ---------------------------
Roderick J. Fleming Director* March 29, 1999
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/s/ James L. Koley
- ---------------------------
James L. Koley Director* March 29, 1999
/s/ John E. Pomeroy
- ---------------------------
John E. Pomeroy Director* March 29, 1999
* By: /s/ Robert G, Kuhbach
---------------------
Robert G. Kuhbach
Attorney-in-Fact
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EXHIBIT INDEX
(2) Purchase Agreement dated as of November 23, 1998 by and among
Thyssen Industrie AG, Thyssen Elevator Holding Corporation, as
buyers, and Dover Corporation, as seller, filed as Exhibit 2.1 to
the Company's Current Report on Form 8-K filed December 8, 1998, is
incorporated by reference. Schedules relating to Purchase Price
Allocation, U.S. Federal Income Taxes, Elevator Financial Statements
and Executive Employment Arrangements have been omitted, but will be
furnished supplementally to the Securities and Exchange Commission
upon request.
(3)(i) Restated Certificate of Incorporation, filed as Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the Period Ended June
30, 1998, is incorporated by reference.
(3)(ii) By-Laws of the Company filed as Exhibit 3.1 to Quarterly Report on
Form 10-Q for Period Ended June 30, 1998, are incorporated by
reference.
(4.1) Amended and Restated Rights Agreement, dated as of November 15,
1996, between Dover Corporation and Harris Trust Company of New
York, filed as Exhibit 1 to Form 8-A/A dated November 15, 1996, is
incorporated by reference.
(4.2) Indenture, dated as of June 8, 1998 between Dover Corporation and
The First National Bank Chicago, as Trustee, filed as Exhibit 4.1 to
the Company's Current Report on Form 8-K filed June 12, 1998, is
incorporated by reference.
(4.3) Form of 6.25% Note due June 1, 2008 ($150,000,000 aggregate
principal amount), filed as Exhibit 4.3 to the Company's Current
Report on Form 8-K filed June 12, 1998, is incorporated by
reference.
(4.4) Form of 6.65% Note due June 1, 2028 ($200,000,000 aggregate
principal amount), filed as Exhibit 4.4 to the Company's Current
Report on Form 8-K filed June 12, 1998, is incorporated by
reference.
(4.5) Form of Indenture between the Company and The First National Bank of
Chicago, as Trustee, relating to the 6.45% Notes due November 15,
2005 (including the form of the note), filed as Exhibit 4 to the
Company's Registration Statement on Form S-3 (Reg. No. 33-63713)
filed under the Securities Act of 1933, is incorporated by
reference.
(4.6) The Company agrees to furnish to the Securities and Exchange
Commission. Upon request, a copy of any instrument with respect to
long-term debt under which the total amount of securities authorized
does not exceed 10 percent of the total consolidated assets of the
Company.
(10.1) 1984 Incentive Stock Option and Cash Performance Program, filed as
Exhibit 10(a) to Annual Report on Form 10-K for year ended December
31, 1984, is incorporated by reference.*
(10.2) Employee Savings and Investment Plan, filed as Exhibit 99 to
Registration Statement on Form S-8 filed under Securities Act of
1933 (Reg. No.33-01419), is incorporated by reference.*
(10.3) 1995 Incentive Stock Option and 1995 Cash Performance Program, as
amended.*
(10.4) 1996 Non-Employee Directors' Stock Compensation Plan, included as
Exhibit A to the Proxy Statement, dated March 16, 1998 is
incorporated by reference.*
(10.5) Executive Officer Annual Incentive Plan, included as Exhibit A to
the Proxy Statement, dated March 16, 1998, is incorporated by
reference.*
(10.6) Form of Executive Severance Agreement.*
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(13) Incorporated portions of Dover's Annual Report to
Stockholders for its fiscal year ended December 31, 1998
as filed with the Commission by EDGAR on March 23, 1999;
are incorporated by reference.
(21) Subsidiaries of Dover.
(23.1) Consent of PricewaterhouseCoopers LLP.
(24) Form of Power of Attorney.
(27) Financial Data Schedule (in EDGAR filing only).
* Executive compensation plan or arrangement.
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SCHEDULE II
DOVER CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years Ended December 31, 1998, 1997, 1996
Additions
Balance at Charged to Balance at
Beginning of Cost and Deductions Close of
Year Expense (1) Year
---- ------- --- ----
(000's omitted)
Year Ended December 31, 1998
Allowance for Doubtful Accounts $19,468 $ 6,542 $ 5,055 $20,955
Year Ended December 31, 1997
Allowance for Doubtful Accounts $16,569 $ 7,248 $ 4,349 $19,468
Year Ended December 31, 1996
Allowance for Doubtful Accounts $15,907 $ 4,472 $ 3,810 $16,569
Notes:
(1) Represents uncollectible accounts written off and reduction of prior
years' over-provision less recoveries of accounts previously written off,
net of $540, $1 ,499 and $921 related to acquisitions and divestitures in
1998, 1997 and 1996, respectively.
Charged,
Balance at (Credited) to Balance at
Beginning of Cost and Acq. by Close of
Year Expense Merger Year
---- ------- ------ ----
(000's omitted)
Year Ended December 31, 1998
Lifo Reserve $40,629 $ (189) $ -- $40,440
Year Ended December 31, 1997
Lifo Reserve $39,787 $ 842 $ -- $40,629
Year Ended December 31, 1996
Lifo Reserve $39,616 $ 171 $ -- $39,787
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REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of Dover Corporation:
Our audits of the consolidated financial statements referred to in our report
dated February 5, 1999 appearing in the 1998 Annual Report to Shareholders of
Dover Corporation, which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K also included an
audit of the financial statement schedules listed in item 14(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
materials respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
New York, New York
February 5, 1999
20