Dover Corporation (DOV)

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Dover Corporation (DOV)

Q1 2010 Earnings Call Transcript

April 23, 2010 9:00 am ET


Paul Goldberg – Treasurer and Director, IR

Bob Livingston – President and CEO

Brad Cerepak – VP, Finance and CFO


Scott Davis – Morgan Stanley

Nigel Coe – Deutsche Bank

John Inch – Banc of America/Merrill Lynch

Jeffrey Sprague – Vertical Research Partners

Steve Tusa – J.P. Morgan

Robert McCarthy – Robert W. Baird

Alex Blanton – Ingalls & Snyder

Terry Darling – Goldman Sachs



Good morning and welcome to the first quarter 2010 Dover Corporation earnings conference call. With us today are Bob Livingston, President and Chief Executive Officer of Dover Corporation, Brad Cerepak, Vice President and CFO of Dover Corporation and Paul Goldberg, Treasurer and Director of Investor Relations at Dover Corporation. After the speakers' opening remarks, there will be a question-and-answer period. (Operator Instructions). As a reminder, ladies and gentlemen, this conference is being recorded and your participation implies consent to all reporting of this call. If you do not agree with these terms, please disconnect at this time. Thank you. I would now like to turn the call over to Mr. Paul Goldberg. Mr. Goldberg, please go ahead sir.

Paul Goldberg

Thank you, Kristy. Good morning and welcome to Dover's first quarter earnings call. With me today are Bob Livingston, Dover's President and Chief Executive Officer and Brad Cerepak, our CFO. Today's call will begin with comments from Bob and Brad on Dover's first quarter operating and financial performance and our updated outlook for the rest of 2010.

We will then open the call up to questions and in the interest of time we kindly ask that you limit yourself to one question with a follow-up. Please note that our current earnings release, investor supplement and associated presentation can be found on our website, This call will be available for playback through May 7 and the audio portion of this call will be archived on our website for three months. The replay telephone number is 800-642-1687. When accessing the playback, you'll need to supply the following reservation code, 66592109.

Before we get started, I would like to remind everyone that our comments today, which are intended to supplement your understanding of Dover, may contain certain forward-looking statements that are inherently subject to uncertainties. We caution everyone to be guided in their analysis of Dover Corporation by referring to Form 10-K for a list of factors that could cause our results to differ from those anticipated in any such forward-looking statement.

We also undertake no obligation to publicly update or revise any forward-looking statements, except as required by law. We would also direct your attention to our website where considerably more information can be found. With that, I'd like to turn this call over to Bob.

Bob Livingston

Thanks, Paul. Good morning everyone and thank you for joining us for this morning's conference call. The first quarter was much improved across Dover and better than anticipated.

Revenue increased 15% over last year and our orders were 41% above a weak first quarter of 2009. Our 2009 acquisitions contributed 5% revenue growth in the quarter. Positive trends noted in the second half of '09 continued in Electronic Technologies, Energy and Product ID and business activity also improved in Fluid Solutions and Material Handling. Clearly, we are seeing evidence of a global economic recovery across a wide portion of our portfolio and we expect these trends to benefit to us next quarter and for the year. Thus we have increased guidance for the year and Brad will discuss our updated outlook later in the call.

With that, let's move to our first quarter results. Today, we reported first-quarter earnings per share of $0.65, up 97% from last year. First quarter revenue was $1.6 billion, an increase of 15% over last year and 5% sequentially.

First quarter revenue was stronger than expected at Fluid Management and Electronic Technologies, slightly better than expected at Industrial Products. Revenue at Engineered Systems was as anticipated and order rates were robust. The order rates at Engineered Systems have them well-positioned for a strong seasonal upswing the next two quarters. Net earnings from continuing operations were $122 million, nearly double last year's result.

I was very pleased to see bookings accelerate as the quarter progressed. For the quarter, bookings were $1.8 billion, again up 41% over the prior year and a 13% sequential improvement. For the second consecutive quarter, sequential bookings growth was double digit and the strength of those bookings was across a wide portion of our portfolio.

Bookings increased in all segments on both a year-over-year and sequential basis. Book-to-bill finished at 1.12. Operating margin for the quarter was 15%, up 480 basis points. Margins improved at Industrial Products, Engineered Systems and Electronic Technologies and remained strong at Fluid Management.

Sequentially margins improved at each segment. These solid results reflect higher volume and the continuing benefits of restructuring actions taken in 2009. It was very gratifying to see how well our companies converted volume to earnings.

In the first quarter, we generated free cash flow of $48 million, 3% of revenue. Our first quarter is traditionally the weakest in terms of cash flow generation. This quarter's cash flow also reflects an increase in working capital to support revenue growth. I remain confident that full-year free cash flow will be around 10% of revenue.

Our acquisition pipeline remains active as we continue to look for opportunities which complement our strong positions and diversify our geographic footprint. Though we did not close any deals in the first quarter, we remain confident we will complete some strategic add-ons as the year unfolds. Now, let me turn the call over to Brad for comments on our segment performance.

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