Dover Corporation (DOV)

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Dover (DOV)

Q2 2011 Earnings Call

July 22, 2011 10:30 am ET


Robert Livingston - Chief Executive Officer, President and Director

Paul Goldberg - Director of Investor Relations and Treasurer

Brad Cerepak - Chief Financial Officer and Senior Vice President


John Inch - BofA Merrill Lynch

Terry Darling - Goldman Sachs Group Inc.

Scott Gaffner - Barclays Capital

Wendy Caplan - SunTrust Robinson Humphrey, Inc.

C. Stephen Tusa - JP Morgan Chase & Co

Shannon O'Callaghan - Nomura Securities Co. Ltd.

Jeffrey Sprague - Citigroup

Unknown Analyst -



Good morning, and welcome to the Second Quarter 2011 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 of Dover Corporation. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded, and your participation implies consent to our recording 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 Paul Goldberg. Mr. Goldberg, please go ahead, sir.

Paul Goldberg

Thank you, Misty. Good morning, and welcome to Dover's second 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 second quarter operating and financial performance and follow with our outlook for the remainder of 2011. We will then open up the call to questions. As a courtesy, we kindly ask that you limit yourself to one question with a follow-up.

Please note that our current earnings release, investor supplement, Form 10-Q and associated presentation can be found on our website,

This call will be available for playback through August 5, and the audio portion of this call will be archived on our website for 3 months. The replay telephone number is (855) 859-2056. When accessing the playback, you'll need to supply the following reservation code: 82478358.

And before we get started, I'd 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 of their analysis of Dover Corporation by referring to our Form 10-K for a list of factors that could cause our results to differ from those anticipated in any such forward-looking statement. Also, we 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.

And with that, I'd like to turn this call over to Bob.

Robert Livingston

Thanks, Paul. Good morning, everyone, and thank you for joining us for this morning's conference call. I am very pleased with our second quarter performance. Following a strong first quarter, we again saw growth in both revenue and earnings and a strong book-to-bill of 1.03. The strength in our orders was broad-based and was largely driven by continuing strength in the Energy and Fluid Solutions markets, mobile handsets and global industrial production. These strong trends are continuing into the second half of the year, along with moderating trends and grocery retail remodeling and solar equipment.

All segments achieved double-digit revenue and earnings growth in the quarter. Segment margin hit 17.4%, an all-time high for Dover. Orders were up 15% and revenue increased 21%. This solid performance enabled Dover to post adjusted earnings per share of $1.19.

I continue to feel positive about our businesses, and as a result, we are increasing full year revenue growth and earnings guidance. We also continue to invest for growth. In addition to our Sound Solutions acquisition, which I'll discuss later, we're investing in international growth initiatives, product innovation and additional capacity, where appropriate. These investments are clearly paying off.

In the second quarter, revenue from China and Latin America increased 43% and 61%, respectively. We continue to make inroads into emerging economies, and I expect our penetration to increase over time, further supported by our newly expanded regional headquarter capabilities in Brazil and India.

I mentioned capacity investments. These additions are in process at many of our operations in China, including a new shared manufacturing facility in Suzhou and expansion of our electronics campus in Shenzhen. In addition, we have recently added MEMS production to our Knowles facility in Malaysia. Domestically, we have put more capacity into U.S. synthetics, and we are expanding the Knowles R&D facility. These projects all have significant strategic value and will help drive future growth.

While we were focused on growth, we continue to look for opportunities to take out cost and streamline our businesses. In fact, we worked on several selective minor restructurings and integrations in the second quarter. In early July, we announced the completion of our Sound Solutions acquisition. This is a key addition for Dover and enables us to serve the fast-growing handset market even better. We now become a more significant supplier to our customers as we leverage technology and scale. Our postmerger integration team is already fully engaged, and I have the highest confidence they will create substantial value for their customers and for Dover.

Our pipeline has matured and developed nicely, and I believe we will complete additional deals before the end of the year. Our focus continues to be on our 5 growth spaces and opportunities that provide synergies with existing businesses.

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