Dover Corporation (DOV)

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Dover Corporation (DOV)

Q4 2012 Earnings Call

January 24, 2013 10:00 am ET


Bob Livingston - President & CEO

Brad Cerepak - SVP & CFO

Paul Goldberg - VP, IR


Nigel Coe - Morgan Stanley

Scott Davis - Barclays

Jeff Sprague - Vertical Research

Deane Dray - Citi

Steve Tusa - JPMorgan

John Inch - Deutsche Bank

Shannon O'Callaghan - Nomura Securities

Andrew Obin - Bank of America



Good morning, and welcome to the Fourth Quarter 2012 Dover Corporation Earnings Conference Call. With us today are Bob Livingston, President and Chief Executive Officer; Brad Cerepak, Senior Vice President and CFO; and Paul Goldberg, Vice President of Investor Relations.

After the speakers' opening remarks, there will be a question-and-answer period. (Operator Instructions) As a reminder, ladies and gentlemen, this conference call 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 conference over to Mr. Paul Goldberg. Mr. Goldberg, please go ahead sir.

Paul Goldberg

Thank you, Paula. Good morning and welcome to Dover's fourth quarter earnings call. Today's call will begin with comments from Bob and Brad on Dover's fourth quarter and full year operating and financial performance, and follow with our outlook for 2013. We will then open 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, and associated presentation can be found on our website, This call will be available for playback through February 7th, and the audio portion of this call will be archived on our website for three months. The replay telephone number is 800-585-8367. When accessing the playback, you'll need to supply the following access code, 86837487.

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 in their analysis of Dover 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 statements. 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.

With that, I'd like to turn the call over to Bob.

Bob Livingston

Thanks, Paul. Good morning everyone and thank you for joining us for this morning's conference call.

2012 was a strong performance year for Dover in revenue and earnings, and a truly important year for us as we continue to execute on our strategy. Before I get to our fourth quarter results, I'd like to comment on a few of our key accomplishments during this past year.

With respect to strengthening our company, we continue to concentrate on building our five key growth spaces. We achieve this in two important ways. First, we work quite active in acquiring market leading businesses, investing a total of $1.2 billion. These acquisitions expanded our markets, enhanced our technology and product offerings and broadened our customer base. For example, through the addition of Anthony in our refrigeration space, we now have access to new markets and new geographies. Our product offering is greatly expanded lead by the exciting close to key strength and we have gained access to another set of customers. The same can be said for our Mag Pump and PCS acquisitions, which also added market leading businesses and technologies to our fluids and energy spaces.

Secondly, we announced our plan to divest our electronic assembly and test businesses. Those strong performers these businesses served historically volatile end markets. We believe that this position, these businesses will greatly improve the consistency of our future results. These activities position us very well as we head into 2013.

Additionally in November, we announced a $1 billion share repurchase program. In total for the year, we repurchased 12.3 million shares for roughly $750 million, which includes $250 million against the $1 billion program.

Overall I am very pleased with our financial results for the year. The highlights include 5% organic growth, acquisition growth of 6%, margins exceeding 17%, and nearly $1 billion in free cash flow.

Now some comments on our fourth quarter results. We posted revenue of $2 billion in the quarter, an increase of 6%, and our fourth quarter adjusted EPS of a $1.09, was a 7% improvement over the prior year.

In our Energy segment, increased production activity, especially international markets and continuing strength in downstream distribution and retail fueling were among the trends that drove solid results in the quarter.

Our drilling results as expected continue to be impacted by the lower year-over-year North American rig count. Overall Energy's performance was characterized by modest revenue growth and strong margins.

At Communication Technologies, the consumer electronics market continue to be strong, especially smartphones. Our MEMs activity was again very strong reflecting the breadth of our OEM coverage and the benefits of multiple designs wins.

Regarding Sound Solutions, we are now on an improved path and achieved sequentially better performance in the fourth quarter. We expect this positive trend for Sound Solutions to continue sequentially and for 2013 to be a much better year.

Within our Engineered System segment, refrigeration and food equipment markets remain solid, and our business performance was again quite strong. We were also very happy to close the Anthony acquisition in the quarter.

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