Dover Corporation (DOV)

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Dover (DOV)

Q1 2011 Earnings Call

April 21, 2011 11:30 am ET


Robert Livingston - Chief Executive Officer, President and Director

Paul Goldberg - Director of Investor Relations and Treasurer

Brad Cerepak - Chief Financial Officer and Vice President of Finance


Scott Davis - Morgan Stanley

John Inch - BofA Merrill Lynch

Terry Darling - Goldman Sachs Group Inc.

James Lucas - Janney Montgomery Scott LLC

Wendy Caplan - SunTrust Robinson Humphrey, Inc.

Shannon O'Callaghan - Nomura Securities Co. Ltd.

C. Stephen Tusa - JP Morgan Chase & Co

Jeffrey Sprague - Citigroup

Nigel Coe - Deutsche Bank AG



Good morning, and welcome to the First 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 at Dover Corporation. [Operator Instructions] Thank you. I would now like to turn the call over to Mr. Paul Goldberg. Mr. Goldberg, please go ahead.

Paul Goldberg

Thank you, Jackie. 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 follow with our outlook for the remainder of 2011. We will then open the call up to questions and 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 May 5, and the audio portion of this call will be archived on our website for three months. The replay telephone number is 1 (800) 642-1687. When accessing the playback, you'll need to supply the following reservation code: 55947580.

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 Corporation by referring to our Form 10-K for a list of those 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. Dover had an excellent start to 2011 as the momentum that was evident last year continued to build in the first quarter. We continue to see strong trends in mobile handsets, solar equipment, the oil and gas market and global industrial production. These trends are reflected in our strong first quarter results and give me the confidence to increase our full year expectations.

All segments achieved double-digit revenue growth and higher margins, absent deal cost. For the first quarter, orders were up 27% and revenue, 24%. Our first quarter order rates of $2.2 billion were at record level for Dover. As we discussed last quarter, we are making deliberate decisions to invest for growth. In addition to acquisitions, we continue to dedicate significant time and resources on international growth initiatives and product innovation.

In the first quarter, our incremental investments in engineering and sales and marketing, especially in emerging economies, are driving emerging market growth. First quarter revenue derived from Asia and Latin America was 20% of Dover's total with a collective growth rate of 38%. We believe this trend is sustainable over the midterm.

As we did in China in 2009, we are now putting the necessary infrastructure in place in Brazil and India to ensure we are well positioned to fully participate in these key growth markets. While still relatively small, our first quarter growth rate was 28% in Brazil and 38% in India.

Acquisition activity continued in the first quarter as we closed on four deals for a combined purchase price of $425 million. In particular, I could not be more pleased with results thus far of Harbison-Fischer, the largest of these acquisitions. Customer feedback has been quite positive with respect to our combined offerings in artificial lift. The integration is proceeding at a pace faster than originally anticipated, and we are seeing early success in our efforts to expand into international markets.

As you recall, in December, we announced the signing of the agreement to acquire Sound Solutions. We originally expected this acquisition to close around the end of the first quarter. We are diligently working through the regulatory approval process, which is taking longer than originally thought. As a result, we don't expect this deal to close before the mid of the second quarter.

In addition, our acquisition pipeline is rebuilding nicely, a result of internal initiatives and an active M&A environment. I am confident we'll announce additional deals in 2011.

Before I turn it over to Brad, let me say I am extremely pleased with the start to our year. We continue to deliver strong financial performance while keeping our eye on our longer-term objectives.

Brad Cerepak

Thanks, Bob. Good morning, everyone. Let's start by turning to Slide 3. Today, we reported first quarter revenue of $2 billion, an increase of 24%. Earnings per share increased 48% to $0.96. After adjusting for discrete tax benefit, EPS was $0.92, a 42% improvement. Segment margin for the quarter was 15.6%, up 60 basis points. Margins increased at all segments, absent onetime deal costs.

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