10-Q 1 y63103e10vq.htm DOVER CORPORATION FORM 10-Q
Table of Contents

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

     
For six months ended June 30, 2002   Commission File No. 1-4018

DOVER CORPORATION
(Exact name of registrant as specified in its charter)

     
Delaware
(State of Incorporation)
  53-0257888
(I.R.S. Employer Identification No.)
     
280 Park Avenue, New York, NY
(Address of principal executive offices)
  10017
(Zip Code)

Registrant’s telephone number, including area code: (212) 922-1640

Indicate by checkmark 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, and (2) has been subject to such filing requirements for the past 90 days.
Yes  (XBOX)    No  (BOX)

The number of shares outstanding of the Registrant’s common stock as of the close of the period covered by this report was 202,713,361.

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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENT
DOVER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
DOVER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
DOVER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
DOVER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
DOVER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
DOVER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
DOVER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
DOVER CORPORATION AND SUBSIDIARIES MARKET SEGMENT RESULTS
DOVER CORPORATION AND SUBSIDIARIES MARKET SEGMENT RESULTS
DOVER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND                      RESULTS OF OPERATIONS
PART II OTHER INFORMATION
Item 4. Submission of Matter to Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENT

DOVER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended June 30,
(000 omitted)

                         
            UNAUDITED
            2002   2001
           
 
Net Sales
  $ 1,097,152     $ 1,108,777  
Cost of Sales
    738,986       741,700  
 
   
     
 
     
Gross Profit
    358,166       367,077  
Selling & Administrative Expenses
    255,431       276,679  
 
   
     
 
     
Operating Profit
    102,735       90,398  
 
   
     
 
Other Deductions (Income):
               
 
Interest expense
    18,037       23,021  
 
Interest income
    (627 )     (2,794 )
 
Foreign exchange
    420       264  
 
All other, net
    (495 )     (7,239 )
 
   
     
 
       
Total
    17,335       13,252  
 
   
     
 
Earnings from Continuing Operations, Before Taxes on Income
    85,400       77,146  
   
Federal and Other Taxes on Income
    21,293       28,359  
 
   
     
 
Net Earnings from Continuing Operations
    64,107       48,787  
 
   
     
 
       
Earnings (loss) from discontinued operations, net of tax
    (1,598 )     1,374  
       
Gain (loss) on sale of discontinued operations, net of tax
    (7,308 )     93,138  
 
   
     
 
Net Earnings (Loss) from Discontinued Operations
    (8,906 )     94,512  
 
   
     
 
Net Earnings Before Cumulative Effect of Change in Accounting Principle
    55,201       143,299  
 
   
     
 
       
Cumulative Effect of Change in Accounting Principle, net of tax
           
Net Earnings (Loss)
  $ 55,201     $ 143,299  
 
   
     
 
 
               
Net Earnings (Loss) per Common Share:
               
     
- Basic
               
       
      Continuing Operations
  $ 0.31     $ 0.24  
       
      Discontinued Operations
    (0.04 )     0.46  
 
   
     
 
       
Total Net Earnings Before Cumulative Effect of Change in Accounting Principle
    0.27       0.70  
 
   
     
 
       
          Cumulative Effect of Change in Accounting Principle, net of tax
           
       
Net Earnings (Loss)
  $ 0.27     $ 0.70  
 
   
     
 
 
               
     
- Diluted
               
       
      Continuing Operations
  $ 0.31     $ 0.24  
       
      Discontinued Operations
    (0.04 )     0.46  
 
   
     
 
       
Total Net Earnings Before Cumulative Effect of Change in Accounting Principle
    0.27       0.70  
 
   
     
 
       
          Cumulative Effect of Change in Accounting Principle, net of tax
           
       
Net Earnings (Loss)
  $ 0.27     $ 0.70  
 
   
     
 
 
               
Weighted average number of common shares outstanding during the period:
               
     
- Basic
    202,655       203,150  
 
   
     
 
     
- Diluted
    203,713       204,353  
 
   
     
 

See Notes to Condensed Consolidated Financial Statements.

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DOVER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
Three Months Ended June 30,
(000 omitted)

                   
      UNAUDITED
      2002   2001
     
 
Net Earnings (Loss)
  $ 55,201     $ 143,299  
 
   
     
 
Other Comprehensive Earnings (Loss), Net of Tax:
               
 
Foreign currency translation adjustments
    65,605       (16,435 )
 
Unrealized gains (losses) on securities (net of tax -$67 in 2002 and -$238 in 2001)
    (124 )     (443 )
 
   
     
 
Other Comprehensive Earnings (Loss)
    65,481       (16,878 )
 
   
     
 
Comprehensive Earnings (Loss)
  $ 120,682     $ 126,421  
 
   
     
 

DOVER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Six Months Ended June 30,
(000 omitted)

                         
            UNAUDITED
            2002   2001
           
 
Net Sales
  $ 2,104,697     $ 2,311,356  
Cost of Sales
    1,419,659       1,532,781  
 
   
     
 
     
Gross Profit
    685,038       778,575  
Selling & Administrative Expenses
    501,275       559,258  
 
   
     
 
     
Operating Profit
    183,763       219,317  
 
   
     
 
Other Deductions (Income):
               
 
Interest expense
    36,277       49,325  
 
Interest income
    (1,692 )     (9,917 )
 
Foreign exchange
    (1,393 )     (172 )
 
All other, net
    (2,683 )     (9,445 )
 
   
     
 
       
Total
    30,509       29,791  
 
   
     
 
Earnings from Continuing Operations, Before Taxes on Income
    153,254       189,526  
   
Federal and Other Taxes on Income
    42,456       62,948  
 
   
     
 
Net Earnings from Continuing Operations
    110,798       126,578  
 
   
     
 
       
Earnings (loss) from discontinued operations, net of tax
    (3,173 )     2,668  
       
Gain (loss) on sale of discontinued operations, net of tax
    (7,308 )     93,138  
 
   
     
 
Net Earnings (Loss) from Discontinued Operations
    (10,481 )     95,806  
 
   
     
 
Net Earnings Before Cumulative Effect of Change in Accounting Principle
    100,317       222,384  
 
   
     
 
     
Cumulative Effect of Change in Accounting Principle, net of tax
    (293,049 )      
Net Earnings (Loss)
  $ (192,732 )   $ 222,384  
 
   
     
 
 
               
Net Earnings (Loss) per Common Share:
               
     
- Basic
               
       
      Continuing Operations
  $ 0.55     $ 0.62  
       
      Discontinued Operations
    (0.05 )     0.47  
 
   
     
 
       
Total Net Earnings Before Cumulative Effect of Change in Accounting Principle
    0.50       1.09  
       
          Cumulative Effect of Change in Accounting Principle, net of tax
    (1.45 )      
 
   
     
 
       
Net Earnings (Loss)
  $ (0.95 )   $ 1.09  
 
   
     
 
 
               
     
- Diluted
               
       
      Continuing Operations
  $ 0.54     $ 0.62  
       
      Discontinued Operations
    (0.05 )     0.47  
 
   
     
 
       
Total Net Earnings Before Cumulative Effect of Change in Accounting Principle
    0.49       1.09  
       
          Cumulative Effect of Change in Accounting Principle, net of tax
    (1.44 )      
 
   
     
 
       
Net Earnings (Loss)
  $ (0.95 )   $ 1.09  
 
   
     
 
 
               
Weighted average number of common shares outstanding during the period:
               
     
- Basic
    202,655       203,150  
 
   
     
 
     
- Diluted
    203,713       204,353  
 
   
     
 

See Notes to Condensed Consolidated Financial Statements.

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DOVER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
Six Months Ended June 30,
(000 omitted)

                   
      UNAUDITED
      2002   2001
     
 
Net Earnings (Loss)
  $ (192,732 )   $ 222,384  
 
   
     
 
Other Comprehensive Earnings (Loss), Net of Tax:
               
 
Foreign currency translation adjustments
    54,306       (52,337 )
 
Unrealized gains (losses) on securities (tax -$194 in 2002 and -$1,475 in 2001)
    (359 )     (2,740 )
 
   
     
 
Other Comprehensive Earnings (Loss)
    53,947       (55,077 )
 
   
     
 
Comprehensive Earnings (Loss)
  $ (138,785 )   $ 167,307  
 
   
     
 

DOVER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Six Months Ended June 30,
(000 omitted)

                   
      UNAUDITED
      2002   2001
     
 
Retained Earnings at January 1
  $ 3,395,293     $ 3,252,319  
Net Earnings (Loss)
    (192,732 )     222,384  
 
   
     
 
 
    3,202,561       3,474,703  
 
               
Deduct:
               
 
Common stock cash dividends ($0.27 per share in 2002, $0.25 in 2001)
    54,747       50,798  
 
   
     
 
Retained Earnings at End of Period
  $ 3,147,814     $ 3,423,905  
 
   
     
 

See Notes to Condensed Consolidated Financial Statements.

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DOVER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000 omitted)

                         
            UNAUDITED        
            June 30, 2002   December 31, 2001
           
 
Assets:
               
Current assets:
               
 
Cash & cash equivalents
  $ 116,417     $ 175,601  
 
Marketable securities
    444       997  
 
Receivables, net of allowance for doubtful accounts
    733,969       672,789  
 
Inventories
    646,472       653,548  
 
Prepaid expenses
    105,784       98,197  
 
Deferred income taxes
    43,988       43,510  
 
   
     
 
       
Total current assets
    1,647,074       1,644,642  
 
   
     
 
Property, plant and equipment (at cost)
    1,791,144       1,742,271  
Accumulated depreciation
    (1,054,936 )     (985,920 )
 
   
     
 
   
Net property, plant and equipment
    736,208       756,351  
 
   
     
 
Goodwill
    1,658,934       1,946,423  
Intangible assets, net of amortization
    188,796       173,194  
Other assets and deferred charges
    67,362       55,990  
Assets from discontinued operations
    17,584       25,602  
 
   
     
 
 
  $ 4,315,958     $ 4,602,202  
 
   
     
 
 
               
Liabilities:
               
Current liabilities:
               
 
Notes payable
  $ 40,230     $ 39,783  
 
Current maturities of long-term debt
    3,931       3,997  
 
Accounts payable
    233,201       206,375  
 
Accrued compensation and employee benefits
    125,171       154,011  
 
Accrued insurance
    46,319       45,535  
 
Other accrued expenses
    210,373       210,210  
 
Federal and other taxes on income
    74,085       155,298  
 
   
     
 
       
Total current liabilities
    733,310       815,209  
 
   
     
 
Long-term debt
    1,034,688       1,033,243  
Deferred income taxes
    60,761       102,855  
Other deferrals (principally compensation)
    127,963       106,878  
Liabilities from discontinued operations
    26,601       24,478  
 
               
Stockholders’ equity:
               
Preferred stock
           
Common stock
    237,613       237,303  
Additional paid-in surplus
    62,642       55,223  
Cumulative translation adjustments
    (95,432 )     (149,738 )
Unrealized holding gains (losses)
    (86 )     273  
Retained earnings
    3,147,814       3,395,293  
 
   
     
 
     
Subtotal
    3,352,551       3,538,354  
Less: treasury stock
    1,019,916       1,018,815  
 
   
     
 
     
Net stockholders’ equity
    2,332,635       2,519,539  
 
   
     
 
 
  $ 4,315,958     $ 4,602,202  
 
   
     
 

See Notes to Condensed Consolidated Financial Statements.

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DOVER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Six Months Ended June 30,
(000 omitted)

                     
        UNAUDITED
        2002   2001
       
 
Cash flows from operating activities:
               
Net Earnings (Loss)
  $ (192,732 )   $ 222,384  
 
   
     
 
Adjustments to reconcile net earnings to net cash from operating activities:
               
 
Cumulative effective of change in accounting principle, net of tax
    293,049        
 
(Earnings) loss from discontinued operations, net of tax
    3,173       (2,668 )
 
(Gain) loss on sale of discontinued operations, net of tax
    7,308       (93,138 )
 
Depreciation
    71,416       69,911  
 
Amortization — goodwill
          25,199  
 
Amortization — other
    9,161       8,431  
 
Net increase (decrease) in deferred taxes
    3,116       5,376  
 
Net increase (decrease) in LIFO reserves
    691       (775 )
 
Increase (decrease) in other deferrals (principally compensation)
    22,736       (26,034 )
 
Other, net
    (7,509 )     6,992  
 
Changes in assets & liabilities (excluding acquisitions and dispositions):
               
   
Decrease (increase) in accounts receivable
    (43,743 )     109,902  
   
Decrease (increase) in inventories, excluding LIFO reserve
    16,011       8,217  
   
Decrease (increase) in prepaid expenses
    (5,110 )     (7,828 )
   
Increase (decrease) in accounts payable
    21,521       (55,770 )
   
Increase (decrease) in accrued expenses
    (32,577 )     18,126  
   
Increase (decrease) in federal & other taxes on income
    (81,309 )     62,259  
 
   
     
 
 
Total adjustments
    277,934       128,200  
 
   
     
 
Net cash from (used in) operating activities
    85,202       350,584  
 
   
     
 
 
               
Cash flows from (used in) investing activities:
               
 
Additions to property, plant & equipment
    (45,623 )     (100,682 )
 
Acquisitions, net of cash & cash equivalents
    (49,482 )     (236,266 )
 
   
     
 
Net cash from (used in) investing activities
    (95,105 )     (336,948 )
 
   
     
 
 
               
Cash flows from (used in) financing activities:
               
 
Increase (decrease) in notes payable
    206       (452,997 )
 
Increase (decrease) in long-term debt
    1,379       398,826  
 
Purchase of treasury stock
    (1,100 )     (10,005 )
 
Proceeds from exercise of stock options
    5,322       2,812  
 
Cash dividends to stockholders
    (54,747 )     (50,798 )
 
   
     
 
Net cash from (used in) financing activities
    (48,940 )     (112,162 )
 
   
     
 
 
               
 
   
     
 
Discontinued operations
    (341 )     277,446  
 
   
     
 
 
               
Net increase (decrease) in cash & cash equivalents
    (59,184 )     178,920  
 
               
Cash & cash equivalents at beginning of period
    175,601       180,560  
 
   
     
 
 
               
Cash & cash equivalents at end of period
  $ 116,417     $ 359,480  
 
   
     
 

See Notes to Condensed Consolidated Financial Statements.

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DOVER CORPORATION AND SUBSIDIARIES
MARKET SEGMENT RESULTS
(unaudited)

                           
      Second quarter ended June 30,        
     
       
                      Percent
SALES   2002   2001   Change

 
 
 
Dover Industries
  $ 286,427,000     $ 299,383,000       -4 %
Dover Diversified
    309,026,000       277,898,000       11 %
Dover Resources
    223,679,000       237,843,000       -6 %
Dover Technologies
    279,446,000       295,144,000       -5 %
 
   
     
         
 
Total Continuing (after intramarket eliminations)
  $ 1,097,152,000     $ 1,108,777,000       -1 %
 
   
     
         
                                 
EARNINGS (Loss)                        

                       
Dover Industries
  $ 39,853,000     $ 39,410,000       1 %
Dover Diversified
    39,396,000       35,036,000       12 %
Dover Resources
    30,356,000       29,373,000       3 %
Dover Technologies
    1,679,000       482,000       248 %
 
   
     
         
   
Subtotal Continuing
    111,284,000       104,301,000       7 %
Corporate expense
    (8,475,000 )     (6,928,000 )     22 %
Net interest expense
    (17,409,000 )     (20,227,000 )     -14 %
 
   
     
         
Earnings from Continuing Operations, before taxes on income
    85,400,000       77,146,000       11 %
Taxes on income
    21,293,000       28,359,000       -25 %
 
   
     
         
Net Earnings from Continuing Operations
    64,107,000       48,787,000       31 %
       
Net Earnings (Loss) from Discontinued Operations*
    (8,906,000 )     94,512,000       -109 %
 
   
     
         
Net Earnings before cumulative effect of change in accounting principle
    55,201,000       143,299,000       -61 %
 
   
     
         
       
Cumulative effect of change in accounting principle, net of tax**
                   
Net Earnings (Loss)
  $ 55,201,000     $ 143,299,000       -61 %
 
   
     
         
 
                       
Net Earnings (Loss) per diluted common share:
                       
       
Continuing Operations
  $ 0.31     $ 0.24       29 %
       
Discontinued Operations*
    (0.04 )     0.46       -109 %
 
   
     
         
 
                       
       
Net Earnings before cumulative effect of change in accounting principle
    0.27       0.70       -61 %
 
   
     
         
       
Cumulative effect of change in accounting principle, net of tax**
                   
       
Net Earnings (Loss)
  $ 0.27     $ 0.70       -61 %
 
   
     
         
 
                       
Average number of diluted shares outstanding
    203,713,000       204,353,000          
 
                       
Impact of goodwill amortization on continuing diluted EPS:
                       
 
EPS from Continuing Operations
  $ 0.31     $ 0.24       29 %
     
Goodwill amortization (net of tax)**
          0.05          
 
   
     
         
 
EPS before goodwill amortization
  $ 0.31     $ 0.29       7 %
 
   
     
         

*In accordance with the adoption of SFAS No. 144, the earnings (net of tax) from discontinued operations were separately presented for all reported periods in earnings from discontinued operations. In the second quarter of 2002, Vectron GmbH, formerly of the Technologies segment, qualified for discontinued operations presentation.
 
**In accordance with the 1/1/2002 adoption of SFAS No.142, goodwill and indefinite-lived intangible assets are no longer amortized on a periodic basis but are subjected to impairment testing on at least an annual basis.

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DOVER CORPORATION AND SUBSIDIARIES
MARKET SEGMENT RESULTS
(unaudited)

                           
      Six months ended June 30,        
     
       
                      Percent
SALES   2002   2001   Change

 
 
 
Dover Industries
  $ 564,750,000     $ 589,646,000       -4 %
Dover Diversified
    597,463,000       531,719,000       12 %
Dover Resources
    431,702,000       470,933,000       -8 %
Dover Technologies
    513,593,000       721,979,000       -29 %
 
   
     
         
 
Total Continuing (after intramarket eliminations)
  $ 2,104,697,000     $ 2,311,356,000       -9 %
 
   
     
         
                                 
EARNINGS (Loss)                        

                       
Dover Industries
  $ 81,503,000     $ 75,767,000       8 %
Dover Diversified
    69,443,000       55,545,000       25 %
Dover Resources
    57,068,000       60,853,000       -6 %
Dover Technologies
    (7,225,000 )     48,512,000       -115 %
 
   
     
         
   
Subtotal Continuing
    200,789,000       240,677,000       -17 %
Corporate expense
    (12,950,000 )     (11,743,000 )     10 %
Net interest expense
    (34,585,000 )     (39,408,000 )     -12 %
 
   
     
         
Earnings from Continuing Operations, before taxes on income
    153,254,000       189,526,000       -19 %
Taxes on Income
    42,456,000       62,948,000       -33 %
 
   
     
         
Net Earnings from Continuing Operations
    110,798,000       126,578,000       -12 %
       
Net Earnings (Loss) from Discontinued Operations*
    (10,481,000 )     95,806,000       -111 %
 
   
     
         
Net Earnings before cumulative effect of change in accounting principle
    100,317,000       222,384,000       -55 %
 
   
     
         
       
Cumulative effect of change in accounting principle, net of tax**
    (293,049,000 )              
Net Earnings (Loss)
  $ (192,732,000 )   $ 222,384,000       -187 %
 
   
     
         
 
                       
Net Earnings (Loss) per diluted common share:
                       
       
Continuing Operations
  $ 0.54     $ 0.62       -13 %
       
Discontinued Operations*
    (0.05 )     0.47       -111 %
 
   
     
         
 
                       
       
Net Earnings before cumulative effect of change in accounting principle
    0.49       1.09       -55 %
 
   
     
         
       
Cumulative effect of change in accounting principle, net of tax**
    (1.44 )              
       
Net Earnings (Loss)
  $ (0.95 )   $ 1.09       -187 %
 
   
     
         
 
                       
Average number of diluted shares outstanding
    203,713,000       204,353,000          
 
                       
Impact of goodwill amortization on continuing diluted EPS:
                       
 
EPS from Continuing Operations
  $ 0.54     $ 0.62       -13 %
     
Goodwill amortization (net of tax)**
          0.10          
 
   
     
         
 
EPS before goodwill amortization
  $ 0.54     $ 0.72       -25 %
 
   
     
         

*In accordance with the adoption of SFAS No. 144, the earnings (net of tax) from discontinued operations were separately presented for all reported periods in earnings from discontinued operations. In the second quarter of 2002, Vectron GmbH, formerly of the Technologies segment, qualified for discontinued operations presentation.

**Reflects the transitional provisions of SFAS No. 142 “Goodwill and Other Intangible Assets” (adopted 1/1/02), which resulted in a $293 million write down (net of $52 million in tax) of impaired goodwill to fair value. In addition, beginning in 2002 goodwill and indefinite-lived intangible assets are no longer amortized on a periodic basis.

 
 
 

DOVER CORPORATION AND SUBSIDIARIES
MARKET SEGMENT IDENTIFIABLE ASSETS
(000 omitted)

                 
    UNAUDITED        
    June 30,   December 31,
    2002   2001
   
 
Dover Industries
  $ 990,795     $ 1,115,291  
Dover Diversified
    999,167       1,122,938  
Dover Resources
    822,666       897,965  
Dover Technologies
    1,386,153       1,315,023  
Corporate
    99,593       125,383  
 
   
     
 
Total Continuing
    4,298,374       4,576,600  
Assets of Discontinued Operations
    17,584       25,602  
 
   
     
 
Consolidated Total
  $ 4,315,958     $ 4,602,202  
 
   
     
 
“Corporate” — principally cash and equivalents and marketable securities
               

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DOVER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A — Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and changes in financial position in conformity with generally accepted accounting principles. In the opinion of the Company, all adjustments, consisting only of normal recurring items necessary for a fair presentation of the operating results have been made. The results of operations of any interim period are subject to year-end audit and adjustments, and are not necessarily indicative of the results of operations for the fiscal year. Certain amounts in prior years have been reclassified to conform to the current quarter’s presentation. In accordance with the adoption of Statement of Financial Accounting Standards “SFAS” No. 144 in 2001, the earnings (net of tax) from discontinued operations were separately presented for all reporting periods in earnings from discontinued operations. The assets, liabilities and cash flows from discontinued operations were also separately presented. All financial results were restated accordingly to reflect the adoption of this statement.

NOTE B — Inventory

Inventories, by components, are summarized as follows :

                   
      (000 omitted)
     
      UNAUDITED        
      June 30,   December 31,
      2002   2001
     
 
Raw materials
  $ 292,306     $ 295,059  
Work in progress
    176,385       178,047  
Finished goods
    209,024       210,995  
 
   
     
 
 
Total
    677,715       684,101  
Less LIFO reserve
    31,243       30,553  
 
   
     
 
 
Net amount per balance sheet
  $ 646,472     $ 653,548  
 
   
     
 

NOTE C — Accumulated Other Comprehensive Earnings

Accumulated other comprehensive earnings (loss), by components, are summarized as follows:

                         
    UNAUDITED (000 omitted)
   
    Accumulated                
    Other           Unrealized
    Comprehensive   Cumulative   Holding
    Earnings   Translation   Gains
    (Loss)   Adjustments   (Loss)
   
 
 
Beginning balance
  $ (149,465 )   $ (149,738 )   $ 273  
Current-period change
    53,947       54,306       (359 )
 
   
     
     
 
Ending balance
  $ (95,518 )   $ (95,432 )   $ (86 )
 
   
     
     
 

NOTE D – Goodwill and Other Intangible Assets

As of January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets”. In accordance with the guidelines of this accounting principle, goodwill and indefinite-lived intangible assets are no longer amortized but will be assessed for impairment on at least an annual basis.

As an initial step in the implementation process, the Company identified 41 Reporting Units that would be tested for impairment. In the Industries, Diversified, and Resources market segments the “stand-alone” operating companies were identified as “Reporting Units”. These entities qualify as Reporting Units in that they are one level below an operating segment (a “Component” as defined in SFAS No. 131), discrete financial information exists for each entity and the segment executive management group directly reviews these units. Due to the lack of similarities in either products, production processes or

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markets served, management could not identify any situations where the components in these three operating segments could currently be aggregated into a single Reporting Unit. In the Technologies segment, three Reporting Units were identified, Marking (consisting of one stand-alone operating company), Circuit Board Assembly and Test or “CBAT” and Specialty Electronic Components or “SEC”.

As required under the transitional accounting provisions of SFAS No. 142, the Company completed both steps required to identify and measure goodwill impairment at each of the 41 Reporting Units as of January 1, 2002. The first step involved identifying all Reporting Units with carrying values (including goodwill) in excess of fair value, which was estimated using the present value of future cash flows. The identified Reporting Units from the first step were then measured for impairment by comparing the implied fair value of the Reporting Unit goodwill, determined in the same manner as in a business combination, with the carrying amount of the goodwill. As a result of these procedures, goodwill was reduced by $345 million and a net after tax charge of $293 million was recognized as a cumulative effect of a change in accounting principle in the first quarter of 2002. Five stand-alone operating companies or Reporting Units accounted for over 90% of the total impairment – Triton and Somero from the Industries segment, Crenlo and Mark Andy from the Diversified segment, and Wilden from the Resources segment. Various factors impacted the identification and amounts of impairment recognized at the reporting units. These included declining market conditions in terms of size and new product opportunities, lower than expected current and/or future operating margins and lack of future growth potential relative to expectations when acquired. Of the total goodwill reduction, $148 million was from the Diversified Segment, $127 million was from the Industries Segment and $70 million was from the Resources Segment. The implementation of SFAS No. 142 required the use of judgments, estimates and assumptions in the identification of Reporting Units and the determination of fair market value and impairment amounts related to the required testing. The Company believes that its use of estimates and assumptions in this matter was reasonable, and complied with generally accepted accounting principles. Additionally, pursuant to SFAS No. 142, the Company completed its reassessment of previously recognized intangible assets, including trademarks, and adjusted the remaining amortization lives of certain intangibles based on relevant factors.

The Company also adopted SFAS No. 141 “Business Combinations” for all business combinations completed after June 30, 2001. SFAS No. 141 prohibits the pooling-of-interests method of accounting for business combinations, prescribes criteria for the initial recognition and measurement of goodwill and other intangible assets, and establishes disclosure requirements for material business combinations.

Provided below is a reconciliation of previously reported financial statement information to pro forma amounts that reflect the elimination of goodwill and indefinite-lived intangible amortization for the comparable periods prior to adoption:

                           
      Three Months Ended June 30, 2001
     
              Earnings Per Share
             
      Earnings   Basic   Diluted
     
 
 
Net Earnings
  $ 143,299     $ 0.70     $ 0.70  
 
    Add back: Goodwill amortization, net of tax
    10,344       0.05       0.05  
 
    Add back: Indefinite-lived intangible amortization, net of tax
    396              
 
   
     
     
 
Pro Forma Net Earnings
  $ 154,039     $ 0.75     $ 0.75  
 
   
     
     
 
 
    Net Earnings from Discontinued Operations
    94,512       0.46       0.46  
Pro Forma Net Earnings from Continuing Operations
  $ 59,527     $ 0.29     $ 0.29  
 
   
     
     
 
                           
      Six Months Ended June 30, 2001
     
              Earnings Per Share
             
      Earnings   Basic   Diluted
     
 
 
Net Earnings
  $ 222,384     $ 1.09     $ 1.09  
 
    Add back: Goodwill amortization, net of tax
    20,554       0.10       0.10  
 
    Add back: Indefinite-lived intangible amortization, net of tax
    793              
 
   
     
     
 
Pro Forma Net Earnings
  $ 243,731     $ 1.19     $ 1.19  
 
   
     
     
 
 
    Net Earnings from Discontinued Operations
    95,806       0.47       0.47  
Pro Forma Net Earnings from Continuing Operations
  $ 147,925     $ 0.72     $ 0.72  
 
   
     
     
 

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The changes in the carrying value of goodwill by market segment through the quarter ended June 30, 2002 are as follows:

                                           
      DOVER
INDUSTRIES
  DOVER
DIVERSIFIED
  DOVER
RESOURCES
  DOVER
TECHNOLOGIES
  TOTAL DOVER
     
 
 
 
 
Balance as of January 1, 2002
  $ 524,907     $ 539,169     $ 378,829     $ 503,518     $ 1,946,423  
 
 
 
Goodwill From Acquisitions
    423       1,809       1,359       28,888       32,479  
 
Goodwill written off Due to Dispositions
                             
 
Impairment Losses
    (127,530 )     (147,950 )     (69,642 )           (345,122 )
 
Other (primarily cumulative translation)
    2,852       3,687       1,830       16,785       25,154  
 
 
Balance as of June 30,2002
  $ 400,652     $ 396,715     $ 312,376     $ 549,191     $ 1,658,934  
 
                                   
 

The following table provides the gross carrying value and accumulated amortization for each major class of intangible asset based on the Company’s reassessment of previously recognized intangible assets and their remaining amortization lives in accordance with the adoption of SFAS No. 142:

                                           
      as of 6/30/2002           as of 12/31/2001
     
         
      Gross Carrying   Accumulated   Average
Amortizable
  Gross Carrying   Accumulated
      Amount   Amortization   Life   Amount   Amortization
     
 
 
 
 
Trademarks
  $ 19,464     $ 7,608       35     $ 88,318     $ 6,892  
Patents
    86,288       36,361       13       88,249       35,432  
Customer Intangibles
    15,258       3,611       10       5,655       1,536  
Unpatented Technologies
    34,573       8,954       14       20,860       9,752  
Non-Compete Agreements
    14,383       8,774       5       10,277       3,219  
Other
    15,381       7,606       11       30,463       13,797  
 
   
     
     
     
     
 
 
Total Amortizable Intangible Assets
    185,347       72,914       14       243,822       70,628  
 
   
     
             
     
 
 
Total Indefinite-Lived Trademarks
    76,363                            
 
   
     
             
     
 
Total
  $ 261,710     $ 72,914             $ 243,822     $ 70,628  
 
   
     
             
     
 

The total intangible amortization expense for the six months ended June 30, 2002 and 2001 was $9.2 million and $8.4 million, respectively.

The estimated amortization expense, based on current intangible balances, for the next five fiscal years beginning January 1, 2002 is as follows:

           
 
For the year ended December 31, 2002:
  $ 19,743  
 
For the year ended December 31, 2003:
  $ 18,273  
 
For the year ended December 31, 2004:
  $ 16,913  
 
For the year ended December 31, 2005:
  $ 15,654  
 
For the year ended December 31, 2006:
  $ 14,488  

NOTE E — Restructuring

In the third and fourth quarters of 2001, the Company announced restructuring programs at operating company locations, primarily in the Technologies and Diversified segments. The restructuring of Technologies’ CBAT operations was in response to the dramatic downturn in the markets served by these operations, which resulted in excess capacity. Technologies’ SEC businesses announced restructuring programs in 2001 primarily related to the closure of two European operations, which were facing difficult market conditions. Imaje’s 2001 restructuring charges related to severance costs for certain employees due to a change in strategic focus. In the Diversified Segment, severance and exit restructuring programs were announced in 2001 primarily to close a Canadian facility of Tranter, that was experiencing declining volume, pricing pressure and excess capacity concerns, and to close a US facility of Mark Andy and reduce head-count in order to better leverage recent acquisition synergies.

Continuing restructuring charges in 2002 of $1.5 million were primarily recorded as selling and administrative expenses and, to a lesser extent, cost of goods sold, as components of continuing operating earnings. The total restructuring charges for discontinued operations through June 30, 2002 of $2.5 million were

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included in earnings from discontinued operations, net of tax. The continuing employee severance programs announced since the third quarter of 2001 have involved approximately 2,800 employees, 85% of which have been terminated. $3.8 million in continuing separation benefits were paid in the first half of 2002 and the remaining total severance reserve balance at June 30, 2002 was $3.3 million. Through June 30, 2002, $1.9 million was spent against the continuing exit reserve balance resulting in a June 30, 2002 total balance of $3.3 million. The Company expects to complete most of these restructuring programs by the end of fiscal 2002. The table provided below as June 30, 2002 details the activity and balances for the restructuring reserve accounts on a continuing operations basis:

                         
Restructuring   Severance   Exit   Total
Continuing Basis - In millions   2Q 2002   2Q 2002   2Q 2002

Beginning Reserve Balance as of December 31, 2001
  $ 5.7     $ 4.9     $ 10.6  
Current Charges
    1.4       0.1       1.5  
Adjustments (Including Cumulative Translation)
          0.2       0.2  
Benefits paid
    3.8       1.9       5.7  
 
 
Ending Reserve Balance as of June 30, 2002
  $ 3.3     $ 3.3     $ 6.6  
 
 

NOTE F — Discontinued Operations

In the second quarter of 2002, the operations of Vectron GmbH, from the Technologies segment qualified for discontinued operations presentation and were subsequently sold for a net loss of $7.3 million. All prior interim and full year reporting periods have been restated to reflect the discontinuance of this operation. Rapidly deteriorating market conditions in the international markets served by Vectron GmbH led to the ultimate decision to dispose of these operations.

The net sales from all discontinued operations for the quarter and six months ended June 30, 2002 were $4.2 million and $9.5 million respectively. Of the four operations held for sale as of December 31, 2001, one operation has been sold, and three operations remain as held for sale through June 30, 2002.

NOTE G — Additional Information

For a more adequate understanding of the Company’s financial position, operating results, business properties and other matters, reference is made to the Company’s Annual Report on Form 10-K which was filed with the Securities and Exchange Commission on March 1, 2002.

Net earnings as reported was used in computing both basic EPS and diluted EPS without further adjustment. The Company does not have a complex capital structure. Accordingly, the entire difference between basic weighted average shares and diluted weighted average shares results from non-vested restricted stock and assumed stock option exercises. The diluted EPS computation was made using the treasury stock method. The diluted weighted average shares in 2002 exclude the dilutive effect of approximately 4.3 million options with exercise prices in excess of the average market price of the Company’s common stock.

In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations”, which is effective for fiscal years beginning after June 15, 2002. SFAS No. 143 establishes the accounting standards for the recognition and measurement of obligations associated with the retirement of tangible long-lived assets. Under SFAS No. 143, the costs of retiring an asset will be recorded as a liability when the retirement obligation arises, and will be amortized over the life of the asset. The Company is still assessing the potential impact of SFAS No. 143 on its consolidated results of operations and financial position. In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections”, which is effective for certain transactions, fiscal years and financial statements issued on or after May 15, 2002. The effect of the adoption of SFAS No. 145 is expected to be immaterial to the Company’s consolidated results of operations and financial position. In July 2002, the FASB issued SFAS No. 146, “Accounting for Exit or Disposal Activities”, which is effective for disposal activities initiated after December 31, 2002. The standard replaces Issue 94-3 and requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The Company is still assessing the potential impact of SFAS No. 146 on its consolidated results of operations and financial position.

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Item 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
(1)   MATERIAL CHANGES IN CONSOLIDATED FINANCIAL CONDITION:

The Company’s liquidity (cash, cash equivalents and marketable securities) decreased $59.7 million during the first six months of 2002 as compared to the position at December 31, 2001. Cash provided from continuing operating activities in the first six months of 2002 was $85.2 million. This reflected lower earnings, increased receivables, decreased accrued expenses and decreased taxes in 2002. Cash used in continuing investing activities in the first six months of 2002 was $95.1 million, reflecting reduced acquisition activity and capital expenditures. Capital expenditures in the first half of 2002 of $45.6 million compared to $100.7 million in 2001, while current year acquisition expenditures of $49.5 million compared to $236.3 million in the prior year. Cash used in continuing financing activities through June 30, 2002 of $48.9 million was primarily used for dividend payments ($54.7 million). The capital expenditures completed were primarily funded by internal cash flow. It is expected that any cash requirements above the internal cash flows generated will be funded through the issuance of commercial paper.

Consolidated receivables as of June 30, 2002 increased $61.2 million primarily due to incremental sales increases in the second quarter at both the Technologies and Diversified segments. Inventory levels at June 20, 2002 were relatively unchanged on both a consolidated and a segment basis compared to December 31, 2001. Working capital increased from $829.4 million at the end of last year to $913.8 million at June 30, 2002, due to decreased taxes payable related to a large U.S. federal estimated payment for 2001 and due to the combination of payments for the 2001 accrued incentive program and lower current year incentive accruals due to operating conditions, these were partially offset by increased accounts payable.

The total debt level of $1.08 billion as of June 30, 2002 was relatively unchanged from the December 31, 2001 level. As of June 30, 2002, net debt (defined as long-term debt plus current maturities on long-term debt plus notes payable less cash and equivalents and marketable securities) of $962.0 million represented 29.2% of total capital, an increase of 2.9 percentage points compared to 26.3% at December 31, 2001. The ratio increase was caused by a combination of a $61.6 million increase in net debt and a $186.9 million reduction in equity. The primary reasons for the reduction in equity were lower earnings, net of dividends, of $45.6 million and the $293.0 million charge for goodwill impairment related to the adoption of SFAS No. 142 in the first quarter of 2002, which was partially offset by reduced cumulative translation adjustments of $54.3 million.

The Company did not repurchase any shares in the open market during the second quarter of 2002.

Through the end of the second quarter, Dover has invested on, a net economic basis (defined as GAAP purchase price adjusted for debt assumed and cash acquired), a total of $49.7 million in five add-on acquisitions.

The Company’s principal sources of liquidity are cash from operations, cash on hand and certain available commercial paper and credit facilities, which management believes, with respect to current operations, will be sufficient to cover its working capital and debt service requirements.

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(2)   MATERIAL CHANGES IN RESULTS OF OPERATIONS:

The Company earned $64.1 million or $.31 per diluted share from continuing operations in the second quarter ended June 30, 2002 compared to $48.8 million or $.24 per diluted share from continuing operations in the comparable period last year. Goodwill amortization in the second quarter of 2001 was $12.6 million ($10.3 million net of tax, or $.05 per diluted share), and in accordance with the adoption of SFAS No. 142 discussed below, there is no comparable amortization in the second quarter of 2002.

Net earnings for the second quarter ended June 30, 2002 were $55.2 million or $.27 per diluted share compared to $143.3 million or $.70 per diluted share in the second quarter of last year. The second quarter of 2001 included in discontinued operations a net gain of $93.1 million (or $.45 per share) on the sale of A-C Compressor and the DovaTech welding businesses. In the second quarter of 2002, discontinued operations generated a net loss of $8.9 million or $.04 per diluted share and included a net loss on the sale of Vectron GmbH of $7.3 million.

Sales in the second quarter of 2002 were $1.1 billion, flat with the comparable quarter in the prior year. Gross profit of $358.2 million in the quarter ending June 30, 2002 declined 2.4% compared to $367.1 million in the prior year. Gross profit margins of 32.6% in the second quarter of 2002 compared to 33.1% in the second quarter of 2001. Operating profit of $102.7 million in the second quarter increased $12.3 million compared to the prior year due primarily to the discontinuation of goodwill amortization in accordance with SFAS No 142. Operating profit margins in the second quarter of 9.4% compared to 8.2% in the prior year.

Segment earnings for the quarter were $111.3 million, an increase of 7% or $7.0 million from $104.3 million last year. In the Dover Industries segment, earnings increased 1% to $39.9 million from the comparable quarter last year on a sales decline of 4%. Dover Diversified’s quarterly sales and earnings increased from the prior year by 11% and 12%, respectively. In Dover Resources, quarterly earnings were $30.4 million, a 3% increase over last year on a sales decrease of 6%. The Dover Technologies segment recorded a profit of $1.7 million on a 5% decrease in sales, a slight increase from last year’s second quarter results. Compared to the prior year’s second quarter, Industries’ margins of 14% and Technologies’ margins of 1% improved by one percentage point, Resources’ 14% margins improved by two percentage points, and Diversified’s margins of 13% were unchanged.

Dover’s tax rate for continuing operations was 24.9% for the second quarter and 27.7% for the current year-to-date period. This lower effective tax rate is attributable to the effect of certain foreign tax strategies, which are not expected to recur. The comparable prior quarter and prior year-to-date effective tax rates were 36.8% and 33.2%, respectively.

Interest expense in the second quarter and on a year to date basis declined compared to the prior year primarily due to lower levels of commercial paper borrowings through June 30, 2002 compared to the levels through June 30, 2001. On a year-to-date basis interest income declined compared to the prior year, which included $5.0 million related to a U.S. Federal tax settlement. “All other, net” income declined in the quarter and on a year to date basis compared to the prior year total, which included an insurance settlement of $6.4 million in the second quarter of 2001 in the Diversified segment.

Net earnings from continuing operations for the first six months of 2002 were $110.8 million or $.54 per diluted share compared to $126.6 million or $.62 per diluted share from continuing operations in the comparable period last year. For the first six months of 2002, net earnings before changes in accounting principles were $100.3 million or $.49 per diluted share, including $10.5 million or $.05 per diluted share in losses from discontinued operations, compared to $222.4 million or $1.09 per share in 2001, which included $95.8 million or $.47 per share in earnings from discontinued operations. The net loss for the six months ended June 30, 2002 after the $293.0 million cumulative impact of the change in accounting principle (described below) was $192.7 million, which compares to earnings of $222.4 million in the first half of the prior year.

Year-to-date sales for 2002 were $2.1 billion compared to $2.3 billion last year, a decrease of 9% due to weaker first quarter sales. Gross profit of $685.0 million for the six months ended June 30, 2002 was down 12% compared to the prior year’s comparable amount of $778.6 million. Gross profit margins of 32.5% in the first half of 2002 compared to 33.7% in the first half of 2001. Operating profit of $183.8 million in the first half of 2002 compared to $219.3 million in 2001 as gross profit declines compared to the prior year were partially offset by reduced selling and administrative expenses due to headcount reductions and the discontinuation of goodwill amortization in accordance with SFAS No 142.

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Compared to the prior year’s first six months, 2002 segment earnings of $200.8 million declined 17% or $39.9 million. In the Industries segment earnings increased 8% to $81.5 million on a 4% sales decline to $564.8 million. Diversified’s earnings of $69.4 million improved 25% or $13.9 million compared to the prior year’s first half on a 12% sales increase to $597.5 million. Resources’ earnings declined 6% to $57.1 million on an 8% sales decrease to $431.7 million. In the Technologies segment a loss for the first six months of 2002 of $7.2 million compared to earnings of $48.5 million after a 29% sales decline to $513.6 million. For the six months ended June 30, 2002, Industries’ margins of 14% improved one percentage point, Diversified’s margins of 12% improved two points, while Resources’ margins of 13% were flat and Technologies margins of –1% compared to 7% in the prior year.

In the third and fourth quarters of 2001, the Company announced restructuring programs at operating company locations, primarily in the Technologies and Diversified segments. The restructuring of Technologies’ CBAT operations was in response to the dramatic downturn in the markets served by these operations, which resulted in excess capacity. Technologies’ SEC businesses announced restructuring programs in 2001 primarily related to the closure of two European operations, which were facing difficult market conditions. Imaje’s 2001 restructuring charges related to severance costs for certain employees due to a change in strategic focus. In the Diversified Segment, severance and exit restructuring programs were announced in 2001 primarily to close a Canadian facility of Tranter, that was experiencing declining volume, pricing pressure and excess capacity concerns, and to close a US facility of Mark Andy and reduce head-count in order to better leverage recent acquisition synergies.

Continuing restructuring charges in 2002 of $1.5 million were primarily recorded as selling and administrative expenses and, to a lesser extent, cost of goods sold, as components of continuing operating earnings. The total restructuring charges for discontinued operations through June 30, 2002 of $2.5 million were included in earnings from discontinued operations, net of tax. The continuing employee severance programs announced since the third quarter of 2001 have involved approximately 2,800 employees, 85% of which have been terminated. $3.8 million in continuing separation benefits were paid in the first half of 2002 and the remaining total severance reserve balance at June 30, 2002 was $3.3 million. Through June 30, 2002, $1.9 million was spent against the continuing exit reserve balance resulting in a June 30, 2002 total balance of $3.3 million. The Company expects to complete most of these restructuring programs by the end of fiscal 2002.

Dover Industries:
Second quarter segment earnings increased 1% or $.4 million to $39.9 and sales declined 4% or $13.0 million to $286.4 million. Segment margins improved to 14% compared to 13% in the second quarter of 2001. The impact of goodwill amortization on earnings in the second quarter of 2001 was $3.4 million. Segment bookings in the quarter were equal to last year and the book-to-bill ratio was 1.04 for the current quarter. Backlog increased 5% from the beginning of the current year to $174.1 million. Sales and earnings were lower at most companies compared to the same quarter last year.

Heil Environmental’s second quarter 2002 sales and earnings were substantially lower than the comparable period last year, due to weak market demand. For Marathon, also serving the waste haulage market but with a broader and less capital-intensive product line and a less concentrated customer base, June 30, 2002 quarterly sales and earnings compared favorably to the prior year. Among the other larger Industries companies, Rotary Lift, while still facing soft markets, improved both sales and earnings on flat margins compared to the second quarter of last year. Heil Trailer continued to face weak markets, which resulted in lower sales and earnings, and flat margins compared to the second quarter last year.

At Texas Hydraulics and PDQ, markets remained weak, hence second quarter 2002 sales and earnings were lower than the same period last year. Triton favorably impacted Industries’ comparisons, particularly compared to a very weak quarter last year, as sales and margins continued to improve due to the benefits of lower costs and favorable new product introductions. This improvement at Triton was largely offset by continued weak results at Somero, as sales, earnings and margins declined compared to the prior year’s second quarter due to declining activity in the construction-related markets it serves.

Industries’ sales for the six months ended June 30, 2002 of $564.8 million declined 4% compared to the prior year’s total of $589.6 million. Segment earnings compared to the prior year improved 8% to $81.5 million from $75.8 million as margins increased to 14% from 13% in the prior year.

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Dover Diversified:
Second quarter segment earnings were $39.4 million, an increase of $4.4 million or 12% over the comparative period last year, and sales in the quarter were $309.0 million, a $31.1 million or 11% increase. Segment margins of 13% were flat to last year’s second quarter. The impact of goodwill amortization on earnings in the second quarter of 2001 was $3.5 million. Bookings in the quarter were $295.1 million and the book-to-bill ratio was .95 for the quarter. Backlog at the end of the quarter was $378.7 million, 2% lower than last year. Acquisitions completed in the last year added approximately $14.6 million to sales in the quarter, with minimal impact on segment earnings after acquisition write-offs.

The primary reasons for the quarterly earnings and sales increases compared to the same period last year were substantial improvements at Crenlo, Hill Phoenix, and Belvac. At Crenlo, substantial losses last year have been eliminated, and profits restored, primarily as the result of management-led cost reduction and restructuring efforts. Hill Phoenix’s continued focus on higher growth customers has led to higher sales, earnings, and margins, compared to the prior year. Belvac benefited from large orders in Europe in the quarter, and now has a stronger backlog. Another large Diversified company, Mark Andy, experienced higher printing press demand in the quarter, and its backlog is now higher than it has been in a year. However, Mark Andy’s quarterly sales declined compared to the prior year and earnings were substantially lower due to a prior year insurance settlement. Tranter, another larger Diversified unit, experienced a recent pick-up in heat exchanger demand; however, quarterly sales and earnings were flat to the prior year’s results.

For the first half of 2002, Diversified’s sales improved 12% to $597.5 million compared to the prior year. Six-month earnings in 2002 improved 25% to $69.4 million as margins improved to 12% from 10% in 2001.

Dover Resources:
Segment earnings increased $1.0 million or 3% to $30.4 million on a sales decrease of 6% or $14.2 million to $223.7 million, as compared to the same period of the prior year. Segment margins at Resources of 14% improved 2 percentage points in the quarter compared to the prior year. The impact of goodwill amortization on earnings in the second quarter of 2001 was $2.6 million. Bookings in the quarter of $229.6 million were down 3% from the prior year and the book-to-bill ratio for the quarter was 1.03. Ending backlog was $87.2 million, a 16% decrease from last year’s second quarter, and an 11% increase from the end of last year. Acquisitions completed in the last year added approximately $2.7 million to sales in the quarter, with almost no impact on segment earnings after acquisition write-offs.

Solid oil and gas prices have favorably impacted recent sales and earnings trends at the oil and gas production related companies (Petroleum Equipment Group, C. Lee Cook, and Quartzdyne) and capital spending in this sector would be helped by continued price stability. However, second quarter sales, earnings and margin comparisons to the prior year were down for these companies. At one of Resources’ largest companies, OPW Fueling Components, the lack of new construction activity will continue to hamper results as earnings in the quarter declined compared to the prior year on an increase in lower-margin sales. Demand at the automotive market impacted the De-Sta-Co companies, where sales and earnings were stable to last year, and will likely weaken. It is unclear whether demand in the process industry markets and general industrial markets served by many of the rest of Resources’ companies, which modestly helped earnings comparisons to the prior year, will be sustainable.

For the six months ended June 30, 2002, Resources sales of $431.7 million declined 8% compared to the prior year. Earnings of $57.1 million were down 6% compared to the prior year on flat margin comparisons.

Dover Technologies:
Segment earnings for the current quarter were $1.7 million compared to $.5 million last year. Margins at Technologies of 1% were slightly better than the prior year’s break-even level. Second quarter sales were $279.4 million, a decline of $15.7 million or 5% from the same period of the prior year. The impact of goodwill amortization on earnings in the second quarter of 2001 was $3.1 million.

Technologies’ CBAT business recorded a loss of $4.4 million for the second quarter compared to a loss of $18.9 million for last year’s comparable period. Second quarter sales were $159.4 million, an increase of $12.0 million or 8% from last year. Bookings, at $176.6 million, were up 37% from the same period

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last year. The CBAT book-to-bill ratio was 1.11 for the second quarter with backlog at $84 million, 57% higher than at the end of 2001. While overall market conditions remained depressed, continuation of recent order rates would result in CBAT’s return to profitability in the third quarter. However, with substantial excess capacity remaining in the market, the stability of customer capital spending trends is far from assured.

In Technologies’ SEC business, for which results in all periods have been reclassified to show Vectron GmbH as a discontinued operation, sales in the quarter were $62.2 million, a decline of $33.4 million or 35% from the same period last year. SEC reported a loss of $2.4 million, as compared to earnings of $10.9 million in last year’s second quarter. Net bookings in the second quarter of $58.6 million were 41% higher than the same period last year. The book-to-bill ratio was .94 for the quarter with backlog at $44.8 million at the end of the period (an 11% decline from the beginning of the current year). As the impact of prior and continuing cost reductions takes hold, some stability in demand could also result in a return to profitability in SEC in the third quarter. However, these businesses now expect a more prolonged downturn in demand for products for telecommunications applications than had been earlier expected, and thus, face a slow, and likely uneven, sales recovery. Operational and product restructuring efforts continue.

In the quarter, Imaje, the French-based industrial ink-jet printer and ink manufacturer, had sales of $57.8 million, up 11% from the comparable period last year. Earnings for the quarter fell by 12% to $12.4 million from the comparable 2001 quarter. Margin declines compared to the prior year reflect increased sales of lower margin Markpoint products (a second quarter 2001 acquisition), lower ink sales to a major OEM customer whose business declined, and an aggressive investment in expanding the sales network. Margins returned to historical levels toward the end of the quarter despite a rather soft market for capital spending in some of the industries served by Imaje.

On a year to date basis, Technologies’ sales of $513.6 million declined 29% compared to the prior year primarily due to weak first quarter results in 2002. Earnings declined from $48.5 million in 2001 to a loss of $7.2 million for the six months ended June 30, 2002, again primarily due to weak first quarter results in 2002.

Outlook:
Improvements in profitability from continuing operations this quarter as compared to both the prior year and the first quarter were largely due to the relative strengthening of Dover’s non-technology businesses. Dover’s second quarter results are typically stronger than the first quarter, due to seasonal spending patterns in many capital goods markets. However, it remains to be seen whether increased uncertainty in U.S. financial markets will undermine the pick-up in industrial capital spending, which is so critical to many of Dover’s businesses. Additionally, while the electronics markets are registering some improvement, they may continue to face weak fundamentals. Stabilizing demand could help results in the businesses serving these markets, but rapid sales recoveries are not expected. Due to a lack of acquisition candidates meeting proscribed criteria, acquisition activity has slowed as the Company awaits better opportunities.

Accounting Pronouncements:
As of January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets”. In accordance with the guidelines of this accounting principle, goodwill and indefinite-lived intangible assets are no longer amortized but will be assessed for impairment on at least an annual basis. As an initial step in the implementation process, the Company identified 41 Reporting Units that would be tested for impairment. In the Industries, Diversified, and Resources market segments the “stand-alone” operating companies were identified as “Reporting Units”. These entities qualify as Reporting Units in that they are one level below an operating segment (a “Component” as defined in SFAS No. 131), discrete financial information exists for each entity and the segment executive management group directly reviews these units. Due to the lack of similarities in either products, production processes or markets served, management could not identify any situations where the components in these three operating segments could currently be aggregated into a single Reporting Unit. In the Technologies segment, three Reporting Units were identified, Marking (consisting of one stand-alone operating company), Circuit Board Assembly and Test or “CBAT” and Specialty Electronic Components or “SEC”.

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As required under the transitional accounting provisions of SFAS No. 142, the Company completed both steps required to identify and measure goodwill impairment at each of the 41 Reporting Units as of January 1, 2002. The first step involved identifying all Reporting Units with carrying values (including goodwill) in excess of fair value, which was estimated using the present value of future cash flows. The identified Reporting Units from the first step were then measured for impairment by comparing the implied fair value of the Reporting Unit goodwill, determined in the same manner as in a business combination, with the carrying amount of the goodwill. As a result of these procedures, goodwill was reduced by $345 million and a net after tax charge of $293 million was recognized as a cumulative effect of a change in accounting principle in the first quarter. Five stand-alone operating companies or Reporting Units accounted for over 90% of the total impairment – Triton and Somero from the Industries segment, Crenlo and Mark Andy from the Diversified segment, and Wilden from the Resources segment. Various factors impacted the identification and amounts of impairment recognized at the reporting units. These included declining market conditions in terms of size and new product opportunities, lower than expected current and/or future operating margins and lack of future growth potential relative to expectations when acquired. Of the total goodwill reduction, $148 million was from the Diversified Segment, $127 million was from the Industries Segment and $70 million was from the Resources Segment. The implementation of SFAS No. 142 required the use of judgments, estimates and assumptions in the identification of Reporting Units and the determination of fair market value and impairment amounts related to the required testing. The Company believes that its use of estimates and assumptions in this matter was reasonable, and complied with generally accepted accounting principles. Additionally, pursuant to SFAS No. 142, the Company completed its reassessment of previously recognized intangible assets, including trademarks, and adjusted the remaining amortization lives of certain intangibles based on relevant factors.

The Company also adopted SFAS No. 141 “Business Combinations” for all business combinations completed after June 30, 2001. SFAS No. 141 prohibits the pooling-of-interests method of accounting for business combinations, prescribes criteria for the initial recognition and measurement of goodwill and other intangible assets, and establishes disclosure requirements for material business combinations.

In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations”, which is effective for fiscal years beginning after June 15, 2002. SFAS No. 143 establishes the accounting standards for the recognition and measurement of obligations associated with the retirement of tangible long-lived assets. Under SFAS No. 143, the costs of retiring an asset will be recorded as a liability when the retirement obligation arises, and will be amortized over the life of the asset. The Company is still assessing the potential impact of SFAS No. 143 on its consolidated results of operations and financial position. In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections”, which is effective for certain transactions, fiscal years and financial statements issued on or after May 15, 2002. The effect of the adoption of SFAS No. 145 is expected to be immaterial to the Company’s consolidated results of operations and financial position. In July 2002, the FASB issued SFAS No. 146, “Accounting for Exit or Disposal Activities”, which is effective for disposal activities initiated after December 31, 2002. The standard replaces Issue 94-3 and requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The Company is still assessing the potential impact of SFAS No. 146 on its consolidated results of operations and financial position.

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Special Notes Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q, the Annual Report on Form 10-K and the documents that are incorporated by reference, particularly sections of any report under the headings “Outlook” or “Management’s Discussion and Analysis”, contain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, industries in which the Company operates, the U.S. and global economies, earnings, cash flow and operating improvements and may be indicated by words or phrases such as “anticipates”, “supports”, “plans”, “projects”, “expects”, “should”, “would”, “could”, “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: continuing impact from the terrorist events of September 11, 2001 on the worldwide economy; 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.

The Company may, from time to time, post additional or supplemental financial or other information on its Internet website, http://www.dovercorporation.com. Such information will supplement regular quarterly public filings and will be found in the “What’s New” section of the website’s home page. It will be accessible from the home page for approximately one month after release, after which time it will be archived on the website for a period of time. The Internet address in this release is for informational purposes only and is not intended for use as a hyperlink.

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PART II OTHER INFORMATION

Item 4. Submission of Matter to Vote of Security Holders

The Annual Meeting of Stockholders was held in Wilmington, Delaware on April 23, 2002. Stockholders representing 163,697,651 shares of common stock, or approximately 84.58% of the outstanding stock, were present in person or by proxy.

All of the nominees for director, namely David H. Benson, Jean-Pierre Ergas, Kristiane C. Graham, James L. Koley, Richard K. Lochridge, Thomas L. Reece, Bernard G. Rethore, Gary L. Roubos and Michael B. Stubbs were elected directors for a one year term, each receiving at least 142,392,279 votes.

Item 5. Other Information

DOVER CORPORATION AND SUBSIDIARIES
GOODWILL AMORTIZATION SUMMARY — 2001 (000’s)

                                         
    1st Quarter   2nd Quarter   3rd Quarter   4th Quarter   Total 2001
   
 
 
 
 
Dover Industries
  $ 3,453     $ 3,441     $ 3,643     $ 4,079     $ 14,616  
Dover Diversified
    3,469       3,469       3,751       3,713       14,402  
Dover Resources
    2,636       2,636       2,636       2,637       10,545  
Dover Technologies
    2,907       3,054       3,336       3,302       12,599  
Total Goodwill
  $ 12,465     $ 12,600     $ 13,366     $ 13,731     $ 52,162  
 
   
     
     
     
     
 
Tax on Goodwill
    2,255       2,256       2,259       2,430       9,200  
 
   
     
     
     
     
 
Net Goodwill
  $ 10,210     $ 10,344     $ 11,107     $ 11,301     $ 42,962  
 
   
     
     
     
     
 
Earnings Per Diluted Share
  $ 0.05     $ 0.05     $ 0.05     $ 0.06     $ 0.21  

Item 6. Exhibits and Reports on Form 8-K

         None.

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Signatures

         Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

             
    DOVER CORPORATION
 
Date: August 13, 2002   /s/ David S. Smith

David S. Smith, Vice President, Finance
and Chief Financial Officer
(Principle Financial Officer)
 
Date: August 13, 2002   /s/ Raymond T. McKay

Raymond T. McKay
Assistant Controller
(Principle Accounting Officer)

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