Dover (DOV)

Q3 2011 Earnings Call

October 21, 2011 10:30 am ET


Robert A. Livingston - Chief Executive Officer, President and Director

Brad M. Cerepak - Chief Financial Officer and Senior Vice President

Paul E. Goldberg - Director of Investor Relations and Treasurer


C. Stephen Tusa - JP Morgan Chase & Co, Research Division

Julian Mitchell - Crédit Suisse AG, Research Division

John G. Inch - BofA Merrill Lynch, Research Division

James C. Lucas - Janney Montgomery Scott LLC, Research Division

Shannon O'Callaghan - Nomura Securities Co. Ltd., Research Division

Jeffrey T. Sprague - Vertical Research Partners Inc.

Terry Darling - Goldman Sachs Group Inc., Research Division



Good morning, and welcome to the Third Quarter 2011 Dover Corporation Earnings Conference Call. With us today are Bob Livingston, President and Chief Executive Officer of Dover Corporation; Brad Cerepak, Senior 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 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 call over to Mr. Paul Goldberg. Mr. Goldberg, please go ahead, sir.

Paul E. Goldberg

Thank you, Melissa. Good morning, and welcome to Dover's third 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 some comments from Bob and Brad on Dover's third 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 you to 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 November 4, and the audio portion of this call will be archived on our website for three months. The replay telephone number is (855) 859-2056. When accessing the playback, you'll need to supply the following reservation code, 18657443.

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 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 A. Livingston

Thanks, Paul. Good morning, everyone, and thank you for joining us this morning. Following a great first half of the year, we delivered strong growth in both revenue and earnings and a seasonably solid book-to-bill of 0.96 for the third quarter. These results were once again broad-based and led by the continued strong demand in our energy and handset markets. In total, I am very pleased with our third quarter performance.

The majority of our businesses continue to see strong market activity, with organic bookings up 11%. As we discussed last quarter, we do anticipate revenue growth to moderate in the fourth quarter, due in part to semicon and solar markets. However, for the full year, I remain quite confident we are on track to deliver 20% revenue growth.

All segments achieved significant revenue and earnings growth in the quarter, absent the impact of onetime charges in connection with the acquisition of Sound Solutions. Segment margin was 16.9%. Orders were up 23%, and revenue increased 22%. This strong performance enabled Dover to post adjusted earnings per share of $1.20, a 25% improvement over last year. Although it's too early to provide specific guidance, I fully expect our Energy businesses and Knowles to continue to expand going into 2012. I also like our leading positions and expanding opportunities in Refrigeration equipment, Product ID and Fluid Solutions.

We made several important strides in our strategic initiatives in the third quarter. Sound Solutions is off to a great start and is performing at the high end of our expectations. We have been and are still adding significant capacity in China to support strong demand for new customers. As we said last quarter, we expect the pace of shipments to accelerate into the fourth quarter. Last quarter, we reported on our MEMS capacity expansion program in Malaysia. I'm happy to say we shipped over eight million microphones in September in only the second month of operation. This capacity expansion is a key part of Knowles' customer service and growth initiatives for the second half of this year and the first half of next year.

We also continued with our investments in the energy space, part of which was the recently announced acquisition of Oil Lift. Oil Lift expands our presence in the progressive cavity pump market and enables us to increase our product offerings in the attractive artificial lift space. Late in the third quarter, we closed on the sale of Paladin and Crenlo. These divestitures are an important step in our continued efforts to focus on our higher-margin growth spaces. We received roughly $300 million in proceeds, which we intend to redeploy in acquisitions.

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