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dover Wachovia_100608

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dover Wachovia_100608

  1. 1. WACHOVIA – BOSTON INVESTOR ROADSHOW B O B L I V I N G S T O N • PAUL GOLDBERG BOSTON –OCTOBER 6, 2008
  2. 2. Forward Looking Statements We want to remind everyone that our comments may contain 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 10K for a list of factors that could cause our results to differ from those anticipated in any such forward looking statements. We would also direct your attention to our internet site, www.dovercorporation.com, where considerably more information can be found. 2
  3. 3. ... . . . a $7 billion global provider of innovative equipment, specialty systems and value added services for the industrial products, fluid management, engineered systems and electronic technologies markets. . . . focuses on growing organically 5-7% over a business cycle and strategically invests in value creating acquisitions. . . . returns value to shareholders through earnings growth initiatives, annually increased dividends and strategic share repurchases. 3
  4. 4. Record Financial Results Four Segment Structure Improves Clarity Platforms For Sustained Growth Strategic Capital Allocation Outlook for 2008 4
  5. 5. Sustainable Growth Story ($000) Revenue Earnings from Continuing Operations 8,000 800 7,000 700 6,000 600 5,000 500 Revenue Earnings 4,000 400 3,000 300 2,000 200 1,000 100 0 0 2003 2004 2005 2006 2007 5-yr CAGR 17.9% 5-yr CAGR 25.3% 5
  6. 6. Balanced Growth Sales ($000) 8,000 Currency 7,000 Acquisition 6,000 Organic 45% Base 5,000 50% 4,000 3,000 2007 Growth Currency 2.2% 2,000 Acquisition 9.7% 1,000 Organic 2.3% Core Industrial 5.2% 0 2003 2006 2007 Organic Growth Rate: Target 5-7%... 5 yr. Average 8.9% 6
  7. 7. Geographic Revenue Mix (YTD June 2008) Dover Growth Rate: 9% 9.2% 27.8% 5.2% Growth in Asia was driven 7.6% by increases in Electronic Technologies and Engineered Systems YTD Growth Rate 7
  8. 8. Strong Free Cash Flow Free Cash Flow as a % of Revenue Source of Dover strength 12% – Consistency 10% – Outcome of metrics focus – $728 million in 2007 8% – 111% conversion rate in 6% 2007 (FCF / earnings from continuing ops) 4% Facilitates strategic capital allocation 2% 2008 free cash flow is on 0% 2004 2005 2006 2007 track for another strong year 8
  9. 9. New Segment Structure Earnings Sales ELECTRONIC ELECTRONIC Technologies INDUSTRIAL INDUSTRIAL Technologies 15% Products Products 19% 32% 29% FLUID FLUID Management Management 22% ENGINEERED 31% ENGINEERED Systems Systems 25% 27% YTD 6/2008 9
  10. 10. New Platform Structure Mobile Electronic Equipment Technologies 17% 19% Material Fluid Handling Solutions 15% 10% Energy Engineered 12% Products Product ID 15% 12% YTD 6/2008 Revenue 10
  11. 11. Dover’s Q2 2008 Performance Q2 ‘08 Q2 ‘07 Q/Q Continuing Earnings Per Share Revenue $2.0B $1.8B +10% EPS $0.98 $0.85 +16% Segment Margins 15.8% 15.6% +20bps Organic Growth 5.4% -1.2% YTD Acquisition Growth 1.3% 11.8% $1.74 Free Cash Flow $192M $211M -9% $3.30 •Strong performance at Electronics Technology $2.90 segment and Energy, Fluid Solutions, Product ID platforms $2.12 • Positive leverage at Fluid Management and Electronic Technology segments • Strong 2nd quarter free cash flow at 9.6% of revenue; YTD $301M (up 29%) • Q2 share repurchases = $198M •Continued momentum in synergy and 2006 2005 2007 2008 integration programs 11
  12. 12. Revenue Growth (Q2 2008) Industrial Engineered Fluid Electronic Total Products Systems Management Technologies Dover Organic 3.0% 0.3% 16.5% 5.2% 5.4% Acquisition 1.4% -- 4.0% -- 1.3% Currency 1.2% 5.5% 2.5% 6.3% 3.5% Total 5.6% 5.8% 23.0% 11.5% 10.2% 12
  13. 13. Industrial Products Revenue Operating Earnings Material Handling ($ in millions) ($ in millions) • – International and military sales were strong – Earnings gain despite raw material cost increase – Successful pricing initiatives alleviate cost increases ↑ 2% – Bookings up sequentially & YOY Mobile Equipment • ↑ 4% – Revenue growth from continued strength in domestic oilfield, military and solid waste markets and Rotary Lift acquisition ↓ 1% – Earnings decline due to one-time ↑ 6% gain from property sale recorded in prior year ($5.3M); earnings growth of 8% without prior year gain – Backlog up over PY; down sequentially 13
  14. 14. Industrial Products Winch companies will continue to grow – Military contracts – Oilfield demand Continued challenges in heavy construction – Performance enhancing initiatives underway – No market improvement expected Waste handling will be strong – Solid backlog – Class eight chassis delivery improves 14
  15. 15. Engineered Systems Revenue Earnings Product Identification ($ in millions) ($ in millions) • – Revenue increase driven by double-digit gains in direct coding business – Earnings reflect cost efficiency benefits from MARKEM•Imaje integration, net of $2 million related expense ↑ 10% ↑ 6% – Bookings & backlog remains strong $539 Engineered Products • – Revenue increases in all businesses except beverage can ↑ 3% ↑ 6% equipment – Earnings impacted by business mix – Refrigeration business continues to diversify customer base – Bookings moderated from strong PY levels 15
  16. 16. Engineered Systems Significant improvements in Product ID – Markem margins up 700 bps – > 50% of revenue tied to fast moving consumer goods – Recurring revenue > 50% Food display equipment fundamentals are sound – Growth will be driven by “sustainability” factors – Well-developed plan to diversify customer base Heat exchanger business will continue to expand 16
  17. 17. Fluid Management Operating Earnings Revenue Energy • ($ in millions) ($ in millions) – Results driven by continued growth in global oil and gas drilling and worldwide demand for power generation – Operational improvements and product mix increased earnings – Bookings & backlog remain strong ↑17% ↑24% Fluid Solutions • – General strength across most industrial markets – Business mix and operational focus improved earnings and margins ↑23% ↑34% – Backlog up 28%. 17
  18. 18. Fluid Management Continued strength in energy – Broad product engagement in downhole drilling, production and logging equipment – Positive power generation trends – Focus on globalizing revenue base Pump and dispensing businesses remain consistent – Global footprint – Expanded product offerings – Chemical, pharmaceutical and wastewater processing capex budgets drive business – Regulatory environment provides opportunity – Consistent sustainable performance 18
  19. 19. Electronic Technologies Revenue Operating Earnings Electronic Technologies • ($ in millions) ($ in millions) – Good business activity in the quarter across the segment with a positive book-to-bill and organic growth of 5.2% – MEMS microphones now being sold to all Tier-1 handset manufacturers ↑6% ↑11% – Military programs continue to be growth drivers of ceramic and microwave product lines – Impact of first quarter restructuring (ECT) is showing improvements in the results – Inflationary pressures in Asia ↑13% (principally China) from currency ↑12% and other costs impacted margins by 1% – Bookings & backlog are up sequentially and YOY 19
  20. 20. Electronic Technologies Cell phone market continues to grow 10% annually – Customer mix was improved – Dominance in MEMS technology continues New product applications in military, telecom and audio result in broader markets Revenues related to fabrication and testing of semiconductors and boards are flat – Adjustments being made to reflect current business environment – Margin improvement is a focus 20
  21. 21. PERFORMANCECOUNTS Target Q2 2008 Q2 2007 Inventory Turns * 8 6.9 6.5 Earnings Growth 10% 7% 11.5% Operating Margins 15% 15.8% 15.6% WC as a % of Revenue 20% 18.5% 19.2% ROI (Operating) 25% 26.1% 25.8% * Dover has improved inventory turns four consecutive years 21
  22. 22. Value Creation Continues 2005 - 2007 Going Forward New Management Team Four Segment Structure Portfolio Transformation Platform Development PERFORMANCECOUNTS PERFORMANCECOUNTS Refocus Acquisitions Capturing SYNERGY Recurring Revenue Theme Minimize Volatility Globalization Management Development Capital Allocation Focus Strategic Capital Allocation Best Financial Results in Continue Improvement in Dover’s History Financial Performance 22
  23. 23. Strategic Capital Allocation Acquisitions – Strategic add-ons to bolster existing platforms – High pricing expected to gradually moderate – 2009 should favor strategic buyers Share Repurchase – Two programs announced in 2007 totaling approximately $1 billion • First program completed in 2007 (10 million shares) • Second program completed 8/2008 (10.8 million shares) • Reduced share count by 10% in a twelve month period Long history of increasing dividend each year – Increased 25% in 2008 ($1.00 per share on annualized basis) – Long-term payout target of 28% - 32% of net earnings We have the capacity to do all three 23
  24. 24. Seeking Synergy Overhead cost structure Expanding role of Supply Chain Council Shared facilities 4% - 6% Business system Earnings consolidations Improvement Examples: – Energy Platform – Product ID – Pump Group – Components Group Emphasis on Tangible Value Creation 24
  25. 25. Second Quarter and YTD Overview Net Debt to Capital Ratio – 28.8%: up 15 bps over 2007 year-end, reflective of higher total debt level to fund share repurchase program Free Cash Flow – QTR: $192.5 million; 9.6% of revenue – YTD: $300.9 million; 7.8% of revenue Effective Tax Rate – QTR: 29.3%, up 220 bps – YTD: 29.4%, up 170 bps Prior year periods benefited from tax positions that were effectively settled. Acquisitions – Two add-ons in the quarter: Brady Mining & Construction Supply Co. (US Synthetic) for $12 million, net of cash acquired and Neptune Chemical Pump Company (Pump Solutions Group) for $65 million, net of cash acquired. Share Repurchase Program – QTR: Repurchased 4 million shares for $198 million. – Completed (August): Repurchased 10 million shares for $461 million 25
  26. 26. 2008 Outlook – Full Year Organic growth: mid single digits Margin improvement: Full year up 25 – 50 bps Capital expenditures: $150 – $175 million Interest expense: $98 - $103 million Full-year tax rate: 27% – 28% (quarterly variance) Free cash flow for full year: 10% of revenue Corporate expenses: $100 - $105 million 26
  27. 27. … A Solid Growth Story with Record Financial Results Metrics are Driving Improved Results … New Organization Structure Driving Change Growth Platforms Emerging, Operating Style Evolving, Clarity is Improving, Focus on Synergy … Strategic Capital Allocation Discipline Balancing Growth and Shareholder Return … Time Honored Value System Intact 27

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