280 Park Avenue
Dover's business goal is to be the leader in all the markets we serve. We earn that status by applying a simple philosophy to the management of our businesses. This requires us to: perceive our customers' real needs for products and support; provide better products and services than the competition; invest to maintain our competitive edge; ask our customers to pay a fair price for the extra value we add.
Service to our customers, product quality, innovation and a long-term orientation are implicit in this credo. Pursuit of this market leadership philosophy by all our businesses, plus value oriented acquisitions of companies that share this philosophy, plus a decentralized management style that gives the greatest scope to the talented people who manage these companies have combined to produce results featuring: long-term earnings growth; high cash flow; superior returns on stockholders' equity.
Dover Corporation is a diversified industrial manufacturing holding company composed of about 50 subsidiaries with about 200 product/market niches. Dover's management implements a distinctive approach: subsidiaries are allowed to operate with almost complete autonomy. Dover-subsidiary managers operate with great independence and are rewarded on the basis of long-term earnings growth and return on investment of individual businesses. The company is often thought of as a portfolio of companies rather than a conglomerate because of its hands-off organizational structure and philosophy of management. Dover-owned companies manufacture a wide range of industrial products, supplying the waste handling, bulk transport, automotive and automotive service, commercial food service, machine tool, fluid handling, petroleum, chemical, and electronics industries. With the early 1999 completion of the sale of Dover Elevator, the company is divided into four business segments--Dover Diversified, Dover Industries, Dover Resources, and Dover Technologies--each of which has its own president and CEO.
Dover Corporation was formed in 1955, when New York stockbroker George Ohrstrom, Sr., recruited Fred D. Durham to manage four companies he had bought in the 1930s and 1940s. One of those companies was C. Lee Cook Company, a maker of seals and piston rings for compressors. C. Lee Cook had been built largely by its owner and president, Fred Durham, before being sold to Ohrstrom. Durham was made Dover's first president in 1955. The other three original companies were Rotary Lift, a manufacturer of automotive lifts; W. C. Norris, a maker of sucker rods for oil-well pumping; and Peerless, which was sold in 1977.
Dover's corporate offices, opened in 1955, were in Washington, D.C. In December of that year 930,000 common shares of Dover stock were listed on the New York Stock Exchange. The stock split three for two in 1965, and has split a number of times since.
Dover's corporate culture was molded by Durham, who felt that "business, like any other human enterprise, thrives best where creativity and initiative are encouraged in an atmosphere of maximum autonomy." Durham set out to give Dover an environment in which executives could work creatively and without the hindrance of bureaucracy. As Durham intended, autonomy, decentralization, and a minimal corporate staff became Dover's hallmarks. At the end of Dover's first year of operation the corporate staff consisted of three people, including Durham.
Each division functioned independently with its own president and board of directors. Between 1955 and 1979 Dover bought 14 companies, mostly privately owned or controlled. As part of Dover, the acquired companies retained much of their autonomy, and, in most cases, their preacquisition management, while benefiting from Dover's financial strength. At first Dover's corporate office assumed the role of central banker, monitoring subsidiaries' fiscal plans and overseeing capital spending in order to ensure high return on capital. Divisions were encouraged to keep cash flow heavy, in order to keep debt low and allow Dover to take advantage of acquisition opportunities and give divisions financial help when needed. The corporate office handled all financing.
The 1958 acquisition of the Shepard Warner Elevator Company gave Dover entry into the electric-elevator business. The purchase of Hunter-Hayes Elevator Company and Reddy Elevator Company in 1964 solidified Dover's position in that industry. For years Dover was number three in the U.S. elevator industry, behind Otis and Westinghouse.
In 1961 Dover bought Cincinnati, Ohio-based OPW, the leading U.S. maker of service station nozzles and other hazardous fluid handling equipment. When Fred Durham reached age 65 in 1964, OPW President Thomas C. Sutton was elected Dover's third president and chief executive officer. Dover's second president, Otto G. Schwenk, had served from 1961 to 1962. Schwenk was let go when Dover company presidents, united in opposition to his attempts to expand the corporate staff, threatened to resign. Also in 1964, Dover's corporate headquarters were moved to New York.
Under Sutton's leadership Dover experienced tremendous growth. Sales leaped from $68 million in 1964 to $835 million in 1981. Sutton stuck closely to Durham's management philosophy, and eliminated the corporate position of internal auditor. To Dover's nucleus of well-managed companies many others were added, in accordance with a policy that required acquisitions to display such qualities as product excellence, market leadership, strong management, and high return on capital.
Expanded Through Acquisition in the 1960s and 1970s
Throughout the 1960s Dover's product base was expanded through acquisitions into a wide range of areas. Major purchases included De-sta-Co, a toggle clamps and flapper valves producer bought in 1962; the 1964 acquisition of Blackmer Pump Company, a maker of industrial pumps; Groen Manufacturing, a maker of steam-jacketed kettles and other equipment for the foodservice industry, purchased in 1967; and Ronningen-Petter, which produced filter-strainer units, bought in 1968. Also in 1968, Dover spun off its Dura-Vent subsidiary to employees. The Dura-Vent sale demonstrated another important facet of Dover's corporate strategy: divestiture of noncore businesses. Dover's 1966 acquisition of Turnbull, however, was not executed as seamlessly. The Turnbull acquisition negated corporate growth for two years as Dover's elevator division struggled to digest Turnbull.
During the 1960s the company began to export a broad range of its products through independent distributors and, later, through its own subsidiaries. During the 1960s and 1970s Dover operated primarily in the building industry--mostly elevators--the petroleum services equipment industry, and manufactured goods for various industrial uses.
In 1975 Dover acquired Dieterich Standard Corporation, a Denver, Colorado-based manufacturer of liquid-measurement instruments. Dieterich president Gary L. Roubos came to Dover with Dieterich. Roubos, with a background in chemical engineering and business administration, was elected Dover's president and chief operating officer within two years of the Dieterich purchase. In 1981 Roubos was named CEO, and in 1989 he became chairman. Roubos continued his predecessor's winning strategy. Acquisitions were typically small companies, mostly bought in exchange for cash. They were market leaders, or had proprietary lines that meshed with Dover's existing businesses and had good growth prospects. Dover acquisitions, almost without exception, had higher-than-average returns on invested capital. Beginning in 1963 and into the early 1980s the company averaged one non-elevator takeover a year. In the years Roubos served as president, from 1977 to 1989, sales doubled from $1 billion to a little over $2 billion. Difficulties in assimilating Weaver, an automotive lift company, caused that company to be shut down. Typically divisions that have been sold were not a good fit with Dover's other product lines.
In July 1979 Dover acquired Universal Instruments Corporation of Binghamton, New York. Universal, the world's leading manufacturer of automated assembly equipment for electronic circuitry, moved Dover into the electronics business. By 1989 Dover Technologies, Dover's electronics division, owned 12 companies. By 1980 the electronics market had become the second most important growth area for Dover, following petroleum-production products. During the 1980s, with the industry moving toward electronic-circuit miniaturization and cost reductions and quality enhancement through use of computer-controlled automation, Universal's sales soared.
Although petroleum-production and marketing equipment were Dover's fastest growing segments during the 1970s and 1980s, it was sensitive to the volatility of deregulation, environmental regulation, and pricing by the Organization of Petroleum Exporting Countries. The Norris division's sucker rods for lifting oil from wells were prey to the cyclical nature of the oil-drilling business and to the deregulation of the gasoline business. By the early 1980s, with the country in the midst of a recession, demand for oil-production equipment, an area that had comprised one-third of pretax profits, was sluggish. For instance, OPW, the leading supplier of gasoline-pump nozzles, had experienced rapid growth during the 1970s, with the installation of new pump nozzles for unleaded gasoline and the conversion of many gas stations to self-serve. Rotary Lift had done very well in the automobile-service industry during the 1970s; a number of mass-merchandisers were entering the automobile-service business and buying machinery from Rotary Lift. Recessionary pressures in the early 1980s, however, deterred purchases in the automotive service and repair industry. The diversity of Dover's product line, and moves into such areas as electronics, aerospace, and other growth areas, helped cushion the company against such economic swings.
Management Restructured in 1985
While Dover continued to grow under Roubos's leadership, its size and complexity began to hamper its approach. Thus, in 1985, Dover's management was restructured. The resulting arrangement created five major subsidiaries, each with between five and nine of its own related subsidiaries headed by a chief executive officer. The presidents of the approximately 40 companies that comprised Dover reported to the CEO of one of the five subsidiaries. The five subsidiary chiefs reported to the Dover CEO. Each subsidiary continued to seek to add complimentary acquisitions. The five subsidiaries were divided into four business sectors for reporting purposes. The sectors created in 1985 reflected the principal areas of market activity. They were building industries, comprised wholly of Dover Elevator International; the electronic products segment, representing Dover Technologies; the petroleum industry sector, representing Dover Resources; and industrial and aerospace products, comprised of the Dover Industries and Dover Sargent subsidiaries.
In 1989 Dover again revised its structure, into six sectors, to reflect shifts in market activity. Since the 1985 restructuring, distinctions created among petroleum, industrial, and aerospace companies had become increasingly blurred and decreasingly descriptive. The six sectors created in 1989 were Dover Elevator International, Dover Technologies, Dover Resources, Dover Industries, Dover Diversified, and Corporate Companies. All sectors except Corporate Companies are also subsidiaries in their own right. True to character, each subsidiary office has three to five employees.
Dover bought about 25 companies between 1985 and 1988, for $460 million, but took on relatively little debt. In general, Dover's capital expenditures were financed with internally generated resources. The results were impressive, as evidenced by Dover's low debt, excellent long-term growth, and consistently above-average return on equity. In 1989 the company made no acquisitions, for the first time since 1980. The reason for this reticence was the inflated prices for acquisitions engendered by the leveraged buyout boom; Dover was following its traditional practice of not overpaying for the companies it acquired.
During the late 1980s and into 1990, market conditions in the defense electronics industry had been highly competitive, and performance of Dover's six defense electronics companies had been weak. At Universal Instruments 1989 profits declined 36 percent, and Nurad suffered an $8 million loss in the commercial radio market. Dover had responded to the flat market conditions by making management changes, ending Nurad's involvement in the commercial radio field, and trimming back operations. Beginning in 1988, Nurad was also the subject of a criminal investigation of its activities as a government contractor.
Dover was adversely affected by the recession of the early 1990s but remained profitable. Net sales stagnated, growing only from $1.95 billion in 1989 to $2.27 billion in 1992, while net earnings fell from $144 million in 1989 to $129.7 million in 1992. The company's return on average equity was also depressed by the recession, leveling at 15.9 percent for both 1991 and 1992--a better-than-average figure, but lower than the 20 percent or so that Dover typically reported. During 1991 Dover took charges totaling $37.3 million to sell or liquidate several underperforming businesses and to increase its insurance reserves for general liability and worker's compensation claims. Many Dover subsidiaries employed cost-cutting strategies during the recession, consolidating plants, reducing employment, freezing salaries, and reducing fringe benefits.
In May 1993 Thomas L. Reece was named president and chief operating officer of Dover; one year later he became president and CEO, with Roubos remaining chairman. Reece had joined the company in 1968 when it acquired Ronningen-Petter, of which he was marketing manager. He had risen through the ranks to become president and CEO of Dover Resources.
During 1993 Dover spun off its Dover Electronics Co. unit to shareholders because the unit was in direct competition with three other Dover Technologies equipment companies. Dover Electronics, a maker of electronic components for original equipment manufacturers, was renamed DOVatron International following the spinoff.
Acquisitions Increased in the Mid-to-Late 1990s
Starting in 1993, Dover also stepped up its acquisition activity in the friendlier postrecession environment. The company acquired the privately held Heil Company in 1993 for about $150 million in cash, making this one of the largest acquisitions in company history. The Chattanooga, Tennessee-based Heil, a manufacturer of garbage truck bodies and refuse equipment, had annual sales of about $165 million. In addition to seeking out larger acquisitions and more of them, Dover made another shift starting in 1994: encouraging the presidents of Dover subsidiaries to be on the lookout for "add-on" acquisitions--companies that could be merged into their own company, thereby strengthening its market position. For instance, Phoenix Refrigeration Systems, a maker of cooling units for supermarket display cases that Dover had acquired in 1993, itself acquired Hill Refrigeration Inc., a display case manufacturer, in 1994. The newly named Hill Phoenix, Inc. was then able to make complete display case units and thereby compete more effectively against its rivals. Dover's more aggressive approach to acquisition also began to be reflected in its financial statements. The company had typically held its debt to less than 15 percent of total capital. But, in part to fund acquisitions, long-term debt increased from $1.2 million in 1992 to $252.1 million in 1993, the latter translating into 81.9 percent of capital. From 1993 through 1997, the average long-term debt to capital ratio was 74.3 percent.
After acquiring ten companies in 1994, Dover spent $323.3 million in 1995 to make another nine acquisitions. The largest of these, and the company's largest purchase to date, also represented the company's increasing concentration on overseas growth. In September 1995 Dover paid $200 million for an 88 percent interest in Valance, France-based Imaje, S.A., one of the world's three largest manufacturers of industrial continuous ink-jet printers and specialized inks. Dover soon increased its interest to virtually 100 percent. In October 1995 the company ventured overseas again to buy the U.K.-based Hammond Engineering, Limited, a maker of rotary vane and screw compressors and hydraulic control units for the trucking industry.
Dover made ten more acquisitions in 1996, with an aggregate price of $281.7 million. The largest of these was the purchase of Pomona, California-based Everett Charles Technologies, Inc., a leading manufacturer of circuit board testing equipment. During 1997 Dover made 17 acquisitions, 15 of which were the add-on type, spending $261.4 million. The two stand-alone acquisitions made that year were not "blockbusters" like Heil, Imaje, and Everett Charles were; added to the Dover Resources group was Hydro Systems Company of Cincinnati, Ohio, a maker of cleaning chemical dispensing systems, while Dover Diversified gained Sanger, California-based Sanger Works Factory Holdings, Inc., the leading manufacturer of production equipment for making corrugated boxes in the United States.
Also in 1997 Dover divested its European elevator operations. In May of the following year, Dover announced that it would spin off its North American elevator operations--and its best-known brand, Dover Elevator--in early 1999. But, instead, Dover in early January 1999 sold Dover Elevator for $1.1 billion to the Thyssen Industries unit of Thyssen AG (which became Thyssen Krupp AG later in 1999 following a merger with Fried. Krupp AG Hoesch-Krupp). The divestment left Dover with four operating groups: Dover Diversified, Dover Industries, Dover Resources, and Dover Technologies. Meanwhile, 1998 was another record year for Dover Corporation as the company completed ten add-on acquisitions and four stand-alones, spending a total of $556 million, the most ever. Among the stand-alones was the largest acquisition yet in terms of price, namely the approximately $220 million purchase of privately held Wilden Pump and Engineering Company, Inc. Wilden was based in Grand Terrace, California, and was the world leader in air-operated double-diaphragm pumps, a worldwide $250 million market. The other stand-alone companies acquired in 1998 were Salt Lake City-based Quartzdyne, Inc., the world leader in quartz-based pressure transducers, which are used in gas and oil drilling; Mentor, Ohio-based Wiseco Piston Company, Inc., the leading U.S. maker of high-performance pistons used in racing engines for autos, motorcycles, boats, and snowmobiles; and PDQ Manufacturing, Inc., a leading manufacturer of touchless car-washing equipment.
Despite the impact of the late 1990s Asian economic crisis, which hit the electronics sector--and consequently, Dover Technologies--particularly hard, Dover Corporation posted record revenues of $3.98 billion in 1998. Net earnings, however, fell from the 1997 total of $405.4 million to $378.8 million. With $800 million in aftertax proceeds in hand from the sale of Dover Elevator, the company planned to make additional acquisitions and repurchase stock. Dover could also be expected to use some of its cash to pay down its burgeoning debt, which ballooned to $610.1 million in 1998, thanks to the record acquisition activity.
Principal Subsidiaries: A-C Compressor Corporation; Avtec Industries, Inc.; Belvac Production Machinery, Inc.; Chief Automotive Systems, Inc.; Communications Techniques, Inc.; Conmec, Inc.; Davenport Machine, Inc.; DEK U.S.A., Inc.; Delaware Capital Formation, Inc.; Delaware Capital Holdings, Inc.; Dielectric Laboratories, Inc.; Dover Diversified, Inc.; Dover Europe Corporation; Dover Industries, Inc.; Dover Resources, Inc.; Dover Technologies International, Inc.; Dow-Key Microwave, Inc.; Duncan Industries Parking Control Systems Corp.; Everett Charles Technologies; The Heil Company; Hill Phoenix, Inc.; Hydro Systems Company; K&L Microwave, Inc.; Marathon Equipment Company; Mark Andy, Inc.; Midland Manufacturing, Inc.; Pathway Bellows, Inc.; PDQ Manufacturing, Inc.; Petro Vend, Inc.; PRC Corporation; Preco Turbine and Compressor Services, Inc.; Quartzdyne, Inc.; Randell Manufacturing, Inc.; Refrigeration Systems, Inc.; Revod Corporation; Robohand, Inc.; Ronningen-Petter; Sanger Works Factory Holdings, Inc.; Sonic Industries, Inc.; Texas Hydraulics, Inc.; Thermal Equipment Corporation; Tipper Tie, Inc.; TNI, Inc.; Tranter, Inc.; Tulsa Winch, Inc.; Universal Instruments Corporation; Vectron Laboratories, Inc.; Vectron Technologies, Inc.; Waukesha Bearings Corporation; Weldcraft Products, Inc.; Wilden Pump and Engineering Company, Inc.; Wiseco Piston Company, Inc.; The Wittemann Company, Inc.; atg test systems GmbH (Germany); DEK Printing Machines Ltd. (U.K.); Dover Corporation (Canada) Ltd.; Dover Europe Afzug GmbH (Germany); Dover Europe GmbH (Germany); Dover Exports, Ltd. (Barbados); Dover France Holdings SARL; Dover International Finance Services Ltd.; Dover UK Holdings Limited; HTT Heat Transfer Technologies, S.A. (Switzerland); Imaje S.A. (France); Imaje GmbH (Germany); Langbein & Englebracht, GmbH (Germany); Luther & Maezler GmbH (Germany); Soltec International, B.V. (Netherlands); SWEP International AB (Sweden); SWEP Technologies AB (Sweden); Universal Electronics Systems H.K. Ltd. (Hong Kong).
Principal Operating Units: Dover Diversified, Inc.; Dover Industries, Inc.; Dover Resources, Inc.; Dover Technologies International, Inc.