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Slide 1: Achieving & Maintaining Market Leadership 2002 Annual Report
Slide 2: DOVER’S BUSINESS PHILOSOPHY Our goal is to be the leader in every market we serve, to the benefit of our customers and our shareholders. TO ACHIEVE AND MAINTAIN MARKET LEADERSHIP, we manage according to this consistent philosophy: q Perceive customers’ real needs and provide products and services to meet or exceed them, Provide better products and services than competitors, Invest to maintain competitive advantage, and Expect a fair price for the extra value we add. q q q Success demands a constant focus on product quality and innovation, and exceptional customer service. It requires a long-term orientation. We enhance our market leadership and shareholder value by acquiring like-minded businesses that strengthen our existing market positions and offer new markets. Intrinsic to Dover’s success is a decentralized management style that gives the maximum possible autonomy to the talented people who manage our companies. Dover will continue to adapt to market conditions, but our philosophy, which has served shareholders well for 47 years, will not change. Contents: Dover’s Business Philosophy 1. Comparative Financial Highlights 2. Letter to Shareholders 4. Company Listing 6. Building Platform Businesses 10. Driving Operating Excellence 14. Eleven Year Consolidated Financial Summary (inside back cover) Board of Directors, Officers, & Shareholder Information
Slide 3: COMPARATIVE FINANCIAL HIGHLIGHTS Dover Corporation and Subsidiaries (Dollars in thousands, except per share figures) 2002 2001 2000 Net sales Earnings before taxes Net earnings Per common share Continuing net earnings per diluted share Dividends Capital expenditures Acquisitions Purchase of treasury stock Cash flows from operations Return on average equity Number of employees $ 4,183,664 $ 269,691 $ 211,149 $ $ $ $ $ $ 1.04 .54 100,732 100,138 14,039 394,915 8.8% 24,934 $ 4,368,415 $ 258,845 $ 181,831 $ $ $ $ $ $ 0.89 .52 162,532 281,819 30,985 683,280 7.9% 26,634 $ 5,064,805 $ 741,953 $ 513,523 $ $ $ $ $ $ 2.47 .48 183,746 506,251 1,868 535,756 25.7% 29,489 “Comparative Financial Highlights” represents results from continuing operations. “Continuing net earnings per diluted share" and “Return on average equity” exclude gains and losses from sales of businesses and equity investments in 2000. “Acquisitions” represents the acquisition purchase price adjusted for long-term debt assumed and cash acquired on the date of acquisition. Profitability Measures Diluted Earnings per share 37% $2.47 35% (in percent) 41% 25% $1.83 26% $1.04 $1.36 $0.89 23% 24% 18% 8% 9% 98 99 00 01 02 98 99 00 01 02 Excluding gains on sales of businesses and equity investments in 1999 and 2000. After-Tax Operating Return On Investment Return on Average Equity 1
Slide 4: LETTER TO SHAREHOLDERS Last year, I described 2001 as "one of the most difficult years in Dover's history" and outlined our efforts to reduce costs, increase efficiency and prepare for improving markets. Those efforts were effective, and we made important progress, in many cases extending our companies' market leadership and strengthening margins. Despite some positive indications during 2002's first half, the year turned out to be as difficult as 2001. Slowly recovering markets weakened again during the second half, and the already depressed electronics industry fell further. Consequently, our technology businesses had to scale back even further to achieve profitability without help from a market recovery. Many of our companies also faced the challenge of maintaining sales in generally down served markets while preserving historic profit margins. Frankly, given the increased worldwide competition and shortterm declines in sales opportunities, our companies more than held their own, although overall margins, after accounting charges, were generally below 2001 levels. Nevertheless, I am cautiously optimistic about 2003. Tough decisions and hard work in 2001 and 2002 have positioned us well to take advantage of any recovery in served markets domestically and abroad. A Year of Pain for Tomorrow’s Gain In all our cost-reduction and restructuring efforts, our operating company presidents have maintained a balance between cutting expenses and investing for future growth. Even as we made our businesses leaner, we listened to our customers and developed new products to meet or anticipate their 2 needs. All Dover operating companies will have significant upward operating leverage when markets improve. During 2002, some of our companies modestly expanded operations in China, primarily to serve our customers in China and Asia more effectively, rather than merely cutting labor costs on products for North America or Europe. While China is attractive both as a source of manufacturing capability and as a market, its rapidly expanding economy is clearly subject to both financial and political strains and risks, and we are expanding there with appropriate caution. We are also pursuing prospects for manufacturing in Brazil, the Czech Republic and other Eastern European countries. With that, Dover recorded a net loss of $121.3 million, or $.60 per diluted share, for 2002. A Successful Business Philosophy, Consistently Applied Corporate credos are commonplace, but I can attest that we really live by the simple, straightforward business philosophy outlined at the front of this report. It requires each of our companies to strive for and maintain market leadership. Individual companies' strategies necessarily differ, but the goal is always to create a value proposition that can sustain a longterm partnership with the customer. That involves listening to our customers to determine their real needs, and then providing the right products and services. It means continuously improving our operations to keep ahead of competitors and being able to perform as expected. Finally, it requires management to be proud enough in what we do to ask to be paid an appropriate price. And that is the source of our historically solid margins, and the strong cash flow that we invest to improve our businesses, acquire new businesses, and pay dividends. For nearly 50 years, Dover has coupled this philosophy with a decentralized management culture that provides maximum autonomy and scope to individual company presidents to build their businesses. We encourage them to operate these businesses like owners, focusing their strategies on achieving long-term growth and sustainable profitability rather than short-term gains. At the same time, we expect them to meet real goals, and to take the initiative to improve their operations and the bottom line. 2002 Results Dover's 2002 sales of $4,183.7 million were down $184.7 million, or 4.2%, from $4,368.4 million in 2001 -far below our peak in 2000 that reflected the technology boom, but slightly higher than our 1999 sales. Sales declines at Dover Technologies, Dover Resources and Dover Industries offset a gain at Dover Diversified. Net income from continuing operations reflected our cost reduction efforts, rising modestly from 2001's extremely low levels, with all segments gaining except Technologies. Because of our 2002 adoption of FASB Rule 142, Dover no longer amortizes goodwill, a change that added approximately $.23 per diluted share to 2002 earnings of $1.04 per diluted share from continuing operations. However, that rule also resulted in an impairment charge to equity of $345.1 million or $293.0 million net of tax in the first quarter.
Slide 5: Operating excellence and platform building are two key avenues to growth, and are discussed later in this report. Continuously improving operations can enhance profits, and bring in new business. Customers whose suppliers are not reliable frequently turn to companies with a demonstrated ability to perform. We also encourage our company presidents to seek out attractive add-on acquisitions that can enhance their product lines or expand their market scope. At the corporate level, our strategy centers on determining the appropriate investment of shareholder resources so as to achieve the optimum long-term return. We set policy, allocate capital, make standalone acquisitions, assist companies with add-ons and, most importantly, make sure we have the right people running our individual businesses. This decentralized approach has served shareholders well. Keeping Finances Strong I am happy to say that Dover is in excellent financial condition, even after the third straight year of a manufacturing recession. Our free cash flow of $268.9 million was 6.4% of sales. We prefer to use these funds to strengthen our existing businesses or to acquire new ones, but in 2002 we found few acquisition candidates that met our stringent criteria for price, quality and growth prospects. Our sole 2002 stand alone acquisition, completed October 1, was Hover-Davis Inc., which makes component feeder systems for the electronic assembly automation industry. It is an operating company in the Circuit Board Assembly and Test (CBAT) segment of Dover Technologies. We reduced our net debt by $139.8 million to $759.1 million in 2002, lowering our debt-to-total capital ratio from 26.3% to 24.1%. We made a discretionary contribution of $44.0 million to our defined benefit pension plan during the third quarter to offset a decline in pension plan values. We also spent $14.0 million to repurchase 511,400 shares of stock in the open market at an average price of $27.45. And we maintained our current quarterly dividend rate of $.135 per share. A Cautiously Positive Outlook Management Changes A number of changes in our executive ranks during 2002 will provide more depth and breadth going forward. Most notably, Rob Kuhbach became Dover's Chief Financial Officer. He was succeeded as General Counsel and Secretary by Joe Schmidt, who has worked with Dover for nearly 10 years, most recently as a Senior Partner at Coudert Brothers. Longtime Dover executives Jack Ditterline and Bill Caton joined Dover Diversified as Executive VP and Chief Financial Officer, respectively, and Dave Ropp was promoted to Executive Vice President at Dover Resources. New operating company presidents included former Dover Diversified CFO Roland Parker at SWF, Bob Livingston at Quadrant in Dover Technologies, Randy Gard at Chief Automotive, Michael Jobe at Heil Environmental, and Eric Howlett, succeeding Michael at Rotary Lift, the last three in Dover Industries. Vernon Pontes became President of the energy-related companies in Dover Resources and Craig McNeill became President of OPW Fueling Components. These and similar changes farther down in the organi3 Thomas L. Reece zation reflect the strength of our management team and our ability to develop the talent we need for continued growth. These challenging times have required many difficult decisions and unpleasant actions, but I am very optimistic about our long-term prospects. Dover is well-positioned to benefit from improving markets. Our companies are lean, competitive, disciplined and hungry. We have solid management teams in place. If markets pick up at least moderately in 2003, our results should improve considerably. A substantial market recovery in 2004, which is increasingly being forecast, should enable us to achieve strong sales and earnings growth, with margins returning to levels more typical of Dover. I am grateful for the dedication and skill of our employees in these difficult times, and for the solid support of our Board of Directors and shareholders as we prepare Dover for a bright and prosperous future. Sincerely, Thomas L. Reece Chairman and Chief Executive Officer February 15, 2003
Slide 6: COMPANY LISTING Technologies Industries Alphasem AG Gerhard Meese, Acting President Products: Semiconductor assembly equipment. www.alphasem.com Hover-Davis John D. Hover, President Products: Component feeders for printed circuit board assembly. www.hoverdavis.com Vectron International, Inc. Products: Precision crystal oscillators and timing devices. www.vectron.com Chief Automotive Systems Randy L. Gard, President Products: Vehicle collision measuring and repair systems; and dust extraction systems. www.chiefautomotive.com Marathon Equipment Gordon C. Shaw, President Products: Waste compactors, conveyors, balers, hoists, shredders, grinders, transfer stations and recycling equipment. www.marathonequipment.com Dielectric Laboratories Brian DuPell, President Products: High frequency capacitors. www.dilabs.com Universal Instruments Corporation Ian P. McEvoy, President Products: Automated assembly equipment for printed circuit boards. www.uic.com Imaje Omar Kerbage, President Products: Continuous inkjet printers, thermal printers, consumables. www.imaje.com DI Foodservice Companies (Groen, Randell & Avtec) Ronald A. Rosati, President Products: Commercial cooking and refrigeration equipment; food service preparation and holding equipment; ventilation systems. www.difoodservice.com PDQ Charles R. Lieb, President Products: Touchless car wash equipment. www.pdqinc.com DEK John F. Hartner, Managing Director Products: Automated screen printers, process consumables and tooling for imaging materials on printed circuit boards and semiconductors. www.dek.com Vitronics Soltec Jeroen Schmits, President Products: Automated soldering equipment for printed circuit boards. www.vitronics-soltec.com K&L Microwave Louis Abbagnaro, President Products: Microwave/R.F. filters. www.klmicrowave.com Rotary Lift Eric F. Howlett, President Products: Vehicle service lifts, vehicle storage lifts and wheel alignment racks. www.rotarylift.com Dow-Key Microwave David W. Wightman, President Products: Microwave/R.F. switches. www.dowkey.com Novacap Dr. Andre P. Galliath, President Products: Application specific multilayer capacitors. www.novacap.com DovaTech A. Patrick Cunningham, President Products: CO2 and solid-state lasers, and industrial water chillers. www.dovatech.com Somero John T. Cooney, President Products: Laser controlled concrete floor placing and screeding equipment. www.somero.com DT Magnetics Wm. F. Barry Hegarty, President Products: Custom transformer and inductor magnetics. www.dtmagnetics.com OK International Michael J. Gouldsmith, President Products: Bench top tools for printed circuit board assembly and repair. www.okinternational.com Heil Environmental Michael G. Jobe, President Products: Refuse and recycling collection vehicles, refuse container lifts and dump bodies’. www.heilco.com Tipper Tie W. David Pierce, President Products: Clip closures, packaging systems, netting, and wire products. www.tippertie.com Everett Charles Technologies David R. Van Loan, President Products: Spring probes, test equipment and test fixtures for printed circuit boards and semiconductors. www.ectinfo.com Quadrant Technologies Robert A. Livingston, President Heil Trailer International Robert A. Foster, President Products: Liquid and dry bulk tank trailers, trucks and intermodal containers, and other specialty trailers. www.heiltrailer.com Telefilter GmbH Products: Crystal/SAW Filters. Triton Systems Ernest L. Burdette, President Products: Off-premise ATMs. www.tritonatm.com Communication Techniques, Inc. Products: Microwave frequency sources. www.cti-inc.com Kurz-Kasch Neal M. Allread, President Products: Electromagnetic stators and specialty plastic products. www.kurz-kasch.com 4
Slide 7: Diversified Resources Belvac Rick Steigerwald, President Products: Can necking, trimming, shaping equipment; plastic container machinery. www.belvac.com Performance Motorsports James A. Johnson, President Products: High performance pistons; connecting rods; cylinder liners and related engine components. www.doverpmi.com Blackmer Carmine F. Bosco, President Products: Rotary vane, eccentric disk, peristaltic, positive displacement pumps; centrifugal pumps, vane & screw type mobile compressors, reciprocating stationary gas compressors. www.blackmer.com OPW Fluid Transfer Group John Anderson, President Products: Liquid transfer valves, liquid level measuring devices, dry bulk conveying fittings, pressure relief vents and valves, swivels and loading systems. www.opwftg.com Quartzdyne Robert B. Wiggins, President Products: Quartz-based pressure transducers. www.quartzdyne.com Crenlo Thomas E. Bell, President Products: Construction and agriculture equipment cabs; electronic enclosures. www.crenlo.com RPA Process Technologies Peter Scovic, President Products: Liquid pressure filter systems, solids recovery systems, and high-viscosity mixer-extruder systems. www.rpaprocess.com Sargent Controls & Aerospace William W. Spurgeon, President Products: Submarine fluid controls; aircraft hydraulic controls; self-lubricating bearings; aircraft fasteners. www.sargentcontrols.com C. Lee Cook David Jackson, President Products: Piston rings, packing and specialty seals; PTFE/plastic molding; compressor rods, pistons, valves, vanes, and repair. www.cleecook.com OPW Fueling Components Craig McNeill, President Products: Liquid and gas fueling nozzles, fittings, valves, environmental protection products and tire inflation equipment; fuel management systems and tank monitors. www.opw-fc.com Graphics Microsystems Erik Tobiason, President Products: Software and hardware quality control systems for pressrooms. www.gmicolor.com Texas Hydraulics** J. Nisha Lobo, President Products: Engineered hydraulic cylinders and other fluid power components. www.texashyd.com SWEP Nils-Gustaf Tobieson, President Products: Compact brazed heat exchangers, district heating systems. www.swep.se De-Sta-Co Industries Jon H. Simpson, President Products: Manual toggle clamps, pneumatic and hydraulic workholding devices; factory automation components and assemblies. www.destaco.com Hill PHOENIX Ralph Coppola, President Products: Commercial refrigeration systems; refrigerated display cases; walk-in coolers; electrical distribution products. www.hillphoenix.com Energy Products Group Vernon Pontes, President Tulsa Winch Group Steven Oden, President Products: Worm and planetary gear winches, speed reducers, swing drives, electronic load monitoring systems. www.tulsawinch.com SWF Roland J. Parker, President Products: Automated packaging machinery. www.swfcompanies.com Alberta Oil Tool (Canada) Products: Sucker rods, fittings, valves and controls; process valves and instrumentation systems. www.aot.ab.ca De-Sta-Co Manufacturing Bob Leisure, President Products: Reed valves for compressors and stamped precision components. www.destacomanufacturing.com Langbein & Engelbracht Jost Weimer, President Products: Paint systems; environmental control equipment; air handling systems. www.l-e.de Tranter PHE Chuck Monachello, President Products: Gasketed, plate/frame and welded heat exchangers. www.tranterphe.com Wilden Pump & Engineering Bruce J. Bartells, CEO/CFO Products: Air operated double diaphragm pumps. www.wildenpump.com Ferguson-Beauregard Products: Plunger Lift Systems, Well Automation Systems. www.fergusonbeauregard.com Duncan Parking Systems James A. Elsner, President Products: Parking control products and systems. www.duncanindustries.com Mark Andy John Eulich, President Products: Narrow web printing presses; pressroom automation equipment; plastic container printing equipment. www.markandy.com Tranter Radiator Rory Segen, President Products: Transformer radiators. www.tranterradiators.com Norris Products: Sucker rods, couplings, well servicing equipment. www.norrisrods.com **Reported under Dover Industries segment in 2002 Waukesha Bearings Donald A. Fancher, President Products: Fluid film bearings; torque and tension tools; remote material handling equipment and isolators. www.waukbearing.com Hydro Systems Jeffrey A. Rowe, President Products: Mechanical and electronic chemical dispensing systems. www.hydrosystemsco.com Norriseal Products: Control Valves, Butterfly Valves. www.norriseal.com 5
Slide 8: ACHIEVING AND MAINTAINING MARKET LEADERSHIP BY... Building Platform Businesses Through Internal and External Investments Dover has a history of acquiring profitable, stand-alone manufacturing businesses serving a wide range of industries. In recent years, as a part of its "tilt toward growth," Dover has also encouraged add-on acquisitions by those individual companies positioned to build growth platforms. Dover companies acquire add-on businesses for strategic reasons, ranging from expanding internationally, gaining market share, penetrating new industries, adding product lines, enlarging their customer base or gaining economies of scale. By coupling internal investments in their businesses with external investments in add-on acquisitions, Dover companies have successfully fueled their own and Dover's growth. The three company examples that follow reflect this approach. 6
Slide 9: SARGENT CONTROLS & AEROSPACE In the late 1990s, with its predominant defense businesses (quiet valves for submarines, hydraulic valves and bearings for aerospace) declining, Sargent developed a three-pronged strategy for growth in commercial aerospace. It sought to expand sales of its highly engineered niche products to OEMs (original equipment manufacturers) and recapture aftermarket MRO (maintenance, repair and overhaul) business lost to third parties, develop new products, and acquire complementary companies that could augment these efforts. Sargent acquired Sonic Industries (high strength fasteners, pins and bolts for commercial airframes) in 1998, Hydraulic Aircraft Specialists (non-OEM hydraulic components and MRO services for U.S. airlines and cargo carriers) in 1999, and C&H Manufacturing (fasteners, pins and bolts for commercial aircraft landing gear) in 2000. In 2002, Cook Airtomic (sealing devices for commercial aircraft engines), was transferred within Dover to align operations more closely with markets served. Sargent invested in new facilities, equipment and/or processes to improve these operations. Through reduced cycle times and expanded capability as a one-stop supplier, Sargent gained significant MRO business, even establishing an MRO operation next to a customer in Florida at the customer's request to repair both its own and others' equipment. A combined sales force, one office dedicated to dealing with the FAA, and strong regional distributors continue to enhance results. Sargent Revenue 98 99 00 01 02 Core Company Acquisitions 7
Slide 10: DEK DEK has extended its world market leadership in screen printers, and created a growing stream of recurring revenue by using its machine business as a platform for expansion into the fragmented process support products (PSP) market. DEK's machines accurately mass image a variety of materials such as solder paste onto circuit board and semiconductor assemblies. DEK customers need special tools, traditionally made in local shops close by, to adapt the machines for each new product design. Also required are items such as cleaning rolls, wipes, stencils, software and spare parts, along with training and maintenance services. DEK, which manufactures printers in England and China, established stencil and tooling shops in five other European sites over the past few years, and in mid-2002 acquired Acumen Technology, a U.S.-based stencil and tooling provider with five sites in North America and two in Asia. These initiatives gave DEK's PSP business global reach and scale and created multi-level customer relationships, enhanced by the industry shift to contract manufacturers who increasingly rely on DEK's process knowledge. DEK now offers customers a single source for printer and PSP needs, which enhances their process yield, reduces time to market and increases line productivity. 8
Slide 11: PMI Revenue 98 99 00 01 02 Core Company Acquisitions PERFORMANCE MOTORSPORTS INC. Performance Motorsports Inc. (PMI) exemplifies how quickly a Dover platform company can grow. Since Dover acquired the original company, Wiseco Piston, in 1998, six complementary businesses have been added, tripling sales. Clyde Wiseman founded Wiseco in an Ohio garage in 1941 after developing forged pistons to make his speedboat go faster. It became the market leader in performance forged pistons for the powersports market: motorcycles, snowmobiles, ATVs, personal watercraft, and outboard motors. Under Dover, it acquired Prox Inter BV, an Amsterdam-based supplier of cast pistons, and JE Piston, the California-based leader in high performance pistons for the automotive aftermarket. While operating separately, Wiseco and JE became the core of PMI. PMI then purchased Vertex Pistons, an Italian maker of cast aluminum pistons for two-cycle engine applications. In 2001 PMI acquired California's Carrillo Industries, the premier maker of steel connecting rods for performance automotive and motorcyle markets, and Perfect Bore Ltd., a U.K. manufacturer of thin-walled coated cylinder liners and specialty pistons for racing. The December 2002 acquisition of France's Chambon S.A., a leader in automotive crankshafts primarily for European racing markets, will enable PMI to develop a complete rotating assembly, including piston, connecting rod and crankshaft, for performance markets in Europe and the U.S. 9
Slide 12: ACHIEVING AND MAINTAINING MARKET LEADERSHIP BY... Driving Operating Excellence Through Lean Principles and Supply Chain Management Dover's company presidents have long known that operating excellence is a prerequisite to growth and profitability. Operating excellence is a moving target, because market leadership today typically must respond to higher customer expectations and more effective competition. Throughout Dover, management teams strive constantly to improve every aspect of operations, ranging from the engineering department, to supply chain management, to the production line and the billing process. Because Dover businesses differ in their size, complexity and characteristics, there is no "one size fits all" approach to achieving operating excellence. Dover teams employ a wide variety of tools and techniques, including LEAN, TCT, Kaizen, Six Sigma, Cellular Manufacturing, JIT, SCM and CRM. The three company examples that follow typify the continuous pursuit of operating excellence throughout Dover. 10
Slide 13: DE-STA-CO INDUSTRIES De-Sta-Co Industries (DSCI) launched its first formal LEAN manufacturing effort six years ago to reduce changeover times on its 35 stamping presses and improve on-time delivery. A series of Kaizen problem-solving events enabled DSCI to cut changeover times from 2 hours 15 minutes to under an hour -- in part by applying its own market-leading toggle clamps to hold dies. That made smaller production runs cost-effective, but revealed hidden production bottlenecks. DSCI eliminated these by utilizing additional Kaizen events, which resulted in further capital improvements and use of some automated clamping and quick die change technology. Changeover time fell even further to under 20 minutes, making possible even more flexible, small-batch manufacturing. DSCI established its "Custom Quick" program to meet the need for custom modification of standard products, which customers traditionally handled themselves. Through cellular manufacturing and a dedicated customer liaison, DSCI reduced the lead-time for quoting and shipping from six weeks to ten days or less. Learning from these experiences, DSCI also acquired a number of automation equipment or component companies in various countries to expand its offerings of both its timesaving clamps and its automation solutions to help its customers manufacture more flexibly and profitably. Kaizen events are now so institutionalized that employees initiate them on their own. DSCI's on-time delivery today exceeds 99% and overdue backlog has essentially disappeared. On Time Delivery 150 120 90 60 30 0 98 99 00 01 02 Press Change-Over Time in Minutes On Time Delivery - % 11
Slide 14: PDQ PDQ, an assembler of touchless, in-bay automatic car-wash equipment that joined Dover in 1998, is successfully using LEAN manufacturing and other techniques to streamline its operations, maintaining strong margins despite lower volume and higher health and business insurance costs. Initially skeptical shop floor workers, after training and early successes with small projects, have become enthusiastic boosters and a constant source of ideas. PDQ chose an easy target for its first manufacturing cell -- the sign assembly area, where stacks of finished signs awaited attachment to car wash machines. Working with vendors, PDQ established a Kanban re-ordering system, reducing raw materials by 45% and finished inventory by 78%, and increasing productivity by 56%. Successful welding and dryer assembly cells followed, and a fourth cell is under development. In the office, a cross-functional team is squeezing significant waste from the order entry process. These efforts reduced total suppliers by 20%, cut manufacturing space by one-third and emptied one of five buildings. Displaced workers were redeployed rather than laid off. Computer transactions plunged from 1,027 to 66 per completed machine; production lead times dropped from four weeks to one. In addition, inventories were cut by a third, with inventory turns increasing from 3.5X to 7.0X, with 10X the next target. PDQ Manufacturing Working Capital as a Percent of Sales 15% 12 9 6 3 0 98 99 00 01 02 12
Slide 15: CRENLO Crenlo, which makes electronic enclosures and operator cabs for agricultural and construction equipment, joined Dover in 1999 and had not previously been exposed to Dover’s "continuous improvement" operating excellence principles. A ‘LEAN Six Sigma’ program was introduced in 2001 and has led to significant improvements. This past year, Crenlo established 31 continuous improvement teams with members from all functional disciplines. Process and design-for-manufacturing changes resulted in notable gains in quality, and reductions in cost and time-to-produce at all three plants. Another initiative was a value improvement project in which the company and its customers assigned engineers to work together to brainstorm product changes to reduce costs for either company or both, sharing the resulting savings. Crenlo applied the same concept to suppliers, again sharing the savings, a "win-win" for all concerned. Crenlo engineers also reorganized the entire production process to squeeze out cost by creating manufacturing cells, each assembling a complete product component. The result: improved quality, a 40% cut in cycle time, and on-time delivery above 98% at its Rochester, Minnesota plants. Management has set the bar even higher for 2003. 13
Slide 16: 11-YEAR CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA (in thousands except per share figures) 2002 2001 2000 1999 DOVER CONTINUING OPERATIONS Net sales Cost of sales Selling and administrative expenses Interest expense Other income (expense), net Earnings before taxes Income taxes Net earnings % of sales Return on average equity EPS per diluted common share: Net earnings Goodwill amortization (net of tax) Net earnings before goodwill EBITACQ Depreciation and amortization Net property, plant and equipment Total assets Total debt Capital expenditures Working capital TOTAL DOVER Net earnings (losses) Dividends per common share Book value per common share Acquisitions (economic cost basis) Common stockholders' equity Common shares outstanding Weighted average number of diluted shares Closing common stock price per share Number of employees $4,183,664 2,823,348 1,018,696 70,001 (1,928) 269,691 58,542 $ 211,149 5.0% 8.8% $ $ 1.04 – 4,368,415 2,982,067 1,066,050 91,010 29,557 258,845 77,014 181,831 4.2% 7.9% 0.89 0.21 1.10 2.11 213,494 738,213 4,507,334 1,075,257 162,532 789,443 1.22 .52 12.44 281,819 2,519,281 202,579 204,013 37.07 26,634 5,064,805 3,204,051 1,046,838 97,055 25,092 741,953 228,430 513,523 10.1% 25.7% 2.47 0.18 2.65 4.40 184,224 690,788 4,555,035 1,472,237 183,746 246,217 2.54 .48 12.02 506,251 2,441,575 203,184 204,677 40.56 29,489 4,125,824 2,617,738 901,166 53,021 31,738 585,637 199,350 386,287 9.4% 23.9% 1.83 0.14 1.97 3.27 163,575 581,765 3,802,412 903,118 117,333 182,304 4.41 .44 10.06 599,171 2,038,751 202,629 210,679 45.38 26,584 $ 1.04 $ 1.81 $ 161,003 $ 704,922 $4,388,171 $1,054,060 $ 100,732 $ 961,063 (0.60) $.54 $ 11.83 $ 100,138 $2,394,623 202,402 203,346 $29.16 24,934 $ “Dover Continuing Operations” - All results and data in this section reflect continuing operations, which exclude discontinued operations. See Note 6 to the Consolidated Financial Statements. “Return on average equity”, “Net earnings” per diluted common share, “Net earnings before goodwill” per diluted common share, “EBITACQ” per diluted common share and the “Total Dover” “Net earnings” for 2000, 1999 and 1996 exclude the net gain from the sale of investments and businesses. “Net earnings before goodwill” is equal to the sum of net earnings from continuing operations and goodwill amortization, net of tax, per weighted average diluted common share. “Working Capital” is total current assets less total current liabilities as of the end of each year indicated. For 2001, the amount shown reflects a significant drop in commercial paper outstanding of $803.9 million, and ending cash and cash equivalents of $175.3 million. In 2002, the Company had no commercial paper outstanding and $294.4 million in cash and cash equivalents, well above levels required for normal operations. EARNINGS PER SHARE GROWTH (average annual rate) For 10-Year Periods Ending 12/31 of each year shown 20% $800 700 15 600 500 10 400 300 5 200 100 0 92 93 94 95 96* 97 98 99* 00* 01 02 0 Dover Long-Term Investment ($ in millions) $350 300 250 200 150 100 50 92 93 94 95 96 97 98 99 00 01 02 Free Cash Flow ($ in millions) 10% 9 8 7 6 5 4 3 2 1 0 92 93 94 95 96* 97 98 99* 00* 01 02 Dover S & P 500 Capital Expenditures Stock Repurchases Acquisitions Free Cash Flow CF % Sales *Excluding gains on sales of businesses in 2000, 1999, and 1996 included in continuing operations. Free cash flow is operating cash generated after funding capital expenditures, working capital and dividends, but excluding aquisitions, net proceeds from dispositions and stock repurchases. *Excluding sales of businesses in 2000, 1999 and 1996. 14
Slide 17: Dover Corporation and Subsidiaries 1998 1997 1996 1995 1994 1993 1992 3,636,754 2,323,254 813,402 60,274 16,295 456,119 150,282 305,837 8.4% 22.7% 1.36 0.10 1.46 2.53 147,766 502,139 3,060,863 1,037,077 104,542 227,027 1.69 .40 8.67 556,019 1,910,907 220,407 224,386 36.63 23,314 3,381,372 2,146,324 745,007 45,862 17,718 461,897 156,590 305,307 9.0% 25.6% 1.35 0.09 1.44 2.56 140,067 522,344 2,574,880 691,883 122,082 220,028 1.79 .36 7.65 261,460 1,703,584 222,596 226,815 36.13 21,814 2,973,068 1,914,913 632,549 41,299 89,763 474,070 155,237 318,833 10.7% 25.1% 1.16 0.06 1.22 2.36 98,991 454,144 2,367,906 743,765 113,679 168,077 1.69 .32 6.62 281,711 1,489,703 225,060 230,518 25.25 19,213 2,809,500 1,857,760 578,155 39,560 34,760 368,785 121,287 247,498 8.8% 26.8% 1.09 0.05 1.14 1.71 87,120 365,368 2,225,020 675,580 88,210 194,058 1.22 .28 5.40 323,291 1,227,706 227,340 227,815 18.44 18,337 2,199,428 1,463,139 465,046 36,064 24,066 259,245 86,910 172,335 7.8% 14.9% 0.75 0.06 0.81 1.40 76,452 275,409 1,649,997 517,647 70,461 262,353 0.88 .25 4.39 185,324 1,011,230 226,920 228,740 12.91 15,512 1,630,987 1,076,537 362,626 21,716 13,518 183,626 63,785 119,841 7.3% 11.8% 0.52 0.04 0.56 0.97 59,147 222,775 1,349,626 427,027 37,108 201,804 0.69 .23 3.80 312,480 883,240 228,652 228,441 15.19 12,941 1,407,218 947,240 324,550 19,247 13,773 129,954 44,207 85,747 6.1% 15.5% 0.37 0.02 0.39 0.71 59,939 188,578 994,343 225,001 35,366 94,934 0.56 .22 3.53 100,961 810,026 228,340 231,953 11.47 11,235 “EBITACQ” is equal to earnings before taxes, net interest and acquisition amoritization from continuing operations per weighted average diluted common share. “Total Dover” - All results and data in this section are on a total Dover basis, which includes discontinued operations. “Acquisitions (economic cost basis)” represents the acquisition purchase price adjusted for long-term debt assumed and cash acquired on the date of acquisition. Adjusted, where applicable, to give retroactive effect to the 2 for 1 stock split in 1997 and 1995. “Net earnings (losses)” include earnings and (losses) from operations, discontinued operations and the effect of cumulative change in accounting principle in 2002 of a $(293.0) million loss or $(1.44) loss per diluted share. NET DEBT ($ in millions) $1,330 1,130 Cash Dividends to Shareholders 40% $0.60 0.55 30 930 730 530 0.50 0.45 20 0.40 0.35 10 330 130 92 93 94 95 96 97 98 99 00 01 02 0.30 0.25 0 0.20 92 93 94 95 96 97 98 99 00 01 02 Net Debt Net Debt to Total Capital 15
Slide 18: DOVER SUBSIDIARY EXECUTIVE OFFICERS These four Chief Executive Officers play a pivotal role in Dover's highly decentralized management structure. Their operating company oversight responsibilities include evaluation of each company president's leadership effectiveness, an assessment of individual company strategies - “Doing the Right Things”, and a review of company tactics - “Doing Things Right”. They review significant internal investment opportunities, including “add-on” acquisitions, and manage all aspects of the “stand-alone” acquisition program. They also promote “best practices” across Dover, keep an eye on key market trends and convey shareholder expectations to operating company management. Lewis E. Burns President and Chief Executive Officer, Dover Industries, Inc. John E. Pomeroy President and Chief Executive Officer, Dover Technologies International, Inc. Ronald L. Hoffman President and Chief Executive Officer, Dover Resources, Inc. Jerry W. Yochum President and Chief Executive Officer, Dover Diversified, Inc. 16
Slide 19: BOARD OF DIRECTORS David H. Benson 2, 4 Richard K. Lochridge 3, 4 President, Lochridge & Company, Inc. 1, 3, 4 Gary L. Roubos 1, 2, 4 Senior Advisor, Fleming Family & Partners Former Chairman of the Board of Dover Corporation, Jean-Pierre M. Ergas Chairman and Chief Executive Officer, BWAY Corporation Thomas L. Reece 1 Chairman, President and Chief Executive Officer Michael B. Stubbs 2, 4 Private Investor 1 Bernard G. Rethore Kristiane C. Graham Private Investor 3, 4 2, 4 Chairman of the Board Emeritus, Flowserve Corporation. Member of Executive Committee Member of Audit Committee Member of Compensation Committee 4 Member of Governance and Nominating Committee 2 3 James L. Koley 1, 2, 4 Chairman, Arts Way Manufacturing Co., Inc. OFFICERS Thomas L. Reece Chairman, President and Chief Executive Officer Robert G. Kuhbach Vice President, Finance, Chief Financial Officer and Treasurer Robert A. Tyre Vice President, Corporate Development Lewis E. Burns Vice President; President and Chief Executive Officer, Dover Industries, Inc. Raymond T. McKay, Jr. Controller Maynard L. Wiff Vice President, Information Technology John E. Pomeroy Vice President; President & Chief Executive Officer, Dover Technologies International, Inc. Jerry W. Yochum Vice President; President and Chief Executive Officer, Dover Diversified, Inc. Charles R. Goulding Vice President, Taxation Joseph W. Schmidt Ronald L. Hoffman Vice President; President and Chief Executive Officer, Dover Resources, Inc. Vice President, General Counsel & Secretary SHAREHOLDER INFORMATION Investor Inquiries and Corporate News For quarterly earnings releases, information on conference calls and webcasts, press releases, annual reports, SEC filings including Form 10K, acquisitions, supplemental financial disclosure, and all other corporate news releases, please visit our website at www.dovercorporation.com Annual Shareholders Meeting The Annual Meeting of Shareholders will be held on Tuesday, April 22, 2003 at 10:00 a.m. (local time) at the Wilmington Trust Company in Wilmington, DE. Via Regular Mail: Mellon Investor Services P.O. Box 3315 South Hackensack, NJ 07606-1915 Phone (888) 567-8341 www.melloninvestor.com Independent Accountants: PricewaterhouseCoopers LLP New York, New York Registered or Overnight Mail: Mellon Investor Services 85 Challenger Road Ridgefield Park, NJ 07660 Phone (888) 567-8341 www.melloninvestor.com Dividends Quarterly dividends on Dover Corporation common stock are typically paid to holders of record as of the last day of the months of February, May, August and November. Shareholder Services For help with any of the following: • Address Changes • Direct deposit of dividends • Dividend reinvestment • Lost dividend checks • Lost stock certificates • Name Changes • Shareholder records • Stock transfers • IRS Form 1099 • Direct Stock Purchase Plan Please contact our Transfer Agent/Registrar, Mellon Investor Services, at the following address: Executive Offices: Dover Corporation 280 Park Avenue New York, New York 10017-1292 (212) 922-1640 website: www.dovercorporation.com What is Dover’s Ticker Symbol? Design: RWI (rwidesign.com) Printing: Earthcolor (earthcolor.com) Dover’s ticker symbol is DOV. The stock trades on the New York Stock Exchange and is one of the corporations listed in the S & P 500.
Slide 20: DOVER CORPORATION 280 Park Avenue New York, NY 10017-1292 www.dovercorporation.com

   
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