Dover Earnings Call Nuggets: Consumer Electronics and Energy Analysis

Dover Corporation (NYSE:DOV) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Consumer Electronics

Shannon O’Callaghan – Nomura Securities: Bob first on the consumer electronics performance here, so 27% in the first quarter, that was above the 15% to 20% you had talked about. What do you attribute the outperformance to? And then, you also didn’t change the revenue guidance for the year for that segment. Are you more cautious on the second half or is that just being conservative in terms of what you are planning for the second half given you outperformed in 2Q?

Robert A. Livingston – President and CEO: Okay, so you’re asking two questions. One, the performance of the second quarter relative to the guidance we provided on the April call, and Shannon, my first comment would be, I was probably being somewhat conservative in my April comments just because we don’t always know how the product stream is going to flow from one quarter to the next. It’s not as easy to predict as it is in some of our other businesses. The guys had an outstanding second quarter. The third and fourth quarter, we do expect some significant growth sequentially second half over the first half. The driver of this growth is going to be new product releases. I think you picked up in my prepared comments that we look at these product launches from the OEMs being late third quarter and early fourth quarter. I’d like to think I’m also being somewhat conservative with our comments on the product launches and the outlook for the Communication Technology space in the second half of the year.

Shannon O’Callaghan – Nomura Securities: Just quickly on Energy, I mean the international growth has been great but the margins were a little lower this quarter. I mean can you talk about your sort of expectations to (start to bring) rig count up a little bit but certainly maybe profitability expectations going through the rest of the year?

Robert A. Livingston – President and CEO: Second quarter margins down a little bit. My first comment would be to treat them – to treat that as a temporary blip. We did have some lower activity in Canada. Actually it was quite a bit lower than we anticipated coming into the quarter. But the other thing that was, I would label as temporary. We did have some elevated product development spending in the second quarter. It wasn’t all constrained to the second quarter but the second quarter spending in this product area was quite a bit higher than the first quarter or even what we will see here in the third quarter. Margins for that segment were 24% and maybe a fraction in the first half. Shannon, margins for the year will be 24% for Energy.

Energy Analysis

Nigel Coe – Morgan Stanley: So just, the – obviously you referred to some of the factors that drove the bookings weakness in Energy Q-over-Q, but obviously that does impact probably the revenue outlook in 3Q. So I’m wondering, as we look into the 3% to 5% core growth for the full year, is there more of a bias towards the lower end of that range at this stage Bob?

Robert A. Livingston – President and CEO: No, absolutely not. In fact, your comment that our lower bookings in the second quarter, you said impact our revenue outlook for the third quarter, that’s not true, Nigel. I think as Brad mentioned in his comments, we do see some of the international business activity especially around production and Energy, most notably around production and Energy as being a little bit lumpy, and it’s not a steady drumbeat. In fact Brad mentioned that the Queensland order for our production group in Energy, we did not receive a second quarter order on that project. It did come in, in early July, and the size of this, Nigel, is, what is it, $70 million or $75 million, Brad?

Brad M. Cerepak – SVP and CFO: $75 million, so that one won’t all ship in the third quarter…

Robert A. Livingston – President and CEO: As an example, that order is actually for product shipments in the late August through mid-first quarter timeframe of next year.

Nigel Coe – Morgan Stanley: So just to clarify that…

Robert A. Livingston – President and CEO: Don’t pencil this in at the low end of that range.

Nigel Coe – Morgan Stanley: Okay, $70 million order came in early July, okay.

Robert A. Livingston – President and CEO: I think it was actually the first week of July, yes.

Nigel Coe – Morgan Stanley: Then switching to Comm Tech, you know you called out Samsung several times, and I don’t think I have ever heard you, actually refer to an OEM customer on the call before. So, I’m wondering if that’s the signal.

Robert A. Livingston – President and CEO: We’re not going to refer to.

Nigel Coe – Morgan Stanley: But is that indicative that Samsung is…

Robert A. Livingston – President and CEO: Yeah.

Nigel Coe – Morgan Stanley: Is that now indicative that Samsung is now your biggest customer?

Robert A. Livingston – President and CEO: No, for the year they will not be. No. It’s fairly – it’s fairly – it’s a fairly closed position between customer one and customer two for the year. They were rather significant for us in the second quarter. We actually have a very, very broad customer base, especially for our microphone business and it’s growing for our speaker and receiver business.

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