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Dover 10-Q 2011 UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 or 15(d) OF
THE SECURTIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2011
Commission File Number: 1-4018
Dover Corporation>
(Exact name of registrant as specified in its charter)
(630) 541-1540
(Registrant’s telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes R No £
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes R No £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12-b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes £ No R
The number of shares outstanding of the Registrant’s common stock as of July 15, 2011 was 186,023,340.
Form 10-Q
Table of Contents
(All other schedules are not required and have been omitted.)
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share figures)
(unaudited)
See Notes to Condensed Consolidated Financial Statements CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)
See Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
Preferred Stock; $100 par value per share; 100,000 shares authorized; no shares issued.
See Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
See Notes to Condensed Consolidated Financial Statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements, in accordance with Securities and Exchange Commission (“SEC”) rules for interim periods, do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the Dover Corporation (“Dover” or the “Company”) Annual Report on Form 10-K for the year ended December 31, 2010, which provides a more complete understanding of the Company’s accounting policies, financial position, operating results, business properties and other matters. The year-end condensed consolidated balance sheet was derived from audited financial statements. It is the opinion of management that these financial statements reflect all adjustments necessary for a fair statement of the interim results. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year.
2. Acquisitions
The following table details the acquisitions made during the six months ended June 30, 2011.
The Company acquired these businesses in four separate transactions for an aggregate purchase price of $424,624, net of cash acquired. The 2011 acquisitions are wholly-owned, with the exception of TAGC Limited LLC in which the Company acquired a 60% controlling interest. The non-controlling interest in TAGC Limited LLC is not material. The Unaudited Condensed Consolidated Statement of Operations includes the results of these businesses from the dates of acquisition. The aggregate revenue of the 2011 acquisitions included in the Company’s consolidated revenue totaled $46,111and $89,644 for the three and six months ended June 30, 2011, respectively.
The Company has allocated purchase price at the dates of acquisition based upon its understanding, obtained during due diligence and through other sources, of the fair value of the acquired assets and assumed liabilities. If additional information is obtained about these assets and liabilities within the measurement period (not to exceed one year from the date of acquisition), including through asset appraisals and learning more about the newly acquired business, the Company may refine its estimates of fair value to allocate the purchase price more accurately; however, any such revisions are not expected to be significant.
The following presents the allocation of the acquisition cost to the assets acquired and liabilities assumed, based on their estimated fair values:
DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)
As a result of these acquisitions, the Company recorded approximately $177,853 of customer-related intangible assets (weighted average lives of 12 years), $8,535 of trademarks (weighted average lives of 11 years), and $3,744 of other intangibles (weighted average lives of 7 years). The 2011 acquisitions resulted in the recognition of goodwill totaling $236,135, of which $3,856 is expected to be deductible for tax purposes Each of the businesses acquired in 2011 manufacture products and/or provide services in the energy and fluid solutions markets, each growth areas for the Company. These businesses were acquired to complement and expand upon existing operations within the Fluid Management segment. As such, the goodwill identified by the acquisitions reflects the benefits expected to be derived from product line expansion and operational synergies.
In accordance with ASU 2010-29, “Disclosure of Supplementary Pro Forma Information for Business Combinations,” the following unaudited pro forma information illustrates the effect on the Company’s revenue and net earnings for the three and six months ended June 30, 2011 and 2010, assuming that the 2011 acquisitions had taken place at the beginning of 2010. As a result, the supplemental pro forma net earnings reflect adjustments to the net earnings as reported in the Unaudited Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2011 to exclude $335 and $2,027, respectively, of nonrecurring expense (after-tax) related to the fair value adjustments to acquisition-date inventory. The supplemental pro forma earnings for the comparable 2010 period were adjusted to include these charges. The 2011 and 2010 supplemental pro forma earnings are also adjusted to reflect the comparable impact of additional depreciation and amortization expense (net of tax) resulting from the fair value measurement of tangible and intangible assets relating to 2011 and 2010 acquisitions.
These pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that actually would have resulted had the acquisitions occurred on the dates indicated or that may result in the future.
3. Inventories, net
DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)
4. Property, Plant and Equipment, net
5. Financial Instruments
Derivatives
The Company is exposed to market risk for changes in foreign currency exchange rates due to the global nature of its operations. In order to manage this risk the Company has hedged portions of its forecasted sales and purchases, which occur within the next twelve months and are denominated in non-functional currencies, with currency forward or collar contracts designated as cash flow hedges. At June 30, 2011 and December 31, 2010, the Company had contracts with U.S. dollar equivalent notional amounts of $37,447 and $63,935, respectively, to exchange foreign currencies, principally the U.S. dollar, British pound, Singapore dollar, Chinese yuan and Malaysian ringgit. The Company believes it is probable that all forecasted cash flow transactions will occur.
The Company has an outstanding floating-to-floating cross currency swap agreement for a total notional amount of $50,000 in exchange for CHF 65,100. In February 2011, the Company amended and restated the terms of the arrangement to extend its maturity date to October 15, 2015. This transaction continues to hedge a portion of the Company’s net investment in CHF-denominated operations. The agreement qualifies as a net investment hedge and the effective portion of the change in fair value is reported within the cumulative translation adjustment section of other comprehensive income. The fair values at June 30, 2011 and December 31, 2010 reflected losses of $29,895 and $19,774, respectively, due to the strengthening of the Swiss franc relative to the U.S. dollar over the term of the arrangement.
In January 2011, the Company entered into foreign currency forward contracts to purchase $350,000 for €258,719, which were designated as hedging an equivalent amount of the Company’s euro denominated net investment. The agreements qualified as net investment hedges with the changes in fair value being reported within the cumulative translation adjustment section of other comprehensive income. These arrangements were settled on April 4, 2011, resulting in a loss of $18,211 being reflected within the cumulative translation adjustment.
The following table sets forth the fair values of derivative instruments held by the Company as of June 30, 2011 and December 31, 2010 and the balance sheet lines in which they are recorded:
The amount of gains or losses from hedging activity recorded in earnings is not significant and the amount of unrealized gains and losses from cash flow hedges which are expected to be reclassified to earnings in the next twelve months is not significant; therefore, additional tabular disclosures are not presented. There are no amounts excluded from the assessment of hedge effectiveness and there are no credit risk related contingent features in the Company’s derivative instruments.
DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)
The Company is exposed to credit loss in the event of nonperformance by counterparties to the financial instrument contracts held by the Company; however, nonperformance by these counterparties is considered unlikely as the Company’s policy is to contract with highly-rated, diversified counterparties.
Fair Value Measurements
ASC 820, “Fair Value Measurements and Disclosures,” establishes a fair value hierarchy that requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value.
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.
Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2011 and December 31, 2010:
Short-term investments consist of investment grade time deposits with original maturities between three months and one year and are included in current assets in the Unaudited Condensed Consolidated Balance Sheet. Short-term investments are measured at fair value using quoted market prices. The derivative contracts are measured at fair value using models based on observable market inputs such as foreign currency exchange rates and interest rates; therefore, they are classified within Level 2 of the valuation hierarchy.
In addition to fair value disclosure requirements related to financial instruments carried at fair value, accounting standards require interim disclosures regarding the fair value of all of the Company’s financial instruments.
The estimated fair value of long-term debt at June 30, 2011 and December 31, 2010 was $2,431,461 and $1,961,697, respectively, compared to the carrying value of $2,187,986 and $1,792,811. The carrying value includes the portion that is due and payable in less than one year of $1,748 and $1,925 at June 30, 2011 and December 31, 2010, respectively. The estimated fair value of the long-term debt is based on quoted market prices for similar instruments. The fair value of short-term loans, principally commercial paper at June 30, 2011 and December 31, 2010, approximates carrying value.
The carrying values of cash and cash equivalents, trade receivables, accounts payable, notes payable, and accrued expenses are reasonable estimates of their fair values as of June 30, 2011 and December 31, 2010 due to the short-term nature of these instruments.
DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)
The following table provides the changes in carrying value of goodwill by segment for the six months ended June 30, 2011:
The following table provides the gross carrying value and accumulated amortization for each major class of intangible asset:
Amortization expense totaled $30,751 and $25,891 for the three months ended June 30, 2011 and 2010, respectively. For the six months ended June 30, 2011 and 2010, amortization expense was $61,765 and $51,655, respectively.
7. Borrowings
Borrowings consist of the following:
DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)
On February 22, 2011, the Company issued $450 million of 4.30% Notes due 2021 and $350 million of 5.375% Notes due 2041. The proceeds of $788,971 from the sale of the notes, net of discounts and issuance costs, were used to repay commercial paper, including commercial paper issued to repay the Company’s $400 million of 6.50% notes, which matured February 15, 2011, and for other general corporate purposes, including the acquisition of Harbison-Fischer. The new notes are redeemable at the option of Dover in whole or in part at any time at a redemption price that includes a make-whole premium, with accrued interest to the redemption date.
At June 30, 2011 and December 31, 2010, notes payable and current maturities of long-term debt within the Unaudited Condensed Consolidated Balance Sheet included commercial paper of $46,000 and $15,000, respectively.
The Company maintains a $1 billion unsecured revolving credit facility which expires on November 9, 2012. The Company primarily uses this facility as liquidity back-up for its commercial paper program and has not drawn down any loans under the $1 billion facility and does not anticipate doing so. The Company generally uses commercial paper borrowings for general corporate purposes, funding of acquisitions and the repurchases of its common stock.
Interest expense for the three months ended June 30, 2011 and 2010 was $31,120 and $28,996, respectively. For the six months ended June 30, 2011 and 2010, interest expense was $62,180 and $57,842, respectively. Interest income for the three months ended June 30, 2011 and 2010 was $2,986 and $2,054, respectively. For the six months ended June 30, 2011 and 2010, interest income was $5,760 and $3,731, respectively.
8. Income Taxes
The Company’s provision for income taxes for continuing operations in interim periods is computed by applying its estimated annual effective tax rate against earnings before income tax expense for the period. In addition, non-recurring or discrete items are recorded during the period in which they occur. The effective tax rates for the three and six months ended June 30, 2011 were 20.2% and 21.8% compared to the prior year rates of 29.2% and 30.1%. The effective tax rates for the three and six month periods of 2011 were favorably impacted by net discrete items totaling $30,354, including $22,338 arising in the second quarter principally from U.S. federal tax settlements and $8,016 arising in the first quarter principally from settlements with state taxing authorities. Excluding discrete items, the effective tax rates for the three and six month periods of 2011 were 27.4% and 27.3%, respectively, which are lower than the effective rates in the comparable 2010 periods primarily due to a more favorable mix of non-U.S. earnings in 2011. The Company believes additional uncertain tax positions will be settled within the next 12 months; however, an estimate cannot be made due to the uncertainties associated with the resolution of these matters.
9. Discontinued Operations
Summarized results of the Company’s discontinued operations are as follows:
The Company currently has no businesses held for sale in discontinued operations. The gain from discontinued operations, net of tax, for the six months ended June 30, 2011 reflects the tax benefit resulting primarily from discrete tax items settled during the period. For the six months ended June 30, 2010, the loss from discontinued operations, net of tax reflects the sale of Triton, an operating company that had been reclassified from the Engineered Systems segment to discontinued operations in 2008.
DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)
At June 30, 2011 and December 31, 2010, the assets and liabilities of discontinued operations primarily represent residual amounts for deferred tax assets, short and long-term reserves, and contingencies related to businesses previously sold.
Additional detail related to the assets and liabilities of the Company’s discontinued operations is as follows:
10. Commitments and Contingent Liabilities
A few of the Company’s subsidiaries are involved in legal proceedings relating to the cleanup of waste disposal sites identified under federal and state statutes which provide for the allocation of such costs among “potentially responsible parties.” In each instance, the extent of the Company’s liability appears to be very small in relation to the total projected expenditures and the number of other “potentially responsible parties” involved and is anticipated to be immaterial to the Company. In addition, a few of the Company’s subsidiaries are involved in ongoing remedial activities at certain current and former plant sites, in cooperation with regulatory agencies, and appropriate reserves have been established.
The Company and certain of its subsidiaries are also parties to a number of other legal proceedings incidental to their businesses. These proceedings primarily involve claims by private parties alleging injury arising out of use of the Company’s products, exposure to hazardous substances, patent infringement, employment matters and commercial disputes. Management and legal counsel, at least quarterly, review the probable outcome of such proceedings, the costs and expenses reasonably expected to be incurred and currently accrued to-date, and the availability and extent of insurance coverage. While it is not possible at this time to predict the outcome of these legal actions, in the opinion of management, based on these reviews, it is unlikely that the disposition of the lawsuits and the other matters mentioned above will have a material adverse effect on the financial position, results of operations, or cash flows of the Company.
Estimated warranty program claims are provided for at the time of sale. Amounts provided for are based on historical costs and adjusted new claims. The changes in the carrying amount of product warranties through June 30, 2011 and 2010 are as follows:
As of June 30, 2011, the Company had approximately $77,561 outstanding in letters of credit with financial institutions, which expire at various dates in 2011 through 2016. These letters of credit are primarily maintained as security for insurance, warranty and other performance obligations.
DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)
From time to time, the Company will initiate various restructuring programs at its operating companies and incur severance and other restructuring costs. For the three months ended June 30, 2011, restructuring charges of $1,214 and $881 were recorded in cost of goods and services and selling and administrative expenses, respectively. For the three months ended June 30, 2010, restructuring charges of $197 were recorded in selling and administrative expenses. For the six months ended June 30, 2011, restructuring charges of $1,301 and $2,274 were recorded in cost of goods and services and selling and administrative expenses, respectively. For the six months ended June 30, 2010, restructuring charges of $713 and $1,535 and were recorded in cost of goods and services and selling and administrative expenses, respectively.
The following table details the Company’s severance and other restructuring reserve activity:
The following table details restructuring charges incurred by segment for the periods presented:
DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)
11. Employee Benefit Plans
The following table sets forth the components of the Company’s net periodic expense relating to retirement and post-retirement benefit plans:
12. Comprehensive Earnings
Comprehensive earnings were as follows:
DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)
13. Segment Information
For management reporting and performance evaluation purposes, the Company categorizes its operating companies into four distinct reportable segments. Segment financial information and a reconciliation of segment results to consolidated results follows:
14. Recent Accounting Standards
In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2009-13, which amended existing guidance for identifying separate deliverables in a revenue-generating transaction where multiple deliverables exist and requires that arrangement consideration be allocated at the inception of an arrangement to all deliverables using the relative selling price method. The ASU also establishes a selling price hierarchy for determining the selling price of a deliverable, which includes: 1) vendor-specific objective evidence if available, 2) third-party evidence if vendor-specific objective evidence is not available, and 3) estimated selling price if neither vendor-specific nor third-party evidence is available.
The majority of the Company’s businesses generate revenue through the manufacture and sale of a broad range of specialized products and components, with revenue recognized upon transfer of title and risk of loss, which is generally upon shipment. When the Company has multiple deliverables in its sales arrangements, they are typically separate units of accounting with vendor-specific objective evidence of selling price. The Company adopted the requirements of ASU 2009-13 on a prospective basis, effective January 1, 2011. The requirements of ASU 2009-13 did not significantly change the Company’s units of accounting or how the Company allocates arrangement consideration to various units of accounting. Therefore, the adoption of ASU 2009-13 did not have a material effect on the Company’s statement of position or results of operations.
In October 2009, the FASB issued ASU 2009-14 which eliminates tangible products containing both software and non-software components that operate together to deliver a product’s functionality from the scope of then-current generally accepted accounting principles for software. The Company adopted ASU 2009-14 on a prospective basis, effective January 1, 2011. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)
In May 2011, the FASB issued ASU 2011-04 which was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This guidance is effective for the Company beginning on January 1, 2012. Its adoption is not expected to significantly impact the Company’s consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05 which provides new guidance on the presentation of comprehensive income. ASU 2011-05 eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders’ equity and instead requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement or in two separate but consecutive statements. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The adoption of this ASU will not have a significant impact on the Company’s consolidated financial statements as it only requires a change in the format of the current presentation.
15. Equity Incentive Program>
During the six months ended June 30, 2011, the Company issued stock appreciation rights (“SARs”) covering 1,524,329 shares and 44,751 performance shares. During the six months ended June 30, 2010, the Company issued SARs covering 2,306,440 shares and 68,446 performance shares.
The fair value of each SAR grant was estimated on the date of grant using the Black-Scholes option pricing model. The performance share awards are market condition awards and have been assessed at fair value on the date of grant using the Monte Carlo simulation model. The following assumptions were used in determining the fair value of the SARs and performance shares awarded during the respective periods:
For the three months ended June 30, 2011 and 2010, after-tax stock-based compensation expense totaled $3,988 and $3,862, respectively. For the six months ended June 30, 2011 and 2010, after-tax stock-based compensation expense totaled $9,361 and $8,426, respectively. Stock-based compensation is reported within selling and administrative expenses in the accompanying Unaudited Condensed Consolidated Statement of Operations.
In May 2007, the Board of Directors authorized the repurchase of up to 10,000,000 shares through May 2012. During the three and six months ended June 30, 2011, the Company repurchased 1,000,000 and 1,450,000 shares of its common stock in the open market. During the six months ended June 30, 2011 the Company also repurchased 79,708 shares from the holders of its employee stock options when they tendered these shares as full or partial payment of the exercise price of such options. Therefore, during the three and six months ended June 30, 2011, a total of 1,079,708 and 1,529,708 shares were repurchased at an average price of $64.06 and $64.31 per share, respectively. Treasury shares increased to 64,415,056 at June 30, 2011 from a balance of 62,885,348 at December 31, 2010.
DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, unless otherwise indicated)
17. Subsequent Events>
The Company assessed events occurring subsequent to June 30, 2011 for potential recognition and disclosure in the Unaudited Condensed Consolidated Financial Statements. No events have occurred that would require adjustment to the Unaudited Condensed Consolidated Financial Statements.
On July 4, 2011, the Company closed on the acquisition of the Sound Solutions business of NXP Semiconductors N.V. The acquisition purchase price of $855 million was funded by cash on hand and is subject to working capital and other contractual adjustments. Sound Solutions is one of the world’s leading manufacturers of dynamic speakers and receivers for cell phones and other consumer electronics. The business will be incorporated into the Knowles business within the Dover Electronic Technologies segment, which will enhance the segment’s product offerings serving the high growth handset market. The Company is in the process of finalizing its appraisals of tangible and intangible assets relating to this acquisition, and the allocation of the purchase price to the assets acquired and liabilities assumed will be completed once the appraisal process has been finalized. Over the last three quarters ended June 30, 2011, the Company has recognized transaction related expenses totaling $3.5 million, which are reflected within selling and administrative expenses, and expects to recognize approximately $11 million of additional transaction related closing costs in the third quarter of 2011 relating to this acquisition.
Refer to the section below entitled “Special Notes Regarding Forward-Looking Statements” for a discussion of factors that could cause actual results to differ from the forward-looking statements contained below and throughout this quarterly report.
OVERVIEW AND OUTLOOK
Dover Corporation (“Dover” or the “Company”) is a global manufacturer of innovative components and equipment, specialty systems and support services for a variety of applications in the industrial products, engineered systems, fluid management and electronic technologies markets. Dover discusses its operations at the platform level within the Industrial Products, Engineered Systems and Fluid Management segments, which contain two platforms each. Electronic Technologies’ results are discussed at the segment level.
The Company continued to experience positive results during the second quarter of 2011 with all segments achieving double-digit revenue and earnings growth, driven by strong bookings from the first quarter. As a result, the Company generated revenue of $2.2 billion during the second quarter of 2011, an increase of 21% compared to the prior year. Gross profit grew $127.2 million or 18% on the strength of increased volume. Bookings remained solid in the second quarter, driven by continuing strong dynamics in the energy markets, consumer electronics, and global industrial production. The Company continues to anticipate strength in the majority of its end-markets through the remainder of the year. However, the strong trends experienced in the first half of the year are expected to be somewhat tempered by a cautious macro-economic environment. In particular, refrigeration case sales are expected to soften in the second half of the year as well as solar equipment sales. The Company continues to focus on the execution of its strategies around product innovation, global expansion, leveraging its scale and disciplined capital allocation.
Given its strong performance in the first six months of 2011 and the addition of Knowles Sound Solutions (as described in Note 17 to the Unaudited Condensed Consolidated Financial Statements), the Company estimates that its 2011 full year organic revenue growth will be in the range of 12% to 14% (assuming a negligible impact from foreign currency) and acquisition related growth will be approximately 6%. Based on these revenue assumptions, as well as the impact of tax benefits received in the first half of the year, a slightly lower effective tax rate, and the net impact of Knowles Sound Solutions (which is expected to reduce 2011 diluted earnings per share by $0.03 to $0.05, subject to finalization of the purchase price allocation), the Company has projected that its continuing diluted earnings per share for 2011 will be in the range of $4.50 to $4.60. If the global or domestic economic conditions accelerate or deteriorate, Dover’s operating results for 2011 could be materially different than currently projected.
Furthermore, in connection with the Company’s strategic planning process, it is currently evaluating the potential sale of certain operating companies within the Material Handling platform of its Industrial Products segment. The decision regarding these entities is expected to be concluded before the end of the year.
RESULTS OF OPERATIONS
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