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Dover Inflates Segment Results With New Calculation Method
Segment results appear much better under new methodology but are no longer comparable.
July 21, 2022
Dover (DOV), a provider of machinery and equipment to the industrial, defense, and aerospace spaces, is no longer counting certain expenses in its segment reporting. Historically, Dover has reported segment earnings as EBIT, or earnings before interest and taxes. In the quarter ended June 30, 2022, Dover began excluding additional items.
The company now defines segment earnings as earnings before:
—Purchase accounting expenses
—Restructuring and other costs (benefits)
—Loss (gain) on dispositions
—Interest income and provision for income taxes
Since Dover did not quantify the impact for investors we will. The new methodology inflated the year ago quarter’s segment earnings by the following percentages:
—Engineered products 13.5%
—Fueling solutions 18.6%
—Imaging & identification 9.5%
—Pumps & process solutions 5.8%
—Refrigeration & food equipment 16.3%
In the latest quarter, Dover excluded $154.7 million from total segment earnings, or 53.4% of net income. The new methodology doesn’t impact consolidated results.
Dover made one acquisition in the first six months of this year and four in the prior year period. We routinely argue a serial acquirer is wrong to exclude acquisition related costs from adjusted consolidated earnings as Dover does. Though we agree excluding purchase accounting expense from segment results does provide investors a better view of a segment’s operating results, Dover has done investors no favor in making prior period results incomparable.
Related: SNA, OSK, PCAR, FELE, IR, DHR, NDSN, ECL, SPXC, IEX, HI, PCRFY, ALFVY,
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