Dover Corporation - 10-Q quarterly report FY2010 Q2

 

(Exact name of registrant as specified in its charter)

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 þ      No o

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). Yesþ      No o

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 o      No þ

The number of shares outstanding of the Registrant’s common stock as of July 16, 2010 was 186,660,653.

(All other schedules are not required and have been omitted)

The following table is a reconciliation of the share amounts used in computing earnings per share:

Preferred Stock; $100 par value per share; 100,000 shares authorized; no shares issued.

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, 2009, 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.

The following table details the acquisitions made during the six months ended June 30, 2010.

The 2010 acquisitions are wholly-owned and had an aggregate cost of $10.0 million, net of cash acquired, at the dates of acquisition. The Company is in the process of finalizing appraisals of tangible and intangible assets and continuing to evaluate the initial purchase price allocations for the 2010 acquisitions. Accordingly, management has used its best estimate in the preliminary purchase price allocations as of the date of these financial statements.

During the six months ended June 30, 2010, the Company recorded adjustments to goodwill by allocating $15.6 million primarily to customer-related intangibles and property, plant and equipment.

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, 2010 and 2009, assuming that the 2010 and 2009 acquisitions had all taken place as of the beginning of the periods presented.

These pro forma results of operations have been prepared for comparative purposes only and include certain adjustments to actual financial results for the periods presented, such as imputed financing costs, and estimated additional amortization and depreciation expense as a result of intangibles and fixed assets acquired, measured at fair value. They do not purport to be indicative of the results of operations that actually would have resulted had the acquisitions occurred on the date indicated or that may result in the future.

In connection with certain acquisitions that occurred prior to January 1, 2009, the Company had established reserves related to severance and facility closings as a component of the purchase price allocation. As of June 30, 2010, these reserves have been substantially paid out.

The following table displays the components of inventory:

The following table details the components of property, plant and equipment, net:

The carrying amount of cash and cash equivalents, trade receivables, accounts payable, notes payable and accrued expenses approximated fair value as of June 30, 2010 and December 31, 2009 due to the short maturity of less than one year for these instruments.

Accounting Standards Codification (“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 instruments 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 unadjusted quoted prices 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 that are supported by little or no market activity that are significant to the fair value of the assets or liabilities.

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis by the level within the fair value hierarchy as of June 30, 2010 and December 31, 2009:

Short-term investments are included in current assets in the Unaudited Condensed Consolidated Balance Sheets, and generally consist of investment grade time deposits with original maturities between three months and one year.

The following table provides the changes in carrying value of goodwill by segment for the six months ended June 30, 2010:

The following table provides the gross carrying value and accumulated amortization for each major class of intangible asset:

Amortization expense totaled $25.9 million and $24.3 million for the three months ended June 30, 2010 and 2009, respectively. For the six months ended June 30, 2010 and 2009, amortization expense was $51.7 million and $48.9 million, respectively.

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, 2010 were 29.2% and 30.1% compared to the prior year rates of 1.1% and 17.4%, respectively. The mix of non-U.S. earnings in low-tax jurisdictions had a positive impact on the effective tax rates for the three and six months ended June 30, 2010 as compared to the prior year periods, excluding the benefit of a $28.4 million favorable tax settlement in the second quarter of 2009.

During the first quarter of 2010, the Company sold a business for net consideration of $7.5 million, resulting in a net after-tax loss of approximately $13.1 million. During the second quarter of 2010, the loss was increased by approximately $0.9 million, net of tax, upon settlement of a $1.5 million working capital adjustment related to the sale. During the six months ended June 30, 2009, the Company recorded adjustments to the carrying value of a business held for sale and other adjustments resulting in a net after-tax loss of approximately $7.4 million.

Summarized results of the Company’s discontinued operations are as follows:

The Company currently has no businesses held for sale in discontinued operations. At June 30, 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:

The Company periodically enters into financial transactions specifically to hedge its exposures to various items, including, but not limited to, interest rate and foreign exchange rate risk. The Company does not enter into derivative financial instruments for speculative purposes and does not have a material portfolio of derivative financial instruments.

In accordance with the provision of ASC 815, Derivatives and Hedging, the Company recognizes all derivatives as either assets or liabilities on the balance sheet and measures those instruments at fair value. If the derivative is designated as a fair value hedge and is effective, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings in the same period. If the derivative is designated as a cash flow hedge, the effective portion of change in the fair value of the derivative is recorded in other comprehensive earnings and is recognized in the statement of operations when the hedged item affects income. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings.

The Company currently has an outstanding swap agreement for a total notional amount of $50.0 million in exchange for CHF 65.1 million. This agreement hedges a portion of the Company’s net investment in non-U.S. operations and the fair value outstanding at June 30, 2010 reflects a loss of $10.7 million which was based on quoted market prices for similar instruments (using Level 2 inputs under the provisions of ASC 820). The change in fair value of this hedge is recorded in cumulative translation adjustments, and the corresponding $10.7 million liability is recorded in other deferrals in the unaudited Condensed Consolidated Balance Sheet. This hedge is effective.

The Company’s other hedging activity is not significant; therefore 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. In addition, the amount of gains or losses from hedging activity recorded in earnings and the amount of unrealized gains or losses from cash flow hedges which are expected to be reclassified to earnings in the next twelve months are not significant to the Company.

The Company’s long-term debt with a book value of $1,844.3 million, of which $53.7 million is current and payable in less than one year, had a fair value of approximately $2,071.2 million at June 30, 2010. The estimated fair value of the long-term debt is based on quoted market prices for similar issues.

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, the availability and extent of insurance coverage, and established reserves. While it is not possible at this time to predict the outcome of these legal actions or any need for additional reserves, 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, 2010 and 2009 are as follows:

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, 2010, the restructuring charges of $0.2 million were recorded in selling and administrative expenses. For the six months ended June 30, 2010, $0.7 million and $1.5 million of restructuring charges 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:

The following tables set forth the components of the Company’s net periodic expense relating to retirement and post-retirement benefit plans:

Comprehensive earnings were as follows:

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:

In January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06 which is intended to improve disclosures about fair value measurements. The guidance requires entities to disclose significant transfers in and out of fair value hierarchy levels, the reasons for the transfers and to present information about purchases, sales, issuances and settlements separately in the reconciliation of fair value measurements using significant unobservable inputs (Level 3). Additionally, the guidance clarifies that a reporting entity should provide fair value measurements for each class of assets and liabilities and disclose the inputs and valuation techniques used for fair value measurements using significant other observable inputs (Level 2) and significant unobservable inputs (Level 3). The Company has applied the new disclosure requirements as of January 1, 2010, except for the disclosures about purchases, sales, issuances and settlements in the Level 3 reconciliation, which will be effective for interim and annual periods beginning after December 15, 2010. The adoption of this guidance has not had and is not expected to have a material impact on the Company’s consolidated financial statements.

In February 2010, the FASB issued ASU 2010-09 which requires that an SEC filer, as defined, evaluate subsequent events through the date that the financial statements are issued. The update also removed the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated. The adoption of this guidance on January 1, 2010 did not have a material effect on the Company’s consolidated financial statements.

In October 2009, the FASB issued ASU 2009-13 which amends existing guidance for identifying separate deliverables in a revenue-generating transaction where multiple deliverables exist, and provides guidance for allocating and recognizing revenue based on those separate deliverables. The guidance is expected to result in more multiple-deliverable arrangements being separable than under current guidance. This guidance is effective for the Company beginning on January 1, 2011 and is required to be applied prospectively to new or significantly modified revenue arrangements. The Company is currently assessing the impact this guidance may have on its consolidated financial statements.

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 current generally accepted accounting principles for software. This guidance is effective for the Company beginning on January 1, 2011 and is required to be applied prospectively to new or significantly modified revenue arrangements. The Company is currently assessing the impact this guidance may have on its consolidated financial statements.

During the six months ended June 30, 2010, the Company issued stock appreciation rights (“SARs”) covering 2,306,440 shares and 68,446 performance shares. During the six months ended June 30, 2009, the Company issued SARs covering 2,796,124 shares and 75,892 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, 2010 and 2009, after-tax stock-based compensation expense totaled $3.9 million and $3.3 million, respectively. For the six months ended June 30, 2010 and 2009, after-tax stock-based compensation expense totaled $8.4 million and $7.2 million, 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 six months ended June 30, 2010, the Company repurchased 1,340,000 shares of its common stock in the open market and 35,926 shares from the holders of its employee stock options/SARs when they tendered shares as full or partial payment of the exercise price of such options/SARs. A total of 1,375,926 shares were repurchased at an average price of $46.84 per share. Treasury shares increased to 61,843,319 at June 30, 2010 from a balance of 60,467,393 at December 31, 2009.

The Company assessed events occurring subsequent to June 30, 2010 for potential recognition and disclosure in the Unaudited Condensed Consolidated Financial Statements. No events have occurred that would require adjustment to or disclosure in the Unaudited Condensed Consolidated Financial Statements.

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.

Dover Corporation (“Dover” or the “Company”) owns a global portfolio of manufacturing companies providing 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.

Management assesses Dover’s liquidity in terms of its ability to generate cash and access capital markets to fund its operating, investing and financing activities. Significant factors affecting liquidity are: cash flows generated from operating activities, capital expenditures, acquisitions, dispositions, dividends, repurchase of outstanding shares, adequacy of commercial paper and available bank lines of credit, and the ability to attract long-term capital with satisfactory terms. The Company generates substantial cash from operations and remains in a strong financial position, maintaining enough liquidity for reinvestment in existing businesses and strategic acquisitions while managing its capital structure on a short and long-term basis.

Cash and cash equivalents of $738.8 million at June 30, 2010 increased $24.4 million from the December 31, 2009 balance of $714.4 million. In addition, short-term investments at June 30, 2010 increased $10.9 million from the balance at December 31, 2009. Cash equivalents were invested in highly liquid investment grade money market instruments with a maturity of less than three months. Short-term investments consist of investment grade time deposits with original maturity dates between three months and one year.

The Company’s total cash, cash equivalents and short-term investment balance of $973.5 million as of June 30, 2010, includes $952.0 million held outside of the United States.

The following table is derived from the Condensed Consolidated Statement of Cash Flows:

Cash flows provided by operating activities for the first six months of 2010 increased $11.0 million from the prior year period. The increase resulted from the significant improvement in earnings, offset in part by higher working capital investment driven by the increased order and revenue levels.

For the six months ended June 30, 2010, the Company used cash in investing activities of $126.8 million compared to cash generated from investing activities of $48.0 million in the prior year period, with the increased use largely reflecting additional net purchases of short-term investments and higher capital expenditures. Capital expenditures during the six months ended June 30, 2010 were $27.8 million higher than expenditures made in the prior year period, while acquisition expenditures in the current period were $24.3 million lower than expenditures for acquisitions in the prior year. Capital expenditures for the first six months of 2010 primarily relate to capacity expansion requirements of our high-growth businesses. The Company currently anticipates that any additional acquisitions made during the remainder of the year will be funded from available cash and internally generated funds and, if necessary, through the issuance of commercial paper, use of established lines of credit or public debt markets.

For the six months ended June 30, 2010, cash used in financing activities decreased $90.4 million. The reduced use of cash in the 2010 period compared to the prior year resulted primarily from a net increase of $122.3 million from the issuance of commercial paper for general corporate purposes, as well as higher proceeds from the exercise of employee stock options, offset in part by treasury stock purchases totaling $64.5 million and dividend payments.

Adjusted Working Capital (a non-GAAP measure calculated as accounts receivable, plus inventory, less accounts payable) increased from the prior year end by $161.7 million, or 14.8%, to $1,254.3 million which reflected an increase in receivables of $197.4 million, an increase in inventory of $100.8 million and an increase in accounts payable of $136.5 million generally due to higher sales volume. Excluding acquisitions and the effects of foreign exchange translation, Adjusted Working Capital would have increased by $190.7 million, or 17.5%. “Average Annual Adjusted Working Capital” as a percentage of revenue (a non-GAAP measure calculated as the five-quarter average balance of accounts receivable, plus inventory, less accounts payable divided by the trailing twelve months of revenue) decreased to 18.1% at June 30, 2010 from 19.9% at December 31, 2009 and inventory turns were 6.5 at June 30, 2010 compared to 6.2 at December 31, 2009.

In addition to measuring its cash flow generation and usage based upon the operating, investing and financing classifications included in the Unaudited Condensed Consolidated Statements of Cash Flows, the Company also measures free cash flow (a non-GAAP measure). Management believes that free cash flow is an important measure of operating performance because it provides both management and investors a measurement of cash generated from operations that is available to fund acquisitions, pay dividends, repay debt and repurchase Dover’s common stock. The Company’s free cash flow for the six months ended June 30, 2010 decreased $16.9 million compared to the prior year period, primarily due to the significant investment in working capital and increase in capital expenditures, partially offset by greater earnings on increased sales volume from continuing operations.

The following table is a reconciliation of free cash flow from cash flow provided by operating activities:

The Company utilizes total debt and net debt-to-total-capitalization calculations to assess its overall financial leverage and capacity and believes the calculations are useful to investors for the same reason. The following table provides a reconciliation of total debt and net debt-to-total-capitalization to the most directly comparable GAAP measures:

The total debt level of $1,874.3 million at June 30, 2010 increased $13.5 million from December 31, 2009, primarily due to the issuance of commercial paper offset in part by repayment of $16.5 million of long-term debt. The net debt decrease was due to a larger cash balance generated from operations in the first half of 2010 when compared to the prior year period, partially offset by a higher total debt level.

The Company’s total long-term debt with a book value of $1,844.3 million, of which $53.7 million is current and payable within one year, had a fair value of approximately $2,071.2 million at June 30, 2010. The estimated fair value of the long-term debt is based on quoted market prices for similar issues.

The Company currently has an outstanding swap agreement for a total notional amount of $50.0 million in exchange for CHF65.1 million. This agreement hedges a portion of the Company’s net investment in non-U.S. operations and the fair value outstanding at June 30, 2010 reflects a loss of $10.7 million which was based on quoted market prices for similar instruments (using Level 2 inputs under the provisions of ASC 820). The change in fair value of this hedge is recorded in cumulative translation adjustments and the corresponding $10.7 million liability is recorded in other deferrals in the unaudited Condensed Consolidated Balance Sheet. This hedge is effective.

Revenue for the second quarter of 2010 increased 28.5% to $1,786.7 million from the comparable 2009 period, with increases at all of the Company’s segments. The Company’s revenue increase was attributed to organic revenue growth of 23.8%, revenue growth of 3.9% related to acquisitions completed in 2010 and 2009, and a 0.8% favorable impact from foreign exchange. Gross profit increased 39.6% to $688.7 million from the prior year quarter while gross profit margin increased 300 basis points to 38.5%. The increase in gross profit reflects the higher sales volumes, coupled with the impacts of lower restructuring charges on a comparative basis and the benefits realized in the current period from restructuring initiatives executed in the prior year.

Revenue for the first six months of 2010 increased 21.7% to $3,370.0 million from the comparable 2009 period, with increases at all of the Company’s segments. The Company’s revenue increase was attributed to organic revenue growth of 15.4%, revenue growth of 4.5% related to acquisitions completed in 2010 and 2009, and a 1.8% favorable impact from foreign exchange. Gross profit increased 33.4% to $1,300.9 from the prior year period while gross profit margin increased 340 basis points to 38.6%, due to the same drivers as in the quarter.

Selling and administrative expenses of $423.8 million for the second quarter of 2010 increased by 16.1% or $58.8 million over the comparable 2009 period. As a percentage of revenue, these costs decreased to 23.7% from 26.3% in the comparable 2009 period, reflecting increased revenue levels, the benefit of cost containment efforts and productivity savings, and the absence of significant restructuring charges in the current period.

Selling and administrative expenses of $833.0 million for the first half of 2010 increased by 13.7% or $100.6 million over the comparable 2009 period. As a percentage of revenue, these costs decreased to 24.7% from 26.4% in the comparable 2009 period, reflecting increased revenue levels, the benefit of cost containment efforts and productivity savings, and the absence of significant restructuring charges in the current period.

Interest expense, net, for the second quarter of 2010 increased by $2.1 million compared to the same quarter of last year, while interest expense, net, for the first half of 2010 increased by $6.9 million compared to the respective prior year period. In both the three and six month periods, the increase was primarily due to reduced interest income resulting from lower interest rates on short term investment balances. Interest income declined by $2.5 million and $7.1 million for the three and six month periods ended June 30, 2010, respectively, compared to the same periods of 2009.

Other income/(expense), net for the quarter and year to date periods ending June 30, 2010 primarily reflects the impact of foreign exchange fluctuations on assets and liabilities denominated in currencies other than the individual business units’ functional currencies. Other income/(expense), net for the quarter and year to date periods ending June 30, 2009 also reflects the impact of foreign exchange fluctuations on assets and liabilities denominated in currencies other than the individual business units’ functional currencies, while the six month period in 2009 also includes a favorable insurance settlement realized in the first quarter of 2009.

The effective tax rates for continuing operations for the three and six months ended June 30, 2010 were 29.2% and 30.1%, compared to the prior period rates of 1.1% and 17.4%, respectively. Excluding the benefit of a $28.4 million favorable tax settlement in the second quarter of 2009, the effective tax rates for the three and six months ended June 30, 2009 were 28.9% and 31.9%, with the variance to the effective tax rates in the 2010 periods being primarily attributed to the mix of non-U.S.

earnings in low-tax jurisdictions. With the exception of contested matters, for which an estimate cannot be made due to uncertainties, the Company believes it is reasonably possible that several uncertain tax positions will be settled in the second half of the year.

Earnings from continuing operations for the second quarter increased 70.4% to $171.9 million, or $0.91 diluted EPS (“EPS”), compared to $100.9 million, or $0.54 EPS, in the prior year second quarter. The increase was primarily a result of end-market improvements across all of the Company’s segments driving increased sales volume, coupled with the absence of significant restructuring charges in the current period and the benefits of restructuring initiatives from the prior year. Earnings from continuing operations for the first half of 2010 increased 81.1% to $293.4 million, or $1.55 diluted EPS, compared to $162.0 million, or $0.87 diluted EPS, in the prior year period primarily driven by the same factors.

The loss from discontinued operations for the second quarter of 2010 was $2.0 million, or $0.01 EPS, compared to a second quarter 2009 loss of $3.8 million, or $0.02 EPS. The 2010 loss related primarily to a working capital adjustment and other tax adjustments on previously sold businesses. The 2009 loss related primarily to a loss from operations of $3.8 million, net of tax, related to a business held for sale at the time.

Loss from discontinued operations for the first half of 2010 was $15.4 million, or $0.08 EPS, compared to a loss of $11.5 million, or $0.06 EPS, in the comparable 2009 period. The 2010 loss related primarily to the loss generated by the sale of a business that had been previously reflected as discontinued operations. The 2009 loss related primarily to adjustments to the fair value of a business held for sale at that time.

From time to time, the Company will initiate various restructuring programs at its operating companies. During 2009, the Company substantially increased the amount of its restructuring efforts in response to the significant decline in global economic activity. The Company does not expect to incur significant restructuring costs during the remainder of 2010 and expects the restructuring costs incurred during the prior year to yield incremental savings of approximately $30 to $40 million in 2010.

At June 30, 2010 and December 31, 2009 the Company had reserves related to severance and other restructuring activities of $7.6 million and $16.8 million, respectively. During the second quarter of 2010, the Company recorded $0.2 million in additional charges and made $3.6 million in payments and other adjustments related to these reserves. The restructuring charges for the quarter were recorded in selling and administrative expenses in the Unaudited Condensed Consolidated Statement of Operations.

During the first half of 2010, the Company recorded $2.2 million in additional charges and made $11.4 million in payments and other adjustments related to these reserves. For the first half of 2010, $0.7 million and $1.5 million of restructuring charges were recorded in cost of goods and services and selling and administrative expenses, respectively, in the Unaudited Condensed Consolidated Statement of Operations.

The following table details the restructuring charges incurred by segment:

The indications of a global economic recovery were first seen in third quarter 2009 bookings. This trend continued through the fourth quarter and the first half of 2010 has continued to show improvements in bookings and backlog. The structural changes made over the last few years, including becoming less dependent on capital goods markets and having greater recurring revenue, together with improved working capital management, strong pricing discipline and general improvements across most end-markets, are expected to result in 2010 revenue, earnings and margin improvements as compared to 2009. As discussed in the Liquidity and Capital Resources section, the Company believes that existing sources of liquidity are adequate to meet anticipated funding needs.

Dover anticipates that 2010 revenue will increase 16% to 18% above 2009 levels. The Company anticipates full year organic growth to be in the range of 13% to 15% (inclusive of foreign currency impact) and acquisition related growth to be around 3% for transactions completed in 2009 and 2010. Based on these assumptions, Dover has projected that its continuing diluted earnings per share for 2010 will be in the range of $3.05 to $3.25 and expects its earnings to follow a traditional pattern. If the global or domestic economic conditions accelerate or deteriorate, Dover’s operating results for 2010 could be materially different than currently projected.