DOWNERS GROVE, Ill., Jan. 29, 2019 /PRNewswire/ -- Dover (NYSE: DOV), a diversified global manufacturer, announced its financial results for the fourth quarter and full year ended December 31, 2018.

Fourth Quarter 2018 Financial Results:

For the fourth quarter ended December 31, 2018, Dover's revenue was $1.8 billion, which represents organic growth of 6.2%. Net earnings on a GAAP basis for the fourth quarter ended December 31, 2018, were $141.6 million, compared to net earnings of $296.4 million in the prior year period, including the results of discontinued operations.

Earnings from continuing operations were $158.0 million, a decrease of 45% as compared to $289.6 million for the prior year period, largely driven by a $110.0 million net benefit from a disposition (net of disposition costs) and a $54.9 million net benefit from the Tax Cuts and Jobs Act (the "Tax Reform Act"), both realized in the fourth quarter of 2017. Diluted earnings per share from continuing operations ("EPS") on a GAAP basis for the fourth quarter ended December 31, 2018, was $1.07, compared to $1.83 for the fourth quarter in the prior year.

For the fourth quarter ended December 31, 2018, earnings from continuing operations included acquisition-related amortization costs of $26.3 million and rightsizing and other costs of $29.6 million, representing $0.18 of EPS and $0.20 of EPS, respectively. In addition, the fourth quarter included a $2.8 million tax benefit ($0.02 of EPS) related to additional Tax Reform Act regulatory guidance covered by SAB 118. Excluding these items, adjusted earnings from continuing operations for the fourth quarter ended December 31, 2018, were $211.0 million (+17% over the comparable period in 2017), and adjusted EPS was $1.43 (+25% over the comparable period in 2017).

The adjusted EPS in the quarter was positively impacted by $0.08 due to a lower annualized effective tax rate ("ETR") and discrete tax items.

Full Year 2018 Financial Results:

For the full year ended December 31, 2018, Dover's revenue was $7.0 billion, driven by organic growth of 3.7%. Net earnings on a GAAP basis for the full year ended December 31, 2018, were $570.3 million, compared to net earnings of $811.7 million in the prior year. Full year 2018 results include a loss from discontinued operations of $20.9 million and the full year 2017 results include earnings from discontinued operations of $65.0 million attributable to Apergy Corporation, which was spun off in the second quarter of 2018.

Earnings from continuing operations were $591.1 million, a decrease of 21% compared to $746.7 million for the prior year, largely driven by net benefits from dispositions and a net benefit from the Tax Reform Act realized in 2017. Diluted EPS on a GAAP basis for the full year ended December 31, 2018, was $3.89, compared to $4.73 in the prior year.

For the full year ended December 31, 2018, earnings from continuing operations included acquisition-related amortization costs of $109.3 million and rightsizing and other costs of $58.3 million, representing $0.72 of EPS and $0.38 of EPS, respectively. In addition, the year included a $2.8 million benefit ($0.02 of EPS) related to additional Tax Reform Act regulatory guidance covered by SAB 118. Excluding these items, adjusted earnings from continuing operations for the full year ended December 31, 2018, were $755.9 million (+15% over full year 2017), and adjusted EPS was $4.97 (+20% over full year 2017).

Free cash flow for the year was $618.2 million, representing 8.8% cash conversion of revenue. Excluding $52.0 million of cash costs from restructuring initiatives, cash conversion was 9.6% of revenue. Capital expenditures from continuing operations for 2018 were $171.0 million, an increase of 1% compared to $170.1 million for the prior year.

The ETR for full year 2018 was 21.4% when normalized for discrete tax benefits, excluding additional Tax Reform Act regulatory guidance covered by SAB 118.  The estimate for 2019 ETR is between 21%-23%.

A reconciliation between GAAP and adjusted earnings and EPS from continuing operations for the fourth quarter and full year ended December 31, 2018 is included as an exhibit herein.

Full Year 2019 Guidance:

In 2019, Dover expects to generate adjusted EPS in the range of $5.65 to $5.85. This guidance is based on full year revenue growth of 2% to 3%, comprised of 2% to 4% organic growth and a 1% impact from completed acquisitions, partially offset by an estimated 2% unfavorable impact from foreign currency exchange. 2019 guidance does not include restructuring charges, including charges expected to be incurred as part of Dover's footprint consolidation initiatives.

A full reconciliation between forecasted GAAP and forecasted adjusted measures is included as an exhibit herein.

Completion of Belanger Acquisition:

On January 25, 2019, Dover announced the completion of its acquisition of the Belanger, Inc. business, a leading full-line car wash equipment manufacturer. With 2018 sales of approximately $55 million, Belanger employs more than 150 people and is headquartered in Northville, Michigan. Belanger now joins OPW within Dover's Fluids segment, and together with PDQ Vehicle Wash Systems, the combined offering will provide customers with a full set of vehicle wash solutions. Dover expects the acquisition to be accretive to margins and adjusted EPS in 2019 and to achieve double-digit return on capital in three years, consistent with Dover's capital deployment criteria. 

Management Commentary:

Dover's President and Chief Executive Officer, Richard J. Tobin, said, "Dover's solid results for the quarter and the year reflect broad-based demand strength in Engineered Systems and Fluids, which posted 2018 annual organic growth of 5.8% and 8.7%, respectively, and more than offset weak demand in Refrigeration & Food Equipment. Our $7.0 billion of revenue for the year reflects an organic growth rate of 3.7%, while adjusted net earnings and adjusted EPS improved 15% and 20%, respectively.

"Dover enters 2019 with solid momentum as represented by our Q4 organic growth rate, solid order backlogs across most of our portfolio, and margin expansion being driven by volume and cost initiatives. Our productivity and footprint initiatives are underway with several in the execution phase, and we have begun to reinvest a portion of our savings from rightsizing initiatives into our digital capabilities and customer-facing platforms.

"We believe we are well-positioned to deliver top-line growth and strong double-digit EPS accretion in 2019. Our guidance reflects a constructive demand environment, continued focus on our margin improvement and rightsizing programs, as well as disciplined deployment of capital, underscored by our recent acquisition of Belanger."

Conference Call Information:

Dover will host a webcast and conference call to discuss its fourth quarter and full year 2018 results and 2019 guidance at 10:00 A.M. Eastern Time (9:00 A.M. Central Time) on Tuesday, January 29, 2019. The webcast can be accessed on the Dover website at dovercorporation.com. The conference call will also be made available for replay on the website. Additional information on Dover's fourth quarter and full year results and its operating segments can be found on the Company's website.

About Dover:

Dover is a diversified global manufacturer with annual revenue of approximately $7 billion. We deliver innovative equipment and components, specialty systems, consumable supplies, software and digital solutions, and support services through three operating segments: Engineered Systems, Fluids and Refrigeration & Food Equipment. Dover combines global scale with operational agility to lead the markets we serve. Recognized for our entrepreneurial approach for over 60 years, our team of 24,000 employees takes an ownership mindset, collaborating with customers to redefine what's possible. Headquartered in Downers Grove, Illinois, Dover trades on the New York Stock Exchange under "DOV." Additional information is available at dovercorporation.com.

Forward-Looking Statements:

This press release contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. All statements in this document other than statements of historical fact are statements that are, or could be deemed, "forward-looking" statements. Forward-looking statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond the Company's control.  Factors that could cause actual results to differ materially from current expectations include, among other things, general economic conditions and conditions in the particular markets in which we operate, changes in customer demand and capital spending, competitive factors and pricing pressures, our ability to develop and launch new products in a cost-effective manner, and our ability to realize synergies from newly acquired businesses. For details on the risks and uncertainties that could cause our results to differ materially from the forward-looking statements contained herein, we refer you to the documents we file with the Securities and Exchange Commission, including our Annual Report on Form 10-K/A for the year ended December 31, 2017, and our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. These documents are available from the Securities and Exchange Commission, and on our website, dovercorporation.com. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

INVESTOR SUPPLEMENT - FOURTH QUARTER AND FULL YEAR 2018

DOVER CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(unaudited)(in thousands, except per share data)






Three Months Ended
December 31,


Years Ended December 31,


2018


2017


2018


2017

Revenue

$

1,808,950


$

1,752,530


$

6,992,118


$

6,820,886

Cost of goods and services

1,163,979


1,102,637


4,432,562


4,291,839

Gross profit

644,971


649,893


2,559,556


2,529,047

Selling, general, and administrative expenses

426,198


465,134


1,716,444


1,722,161

Operating earnings

218,773


184,759


843,112


806,886

Interest expense

32,015


36,363


130,972


144,948

Interest income

(2,201)


(1,822)


(8,881)


(8,491)

Gain on sale of businesses

—


(113,042)


—


(203,135)

Other expense (income), net

2,284


(844)


(4,357)


(2,251)

Earnings before provision for income taxes

186,675


264,104


725,378


875,815

Provision (benefit) for income taxes

28,700


(25,541)


134,233


129,152

Earnings from continuing operations

157,975


289,645


591,145


746,663

(Loss) earnings from discontinued operations, net

(16,406)


6,803


(20,878)


65,002

Net earnings

$

141,569


$

296,448


$

570,267


$

811,665









Basic earnings per share*:








Earnings from continuing operations

$

1.08


$

1.86


$

3.94


$

4.80

(Loss) earnings from discontinued operations, net

(0.11)


0.04


(0.14)


0.42

Net earnings

$

0.97


$

1.90


$

3.80


$

5.21









Weighted average shares outstanding

146,007


155,734


149,874


155,685

Diluted earnings per common share*:








Earnings from continuing operations

$

1.07


$

1.83


$

3.89


$

4.73

(Loss) earnings from discontinued operations, net

(0.11)


0.04


(0.14)


0.41

Net earnings

$

0.96


$

1.88


$

3.75


$

5.15









Weighted average shares outstanding

147,940


158,013


152,133


157,744









Dividends paid per common share

$

0.48


$

0.47


$

1.90


$

1.82









* Per share data may be impacted by rounding.








 

 

DOVER CORPORATION

QUARTERLY SEGMENT INFORMATION

(unaudited)(in thousands)


2018


2017


Q1

Q2

Q3

Q4

FY 2018


Q1

Q2

Q3

Q4

FY 2017

REVENUE












Engineered Systems












Printing & Identification

$

282,522

$

299,834

$

283,232

$

296,843

$

1,162,431


$

249,238

$

278,220

$

272,941

$

293,616

$

1,094,015

Industrials

389,104

403,155

388,302

399,956

1,580,517


379,634

400,065

398,058

396,212

1,573,969


671,626

702,989

671,534

696,799

2,742,948


628,872

678,285

670,999

689,828

2,667,984













Fluids

628,098

693,666

690,065

785,509

2,797,338


597,645

633,252

638,068

686,100

2,555,065













Refrigeration & Food Equipment

338,235

401,766

386,214

326,878

1,453,093


356,834

426,304

438,788

377,179

1,599,105













Intra-segment eliminations

(288)

(327)

(410)

(236)

(1,261)


(141)

(470)

(80)

(577)

(1,268)

Total consolidated revenue

$

1,637,671

$

1,798,094

$

1,747,403

$

1,808,950

$

6,992,118


$

1,583,210

$

1,737,371

$

1,747,775

$

1,752,530

$

6,820,886













NET EARNINGS












Segment Earnings:












Engineered Systems

$

102,066

$

126,649

$

108,714

$

113,841

$

451,270


$

177,207

$

110,103

$

102,767

$

214,407

$

604,484

Fluids

67,348

93,028

101,207

128,221

389,804


67,172

91,465

103,052

106,941

368,630

Refrigeration & Food Equipment

29,182

51,372

42,434

13,131

136,119


33,562

65,829

65,413

29,018

193,822

Total segments

198,596

271,049

252,355

255,193

977,193


277,941

267,397

271,232

350,366

1,166,936

Corporate expense / other

30,763

30,050

30,207

38,704

129,724


37,282

34,818

30,843

51,721

154,664

Interest expense

35,640

32,125

31,192

32,015

130,972


36,359

36,854

35,372

36,363

144,948

Interest income

(2,057)

(2,563)

(2,060)

(2,201)

(8,881)


(2,575)

(2,335)

(1,759)

(1,822)

(8,491)

Earnings before provision for income
taxes

134,250

211,437

193,016

186,675

725,378


206,875

198,060

206,776

264,104

875,815

Provision for income taxes

24,841

44,981

35,711

28,700

134,233


51,787

55,585

47,321

(25,541)

129,152

Earnings from continuing operations

109,409

166,456

157,305

157,975

591,145


155,088

142,475

159,455

289,645

746,663

Earnings (loss) from discontinued
operations, net

22,025

(26,497)

—

(16,406)

(20,878)


17,159

21,583

19,457

6,803

65,002

Net earnings

$

131,434

$

139,959

$

157,305

$

141,569

$

570,267


$

172,247

$

164,058

$

178,912

$

296,448

$

811,665













SEGMENT MARGIN










Engineered Systems

15.2%

18.0%

16.2%

16.3%

16.5%


28.2%

16.2%

15.3%

31.1%

22.7%

Fluids

10.7%

13.4%

14.7%

16.3%

13.9%


11.2%

14.4%

16.2%

15.6%

14.4%

Refrigeration & Food Equipment

8.6%

12.8%

11.0%

4.0%

9.4%


9.4%

15.4%

14.9%

7.7%

12.1%

Total segment operating margin

12.1%

15.1%

14.4%

14.1%

14.0%


17.6%

15.4%

15.5%

20.0%

17.1%













DEPRECIATION AND AMORTIZATION EXPENSE










Engineered Systems

$

19,239

$

19,203

$

18,204

$

19,233

$

75,879


$

20,598

$

21,272

$

23,150

$

20,427

$

85,447

Fluids

34,449

34,981

34,954

36,060

140,444


32,454

33,362

34,211

35,794

135,821

Refrigeration & Food Equipment

13,579

13,524

13,533

19,841

60,477


15,035

14,522

14,093

13,557

57,207

Corporate

1,358

1,595

1,399

1,428

5,780


1,133

1,252

1,079

1,339

4,803

Total depreciation and amortization
expense

$

68,625

$

69,303

$

68,090

$

76,562

$

282,580


$

69,220

$

70,408

$

72,533

$

71,117

$

283,278

 

 

DOVER CORPORATION

QUARTERLY SEGMENT INFORMATION

(continued)

(unaudited)(in thousands)


2018


2017


Q1

Q2

Q3

Q4

FY 2018


Q1

Q2

Q3

Q4

FY 2017

BOOKINGS












Engineered Systems












Printing & Identification

$

284,437

$

306,770

$

271,367

$

295,963

$

1,158,537


$

256,664

$

282,158

$

268,700

$

306,818

$

1,114,340

Industrials

466,722

412,780

390,606

481,172

1,751,280


444,058

392,816

390,254

397,053

1,624,181


751,159

719,550

661,973

777,135

2,909,817


700,722

674,974

658,954

703,871

2,738,521













Fluids

703,461

737,340

723,996

734,943

2,899,740


638,801

631,350

655,305

687,307

2,612,763













Refrigeration & Food Equipment

372,701

428,816

331,979

341,221

1,474,717


438,576

466,276

357,855

319,899

1,582,606













Intra-segment eliminations

(624)

33

(549)

(584)

(1,724)


(1,093)

(397)

(339)

(502)

(2,331)













Total consolidated bookings

$

1,826,697

$

1,885,739

$

1,717,399

$

1,852,715

$

7,282,550


$

1,777,006

$

1,772,203

$

1,671,775

$

1,710,575

$

6,931,559













BACKLOG












Engineered Systems












Printing & Identification

$

135,915

$

137,019

$

126,609

$

122,028



$

109,347

$

115,763

$

116,359

$

129,752


Industrials

376,474

372,525

367,963

438,546



327,180

321,315

316,835

329,575



512,389

509,544

494,572

560,574



436,527

437,078

433,194

459,327














Fluids

544,250

564,959

588,632

523,791



434,274

438,445

462,471

459,746














Refrigeration & Food Equipment

283,250

309,440

255,783

268,991



341,530

382,598

302,574

244,972














Intra-segment eliminations

(389)

(134)

(58)

(185)



(725)

(268)

(174)

(371)














Total consolidated backlog

$

1,339,500

$

1,383,809

$

1,338,929

$

1,353,171



$

1,211,606

$

1,257,853

$

1,198,065

$

1,163,674


 

 

 

DOVER CORPORATION

QUARTERLY EARNINGS PER SHARE

(unaudited)(in thousands, except per share data*)

Earnings Per Share













2018


2017


Q1

Q2

Q3

Q4

FY 2018


Q1

Q2

Q3

Q4

FY 2017

Basic earnings (loss) per common share:










Continuing operations

$

0.71

$

1.10

$

1.07

$

1.08

$

3.94


$

1.00

$

0.92

$

1.02

$

1.86

$

4.80

Discontinued operations

0.14

(0.17)

—

(0.11)

(0.14)


0.11

0.14

0.12

0.04

0.42

Net earnings

$

0.85

$

0.92

$

1.07

$

0.97

$

3.80


$

1.11

$

1.05

$

1.15

$

1.90

$

5.21













Diluted earnings (loss) per common share:










Continuing operations

$

0.70

$

1.08

$

1.05

$

1.07

$

3.89


$

0.99

$

0.90

$

1.01

$

1.83

$

4.73

Discontinued operations

0.14

(0.17)

—

(0.11)

(0.14)


0.11

0.14

0.12

0.04

0.41

Net earnings

$

0.84

$

0.91

$

1.05

$

0.96

$

3.75


$

1.09

$

1.04

$

1.14

$

1.88

$

5.15













Net earnings (loss) and weighted average shares used in calculated earnings per share amounts are as follows:

Net earnings (loss):












Continuing operations

$

109,409

$

166,456

$

157,305

$

157,975

$

591,145


$

155,088

$

142,475

$

159,455

$

289,645

$

746,663

Discontinued operations

22,025

(26,497)

—

(16,406)

(20,878)


17,159

21,583

19,457

6,803

65,002

Net earnings

$

131,434

$

139,959

$

157,305

$

141,569

$

570,267


$

172,247

$

164,058

$

178,912

$

296,448

$

811,665













Weighted average shares outstanding:










Basic

154,520

151,744

147,344

146,007

149,874


155,540

155,703

155,757

155,734

155,685

Diluted

157,090

153,938

149,457

147,940

152,133


157,399

157,513

157,555

158,013

157,744













* Per share data may be impacted by rounding.



 

Non-GAAP Reconciliations


Adjusted Earnings Per Share (Non-GAAP)

Earnings from continuing operations are adjusted by the effect of acquisition-related amortization, the Tax Cuts and Jobs Act, gains on disposition of
businesses, disposition costs, rightsizing and other costs, and a product recall reversal to derive adjusted earnings from continuing operations and adjusted
diluted earnings per common share as follows:


2018


2017


Q1

Q2

Q3

Q4

FY 2018


Q1

Q2

Q3

Q4

FY 2017

Adjusted earnings:












Earnings from continuing operations

$

109,409

$

166,456

$

157,305

$

157,975

$

591,145


$

155,088

$

142,475

$

159,455

$

289,645

$

746,663

Acquisition-related amortization, pre-tax 1

38,150

38,072

34,997

35,078

146,297


38,996

37,620

37,553

37,108

151,277

Acquisition-related amortization, tax impact 2

(9,716)

(9,683)

(8,785)

(8,817)

(37,001)


(12,777)

(12,027)

(12,171)

(11,906)

(48,881)

Tax Cuts and Jobs Act 3

—

—

—

(2,832)

(2,832)


—

—

—

(54,908)

(54,908)

Gain on dispositions, pre-tax 4

—

—

—

—

—


(88,402)

—

—

(116,932)

(205,334)

Gain on dispositions, tax impact 2

—

—

—

—

—


26,682

—

—

6,071

32,753

Disposition costs, pre-tax 5

—

—

—

—

—


—

—

3,314

1,931

5,245

Disposition costs, tax impact 2

—

—

—

—

—


—

—

(964)

(1,051)

(2,015)

Rightsizing and other costs, pre-tax 6

4,371

6,808

24,201

37,448

72,828


—

—

—

49,379

49,379

Rightsizing and other costs, tax impact 2

(797)

(1,448)

(4,477)

(7,809)

(14,531)


—

—

—

(14,746)

(14,746)

Product recall reversal, pre-tax

—

—

—

—

—


—

—

—

(7,200)

(7,200)

Product recall reversal, tax impact 2

—

—

—

—

—


—

—

—

2,614

2,614

Adjusted earnings from continuing operations

$

141,417

$

200,205

$

203,241

$

211,043

$

755,906


$

119,587

$

168,068

$

187,187

$

180,005

$

654,847













Adjusted diluted earnings per common share*:












Diluted earnings per share from continuing operations

$

0.70

$

1.08

$

1.05

$

1.07

$

3.89


$

0.99

$

0.90

$

1.01

$

1.83

$

4.73

Acquisition-related amortization, pre-tax 1

0.24

0.25

0.23

0.24

0.96


0.25

0.24

0.24

0.23

0.96

Acquisition-related amortization, tax impact 2

(0.06)

(0.06)

(0.06)

(0.06)

(0.24)


(0.08)

(0.08)

(0.08)

(0.08)

(0.31)

Tax Cuts and Jobs Act 3

—

—

—

(0.02)

(0.02)


—

—

—

(0.35)

(0.35)

Gain on dispositions, pre-tax 4

—

—

—

—

—


(0.56)

—

—

(0.74)

(1.30)

Gain on dispositions, tax impact 2

—

—

—

—

—


0.17

—

—

0.04

0.21

Disposition costs, pre-tax 5

—

—

—

—

—


—

—

0.02

0.01

0.03

Disposition costs, tax impact 2

—

—

—

—

—


—

—

(0.01)

(0.01)

(0.02)

Rightsizing and other costs, pre-tax 6

0.03

0.04

0.16

0.25

0.48


—

—

—

0.31

0.31

Rightsizing and other costs, tax impact 2

(0.01)

(0.01)

(0.03)

(0.05)

(0.10)


—

—

—

(0.09)

(0.09)

Product recall reversal, pre-tax

—

—

—

—

—


—

—

—

(0.05)

(0.05)

Product recall reversal, tax impact 2

—

—

—

—

—


—

—

—

0.02

0.02

Adjusted diluted earnings per share from continuing operations

$

0.90

$

1.30

$

1.36

$

1.43

$

4.97


$

0.76

$

1.07

$

1.19

$

1.14

$

4.15











1 Includes amortization on acquisition-related intangible assets and inventory step-up.

2 Adjustments were tax effected using the statutory tax rates in the applicable jurisdictions or the effective tax rate, where applicable, for each period.

3 2017 Tax impact primarily related to the enactment of the Tax Cuts and Jobs Act ("Tax Reform Act"). This benefit also includes decreases in statutory tax
rates of foreign jurisdictions. 2018 adjustment represents tax benefits related to additional Tax Act regulatory guidance covered by SAB 118.

4 Includes a gains from the sales of Performance Motorsports International and Warn Industries, Inc. in the first and fourth quarters of 2017, respectively.

5 Disposition costs include costs related to the sale of Warn Industries, Inc. in the fourth quarter of 2017.

6 Rightsizing and other costs include actions taken on employee reductions, facility consolidations and site closures, product line exits and other associated
asset charges.

* Per share data and totals may be impacted by rounding.

 

Non-GAAP Reconciliations (continued)


Adjusted Guidance Reconciliation


2018 Actual


2019 Guidance

Adjusted net earnings per share*:




Net earnings (GAAP)

$

3.89


$          4.81 - 5.01

Acquisition-related amortization, net

0.72


0.76

Tax Cuts and Jobs Act

(0.02)


—

Rightsizing and other costs, net

0.38


0.08

Adjusted net earnings (Non-GAAP)

$

4.97


$          5.65 - 5.85





* Per share data and totals may be impacted by rounding.

 

 

DOVER CORPORATION

CONSOLIDATED BALANCE SHEETS

(unaudited)(in thousands)



December 31, 2018


December 31, 2017

Assets:




Cash and cash equivalents

$

396,221


$

753,964

Receivables, net of allowances

1,231,859


1,183,514

Inventories, net

748,796


677,043

Prepaid and other current assets

126,878


175,626

Property, plant and equipment, net

806,497


787,940

Goodwill

3,677,328


3,686,372

Intangible assets, net

1,134,256


1,282,624

Other assets and deferred charges

243,936


245,723

Assets of discontinued operations

—


1,865,553

Total assets

$

8,365,771


$

10,658,359





Liabilities and Stockholders' Equity:




Notes payable and current maturities of long-term debt

$

220,318


$

581,102

Payables and accrued expenses

1,607,103


1,560,876

Deferred taxes and other non-current liabilities

826,024


882,246

Long-term debt

2,943,660


2,986,702

Liabilities of discontinued operations

—


264,253

Stockholders' equity

2,768,666


4,383,180

Total liabilities and stockholders' equity

$

8,365,771


$

10,658,359

 

 

DOVER CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)(in thousands)



Years Ended December 31,


2018


2017

Operating activities:




Net earnings

$

570,267


$

811,665

Loss (earnings) from discontinued operations, net

20,878


(65,002)

Depreciation and amortization

282,580


283,278

Stock-based compensation

23,698


24,073

Contributions to employee benefit plans

(25,933)


(18,588)

Gain on sale of businesses

—


(203,135)

Net change in assets and liabilities

(82,297)


(92,882)

Net cash provided by operating activities

789,193


739,409





Investing activities:




Additions to property, plant and equipment

(170,994)


(170,068)

Acquisitions (net of cash and cash equivalents acquired)

(68,556)


(27,188)

Proceeds from the sale of property, plant and equipment

5,908


11,774

Proceeds from the sale of businesses

3,937


372,666

Other

(15,775)


21,151

Net cash (used in) provided by investing activities

(245,480)


208,335





Financing activities:




Cash received from Apergy, net of cash distributed

689,643


—

Change in commercial paper and notes payable, net

(10,722)


(182,596)

Reduction of long-term debt

(350,000)


—

Dividends to stockholders

(283,573)


(283,959)

Purchase of common stock

(894,977)


(105,023)

Payments to settle employee tax obligations on exercise

(46,257)


(18,443)

Other

(1,952)


(2,912)

Net cash used in financing activities

(897,838)


(592,933)





Net cash (used in) provided by discontinued operations

(14,263)


48,533





Effect of exchange rate changes on cash

10,645


1,474





Net (decrease) increase in cash and cash equivalents

(357,743)


404,818

Cash and cash equivalents at beginning of period

753,964


349,146

Cash and cash equivalents at end of period

$

396,221


$

753,964

ADDITIONAL INFORMATION
FOURTH QUARTER AND FULL YEAR 2018
(Amounts in thousands except share data and where otherwise indicated)

Acquisitions

The Company did not complete any acquisitions during the fourth quarter of 2018. For the full year 2018, the Company acquired two businesses in separate transactions for total consideration of $68.6 million, net of cash acquired. The businesses were acquired to complement and expand upon existing operations within the Fluids and Refrigeration & Food Equipment segments.

Discontinued and Disposed Businesses

The Company did not dispose of any significant businesses during the fourth quarter of 2018. For the full year 2018, the Company completed the separation of Apergy Corporation ("Apergy") from Dover through the pro rata distribution of 100% of the common stock of Apergy to Dover's shareholders. The historical results of Apergy, including the results of operations, cash flows, and related assets and liabilities, have been reclassified to discontinued operations for all periods presented.

Rightsizing and Other Costs

During the year ended December 31, 2018, the Company executed several programs in order to further optimize operations. Rightsizing programs in 2018 included 1) alignment of our cost structure in preparation for the Apergy separation, 2) broad-based selling, general and administrative expense reduction and 3) initiation of footprint consolidation actions. During the fourth quarter of 2018, the Company recorded rightsizing and other related costs of $37.4 million which is comprised of $22.1 million of restructuring costs and $15.3 million of other charges. During the full year 2018, the Company recorded rightsizing and other related costs of $72.8 million which is comprised of $56.1 million of restructuring costs and $16.7 million of other charges. These costs primarily relate to actions taken on employee reductions, facility consolidations and site closures, product line exits and other associated asset charges. During the fourth quarter and full year 2018, rightsizing and other charges were broad based across all segments as well as corporate, with costs incurred by segment as follows:

($ in millions)

2018


Q4


FY

Engineered Systems

$

7.1


$

19.9

Fluids

12.8


28.7

Refrigeration & Food Equipment

9.5


10.0

Corporate

8.0


14.2

Total

$

37.4


$

72.8

Tax Rate

The effective tax rate was a provision of 15.4% and a benefit of 9.7% for the fourth quarters of 2018 and 2017, respectively. On a full year basis, the effective tax rates for 2018 and 2017 were 18.5% and 14.7%, respectively. The tax rates were significantly impacted by the Tax Reform Act which decreased the U.S. statutory rate from 35% to 21% effective January 1, 2018. The 2018 US tax rate was impacted by the lower 21% rate, in addition to the tax deduction for share-based awards and other favorable discrete items. The 2017 tax rate was significantly impacted by revaluing the U.S. deferred income tax liabilities to 21%, offset by the U.S. tax charge for the deemed repatriation of foreign earnings.

Share Repurchases

During the year ended December 31, 2018, the Company purchased approximately 10.7 million shares of its common stock for a total cost of $895.0 million, or $83.35 per share. Together with other repurchases in December 2017 and over the course of 2018, the Company has completed the $1 billion of share repurchases announced in November 2017. As of December 31, 2018, 9,703,666 shares remain authorized for repurchase under the February 2018 share repurchase authorization.

Capitalization 

The following table provides a reconciliation of total debt and net debt to net capitalization to the most directly comparable GAAP measures:

Net Debt to Net Capitalization Ratio (Non-GAAP)


December 31, 2018


December 31, 2017

Current maturities of long-term debt


$

—


$

350,402

Commercial paper


220,318


230,700

Notes payable and current maturities of long-term debt


220,318


581,102

Long-term debt


2,943,660


2,986,702

Total debt


3,163,978


3,567,804

Less: Cash and cash equivalents


(396,221)


(753,964)

Net debt


2,767,757


2,813,840

Add: Stockholders' equity


2,768,666


4,383,180

Net capitalization


$

5,536,423


$

7,197,020

Net debt to net capitalization


50.0%


39.1%

Quarterly Cash Flow


2018


2017


Q1

Q2

Q3

Q4

FY 2018


Q1

Q2

Q3

Q4

FY 2017

Net Cash Flows
Provided By (Used In):












Operating activities

$

15,535

$

159,205

$

243,944

$

370,509

$

789,193


$

45,726

$

152,506

$

255,765

$

285,412

$

739,409

Investing activities

(122,597)

(51,606)

(35,922)

(35,355)

(245,480)


86,429

(46,460)

(47,584)

215,950

208,335

Financing activities

(289,103)

(227,734)

(232,476)

(148,525)

(897,838)


(93,293)

(216,273)

(197,635)

(85,732)

(592,933)

Quarterly Free Cash Flow (Non-GAAP)


2018


2017


Q1

Q2

Q3

Q4

FY 2018


Q1

Q2

Q3

Q4

FY 2017

Cash flow from operating activities

$

15,535

$

159,205

$

243,944

$

370,509

$

789,193


$

45,726

$

152,506

$

255,765

$

285,412

$

739,409

Less: Capital expenditures

(44,678)

(51,686)

(38,192)

(36,438)

(170,994)


(36,931)

(42,035)

(51,396)

(39,706)

(170,068)

Free cash flow *

$

(29,143)

$

107,519

$

205,752

$

334,071

$

618,199


$

8,795

$

110,471

$

204,369

$

245,706

$

569,341













Free cash flow as a
percentage of revenue

(1.8)%

6.0%

11.8%

18.5%

8.8%

0.6%

6.4%

11.7%

14.0%

8.3%


*  FY 2018 and 2017 free cash flow includes cash payments related to restructuring initiatives of $52.0 million and $22.6 million, respectively.

Revenue Growth Factors


2018


Q1


Q2


Q3


Q4


Full Year

Organic

1.7%


3.5%


3.1%


6.2%


3.7%

Acquisitions

0.6%


0.4%


0.3%


0.6%


0.5%

Dispositions

(3.1)%


(2.6)%


(2.8)%


(1.5)%


(2.5)%

Currency translation

4.2%


2.2%


(0.6)%


(2.1)%


0.8%


3.4%


3.5%


—%


3.2%


2.5%

Non-GAAP Disclosures

In an effort to provide investors with additional information regarding our results as determined by GAAP, Management also discloses non-GAAP information that Management believes provides useful information to investors. Adjusted net earnings, adjusted diluted earnings per common share, net debt, net capitalization, net debt to net capitalization ratio, free cash flow, and organic revenue growth are not financial measures under GAAP and should not be considered as a substitute for net earnings, diluted earnings per common share, debt or equity, cash flows from operating activities, or revenue as determined in accordance with GAAP, and they may not be comparable to similarly titled measures reported by other companies. 

Adjusted earnings from continuing operations represents earnings from continuing operations adjusted for the effect of acquisition-related amortization, the Tax Cuts and Jobs Act, gains on disposition of businesses, disposition costs, rightsizing and other costs and a product recall reserve reversal. We exclude after-tax acquisition-related amortization because the amount and timing of such charges are significantly impacted by the timing, size, number and nature of the acquisitions the Company consummates. We exclude the other items because they occur for reasons that may be unrelated to the Company's commercial performance during the period and/or Management believes they are not indicative of the Company's ongoing operating costs or gains in a given period. Management believes this information is useful to investors to better understand the Company's ongoing profitability as it will better reflect the Company's core operating results, offer more transparency and facilitate easier comparability to prior and future periods and to its peers. Adjusted diluted earnings per common share represents adjusted net earnings divided by average diluted shares.

Net debt represents total debt minus cash and cash equivalents. Net capitalization represents net debt plus stockholders' equity. Management believes the net debt to net capitalization ratio is useful to assess our overall financial leverage and capacity. 

Free cash flow represents net cash provided by operating activities minus capital expenditures. Management believes that free cash flow is an important measure of operating performance because it provides management and investors a measurement of cash generated from operations that is available for mandatory payment obligations and investment opportunities, such as funding acquisitions, paying dividends, repaying debt and repurchasing our common stock.

Management believes that reporting organic revenue growth, which excludes the impact of foreign currency exchange rates and the impact of acquisitions and dispositions, provides a useful comparison of our revenue performance and trends between periods.

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SOURCE Dover