Dover Reports Fourth Quarter and Full Year 2017 Results and Provides 2018 Guidance

Print Page Print PageRSS Feeds RSS FeedsE-mail Alerts E-mail Alerts

Press Release

  View printer-friendly version

<<  Back

Dover Reports Fourth Quarter and Full Year 2017 Results and Provides 2018 Guidance

- Reports quarterly revenue of $2.0 billion, an increase of 13% from the prior year
- Delivers quarterly diluted net earnings per share of $1.88, up 83% over the prior year
- Generates quarterly adjusted diluted net earnings per share of $1.13, excluding items such as the net benefits from the Tax Cuts and Jobs Act and a disposition, as well as fourth quarter costs associated with rightsizing initiatives and the Wellsite separation
- Provides 2018 guidance, reflecting 5% to 7% organic revenue growth and continued margin expansion

DOWNERS GROVE, Ill., Jan. 30, 2018 /PRNewswire/ -- Dover (NYSE: DOV), a diversified global manufacturer, announced its financial results for the fourth quarter and full year ended December 31, 2017.

Fourth Quarter and Full Year 2017 Financial Results:

For the fourth quarter ended December 31, 2017, Dover's revenue was $2.0 billion, an increase of 13% from the prior year. The increase in the quarter was driven by organic growth of 8%, acquisition growth of 6% and a favorable impact from foreign exchange ("FX") of 2%, partially offset by a 3% impact from dispositions. Net earnings were $296.4 million, an increase of 84% as compared to $161.2 million for the prior year period. Diluted net earnings per share ("EPS") for the fourth quarter ended December 31, 2017, were $1.88, compared to $1.03 EPS in the prior year period, representing an increase of 83%.

For the fourth quarter ended December 31, 2017, EPS included a $0.32 net benefit from the Tax Cuts and Jobs Act, a $0.70 net benefit from a disposition and a $0.03 benefit from a reduction to a previously recorded product recall reserve. Fourth quarter 2017 EPS also included rightsizing and other costs of $0.25 and Wellsite separation related costs of $0.05. Excluding these aforementioned benefits and costs, adjusted EPS for the fourth quarter ended December 31, 2017, was $1.13, an increase of 49% over an adjusted EPS of $0.76 in the prior year period.

For the year ended December 31, 2017, Dover's revenue was $7.8 billion, an increase of 15% from the prior year. This increase includes organic growth of 8%, acquisition growth of 10%, partially offset by a 3% impact from dispositions. The impact of FX was negligible. Net earnings were $811.7 million, an increase of 59% as compared to $508.9 million for the prior year period. EPS for the year ended December 31, 2017, was $5.15, compared to $3.25 EPS in the prior year period, representing an increase of 58%.

For the year ended December 31, 2017, EPS included a $0.32 net benefit from the Tax Cuts and Jobs Act, a $1.07 net benefit from dispositions and a $0.03 benefit from a reduction to a previously recorded product recall reserve. Full year 2017 EPS also included rightsizing and other costs of $0.25 and Wellsite separation related costs of $0.06. Excluding these aforementioned benefits and costs, adjusted EPS for the year ended December 31, 2017, was $4.03, an increase of 39% over a comparably adjusted EPS of $2.90 for full year 2016.

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

Impact of the Tax Cuts and Jobs Act:

In the fourth quarter ended December 31, 2017, Dover recorded a net benefit of $50.9 million, or $0.32 EPS relating to the enactment of the Tax Cuts and Jobs Act. This benefit was primarily derived from the revaluation of deferred tax liabilities, offset in part, by the recognition of a U.S. tax charge for the deemed repatriation of foreign earnings. On a go-forward basis, Dover anticipates its effective tax rate will be 22% to 23%, 4 to 5 points lower than its prior effective rate, principally as a result of the Tax Cuts and Jobs Act.

2018 Guidance:

Beginning in 2018, Dover will provide adjusted EPS guidance and results that will exclude after-tax acquisition-related amortization. The Company believes reporting adjusted EPS on this basis better reflects its core operating results, offers more transparency and facilitates easier comparability with peer companies.

A full reconciliation between forecasted GAAP and forecasted adjusted measures, reflecting adjustments for aforementioned acquisition-related amortization as well as carryover rightsizing costs, is included as an exhibit herein.

In 2018, Dover expects to generate adjusted diluted earnings per share in the range of $5.73 to $5.93, representing an increase of 19% over the prior year on a comparable basis. This guidance is based on full year revenue growth of 3% to 5%, and is comprised of organic growth of 5% to 7% and a favorable impact from FX of 1%, partially offset by a 3% impact from dispositions. The impact of completed acquisitions is expected to be negligible.

Dover's guidance for 2018 includes full year Wellsite operating performance, but does not include any costs related to the Wellsite separation, which will be reported as incurred.

Wellsite Separation Update:

Dover announced on December 7, 2017, that it expects to spin off, on a tax-free basis, the upstream energy businesses within its Energy segment, collectively, the "Wellsite" business.  Wellsite includes Dover Artificial Lift, Dover Energy Automation, and US Synthetic, and operates in some of the most attractive segments of the oil & gas drilling and production industry. Dover expects to complete the spin-off of Wellsite in May of 2018.

For the full year ended December 31, 2017, Wellsite's revenue was $1.0 billion, and earnings before interest, taxes, depreciation and amortization ("EBITDA") were $242 million, excluding costs related to rightsizing and Wellsite separation. For full year 2018, Wellsite is expected to generate revenue growth of approximately 16%, and EBITDA of approximately $315 million, before public company costs, estimated to be approximately $35 million.

Completion of the transaction is subject to certain customary conditions, including, among others, assurance that the spin-off of Wellsite will be tax-free to Dover and U.S. shareholders, the effectiveness of appropriate filings with the U.S. Securities and Exchange Commission and final approval by Dover's Board of Directors.

Management Commentary:

Dover's President and Chief Executive Officer, Robert A. Livingston, said, "Our fourth quarter performance reflects strong global markets which drove broad-based revenue growth. Volume gains, combined with our cost and productivity actions, resulted in significant adjusted margin improvement. We had particularly strong growth in our waste handling, food equipment and pumps businesses, as well as in our Wellsite business. In all, our team's strong execution delivered a solid quarter, while at the same time making significant progress on the Wellsite spin-off, rightsizing and several other commercial initiatives.

"During 2017, we continued to make strides simplifying our portfolio and increasing our focus on the markets where we have built very strong positions. We also expanded adjusted margin more than 150 basis points, and we are on track to our three-year plan.

"With respect to 2018, our guidance reflects the continued execution of our strategy. We expect broad-based organic growth and another year of margin expansion in excess of 100 basis points. Further, as part of our disciplined capital allocation plan, we expect to deploy capital towards highly synergistic, margin accretive bolt-on acquisitions, while at the same time investing in the businesses we own, completing our planned $1 billion share repurchase and raising our dividend for the 62nd consecutive year."

Conference Call Information:

Dover will host a webcast and conference call to discuss its fourth quarter and full year 2017 results and 2018 guidance at 10:00 A.M. Eastern Time (9:00 A.M. Central Time) on Tuesday, January 30, 2018. 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 exceeding $7 billion. We deliver innovative equipment and components, specialty systems, consumable supplies, software and digital solutions, and support services through four operating segments: Engineered Systems, Fluids, Refrigeration & Food Equipment and Energy. 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 29,000 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. Such statements concern future events and may be indicated by words or phrases such as "may," "anticipates," "expects," "believes," "suggests," "will," "plans," "should," "would," "could," and "forecast," or the use of the future tense and similar words or phrases. Forward-looking statements address matters that are uncertain, including, by way of example only: the planned spin-off of the Wellsite business, including the benefits of such transaction and the expected performance following completion of the planned spin-off, sale or other strategic transaction, operating and strategic plans, future sales, earnings, cash flows, margins, organic growth, growth from acquisitions, restructuring charges, cost structure, capital expenditures, capital allocation, capital structure, dividends, cash flows, exchange rates, tax rates, interest rates, interest expense, changes in operations and trends in industries in which our businesses operate, anticipated market conditions and our positioning, global economies, and operating improvements. Forward-looking statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond Dover's control. These factors could cause actual results to differ materially from current expectations and include, but are not limited to, uncertainties as to whether the Wellsite spin-off will be completed; the possibility that closing conditions for the Wellsite spin-off may not be satisfied or waived; the impact of the separation transaction on Dover and the Wellsite business on a standalone basis if the spin-off is completed;  whether the strategic benefits of separation can be achieved, economic conditions generally and changes in economic conditions globally and in the markets and industries served by our businesses, including oil and gas activity and U.S. industrials activity; conditions and events affecting domestic and global financial and capital markets; oil and natural gas demand, production growth, and prices; changes in exploration and production spending by our customers and changes in the level of oil and natural gas exploration and development; changes in customer demand and capital spending; risks related to our international operations and the ability of our businesses to expand into new geographic markets; the impact of interest rate and currency exchange rate fluctuations; increased competition and pricing pressures; the impact of loss of a significant customer, or loss or non-renewal of significant contracts; the ability of our businesses to adapt to technological developments; the ability of our businesses to develop and launch new products, timing of such launches and risks relating to market acceptance by customers; the relative mix of products and services which impacts margins and operating efficiencies; the impact of loss of a single-source manufacturing facility; short-term capacity constraints; domestic and foreign governmental and public policy changes or developments, including import/export laws and sanctions, tax policies, environmental regulations and conflict minerals disclosure requirements; increases in the cost of raw materials; our ability to identify and successfully consummate value-adding acquisition opportunities or planned divestitures, and to realize anticipated earnings and synergies from acquired businesses and joint ventures; our ability to achieve expected savings from integration and other cost-control initiatives, such as lean and productivity programs as well as efforts to reduce sourcing input costs; the impact of legal compliance risks and litigation, including product recalls; indemnification obligations related to acquired or divested businesses; cybersecurity and privacy risks; protection and validity of patent and other intellectual property rights; goodwill or intangible asset impairment charges; a downgrade in our credit ratings which, among other matters, could make obtaining financing more difficult and costly; and work stoppages, union and works council campaigns and other labor disputes which could impact our productivity. Dover refers you to the documents that it files from time to time with the Securities and Exchange Commission, such as its reports on Form 10-K, Form 10-Q and Form 8-K, for a discussion of these and other risks and uncertainties that could cause its actual results to differ materially from its current expectations and from the forward-looking statements contained herein. Dover undertakes no obligation to update any forward-looking statement, except as required by law.

 

 

INVESTOR SUPPLEMENT - FOURTH QUARTER AND FULL YEAR 2017


DOVER CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

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



Three Months Ended
December 31,


Years Ended December 31,


2017


2016


2017


2016

Revenue

$

2,017,438



$

1,777,961



$

7,830,436



$

6,794,342


Cost of goods and services

1,282,014



1,158,257



4,940,059



4,322,373


Gross profit

735,424



619,704



2,890,377



2,471,969


Selling, general, and administrative expenses

536,080



455,622



1,975,932



1,757,523


Operating earnings

199,344



164,082



914,445



714,446


Interest expense

36,414



35,515



145,208



136,401


Interest income

(1,823)



(2,738)



(8,502)



(6,759)


Gain on sale of businesses

(113,045)



(84,537)



(203,138)



(96,598)


Other expense (income), net

4,146



(191)



7,034



(7,930)


Earnings before (benefit) provision for income taxes

273,652



216,033



973,843



689,332


(Benefit) provision for income taxes

(22,796)



54,871



162,178



180,440


Net earnings

$

296,448



$

161,162



$

811,665



$

508,892










Net earnings per share:








Basic

$

1.90



$

1.04



$

5.21



$

3.28


Diluted

$

1.88



$

1.03



$

5.15



$

3.25










Weighted average shares outstanding:








Basic

155,734



155,376



155,685



155,231


Diluted

158,013



156,816



157,744



156,636










Dividends paid per common share

$

0.47



$

0.44



$

1.82



$

1.72


 

 

DOVER CORPORATION

QUARTERLY SEGMENT INFORMATION

(unaudited)(in thousands)



2017


2016


Q1

Q2

Q3

Q4

FY 2017


Q1

Q2

Q3

Q4

FY 2016

REVENUE












Engineered Systems












Printing & Identification

$

249,238


$

278,220


$

272,941


$

293,615


$

1,094,014



$

239,681


$

263,648


$

253,091


$

266,082


$

1,022,502


Industrials

358,397


377,210


372,891


373,776


1,482,274



337,314


328,784


317,471


360,212


1,343,781



607,635


655,430


645,832


667,391


2,576,288



576,995


592,432


570,562


626,294


2,366,283














Fluids

525,195


553,259


562,818


609,558


2,250,830



399,062


405,838


412,822


482,852


1,700,574














Refrigeration & Food Equipment

356,834


426,304


438,788


377,179


1,599,105



363,252


429,386


451,328


376,373


1,620,339














Energy

324,088


359,168


359,298


363,647


1,406,201



283,230


259,008


273,248


292,952


1,108,438














Intra-segment eliminations

(380)


(810)


(461)


(337)


(1,988)



(266)


(319)


(197)


(510)


(1,292)


Total consolidated revenue

$

1,813,372


$

1,993,351


$

2,006,275


$

2,017,438


$

7,830,436



$

1,622,273


$

1,686,345


$

1,707,763


$

1,777,961


$

6,794,342














NET EARNINGS












Segment Earnings:












Engineered Systems

$

174,398


$

106,820


$

98,348


$

210,864


$

590,430



$

93,748


$

104,034


$

97,240


$

96,807


$

391,829


Fluids

52,639


73,558


87,164


91,747


305,108



46,047


54,033


66,178


34,663


200,921


Refrigeration & Food Equipment

33,562


65,829


65,413


29,018


193,822



38,161


63,230


64,111


118,126


283,628


Energy

41,691


53,368


51,936


41,432


188,427



11,244


(75)


13,279


30,888


55,336


Total segments

302,290


299,575


302,861


373,061


1,277,787



189,200


221,222


240,808


280,484


931,714


Corporate expense / other

36,489


34,190


31,741


64,818


167,238



29,862


24,566


26,638


31,674


112,740


Interest expense

36,409


36,932


35,453


36,414


145,208



33,318


33,779


33,789


35,515


136,401


Interest income

(2,580)


(2,338)


(1,761)


(1,823)


(8,502)



(1,604)


(1,622)


(795)


(2,738)


(6,759)


Earnings before provision (benefit) for income taxes

231,972


230,791


237,428


273,652


973,843



127,624


164,499


181,176


216,033


689,332


Provision (benefit) for income taxes

59,725


66,733


58,516


(22,796)


162,178



28,268


46,209


51,092


54,871


180,440


Net earnings

$

172,247


$

164,058


$

178,912


$

296,448


$

811,665



$

99,356


$

118,290


$

130,084


$

161,162


$

508,892














SEGMENT MARGIN










Engineered Systems

28.7

%

16.3

%

15.2

%

31.6

%

22.9

%


16.2

%

17.6

%

17.0

%

15.5

%

16.6

%

Fluids

10.0

%

13.3

%

15.5

%

15.1

%

13.6

%


11.5

%

13.3

%

16.0

%

7.2

%

11.8

%

Refrigeration & Food Equipment

9.4

%

15.4

%

14.9

%

7.7

%

12.1

%


10.5

%

14.7

%

14.2

%

31.4

%

17.5

%

Energy

12.9

%

14.9

%

14.5

%

11.4

%

13.4

%


4.0

%

%

4.9

%

10.5

%

5.0

%

Total segment operating margin

16.7

%

15.0

%

15.1

%

18.5

%

16.3

%


11.7

%

13.1

%

14.1

%

15.8

%

13.7

%













DEPRECIATION AND AMORTIZATION EXPENSE










Engineered Systems

$

19,575


$

20,259


$

22,104


$

19,481


$

81,419



$

16,036


$

16,075


$

16,238


$

25,597


$

73,946


Fluids

28,503


29,473


30,252


31,892


120,120



20,511


20,981


20,833


22,899


85,224


Refrigeration & Food Equipment

15,035


14,522


14,093


13,557


57,207



16,728


16,881


16,146


15,263


65,018


Energy

31,365


32,000


33,421


34,210


130,996



34,160


33,289


32,605


31,366


131,420


Corporate

1,120


1,164


994


1,220


4,498



1,169


868


901


2,193


5,131


Total depreciation and amortization expense

$

95,598


$

97,418


$

100,864


$

100,360


$

394,240



$

88,604


$

88,094


$

86,723


$

97,318


$

360,739



 

 

DOVER CORPORATION

QUARTERLY SEGMENT INFORMATION

(continued)

(unaudited)(in thousands)



2017


2016


Q1

Q2

Q3

Q4

FY 2017


Q1

Q2

Q3

Q4

FY 2016

BOOKINGS












Engineered Systems












Printing & Identification

$

256,665


$

282,157


$

268,700


$

306,818


$

1,114,340



$

242,569


$

266,490


$

248,443


$

268,951


$

1,026,453


Industrials

419,455


367,352


366,430


374,280


1,527,517



329,957


304,345


331,435


374,073


1,339,810



676,120


649,509


635,130


681,098


2,641,857



572,526


570,835


579,878


643,024


2,366,263














Fluids

565,987


554,656


576,538


613,804


2,310,985



418,345


413,767


413,535


457,283


1,702,930














Refrigeration & Food Equipment

438,576


466,276


357,855


319,899


1,582,606



411,367


468,661


429,134


336,645


1,645,807














Energy

348,317


352,617


368,377


354,833


1,424,144



273,445


246,021


270,685


299,771


1,089,922














Intra-segment eliminations

(1,149)


(529)


(468)


(542)


(2,688)



(90)


(944)


(245)


(308)


(1,587)














Total consolidated bookings

$

2,027,851


$

2,022,529


$

1,937,432


$

1,969,092


$

7,956,904



$

1,675,593


$

1,698,340


$

1,692,987


$

1,736,415


$

6,803,335














BACKLOG












Engineered Systems












Printing & Identification

$

109,347


$

115,763


$

116,359


$

129,752




$

102,640


$

104,509


$

101,190


$

98,924



Industrials

310,008


301,474


297,860


310,463




235,384


210,646


224,892


252,780




419,355


417,237


414,219


440,215




338,024


315,155


326,082


351,704















Fluids

371,717


378,774


398,827


399,742




286,457


315,786


318,246


331,238















Refrigeration & Food Equipment

341,530


382,598


302,574


244,972




303,479


332,312


309,462


258,329















Energy

156,255


147,568


158,645


149,579




144,828


129,873


126,519


134,181















Intra-segment eliminations

(729)


(378)


(383)


(571)




(36)


(265)


(252)


(102)















Total consolidated backlog

$

1,288,128


$

1,325,799


$

1,273,882


$

1,233,937




$

1,072,752


$

1,092,861


$

1,080,057


$

1,075,350



 

 

DOVER CORPORATION

QUARTERLY EARNINGS PER SHARE

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


Earnings Per Share













2017


2016


Q1

Q2

Q3

Q4

FY 2017


Q1

Q2

Q3

Q4

FY 2016

Net earnings per share:












Basic

$

1.11


$

1.05


$

1.15


$

1.90


$

5.21



$

0.64


$

0.76


$

0.84


$

1.04


$

3.28


Diluted

$

1.09


$

1.04


$

1.14


$

1.88


$

5.15



$

0.64


$

0.76


$

0.83


$

1.03


$

3.25














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

Net earnings

$

172,247


$

164,058


$

178,912


$

296,448


$

811,665



$

99,356


$

118,290


$

130,084


$

161,162


$

508,892














Weighted average shares outstanding:










Basic

155,540


155,703


155,757


155,734


155,685



155,064


155,180


155,300


155,376


155,231


Diluted

157,399


157,513


157,555


158,013


157,744



156,161


156,595


156,798


156,816


156,636














* Per share data may be impacted by rounding.

 

 

Non-GAAP Reconciliations














Adjusted Earnings Per Share (Non-GAAP)







Net earnings are adjusted by the effect of the Tax Cuts and Jobs Act, gains on disposition of businesses, disposition costs, Wellsite separation costs, rightsizing and other costs and a product recall reserve charge and reversal to derive adjusted net earnings and adjusted diluted earnings per common share as follows:


2017


2016


Q1

Q2

Q3

Q4

FY 2017


Q1

Q2

Q3

Q4

FY 2016

Adjusted net earnings:









Net earnings

$

172,247


$

164,058


$

178,912


$

296,448


$

811,665



$

99,356


$

118,290


$

130,084


$

161,162


$

508,892


Tax Cuts and Jobs Act 1




(50,859)


(50,859)








Gain on dispositions, pre-tax 2

(88,402)




(116,932)


(205,334)



(11,853)




(85,035)


(96,888)


Gain on dispositions, tax impact 3

26,682




6,071


32,753



625




28,060


28,685


Disposition costs, pre-tax 4



3,314


1,931


5,245








Disposition costs, tax impact 3



(964)


(1,051)


(2,015)








Wellsite separation costs, pre-tax



1,718


13,552


15,270








Wellsite separation costs, tax impact 3



(500)


(5,025)


(5,525)








Rightsizing and other costs, pre-tax 5




56,278


56,278








Rightsizing and other costs, tax impact 3




(17,149)


(17,149)








Product recall (reversal) charge, pre-tax




(7,200)


(7,200)






23,150


23,150


Product recall (reversal) charge, tax impact 3




2,614


2,614






(8,913)


(8,913)


Adjusted net earnings

$

110,527


$

164,058


$

182,480


$

178,678


$

635,743



$

88,128


$

118,290


$

130,084


$

118,424


$

454,926














Adjusted diluted earnings per common share*:










Diluted earnings per share

$

1.09


$

1.04


$

1.14


$

1.88


$

5.15



$

0.64


$

0.76


$

0.83


$

1.03


$

3.25


Tax Cuts and Jobs Act 1




(0.32)


(0.32)








Gain on dispositions, pre-tax 2

(0.56)




(0.74)


(1.30)



(0.08)




(0.54)


(0.62)


Gain on dispositions, tax impact 3

0.17




0.04


0.21






0.18


0.18


Disposition costs, pre-tax 4



0.02


0.01


0.03








Disposition costs, tax impact 3



(0.01)


(0.01)


(0.02)








Wellsite separation costs, pre-tax



0.01


0.09


0.10








Wellsite separation costs, tax impact 3




(0.03)


(0.03)








Rightsizing and other costs, pre-tax 5




0.36


0.36








Rightsizing and other costs, tax impact 3




(0.11)


(0.11)








Product recall (reversal) charge, pre-tax




(0.05)


(0.05)






0.15


0.15


Product recall (reversal) charge, tax impact 3




0.02


0.02






(0.06)


(0.06)


Adjusted diluted earnings per share

$

0.70


$

1.04


$

1.16


$

1.13


$

4.03



$

0.56


$

0.76


$

0.83


$

0.76


$

2.90














1 Tax impact primarily related to the enactment of the Tax Cuts and Jobs Act. This benefit also includes decreases in statutory tax rates of foreign jurisdictions.

2 Includes gains from the sales of Performance Motorsports International and Warn Industries, Inc. in the first and fourth quarters of 2017, respectively, as well as Texas Hydraulics and Tipper Tie in the first and fourth quarters of 2016, respectively.

3 Gain on dispositions, disposition costs, Wellsite separation costs, rightsizing and other costs and a product recall (reversal) charge were tax effected using the statutory tax rates in the applicable jurisdictions for each period.

4 Disposition costs include costs related to the fourth quarter sale of Warn Industries.

5 Rightsizing and other costs include actions taken on employee reductions, facility consolidations and site closures and product line divestitures and exits.

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

 

 

Non-GAAP Reconciliations (continued)


Beginning in 2018, Dover will provide adjusted EPS guidance and results that will exclude after-tax acquisition-related amortization. The table below presents reconciliations for projected EPS adjusted on the basis for 2018, as well as EPS adjusted on the basis for 2017, to aid comparison.


Adjusted Earnings Per Share Excluding Acquisition-Related Amortization (Non-GAAP)


2017


Q1

Q2

Q3

Q4

FY 2017

Adjusted net earnings excluding acquisition-related amortization:

Adjusted net earnings

$

110,527


$

164,058


$

182,480


$

178,678


$

635,743


Acquisition-related amortization, pre-tax 7

52,203


50,833


50,524


50,630


204,190


Acquisition-related amortization, tax impact 8

(17,554)


(16,807)


(16,885)


(16,797)


(68,043)


Adjusted net earnings excluding acquisition-related amortization

$

145,176


$

198,084


$

216,119


$

212,511


$

771,890








Adjusted diluted earnings per common share excluding acquisition-related amortization*:

Adjusted diluted earnings per share

$

0.70


$

1.04


$

1.16


$

1.13


$

4.03


Acquisition-related amortization, pre-tax 7

0.33


0.32


0.32


0.32


1.29


Acquisition-related amortization, tax impact 8

(0.11)


(0.11)


(0.11)


(0.11)


(0.43)


Adjusted diluted earnings per common share excluding acquisition-related amortization

$

0.92


$

1.26


$

1.37


$

1.34


$

4.89



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

8 Acquisition-related amortization was tax effected using the statutory tax rates in the applicable jurisdictions for each period.

 

 

Adjusted Guidance Reconciliation





2017 Actual


2018 Guidance

Adjusted net earnings per share*:




Net earnings (GAAP)

$

5.15


$      4.75 - 4.95

Tax Cuts and Jobs Act

(0.32)


Gain on dispositions, net

(1.09)


Disposition costs, net

0.02


Wellsite separation costs, net

0.06


Rightsizing and other costs, net

0.25


0.05

Product recall reversal, net

(0.03)


Adjusted net earnings (Non-GAAP)

4.03

**

       4.80 - 5.00

Acquisition-related amortization, net

0.86


0.93

Adjusted net earnings (new basis)

$

4.89


$      5.73 - 5.93





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

** As reported.

 

 

DOVER CORPORATION

CONSOLIDATED BALANCE SHEETS

(unaudited)(in thousands)



December 31, 2017


December 31, 2016

Assets:




Cash and cash equivalents

$

753,964



$

349,146


Receivables, net of allowances

1,385,567



1,265,201


Inventories, net

878,635



870,487


Prepaid and other current assets

188,954



104,357


Property, plant and equipment, net

999,772



945,670


Goodwill

4,591,912



4,562,677


Intangible assets, net

1,609,927



1,802,923


Other assets and deferred charges

248,922



215,530


Total assets

$

10,657,653



$

10,115,991






Liabilities and Stockholders' Equity:




Notes payable and current maturities of long-term debt

$

581,102



$

414,550


Payables and accrued expenses

1,717,091



1,525,768


Deferred taxes and other non-current liabilities

989,578



1,169,290


Long-term debt

2,986,702



3,206,637


Stockholders' equity

4,383,180



3,799,746


Total liabilities and stockholders' equity

$

10,657,653



$

10,115,991


 

 

DOVER CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)(in thousands)



Years Ended December 31,


2017


2016

Operating activities:




Net earnings

$

811,665



$

508,892


Depreciation and amortization

394,240



360,739


Stock-based compensation

26,528



21,015


Contributions to employee benefit plans

(20,464)



(25,691)


Gain on sale of businesses

(203,138)



(96,598)


Net change in assets and liabilities

(187,272)



93,618


Net cash provided by operating activities

821,559



861,975






Investing activities:




Additions to property, plant and equipment

(196,735)



(165,205)


Acquisitions (net of cash and cash equivalents acquired)

(36,031)



(1,561,737)


Proceeds from the sale of property, plant and equipment

15,322



17,749


Proceeds from the sale of businesses

372,666



206,407


Other

21,151



(1,057)


Net cash provided by (used in) investing activities

176,373



(1,503,843)






Financing activities:




Change in commercial paper and notes payable, net

(183,194)



254,834


Net increase in debt



654,382


Dividends to stockholders

(283,959)



(268,339)


Purchase of common stock

(105,023)




Net payments to settle employee tax obligations on exercise

(18,443)



(7,269)


Other

(4,120)




Net cash (used in) provided by financing activities

(594,739)



633,608






Effect of exchange rate changes on cash

1,625



(4,779)






Net increase (decrease) in cash and cash equivalents

404,818



(13,039)


Cash and cash equivalents at beginning of period

349,146



362,185


Cash and cash equivalents at end of period

$

753,964



$

349,146


 

 

ADDITIONAL INFORMATION 
FOURTH QUARTER AND FULL YEAR 2017 
(Amounts in thousands except share data and where otherwise indicated)

Acquisitions

During the fourth quarter of 2017, the Company completed two acquisitions for an aggregate consideration of $10.3 million. For the full year 2017, the Company acquired three businesses in separate transactions for total consideration of $43.1 million, net of cash acquired and including contingent consideration. The businesses were acquired to complement and expand upon existing operations within the Engineered Systems and Energy segments.

Disposed Businesses

During the fourth quarter of 2017, the Company completed the sale of the consumer and industrial winch business of Warn Industries, Inc. a leading designer, manufacturer and marketer of high performance vehicle equipment and accessories for total proceeds of $250.3 million and a pre-tax gain on sale of $116.9 million. For the full year 2017, the Company also completed the sale of Performance Motorsports International, a manufacturer of pistons and other engine related components serving the motorsports and powersports markets, during the first quarter for total proceeds of $118,706 and a pre-tax gain on sale of $88.4 million. These disposals were within the Engineered System segment and did not represent strategic shifts in business and, therefore, did not qualify for presentation as a discontinued operation.

Rightsizing and Other Costs

During the fourth quarter, the Company, as previously announced, recorded rightsizing and other related costs of $56.3 million to better align its cost structure in preparation for the Wellsite separation. The $56.3 million is comprised of $45.8 million of restructuring costs and $10.5 million of other charges. These costs relate to actions taken on employee reductions, facility consolidations and site closures and product line divestitures and exits. These charges were broad based across all segments as well as corporate, with costs incurred of $9.2 million in Engineered Systems, $8.2 million in Fluids, $15.3 million in Refrigeration & Food Equipment, $7.3 million in Energy and $16.3 million at Corporate.

Tax Rate

The effective tax rate was a benefit of 8.3% and a provision of 25.4% for the fourth quarters of 2017 and 2016, respectively. On a full year basis, the effective tax rates for 2017 and 2016 were 16.7% and 26.2%, respectively. The 2017 rates were significantly impacted by the Tax Cuts and Jobs Act that resulted in revaluing the U.S. deferred income tax liabilities due to the decrease in the U.S. statutory rate from 35% to 21%, offset by the U.S. tax charge for the deemed repatriation of foreign earnings. The 2016 rates were favorably impacted by the settlement of uncertain tax positions.

Share Repurchases

During the year ended December 31, 2017, the Company purchased approximately 1.1 million shares of its common stock in the open market at a total cost of $105.0 million, or $99.11 per share. These repurchases were made pursuant to the share repurchase program approved in January 2015, which authorized $15 billion for share repurchases over the following three years. That program is now expired and the Company expects approval of a new share repurchase authorization in the first quarter of 2018.

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, 2017


December 31, 2016

Current maturities of long-term debt


$

350,402



$

6,950


Commercial paper


230,700



407,600


Notes payable and current maturities of long-term debt


581,102



414,550


Long-term debt


2,986,702



3,206,637


Total debt


3,567,804



3,621,187


Less: Cash and cash equivalents


(753,964)



(349,146)


Net debt


2,813,840



3,272,041


Add: Stockholders' equity


4,383,180



3,799,746


Net capitalization


$

7,197,020



$

7,071,787


Net debt to net capitalization


39.1

%


46.3

%

 

Quarterly Cash Flow


2017


2016


Q1

Q2

Q3

Q4

FY 2017


Q1

Q2

Q3

Q4

FY 2016

Net Cash Flows Provided
By (Used In):












Operating activities

$

78,071


$

155,877


$

268,017


$

319,594


$

821,559



$

133,413


$

207,868


$

231,665


$

289,029


$

861,975


Investing activities

81,780


(51,137)


(55,428)


201,158


176,373



(425,857)


(69,415)


(66,110)


(942,461)


(1,503,843)


Financing activities

(93,293)


(216,273)


(197,634)


(87,539)


(594,739)



178,507


(127,678)


98,491


484,288


633,608


 

Quarterly Adjusted Free Cash Flow (Non-GAAP)


2017


2016


Q1

Q2

Q3

Q4

FY 2017


Q1

Q2

Q3

Q4

FY 2016

Cash flow from operating activities

$

78,071


$

155,877


$

268,017


$

319,594


$

821,559



$

133,413


$

207,868


$

231,665


$

289,029


$

861,975


Less: Capital expenditures

(42,259)


(48,335)


(59,555)


(46,586)


(196,735)



(37,230)


(35,422)


(43,116)


(49,437)


(165,205)


Plus: Cash taxes paid for gains on dispositions1


42,955


5,651


20,434


69,040




435


217


217


869


Plus: Cash paid for Wellsite separation costs



369


9,139


9,508








Adjusted free cash flow

$

35,812


$

150,497


$

214,482


$

302,581


$

703,372



$

96,183


$

172,881


$

188,766


$

239,809


$

697,639














Adjusted free cash flow as a percentage of revenue

2.0

%

7.5

%

10.7

%

15.0

%

9.0

%


5.9

%

10.3

%

11.1

%

13.5

%

10.3

%













Adjusted free cash flow as a percentage of adjusted net earnings

32.4

%

91.7

%

117.5

%

169.3

%

110.6

%


109.1

%

146.2

%

145.1

%

202.5

%

153.4

%













1 Federal and state tax payments related to the gains on the dispositions of Warn Industries and Performance Motorsports in 2017 and Tipper Tie and Texas Hydraulics in 2016.

 

Revenue Growth Factors


2017


Q1


Q2


Q3


Q4


Full Year

Organic

4

%


10

%


9

%


8

%


8

%

Acquisitions

12

%


12

%


10

%


6