UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 2020
Commission File Number: 1-4018
(Exact name of registrant as specified in its charter)
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
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 every Interactive Data File required to be submitted 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 such files.) Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report. Yes ☑ No o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of the close of business on June 30, 2020 was $13,862,183,340 . The registrant’s closing price as reported on the New York Stock Exchange-Composite Transactions for June 30, 2020 was $96.56 per share. The number of outstanding shares of the registrant’s common stock as of February 2, 2021 was 143,649,247 .
Documents Incorporated by Reference: Part III — Certain Portions of the Proxy Statement for Annual Meeting of Shareholders to be held on May 7, 2021 (the “2021 Proxy Statement”).
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Special Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K, especially "Management’s Discussion and Analysis of Financial Condition and Results of Operations," 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. Some of these statements may be indicated by words such as “may”, “anticipate”, “expect”, believe”, “intend”, “guidance”, “estimates”, “suggest”, “will”, “plan”, “should”, “would”, “could”, “forecast” and other words and terms that use the future tense or have a similar meaning. Forward-looking statements are based on current expectations and 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, the impacts of COVID-19, or other future pandemics, on the global economy and on our customers, suppliers, employees, business and cash flows, other 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, changes in law, including developments with respect to trade policy and tariffs, our ability to identify and complete acquisitions and integrate and realize synergies from newly acquired businesses, the impact of interest rate and currency exchange rate fluctuations, capital allocation plans and changes in those plans, including with respect to dividends, share repurchases, investments in research and development, capital expenditures and acquisitions, changes in material costs or the supply of input materials, the impact of legal compliance risks and litigation, including with respect to product quality and safety, cybersecurity with respect to IT systems and digital solutions and privacy, and our ability to capture and protect intellectual property rights. Certain of these risks and uncertainties are described in more detail in Item 1A. "Risk Factors" of this Annual Report on Form 10-K. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.
In this Annual Report on Form 10-K, we refer to measures used by management to evaluate performance, including a number of financial measures that are not defined under accounting principles generally accepted in the United States of America ("GAAP"). We include reconciliations to provide more details on the use and derivation of these financial measures. Please see "Non-GAAP Disclosures" at the end of Item 7 for further detail.
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TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS
Overview
Dover Corporation is a diversified global manufacturer and solutions provider delivering innovative equipment and components, consumable supplies, aftermarket parts, software and digital solutions and support services through five operating segments: Engineered Products, Fueling Solutions, Imaging & Identification, Pumps & Process Solutions, and Refrigeration & Food Equipment. Unless the context indicates otherwise, references herein to "Dover," "the Company," and words such as "we," "us," or "our" include Dover Corporation and its consolidated subsidiaries. Dover was incorporated in 1947 in the State of Delaware and became a publicly traded company in 1955. Dover is headquartered in Downers Grove, Illinois and currently employs approximately 23,000 people worldwide.
Dover's five segments are structured around businesses with similar business models, go-to-market strategies and manufacturing practices. This structure enables management efficiency, aligns Dover’s operations with its strategic initiatives and capital allocation priorities, and provides transparency about our performance to external stakeholders. Dover's five operating and reportable segments are as follows:
•Our Engineered Products segment is a provider of a wide range of products, software and services that have broad customer applications across a number of markets, including aftermarket vehicle service, solid waste handling, industrial automation, aerospace and defense, industrial winch and hoist, and fluid dispensing.
•Our Fueling Solutions segment is focused on providing components, equipment, and software and service solutions enabling safe transport of fuels and other hazardous fluids along the supply chain, as well as the safe and efficient operation of retail fueling and vehicle wash establishments.
•Our Imaging & Identification segment supplies precision marking and coding, product traceability and digital textile printing equipment, as well as related consumables, software and services.
•Our Pumps & Process Solutions segment manufactures specialty pumps, fluid handling components, plastics and polymer processing equipment, single use pumps, flow meters and connectors, and highly engineered components for rotating and reciprocating machines.
•Our Refrigeration & Food Equipment segment is a provider of innovative and energy-efficient equipment and systems that serve the commercial refrigeration, heating and cooling and food equipment markets.
Spin-off of Energy Businesses
On May 9, 2018, we completed the spin-off of Apergy Corporation ("Apergy") to our shareholders. Apergy consists of the upstream energy businesses previously included in our former Energy segment. The transaction was completed through the pro rata distribution of 100% of the common stock of Apergy to Dover's shareholders of record as of the close of business on April 30, 2018. Each Dover shareholder received one share of Apergy common stock for every two shares of Dover common stock held as of the record date. Apergy changed its name to ChampionX Corporation on June 3, 2020. For more details, see Note 2 — Spin-off of Apergy Corporation in the Consolidated Financial Statements in Item 8 of this Form 10-K.
COVID-19
On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus ("COVID-19") a pandemic. The COVID-19 outbreak and associated counter-acting measures implemented by governments around the world, as well as increased business uncertainty, had an adverse impact on our financial results beginning late in the first quarter. To help mitigate the financial impact, we executed temporary cost savings measures, reduced our capital spending for the year, initiated restructuring actions and proactively managed our working capital. Activity in many of the end-markets we serve has sequentially improved since the second quarter of 2020 and we expect that improvement trend to continue for most of our businesses in 2021, though uncertainty remains. Despite the impact of COVID-19 to our business in 2020, we remained committed to our management philosophy, company goals and our business strategy. For more
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details on the impact of COVID-19 to our business see Item 7. Management's Discussion and Analysis in this Form 10-K.
Management Philosophy
Dover is committed to steadily creating shareholder value through a combination of sustained long-term profitable growth, operational excellence, superior free cash flow generation and productive capital re-deployment while adhering to a conservative financial policy. Dover seeks to be a leader in a diverse set of growing markets where customers are loyal to trusted partners and suppliers, and value product performance and differentiation driven by superior engineering, manufacturing precision, total solution development and excellent supply chain performance. Our businesses are long-time leaders in their respective markets and are known for their innovation, engineering capability and customer service excellence. We aim to continue growing our businesses from this strong foundation. Our operating structure of five business segments allows for differentiated acquisition focus consistent with our portfolio and capital allocation priorities. We believe our business segment structure also presents opportunities to identify and capture operating synergies, such as global sourcing and supply chain integration, shared services, and manufacturing practices, and further advances the development of our executive talent. Our executive management team sets strategic direction, initiatives and goals, provides oversight of strategy execution and achievement of these goals for our business segments, and with oversight from our Board of Directors, makes capital allocation decisions, including with respect to organic investment initiatives, major capital projects, acquisitions and the return of capital to our shareholders.
We foster an operating culture with high ethical and performance standards that values accountability, rigor, trust, inclusion, respect and open communications, designed to allow individual growth and operational effectiveness. We are also committed to creating sustainable business practices that protect the environment, and through the development of products that help our customers meet their sustainability goals.
Company Goals
We are committed to driving superior shareholder returns through three key tenets of our corporate strategy. First, we are committed to achieving organic sales growth above that of gross domestic product (GDP+ or 3% to 5% annually on average) over a long-term business cycle, absent prolonged adverse economic conditions, complemented by growth through strategic acquisitions. Second, we continue to focus on improving returns on capital, as well as segment and corporate earnings margin by enhancing our operational capabilities and making investments across the organization in software and digital applications, operations management, information technology ("IT"), shared services (including Dover Business Services and the India Innovation Center), and talent. We also focus on continuous, effective cost management and productivity initiatives, such as automation and digitally-supported manufacturing, supply chain optimization, restructuring, improved footprint utilization, strategic pricing and portfolio management. Third, we aim to generate strong and growing free cash flow and earnings per share through strong earnings performance, productivity improvements and active working capital management. Dover prioritizes deploying free cash flow towards high-return and high-confidence organic reinvestments aimed at growing, improving and strengthening our businesses, as well as through inorganic investments that synergistically enhance the quality of our portfolio. Dover’s value creation strategy is supported by a financial policy that includes a prudent approach to financial leverage, and a disciplined approach to capital allocation that allows for a balance between reinvestment and return of capital to shareholders through growing dividends and opportunistic share repurchases. We support achievement of these goals by (1) aligning management compensation with strategic and financial objectives, (2) actively managing our portfolio to increase enterprise scale, improve business mix over time, and pursue acquisitions that fit the characteristics of an ideal Dover business and (3) investing in talent development programs.
Characteristics of a Dover Business
Our businesses generally operate in strategically attractive niche industrial markets with supportive long-term growth trends, favorable supply and demand landscapes, mature and incrementally improving technologies and highly loyal customers, suppliers or channel partners. Our businesses have consistently enjoyed a customer base that chooses products primarily based on performance. In many instances, our businesses produce critical equipment or components to a larger system, where value-in-use and costs and risks of switching far exceed the cost of the product itself. Our products tend to have meaningful replacement, consumable or aftermarket demand due, in part, to a large installed base because they play a specialized role in customer applications. Recurring demand, which includes parts, consumables, services and software, represents approximately 30% of our revenue. Our businesses increasingly complement our component or equipment offerings with
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digital solutions (such as connected products, sensors and software) that create new sources of value to our customers and allow Dover businesses to drive growth and increase relevance with our customers. Dover businesses also exhibit attractive financial profiles, characterized by predictable, stable revenue, low capital intensity, strong cash-flow and sustainable returns on invested capital well in excess of our cost of capital.
Business Strategy
To achieve our stated goals, we are focused on executing the following pillars of Dover’s business strategy:
Capturing growth potential in our end-markets and adjacencies
Dover’s business segments are focused on building enduring competitive advantages and leadership positions in markets that we believe are positioned for sustained future growth. We believe that our businesses are among the top suppliers in most markets and niches that we serve (as defined by customer applications, geographies or products), which positions us well to capture future growth. We capitalize on our engineering, technology and design expertise and maintain an intense focus on meeting the needs of our customers and adding significant, and often new, value to their operations through superior product performance, safety and reliability and a commitment to aftermarket support. We cultivate and maintain an entrepreneurial culture and continuously innovate to address our customers’ needs to help them win in the markets they serve.
In particular, our businesses are well-positioned to capitalize on growing industrial manufacturing and trade volumes, adoption of digital technologies, increasing requirements for sustainability, safety, energy efficiency and consumer product safety, and growth of the middle class and consumption in emerging economies. Our Engineered Products segment is capitalizing on secular growth in waste generation and the increasing sophistication and automation of waste collection operations and increasing car parc, car age and miles driven, as well as increasing digitization and sensorization of modern vehicles. Our Fueling Solutions segment benefits from the worldwide growth in safety and compliance regulations, new infrastructure build-out in emerging economies, consolidation in the convenience retail sector, increased sophistication and digitization of convenience stores and fuel retailing, as well as a secular growth in automated vehicle wash systems and solutions (over manual and do-it-yourself washing). Our Imaging & Identification segment leverages its unique product offering containing equipment, consumables, software and services to address market needs and requirements including conversion to digital textile printing, increased demand for product traceability and brand protection, and consumer product safety. Our Pumps & Process Solutions segment is focused on capturing growth in its installed base and growing sophistication of fluid transfer and rotating machinery components within the chemical, plastics and polymer, industrial, mid and downstream oil & gas, biopharma and hygienic markets as well as globalizing brands across geographies while expanding sales channels and engineering support. Our Refrigeration & Food Equipment segment is responding to our customers’ demand for increased energy efficiency and sustainability in food retail merchandising solutions, as well as increasing demand for sustainable heating and cooling solutions and growing global demand for aluminum beverage cans.
We aim to grow by making organic investments in research and development, developing new products and technologies, improving digital capabilities, expanding our geographic coverage, and pursuing disciplined strategic acquisitions that will enhance our portfolio and position Dover for long-term growth. We continually evaluate how our assets and capabilities can position Dover to grow in markets adjacent to our core businesses (for example, new applications, geographies, product segments or adjacent technologies) where Dover can be advantaged.
In addition to product innovation, we plan to grow by developing digital technologies. Our Boston-based Dover Digital Labs serves as the company-wide hub for our digital initiative. We have continued to invest in this facility and our team of software developers, data scientists, and product managers to enhance our digital capability. The Digital Labs team is driving digital transformation across our businesses along the following three areas: (i) enhancing the customer experience through more efficient and streamlined digital customer interfaces that make it easy to do business with Dover companies; (ii) developing connected software and machine learning augmented solutions built to integrate and work with Dover's core equipment and component offerings in our end-markets; and (iii) driving increased efficiency, safety and quality in our manufacturing operations by employing cutting-edge automation and “digital factory” solutions. We believe that the Digital Labs center enhances the effectiveness of our products and fuels our commercial growth strategy. By leveraging a central resource for Industrial Internet of Things ("IIoT") and connected product initiatives, we are able to leverage efficiency of support infrastructure, improve product security and offer better efficiency in software and sensor integration engineering to keep our projects cost-competitive.
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Improving profitability and return on invested capital
We are committed to generating sustainable returns on invested capital well above the cost of capital across all of our businesses. We continually evaluate and pursue opportunities to improve efficiency, margin and return on capital. We are intensely focused on driving operational excellence across our businesses. We have implemented numerous productivity initiatives to maximize our efficiency, such as supply chain integration, shared services, lean manufacturing principles and production automation, as well as workplace safety initiatives to help ensure the health and welfare of our employees. Our businesses place a strong emphasis on continual product quality improvement and new product development to better serve customers and to facilitate expansion into new products and geographic markets.
We also focus on our margin expansion program, designed to reduce our selling, general and administrative cost base and rationalize our manufacturing and supply chain footprint across the portfolio. We continually expand initiatives to extract productivity gains across the businesses and realize savings. Our margin expansion initiatives are focused on four core enterprise capabilities: (1) leverage our Digital Labs team to enhance our digital capabilities, (2) improve utilization and optimization of our manufacturing footprint through centralized resources and investment, (3) further centralize shared services under Dover Business Services, and (4) invest in our India Innovation Center shared services.
Our Dover Digital Labs consists of a team of approximately 100 software developers, data scientists and product managers who provide digital capabilities to enhance the customer experience, develop connected products, and drive automation and efficiency inside our factories through digital technologies and in our business processes. Our Dover Digital leadership has built common platforms which we have begun deploying on customer facing applications to make it easier to find, configure, buy and obtain service on products from Dover companies. The Dover Digital Labs team has also deployed shared IIoT capability so many of Dover's products are remotely configurable and monitored, enabling our businesses to sell aftermarket parts and offer remote diagnostic services.
In 2019, we began to coordinate and oversee operations management from the corporate center of excellence. This team, comprised of a small group of functional experts, works closely with our businesses to drive execution excellence in our operational initiatives and best-in-class processes, standards and measurement tools to identify, prioritize and monitor execution of operational improvement initiatives. The operations center of excellence has expertise in health and safety, supply chain management, lean operations, project management, and advanced manufacturing and automation. We continue to focus on initiatives to improve operational efficiency and enhance and solidify the continuous improvement programs embedded in our businesses' day-to-day operations, such as significant production automation and footprint consolidation projects.
We continue to invest in Dover Business Services shared service centers, consisting of a team of more than 300 people, to provide important transactional and value-added services to our businesses in the areas of finance, IT and human resources. Our shared service model allows us to leverage scale across Dover, increase process efficiencies through technology and specialization and reduce risk through centralized controls. Our shared service centers serve our businesses by freeing resources normally dedicated to transactional services to allow those resources to focus on customers, markets and product excellence. We expect to continue driving efficiencies through Dover Business Services as we increase the level of service centralization across the portfolio.
Our India Innovation Center has a team of approximately 500 people that our businesses can leverage for product engineering, digital solutions development, data & information management, research & development, and intellectual property services. The scale and expertise of this team allows our businesses to access resources that would be unaffordable to them as stand-alone companies, and allows for concurrent engineering on time sensitive projects.
Additionally, we focus on improving margins and returns by rigorously capturing synergies from our acquisitions and providing best-in-class corporate support and services through a lean corporate center.
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Disciplined capital allocation and continuous portfolio enhancement
We are focused on the most efficient allocation of capital to maximize returns on investment. To do this, we prioritize organic reinvestment to grow and strengthen our existing businesses. We plan to make average annual investments in capital spending of approximately 2% - 4% of revenue with a focus on internal projects designed to expand our market participation, develop new products and improve productivity. We seek to deploy capital in acquisitions in attractive growth areas across our five segments. Dover focuses primarily on bolt-on acquisitions, applying strict selection criteria of market attractiveness (including growth, maturity, and performance-based competition), business fit (including sustained leading position, revenue visibility, and favorable customer value-add versus switching cost or risk) and financial return profile (accretive growth and margins and double-digit return on capital). We opportunistically divest businesses where we see limited runway for future value creation in line with our aspirations, or where market and business fundamentals change and no longer fit our criteria of business attractiveness and portfolio fit. Finally, we have consistently returned cash to shareholders by paying dividends, which have increased annually over each of the last 65 years. We undertake opportunistic share repurchases as part of our capital allocation strategy. We employ a prudent financial policy to support our capital allocation strategy, which includes maintaining an investment grade credit rating.
Portfolio Development
Acquisitions
Our acquisition program has two key elements. As a first priority, we seek to acquire attractive add-on businesses with a strong fit that enhance our existing franchises either by increasing their reach and customer access, by broadening their product mix or by enhancing technological capability and customer value-add. Second, in the right circumstances, we may strategically pursue larger, stand-alone businesses that complement our existing businesses or provide a path for us to pursue growth in near adjacencies. With all our acquisitions, we seek businesses that are leaders in their markets or niches, have a strong track record for innovation, offer differentiated solutions, clearly complement our businesses and have a solid organic growth profile, attractive and sustainable returns, and offer significant synergy potential to generate double-digit return on capital within three years after the acquisition is completed.
Over the past three years (2018 through 2020), we have spent approximately $620.7 million to purchase eleven businesses. During 2020, we acquired six businesses for an aggregate consideration of $335.8 million, net of cash acquired. Consistent with our acquisition program, we acquired these businesses to complement and expand upon existing operations within the Engineered Products, Fueling Solutions, Imaging & Identification, and Pumps & Process Solutions segments. During 2019, we acquired three businesses for an aggregate consideration of $216.4 million, net of cash acquired and including contingent consideration. We acquired these businesses to complement and expand upon existing operations within the Fueling Solutions and Pumps & Process Solutions segments. During 2018, we acquired two businesses for an aggregate purchase price of $68.6 million, net of cash acquired, within the Pumps & Process Solutions and Refrigeration & Food Equipment segments. For more details regarding acquisitions completed over the past three years, see Note 4 — Acquisitions in the Consolidated Financial Statements in Item 8 of this Form 10-K.
Our future growth depends in large part on finding and acquiring successful businesses that expand the scope of our offerings and make us an even more important supplier to our customers. While we expect to generate annual organic revenue growth of 3% - 5% over a long-term business cycle absent extraordinary adverse economic conditions, our success in consistently growing the portfolio is also dependent on the ability to acquire and integrate businesses successfully within our existing structure. To track post-merger integration and accountability, we utilize an internal scorecard and well-defined processes to help ensure expected synergies are realized and value is created.
Dispositions
We have sold or divested some of our businesses based on changes in specific market outlook, structural changes in financial performance, value-creation potential, or for other strategic considerations, which included an effort to reduce our exposure to cyclical markets or focus on our higher margin growth spaces. Most of our efforts to streamline and improve the portfolio to less cyclical and higher growth businesses were completed in 2018 with the Apergy spin-off.
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Going forward, we recognize that some businesses in Dover’s portfolio may have a greater value-creation potential if owned by another parent with a larger presence and focus on a given niche. We pragmatically consider such opportunities as part of our ongoing portfolio management and review processes and execute divestitures if the value created is determined to be at an appropriate premium to the value of such business to Dover and allows Dover shareholders to participate in the future value-creation potential from a change in ownership.
During the past three years (2018 through 2020) we have sold businesses for aggregate cash consideration of $43.6 million. During 2020 and 2019, we completed the sales of the Chino, California branch of The AMS Group ("AMS Chino") in the Refrigeration & Food Equipment segment and Finder Pompe S.r.l. ("Finder") within the Pumps & Process Solutions segment, respectively. During 2018, there were no other material dispositions aside from the spin-off of Apergy as previously discussed. The financial position and results of operations for Apergy have been presented as discontinued operations for all periods presented. The disposals in 2020 and 2019 did not represent strategic shifts in operations and, therefore, did not qualify for presentation as discontinued operations. For more details, see Note 5 — Discontinued and Disposed Operations in the Consolidated Financial Statements in Item 8 of this Form 10-K.
Business Segments
As noted previously, Dover's five segments are structured around businesses with similar business models, go-to-market strategies and manufacturing practices. This structure enables management efficiency, aligns Dover’s operations with its strategic initiatives and capital allocation priorities, and provides transparency about our performance to external stakeholders. This structure increases management efficiency and better aligns Dover’s operations with its strategic initiatives and capital allocation priorities across its businesses. Dover's five operating and reportable segments are as follows: Engineered Products, Fueling Solutions, Imaging & Identification, Pumps & Process Solutions and Refrigeration & Food Equipment. For financial information about our segments and geographic areas, see Note 20 — Segment Information in the Consolidated Financial Statements in Item 8 of this Form 10-K.
Engineered Products
Our Engineered Products segment provides a wide range of products, software and services that have broad customer applications across a number of markets, including: solid waste handling, aftermarket vehicle service, industrial automation, aerospace and defense, industrial winch and hoist, and fluid dispensing. Our waste handling business is a leading North American supplier of equipment, software and services for the refuse collection industry and for on-site processing and compaction of trash and recyclable materials. Our vehicle service business provides products, software and services used primarily in vehicle repair and maintenance, including light and heavy-duty vehicle lifts, wheel service equipment, vehicle diagnostics and vehicle collision repair solutions. The businesses in the industrial automation market provide a wide range of modular automation components including manual clamps, power clamps, rotary and linear mechanical indexers, conveyors, pick and place units, glove ports and manipulators, as well as end-of-arm robotic grippers, slides and end effectors. Our industrial winch and hoist business provides a range of winches, hoists, bearings, drives, and electric monitoring systems for infrastructure and other industrial markets. The segment also supplies radio frequency and microwave filters and switches to enable secure communications in aerospace and defense applications, and benchtop soldering and fluid dispensing solutions in electronics and industrial product assembly.
Our Engineered Products segment's products are manufactured primarily in the U.S., Europe and Asia and are sold throughout the world directly and through a network of distributors.
Fueling Solutions
Our Fueling Solutions segment provides components, equipment and software, and service solutions enabling safe transport of fuels and other hazardous fluids along the supply chain, as well as safe and efficient operation of retail fueling and vehicle wash establishments across the globe. Among solutions supplied by the segment are fuel dispensers, payment systems, hardware and underground containment systems, vehicle wash systems, as well as asset tracking, monitoring and operational optimization software. Additionally, Fueling Solutions supplies components used for the transfer of fuels and other critical liquids across the supply chain.
Our Fueling Solutions segment's products are manufactured primarily in the United States, Europe, China, Brazil and Canada and are sold throughout the world directly and through a network of distributors.
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Imaging & Identification
The companies in our Imaging & Identification segment are global suppliers of precision marking and coding, packaging intelligence, product traceability and brand protection, digital textile printing equipment and solutions, as well as related consumables, software and services. The Imaging & Identification segment primarily designs and manufactures equipment and consumables used for printing variable information (such as bar coding of dates and serial numbers) on fast-moving consumer goods, provides serialization solutions for pharmaceutical customers, and develops supply chain traceability solutions capitalizing on expanding food and product safety, supply chain traceability and brand protection requirements, and growth in emerging markets. In addition, our businesses serving the apparel and textile printing market are benefiting from a secular shift from analog to digital printing, resulting from growing demand for “fast fashion”, and more customized and complex fashion designs, as well as increasing environmental sustainability requirements (digital printing process is significantly more environment-friendly due to lower water consumption). Businesses within this segment leverage digital printing capabilities and operate business models that involve initial equipment and software sales followed by significant consumable, software and service aftermarket revenue streams.
Our Imaging & Identification segment's products are manufactured primarily in the United States, Europe and Asia and are sold throughout the world directly and through a network of distributors.
Pumps & Process Solutions
The businesses in our Pumps & Process Solutions segment manufacture specialty pumps, fluid handling components, plastics and polymers processing equipment, and highly-engineered components for rotating and reciprocating machines. The segment’s products are used in a wide variety of markets, including plastics and polymers processing, chemicals production, food/sanitary, biopharma, medical, transportation, petroleum refining, power generation and general industrial applications. Our specialty pumps and components are used in demanding and specialized operating environments with high performance requirements. Businesses within this segment share the following commonalities: the products are components or small pieces of equipment that are part of large production systems with components often specified by customers or regulations, there is a diverse and fragmented customer base, there is significant aftermarket demand from a large installed base, and the route-to-market is a mix of distribution and direct sales.
Our Pumps & Process Solutions segment's products are manufactured primarily in the United States, Europe, Mexico and Asia and are sold throughout the world directly and through a network of distributors and original equipment manufacturers ("OEMs").
Refrigeration & Food Equipment
Our Refrigeration & Food Equipment segment is a provider of innovative and energy-efficient equipment and systems that serve the commercial refrigeration, heating and cooling, and food equipment markets. Our refrigeration business manufactures refrigeration systems, refrigeration display cases, commercial glass refrigerator and freezer doors and brazed plate heat exchangers used for industrial heating and cooling and residential climate control. Other businesses in this segment design and manufacture commercial food service equipment and can-shaping machinery. The majority of the products that are manufactured or serviced by the Refrigeration & Food Equipment segment are used by the retail food industry, including supermarkets, “big-box” retail and convenience stores, the commercial/industrial refrigeration industry, institutional and commercial food service, food production markets and beverage can-shaping industries.
Our Refrigeration & Food Equipment segment's products are manufactured primarily in North America, Europe and Asia and are sold globally, directly and through a network of distributors.
Raw Materials
We use a wide variety of raw materials, primarily metals and semi-processed or finished components, which are generally available from a number of sources. As a result, shortages or the loss of any single supplier have not had, and are not likely to have, a material impact on operating profits. While the required raw materials are generally available, commodity pricing can be volatile, particularly for various grades of steel, copper, aluminum and select other commodities. Although cost increases in commodities may be recovered through increased prices to customers, our operating results are exposed to such
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fluctuations. We attempt to control such costs through fixed-price contracts with suppliers and various other programs, such as our global supply chain activities.
Research and Development
Our businesses invest to develop innovative products, as well as to upgrade and improve existing products, to satisfy customer needs, including demand for energy-efficient products designed to help customers meet sustainability goals, expand revenue opportunities domestically and internationally, maintain or extend competitive advantages, improve product reliability and reduce production costs.
Our Imaging & Identification segment expends significant effort in research and development because the rate of product development by their customers is often quite high. Our businesses that develop product identification and printing equipment and software solutions believe that their customers expect a continuing rate of product innovation, and performance and total cost of ownership improvement. The result has been downward pricing trends that can only be mitigated with the continuous development of innovative product solutions in a market where product life cycles generally average less than seven years.
Our Fueling Solutions segment invests in research and development to advance innovative fuel dispensing and payment platforms, fuel site asset management and connectivity solutions, and IIoT-enabled cloud-based connected solutions for retail and commercial fleet fueling settings. These technology investments align with our customer’s needs and our commitment to delivering our customers operational cost reductions, increased sales, and an enhanced customer experience through a combination of intelligent fueling and retail solutions.
Our Pumps & Process Solutions segment invests in research and development for new product introduction and custom solutions to drive volume and share in both existing markets and newer/faster growth markets – such as single-use biopharmaceutical manufacturing and liquid cooling of high performance electronics. These investments will allow us to take advantage of existing growth trends such as vaccine production for certain COVID-19 vaccines and also cell and gene therapy applications coming on the market.
Our segments contain many businesses that are also involved in important product improvement initiatives. These businesses concentrate on working closely with customers on specific applications, expanding product lines and market applications and continuously improving manufacturing processes. Some of these businesses experience a much more rapid rate of change requiring higher product development capability and products.
Our businesses invest in research and development to pursue digital strategies based on customer needs and take advantage of the cross-company capabilities developed at the Dover Digital Labs center. For example, Vehicle Services Group, within the Engineered Products segment, launched Mosaic Advanced Diagnostic Technology built in partnership with Burke Porter Group and work completed at the Digital Labs. Mosaic is the automotive repair industry’s first digitally enabled cloud based after-market advanced driver assistance systems (ADAS) sensor calibration technology. Environmental Solutions Group, from the Engineered Products segment, launched artificial intelligence capabilities through 3rd Eye Digital Solution to use data to improve operations outcomes for waste hauling fleets.
Human Capital Resources
Our employees are our most valuable asset and are critical to our ability to deliver on our strategic plans. Our success in delivering high quality and innovative products and solutions for our customers and driving operational excellence is only achievable through the talent, expertise, and dedication of our global team. We had approximately 23,000 employees worldwide as of December 31, 2020.
We recognize that attracting, developing and retaining skilled talent and promoting a diverse and inclusive culture are essential to maintaining our leadership positions in the markets we serve. We are increasingly leveraging the corporate center to drive talent recruitment and development by implementing consistent human capital management practices across our businesses. This center-led focus is enabling us to make development opportunities available across our enterprise which promotes employee advancement, engagement and retention. We offer employees resources to continuously improve their skills and performance with the goal of further cultivating the diverse, entrepreneurial talent inside our global businesses to fill key positions. We seek people who are proactive and dedicated, demonstrate an ownership mindset and share our
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commitment to the pursuit of operational excellence. We continue to make significant investments in talent development and recognize that the growth and development of our employees is essential for our continued success.
We have invested in the following human capital resources, to align with our key priorities:
•Dover Digital Labs – Our team of software developers, data scientists, and product managers drive digital transformation across our businesses by enhancing customer experience, developing connected products and enabling digital manufacturing.
•Operational management – Our operations teams, including our management team at the corporate center, continually focuses on improving operational efficiency, such as implementing production automation.
•Health and safety – We are committed to providing a healthy environment and safe workplace by operating in accordance with established health and safety protocols across our facilities while maintaining an enhanced health and safety compliance program. In response to the COVID-19 pandemic, we have modified practices at our manufacturing locations and offices to adhere to guidance from the U.S. Centers for Disease Control and Prevention and local health and governmental authorities in our global network. We have invested at the corporate center to provide oversight, enhance coordination and ensure robust safety protocols are present across our operations. We believe that a healthy and safe workforce is an engaged workforce that is ready and able to contribute to our success.
•Shared services – We invest in Dover Business Services and our India Innovation Center. Our shared services capabilities include a wide range of functional areas including transactional support, human resources, IT, engineering and product development. These services enable productivity and growth as well as free up resources at our businesses to focus on customers, markets and product development.
Intellectual Property and Intangible Assets
Our businesses own many patents, trademarks, licenses and other forms of intellectual property, which have been created, registered or acquired over a number of years and, to the extent relevant, expire at various times over a number of years. A large portion of our businesses’ intellectual property consists of patents, unpatented technology and proprietary information constituting trade secrets that we seek to protect in various ways, including confidentiality agreements with employees and suppliers where appropriate. In addition, a significant portion of our intangible assets relate to customer relationships. While our intellectual property and customer relationships are important to our success, the loss or expiration of any of these rights or relationships, or any group of related rights or relationships, is not likely to materially affect our results on a consolidated basis. We believe that our commitment to continuous engineering improvements, new product development and improved manufacturing techniques, as well as strong sales, marketing and service efforts, are significant to our general leadership positions in the niche markets we serve.
Customers
We serve thousands of customers, none of which accounted for more than 10% of our consolidated revenue in 2020. Given our diversity of served markets, customer concentrations are not significant. Businesses supplying the environmental solutions, defense, automotive and commercial refrigeration industries tend to deal with a few large customers that are significant within those industries. This also tends to be true for businesses supplying the power generation and chemical industries. In the other markets served, there is usually a much lower concentration of customers, particularly where our companies provide a substantial number of products and services applicable to a broad range of end-use applications.
Seasonality
In general, while our businesses are not highly seasonal, we do tend to have stronger revenue generation in the second half of the year, which is driven by customer capital expenditure timing and seasonal activity patterns in our end-markets. Our businesses serving the retail fueling market tend to increase in the second half of the year based on the historical purchasing patterns of their customers. Our businesses serving the major equipment markets, such as power generation, chemical and processing industries, have longer lead times geared to seasonal, commercial, or consumer demands and customers in these markets tend to delay or accelerate product ordering and delivery to coincide with those market trends which moderates the aforementioned seasonality patterns. Our food retail refrigeration business tends to face higher levels of demand in the second and third quarters as retailers avoid construction and remodeling activity during fall/winter holidays.
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Competition
Our competitive environment is complex because of the wide diversity of our products manufactured and the markets served. In general, most of our businesses are market leaders that compete with only a few companies, and the key competitive factors are customer service, product quality, price and innovation. A summary of our key competitors within each of our segments follows:
| Segment | Key Competitors | |||||||
| Engineered Products | Oshkosh Corp. (McNeilus), Tünkers Maschinenbau GmbH, Snap-On Inc. (Challenger Lifts, Car-O-Liner), Labrie Enviroquip Group, PACCAR (Braden), Vontier (Hennessey Industries, Inc.) and numerous others | |||||||
| Fueling Solutions | Vontier (Gilbarco Veeder-Root), Tatsuno, Verifone, Franklin Electric, Elaflex, Gardner Denver, Inc. (Emco Wheaton), Dixon Valve & Coupling Company, Professional Datasolutions, Inc. (PDI), Salco, Washtec AG | |||||||
| Imaging & Identification | Danaher Corporation (Videojet), Brother Industries, Ltd. (Domino Printing), Electronics for Imaging (Reggiani), SPG Prints, Konica Minolta, Kornit Digital Ltd. | |||||||
| Pumps & Process Solutions | IDEX Corporation, ITT, SPX Flow Inc. (Waukesha), Ingersoll Rand (Milton Roy, Dosatron), Spirax Sarco, Nordson Corporation, Kingsbury, Seko, Ecolab, Millipore, Danaher Corporation (Pall), EnPro Industries (Compressor Products International, Garlock), Hoerbiger Holdings AG, Miba AG, Hillenbrand Inc. (Coperion) | |||||||
| Refrigeration & Food Equipment | Panasonic (Hussman Corp.), Alfa Laval, Welbilt Corp, Illinois Tool Works, Middleby Corp., Stolle Machinery | |||||||
International
Consistent with our strategic focus on positioning our businesses for growth, we aim to increase our revenue in international markets, particularly in developing economies in Asia, the Middle East, Eastern Europe and South America.
Most of our non-U.S. subsidiaries and affiliates are currently based in China, France, Germany, Italy, Sweden, Switzerland, the United Kingdom, and other locations including Australia, Brazil, Canada, India, Mexico, and the Netherlands.
The following table shows annual revenue derived from customers outside the U.S. as a percentage of total annual revenue for each of the last three years, by segment and in total:
| Percentage of Non-U.S. Revenue by Segment | |||||||||||||||||
| Years Ended December 31, | |||||||||||||||||
| 2020 | 2019 | 2018 | |||||||||||||||
| Engineered Products | 27 | % | 27 | % | 30 | % | |||||||||||
| Fueling Solutions | 45 | % | 52 | % | 54 | % | |||||||||||
| Imaging & Identification | 75 | % | 77 | % | 78 | % | |||||||||||
| Pumps & Process Solutions | 51 | % | 49 | % | 51 | % | |||||||||||
| Refrigeration & Food Equipment | 37 | % | 39 | % | 38 | % | |||||||||||
| Total percentage of revenue derived from customers outside of the United States | 45 | % | 47 | % | 48 | % | |||||||||||
Our international operations are subject to certain risks, such as price and exchange rate fluctuations and non-U.S. governmental restrictions, which are discussed further in Item 1A. "Risk Factors." For additional details regarding our non-U.S. revenue and the geographic allocation of the assets of our continuing operations, see Note 20 — Segment Information to the Consolidated Financial Statements in Item 8 of this Form 10-K.
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Environmental Matters
Sustainability
We are committed to creating economic value for shareholders by developing products designed to help our customers meet their sustainability goals, run their operations more efficiently and satisfy evolving regulatory and environmental standards. We believe that sustainability-driven innovation in response to customer demand helps us contribute positively to enhanced resource efficiency and waste reduction while presenting a valuable growth opportunity. We highlight key initiatives and performance metrics about our sustainability activities under the “Sustainability” tab on our website, www.dovercorporation.com.
Other Matters
Our operations are governed by a variety of international, national, state and local environmental laws. We are committed to continued compliance and believe our operations generally are in substantial compliance with these laws. In a few instances, particular plants and businesses have been the subject of administrative and legal proceedings with governmental agencies or private parties relating to the discharge or potential discharge of regulated substances. Where necessary, these matters have been addressed with specific consent orders to achieve compliance.
There have been no material effects upon our earnings and competitive position resulting from our compliance with laws or regulations enacted or adopted relating to the protection of the environment. We are aware of a number of existing or upcoming regulatory initiatives intended to reduce emissions in geographies where our manufacturing and warehouse/distribution facilities are located and have evaluated the potential impact of these regulations on our businesses. We anticipate that direct impacts from regulatory actions will not be significant in the short- to medium-term. We expect the regulatory impacts associated with climate change regulation would be primarily indirect and would result in "pass-through" costs from energy suppliers, suppliers of raw materials and other services related to our operations.
Other Information
We make available free of charge through the "Investor Information" link on our website, www.dovercorporation.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports. We post each of these reports on the website as soon as reasonably practicable after the report is filed with the Securities and Exchange Commission. The information on our website is not incorporated into this Form 10-K.
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ITEM 1A. RISK FACTORS
The risk factors discussed in this section should be considered together with information included elsewhere in this Form 10-K and should not be considered the only risks to which we are exposed. In general, we are subject to the same general risks and uncertainties that impact many other industrial companies such as general economic, industry and/or market conditions and growth rates; the impact of natural disasters and their effect on global markets; and changes in laws or accounting rules. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, including our results of operations, liquidity and financial condition.
Business and Operational Risks
•The COVID-19 pandemic has adversely impacted, and poses risks to, our business, the nature and extent of which are highly uncertain and unpredictable.
The COVID-19 pandemic has disrupted the global economy and adversely impacted our business, including demand for our products across multiple end-markets as well as our supply chain and operations. While we have experienced sequentially improving activity in most markets and geographies, the public health situation, global response measures and corresponding impacts on various markets remain fluid and uncertain and may lead to sudden changes in trajectory and outlook. Accordingly, we are currently unable to quantify the full and long-term impact of the pandemic on our results of operations, financial position and cash flows.
We are monitoring the global outbreak of COVID-19 and taking steps to mitigate its risks by working with our customers, employees, suppliers and other stakeholders. Significant portions of our workforce and operations have been impacted by quarantines, government orders and guidance, facility closures, illness, travel restrictions, implementation of precautionary measures and other restrictions. Over the course of the pandemic, we have continued to operate in accordance with established health and safety protocols across our facilities while maintaining an enhanced health and safety compliance program. More specifically, we have modified practices at our manufacturing locations and offices to adhere to guidance from the U.S. Centers for Disease Control and Prevention and local health and governmental authorities in our global network with respect to social distancing, physical separation, personal protective equipment and sanitization, and have restricted the number of employees permitted in common areas at any given time. Further actions may be required as conditions evolve, including if new waves of infection emerge in various parts of the globe or until a vaccine is widely available. In addition, because the pandemic has decreased customer demand in many of our end-markets, some of our businesses have continued to operate at reduced capacity. We cannot predict the number or timing of any future facility closures, the potential for operating at reduced capacity or the size of the workforce that may be impacted by potential labor actions such as furloughs or layoffs.
The COVID-19 pandemic has the potential to disrupt our supply chain as a result of shifts in demand, illness, quarantine, travel restrictions or financial hardship. We have been able to procure the critical raw materials and components necessary to continue production of our products, but there is no guarantee that we will be able to do so in the future. In addition, we may experience additional adverse impacts on our operational and commercial activities, costs, customer orders and purchases and our collections of accounts receivable, which may be material, and the extent of these adverse impacts on future operational and commercial activities, costs, customer orders and purchases and our collections remains uncertain even if conditions begin to improve.
Furthermore, the pandemic has impacted and may further impact the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates and interest rates. Due to the unprecedented and sustained social and economic consequences of the COVID-19 pandemic on the global economy generally, there is uncertainty around its duration and the timing of recovery. The ultimate significance of the COVID-19 pandemic, including any measures to reduce its spread, on our business will depend on events that are beyond our control and that we cannot predict and could have a material adverse effect on our consolidated results of operations, financial condition and cash flows.
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•We are subject to risks relating to our existing international operations and expansion into new geographical markets.
In 2020, the COVID-19 pandemic had a greater impact on revenue from international markets compared to the United States, resulting in a greater rate of decline. As a result, approximately 45% of our revenues for 2020 as compared to approximately 47% in 2019 were derived outside the United States. This was mostly in Europe and China.
We will continue to focus on global markets as part of our overall growth strategy and expect sales from outside the United States to continue to represent a significant portion of our revenues. Our international operations and our global expansion strategy are subject to general risks related to such operations, including:
| o | political, social and economic instability and disruptions; | ||||
| o | government import and export controls, economic sanctions, embargoes or trade restrictions; | ||||
| o | the imposition of duties and tariffs and other trade barriers and retaliatory countermeasures; | ||||
| o | limitations on ownership and dividend of earnings; | ||||
| o | transportation delays and interruptions; | ||||
| o | labor unrest and current and changing regulatory environments; | ||||
| o | widespread public health crises, such as a pandemic or epidemic; | ||||
| o | increased compliance costs, including costs associated with disclosure requirements and related due diligence; | ||||
| o | the impact of loss of a single-source manufacturing facility; | ||||
| o | difficulties in staffing and managing multi-national operations; | ||||
| o | limitations on our ability to enforce legal rights and remedies; | ||||
| o | potentially adverse tax consequences; and | ||||
| o | access to or control of networks and confidential information due to local government controls and vulnerability of local networks to cyber risks. | ||||
If we are unable to successfully manage the risks associated with expanding our global business or adequately manage operational risks of our existing international operations, the risks could have a material adverse effect on our growth in geographic markets, our reputation, our consolidated results of operations, financial position and cash flows.
•Our operations, businesses and products are subject to cybersecurity risks.
We depend on our own and third party IT systems, including cloud-based systems and managed service providers, to store, process and protect our information and support our business activities. We also use our third party IT systems to support employee data processing for our global work force and to support customer business activities, such as transmitting payment information, providing mobile monitoring services, and capturing operational data. Additionally, some of our products contain computer hardware and software and offer the ability to connect to computer networks. Increasingly, our customers, including government customers, are requiring cybersecurity protections and mandating cybersecurity standards for our products. Our business has both an increasing reliance on IT systems and an increasing digital footprint as a result of changing technologies, connected devices and digital offerings, as well as expanded remote work policies. If these technologies, systems, products or services are damaged, cease to function properly, are compromised due to employee or third-party contractor error, user error, malfeasance, system errors, or other vulnerabilities, or are subject to cybersecurity attacks, such as those involving denial of service attacks, unauthorized access, malicious software, or other intrusions, including by criminals, nation states or insiders, our business may be adversely impacted. The impacts could include production downtimes, operational delays, and other impacts on our operations and ability to provide products and services to our customers; compromise of confidential, proprietary or otherwise protected information, including personal information and customer confidential data; destruction, corruption, or theft of data or intellectual property; manipulation, disruption, or improper use of these technologies, systems, products or services; financial losses from fraudulent transactions, remedial actions, loss of business or potential liability; adverse media coverage; and legal claims or legal proceedings, including regulatory investigations, actions and fines; and damage to our reputation. There has been a rise in the number of cyberattacks targeting confidential business information
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generally and in the manufacturing industry specifically, as well as an increase in cyberattacks targeting managed service providers, by both state-sponsored and criminal organizations. Moreover, there has been a rise in the number of cyberattacks that depend on human error or manipulation, including phishing attacks or schemes that use social engineering to gain access to systems or perpetuate wire transfer or other frauds.
These trends increase the likelihood of such events occurring as well as the costs associated with protecting against such attacks. It is possible for vulnerabilities in our IT systems to remain undetected for an extended period of time up to and including several years. We attempt to mitigate these risks by employing a number of measures, including employee training, systems monitoring and other technical security controls, a breach response plan, maintenance of backup and protective systems, and security personnel. Not withstanding those measures, our systems, networks, products and services remain potentially vulnerable to known or unknown cybersecurity attacks and other threats, any of which could have a material adverse effect on our consolidated results of operations, financial condition and cash flows. We, and the service providers that we depend on to support our systems and business operations, are regularly the target of, and periodically respond to, cyberattacks, including phishing and denial-of-service attacks, and must continuously monitor and develop our systems to protect our technology infrastructure and data from misappropriation or corruption. In addition, a cybersecurity attack could persist for an extended period of time before being detected, and, following detection, it could take considerable time for us to obtain full and reliable information about the extent, amount and type of information compromised. During the course of an investigation, we may not know the full impact of the event and how to remediate it, and actions, decisions and mistakes that are taken or made may further increase the negative effects of the event on our business, results of operations and reputation. While we maintain insurance coverage that is intended to address certain aspects of cybersecurity risks, such insurance coverage may not cover all losses or all types of claims that arise. As cyber threats continue to evolve, cybersecurity and data protection laws and regulations continue to develop in the U.S. and globally, and our business continues to move towards increased online connectivity within our information systems and through more Internet-enabled products and offerings, we expect to expend additional resources to continue to build out our compliance programs, strengthen our information security, data protection and business continuity measures, and investigate and remediate vulnerabilities.
•Unforeseen developments in contingencies such as litigation and product recalls could adversely affect our consolidated results of operations, financial condition and cash flows.
We and certain of our subsidiaries are, and from time to time may become, parties to a number of legal proceedings incidental to our businesses, including alleged injuries arising out of the use of products or exposure to hazardous substances, or claims related to patent infringement, employment matters and commercial disputes. The defense of these lawsuits may require significant expenses and divert management’s attention, and we may be required to pay damages that could adversely affect our consolidated results of operations, financial condition and cash flows. In addition, any insurance or indemnification rights that we may have may be insufficient or unavailable to protect us against potential loss exposures.
We may be exposed to product recalls and adverse public relations if our products are alleged to have defects, to cause property damage, to cause injury or illness, or if we are alleged to have violated governmental regulations. A product recall could result in substantial and unexpected expenditures, which would reduce operating profit and cash flow. In addition, a product recall may require significant management attention. Product recalls may hurt the value of our brands and lead to decreased demand for our products. Product recalls also may lead to increased scrutiny by federal, state or international regulatory agencies of our operations and increased litigation and could have a material adverse effect on our consolidated results of operations, financial condition and cash flows.
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•Our revenue, operating profits and cash flows could be adversely affected if our businesses are unable to protect or obtain patent and other intellectual property rights.
Our businesses own patents, trademarks, licenses and other forms of intellectual property related to their products and continuously invest in research and development that may result in innovations and general intellectual property rights. Our businesses employ various measures to develop, maintain and protect their intellectual property rights. These measures may not be effective in capturing intellectual property rights, and they may not prevent their intellectual property from being challenged, invalidated, or circumvented, particularly in countries where intellectual property rights are not highly developed or protected. Unauthorized use of our businesses' intellectual property rights could adversely impact the competitive position of our businesses and could have a negative impact on our consolidated results of operations, financial condition and cash flows.
Industry Risks
•Increasing product/service and price competition by international and domestic competitors, including new entrants, and our inability to introduce new and competitive products could cause our businesses to generate lower revenue, operating profits and cash flows.
Our competitive environment is complex because of the wide diversity of the products that our businesses manufacture and the markets they serve. In general, most of our businesses compete with only a few companies. Our ability to compete effectively depends on how successfully we anticipate and respond to various competitive factors, including new products, digital solutions and support services that may be introduced by competitors, changes in customer preferences, evolving regulations, new business models and technologies and pricing pressures. If our businesses are unable to anticipate their competitors’ developments or identify customer needs and preferences on a timely basis, or successfully introduce new products, digital solutions and support services in response to such competitive factors, they could lose customers to competitors. If our businesses do not compete effectively, we may experience lower revenue, operating profits and cash flows.
•Our operating results depend in part on the timely development and commercialization, and customer acceptance, of new and enhanced products, digital solutions and support services based on technological innovation.
The success of new and improved products, digital solutions and support services depends on their initial and continued acceptance by our customers. Certain of our businesses sell in markets that are characterized by rapid technological changes, frequent new product introductions, changing industry standards and corresponding shifts in customer demand, which may result in unpredictable product transitions, shortened life cycles and increased importance of being first to market. Failure to correctly identify and predict customer needs and preferences, to deliver high quality, innovative and competitive products to the market, to adequately protect our intellectual property rights or to acquire rights to third-party technologies, to provide adequate data security and privacy protections and to stimulate customer demand for, and convince customers to adopt new products, digital solutions and support services could adversely affect our consolidated results of operations, financial condition and cash flows. In addition, we may experience difficulties or delays in the research, development, production or marketing of new products, digital solutions and support services which may prevent us from recouping or realizing a return on the investments required to continue to bring new products and services to market.
•We could lose customers or generate lower revenue, operating profits and cash flows if there are significant increases in the cost of our raw materials or components or if suppliers are not able to meet our quality and delivery requirements.
We purchase raw materials, sub-assemblies and components for use in our manufacturing operations. Factors such as freight costs, transportation availability, inventory levels, the level of imports, the imposition of duties, tariffs and other trade barriers and general economic conditions may affect the price of these raw materials, sub-assemblies and components. Significant price increases for certain commodities, other raw materials or components could adversely affect operating profits of our businesses. While we generally attempt to mitigate the impact of increased raw material prices by hedging or passing along the increased costs to customers, there may be a time delay between the increased raw material prices and the ability to increase the prices of products, or we may be unable to increase the prices of products due to a competitor’s pricing pressure or other factors.
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We use a wide range of raw materials and components in our manufacturing operations that come from numerous suppliers. While we believe that sources of supply for raw materials and components are generally adequate, it is difficult to predict what effects of extended lead times or shortages may have in the future. In addition, some of the raw materials and components may be available only from limited or single source suppliers. If a single source or limited source supplier were to cease or interrupt production for any reason or otherwise fail to supply those raw materials or components to us on favorable purchase terms, including at favorable prices, in sufficient quantities and with adequate lead times needed for efficient manufacturing, our ability to meet customer commitments, and satisfy market demands for affected products could be negatively affected. Consequently, a significant price increase in raw materials or a shortage in or the unavailability of raw materials or components may result in a loss of customers and adversely impact our consolidated results of operations, financial condition and cash flows.
Legal and Regulatory Risks
•Our businesses are subject to regulation and their profitability and reputation could be adversely affected by domestic and foreign governmental and public policy changes, risks associated with emerging markets, changes in statutory tax rates and unanticipated outcomes with respect to tax audits.
Our businesses’ domestic and international sales and operations must comply with a wide variety of laws, regulations and policies (including environmental, employment and health and safety regulations, data security laws, data privacy laws, export/import laws, tax policies such as export subsidy programs and research and experimentation credits, carbon emission regulations, energy efficiency and design regulations and other similar programs). These laws, regulations and policies are complex, change frequently, have tended to become more stringent over time and may be inconsistent across jurisdictions. Failure to comply (or any alleged or perceived failure to comply) with any of the foregoing could result in civil and criminal, monetary and non-monetary penalties as well as potential damage to our reputation and disruption to our business. We cannot provide assurance that our costs of complying with new and evolving regulatory reporting requirements and current or future laws will not exceed our estimates. In addition, the United Kingdom's exit from the European Union common market and the terms of the UK EU Trade and Cooperation agreement may impact our market access and pricing, compliance with regulatory requirements and ability to hire and maintain personnel. Any of these factors could adversely affect customer demand, our relationships with customers and suppliers, and our business and financial position.
Certain of our businesses have sales or operations in countries, including Brazil, Russia, India and China, and may in the future invest in other countries, any of which may carry high levels of currency, political, compliance, or economic risk. While these risks or the impact of these risks are difficult to predict, any one or more of them could adversely affect our businesses and reputation.
Our effective tax rate is impacted by changes in the mix among earnings in countries with differing statutory tax rates, changes in the valuation allowance of deferred tax assets and changes in tax laws. The amount of income taxes and other taxes paid can be adversely impacted by changes in statutory tax rates and laws and are subject to ongoing audits by domestic and international authorities. If these audits result in assessments different from amounts estimated, then our consolidated results of operations, financial position and cash flows may be adversely affected by unfavorable tax adjustments.
Financial and Strategic Risks
•Our exposure to exchange rate fluctuations on cross-border transactions and the translation of local currency results into U.S. dollars could negatively impact our results of operations.
We conduct business through our subsidiaries in many different countries, and fluctuations in currency exchange rates could have a significant impact on our reported consolidated results of operations, financial condition and cash flows, which are presented in U.S. dollars. Cross-border transactions, both with external parties and intercompany relationships, result in increased exposure to foreign exchange effects. Accordingly, significant changes in currency exchange rates, particularly the Euro, Chinese Renminbi (Yuan), Swedish krona, Pound Sterling, Indian rupee, Singapore dollar, Danish krone, and Canadian dollar, could cause fluctuations in the reported results of our businesses’ operations that could negatively affect our results of operations. Additionally, the strengthening of certain currencies such as the Euro and
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U.S. dollar potentially exposes us to competitive threats from lower cost producers in other countries. Our sales are translated into U.S. dollars for reporting purposes. The strengthening of the U.S. dollar could result in unfavorable translation effects as the results of foreign locations are translated into U.S. dollars.
•Our growth and results of operations may be adversely affected if we are unsuccessful in our capital allocation and acquisition program.
We expect to continue our strategy of seeking to acquire value creating add-on businesses that broaden our existing position and global reach as well as, in the right circumstances, strategically pursue larger acquisitions that could have the potential to either complement our existing businesses or allow us to pursue a new platform. However, there can be no assurance that we will be able to continue to find suitable businesses to purchase, that we will be able to acquire such businesses on acceptable terms, or that all closing conditions will be satisfied with respect to any pending acquisition. In addition, we face the risk that a completed acquisition may underperform relative to expectations. We may not achieve the synergies originally anticipated, may become exposed to unexpected liabilities or may not be able to sufficiently integrate completed acquisitions into our current business and growth model. Further, if we fail to allocate our capital appropriately, in respect of either our acquisition program or organic growth in our operations, we could be overexposed in certain markets and geographies and unable to expand into adjacent products or markets. These factors could potentially have an adverse impact on our consolidated results of operations, financial condition and cash flows.
•If the Apergy spin-off, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, we and our shareholders could be subject to significant tax liabilities.
In connection with the spin-off of Apergy, we received a private letter ruling from the Internal Revenue Service (the "IRS Ruling") together with an opinion of McDermott Will & Emery LLP, our tax counsel, substantially to the effect that, among other things, certain transactions to effect the spin-off will qualify as a tax-free reorganization for U.S. federal income tax purposes under Section 368(a)(1)(D) of the Internal Revenue Code (the “Code”), and the distribution will qualify as a tax-free distribution to our shareholders under Section 355 of the Code. The IRS Ruling and the opinion of tax counsel relied on certain facts and assumptions, and certain representations and undertakings from us and Apergy, including those regarding the past and future conduct of certain of our businesses and other matters. If any of these facts, assumptions, representations or undertakings are incorrect or not satisfied, we and our shareholders may not be able to rely on the IRS Ruling or the opinion, and could be subject to significant tax liabilities. Notwithstanding the IRS Ruling and the opinion, the IRS could determine on audit that the distribution is taxable if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated or if it disagrees with the conclusions in the opinion. In addition, we and Apergy intend for certain related transactions to qualify for tax-free treatment under U.S. federal, state and local tax law and/or foreign tax law.
If the distribution is determined to be taxable for U.S. federal income tax purposes, we and our shareholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities. For example, if the distribution fails to qualify for tax-free treatment, we would, for U.S. federal income tax purposes, be treated as if we had sold the Apergy common stock in a taxable sale for its fair market value, and our shareholders who are subject to U.S. federal income tax would be treated as receiving a taxable distribution in an amount equal to the fair market value of the Apergy common stock received in the distribution. In addition, if certain related transactions fail to qualify for tax-free treatment under U.S. federal, state and local tax law and/or foreign tax law, we could incur significant tax liabilities under U.S. federal, state, local and/or foreign tax law, respectively.
•The indemnification provisions of acquisition and disposition agreements by which we have acquired or sold or disposed of companies may not fully protect us and may result in unexpected liabilities.
Certain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of those companies before we acquired them. In most of these agreements, however, the liability of the former owners is limited and certain former owners may be unable to meet their indemnification responsibilities. Similarly, the purchasers of our disposed operations may from time to time agree to indemnify us for operations of such businesses after the closing. We cannot be assured that any of these indemnification provisions will fully protect us, and as a result we may face unexpected liabilities that adversely affect our consolidated results of operations, financial condition and cash flows. In addition, we have retained certain liabilities directly or
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through indemnifications made to the buyers of businesses we have sold or disposed against known and unknown contingent liabilities such as tax liabilities and environmental matters.
In connection with the spin-off, Apergy agreed to indemnify us for any losses relating to the conduct of the Apergy business. There can be no assurance that the indemnity agreements will be sufficient to protect us against the full amount of any liabilities that may arise, or that the indemnitors will be able to fully satisfy their indemnification obligations. The failure to receive amounts for which we are entitled to indemnification could adversely affect our results of operations, cash flows and financial condition.
Labor and Employment Risks
•Our reputation, ability to do business and results of operations may be impaired by improper conduct by any of our employees, agents, or business partners.
While we strive to maintain high standards, we cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by our employees, agents, or business partners that would violate United States and/or non-United States laws or fail to protect our confidential information, including the laws governing payments to government officials, bribery, fraud, anti-kickback and false claims, competition, export and import compliance, environmental compliance, money laundering and data privacy, as well as the improper use of proprietary information or social media. Any such violations of law or improper actions could subject us to civil or criminal investigations in the United States and in other jurisdictions, could lead to substantial civil or criminal, monetary and non-monetary penalties and related shareholder lawsuits, could lead to increased costs of compliance and could damage our reputation, our consolidated results of operations, financial condition and cash flows.
•If we experience work stoppages, union and works council campaigns and other labor disputes, our productivity and results of operations could be adversely impacted.
We have a number of collective bargaining units in the United States and various foreign collective labor arrangements. We are subject to potential work stoppages, union and works council campaigns and other labor disputes, any of which could adversely impact our productivity, reputation, consolidated results of operations, financial condition and cash flows.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 2. PROPERTIES
The number, type, location and size of the properties used by our operations as of December 31, 2020 are shown in the following charts, by segment:
| Number and nature of facilities | Square footage (in 000s) | ||||||||||||||||||||||||||||||||||
| Manufacturing | Warehouse | Sales / Service | Total | Owned | Leased | ||||||||||||||||||||||||||||||
| Engineered Products | 29 | 17 | 10 | 56 | 2,855 | 1,201 | |||||||||||||||||||||||||||||
| Fueling Solutions | 30 | 10 | 24 | 64 | 1,128 | 1,918 | |||||||||||||||||||||||||||||
| Imaging & Identification | 12 | 15 | 60 | 87 | 697 | 928 | |||||||||||||||||||||||||||||
| Pumps & Process Solutions | 38 | 7 | 24 | 69 | 3,251 | 896 | |||||||||||||||||||||||||||||
| Refrigeration & Food Equipment | 23 | 24 | 18 | 65 | 1,406 | 2,633 | |||||||||||||||||||||||||||||
| Locations | Expiration dates of leased facilities (in years) | ||||||||||||||||||||||||||||||||||||||||
| North America | Europe | Asia | Other | Total | Minimum | Maximum | |||||||||||||||||||||||||||||||||||
| Engineered Products | 34 | 14 | 5 | 1 | 54 | 1 | 8 | ||||||||||||||||||||||||||||||||||
| Fueling Solutions | 16 | 17 | 10 | 3 | 46 | 1 | 12 | ||||||||||||||||||||||||||||||||||
| Imaging & Identification | 10 | 36 | 22 | 1 | 69 | 1 | 11 | ||||||||||||||||||||||||||||||||||
| Pumps & Process Solutions | 31 | 17 | 8 | 4 | 60 | 1 | 12 | ||||||||||||||||||||||||||||||||||
| Refrigeration & Food Equipment | 29 | 17 | 8 | 5 | 59 | 1 | 10 | ||||||||||||||||||||||||||||||||||
Our owned and leased facilities are well-maintained and suitable for our operations.
ITEM 3. LEGAL PROCEEDINGS
See Part II, Item 8, Notes to Consolidated Financial Statements, Note 17 — Commitments and Contingent Liabilities.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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INFORMATION ABOUT OUR EXECUTIVE OFFICERS
All of our officers are elected annually at the first meeting of the Board of Directors following our annual meeting of shareholders, and are subject to removal at any time by the Board of Directors. Our executive officers as of February 12, 2021, and their positions with Dover (and, where relevant, prior business experience) for the past five years, are as follows:
| Name | Age | Positions Held and Prior Business Experience | ||||||||||||
| Richard J. Tobin | 57 | President and Chief Executive Officer (since May 2018) and Director (since August 2016); prior thereto Chief Executive Officer (from 2013 to 2018) of CNH Industrial NV. | ||||||||||||
| Kimberly K. Bors | 60 | Senior Vice President, Human Resources (since January 2020) of Dover; prior thereto Senior Vice President and Chief Human Resources Officer of The Mosaic Company (from July 2017 to December 2018); prior thereto Senior Vice President, Human Resources & Administration for Schneider, North America at Schneider Electric (September 2014 to June 2017). | ||||||||||||
| Ivonne M. Cabrera | 54 | Senior Vice President, General Counsel and Secretary (since January 2013) of Dover. | ||||||||||||
| Brad M. Cerepak | 61 | Senior Vice President and Chief Financial Officer (since May 2011) of Dover. | ||||||||||||
| Girish Juneja | 51 | Senior Vice President and Chief Digital Officer (since May 2017) of Dover; prior thereto Senior Vice President/Chief Technology Officer and General Manager of the Marketplace Solutions Business of Altisource (from January 2014 to April 2017). | ||||||||||||
| David J. Malinas | 46 | Senior Vice President, Operations (since July 2019) of Dover; prior thereto Senior Vice President and President, Industrial Process for ITT Corporation (from June 2017 to June 2019); prior thereto Vice President and General Manager, Controlled Temperature Technologies Businesses at Thermo Fisher Scientific Inc. ("Thermo Fisher") (from March 2017 to June 2017); prior thereto Vice President, Industrial Segment at Thermo Fisher (from December 2015 to March 2017); prior thereto Vice President and General Manager, Global Chemicals Business Unit (from June 2012 to November 2015) at Thermo Fisher. | ||||||||||||
| Anthony K. Kosinski | 54 | Vice President, Tax (since June 2016) of Dover; prior thereto Director, Domestic Tax (June 2003 to June 2016) of Dover. | ||||||||||||
| James M. Moran | 55 | Vice President, Treasurer (since November 2015) of Dover; prior thereto Senior Vice President and Treasurer (from June 2013 to August 2015) of Navistar International Corporation (“NIC”); prior thereto Vice President and Treasurer (from 2008 to June 2013) of NIC; also served as Senior Vice President and Treasurer of Navistar, Inc. (from June 2013 to August 2015) . | ||||||||||||
| Ryan W. Paulson | 47 | Vice President & Controller (from July 2019) of Dover; prior thereto Assistant Controller, Global Consolidations & Operations Accounting (from August 2017 to July 2019); prior thereto partner at PricewaterhouseCoopers LLP (from July 2012 to June 2017). | ||||||||||||
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information and Dividends
The principal market in which Dover common stock is traded is the New York Stock Exchange.
Holders
The number of holders of record of Dover common stock as of February 2, 2021 was approximately 18,639. This figure includes participants in our domestic 401(k) program.
Securities Authorized for Issuance Under Equity Compensation Plans
Information relating to securities authorized for issuance under our equity compensation plans is contained in Part III, Item 12 of this Form 10-K.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
During the year ended December 31, 2020, under our February 2018 standing share repurchase authorization, which expired on December 31, 2020, the Company purchased 979,165 shares of common stock at a total cost of $106,279 or $108.54 per share.
The total number of shares purchased by month during the fourth quarter of 2020 were as follows:
| Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value in Thousands) of Shares that May Yet Be Purchased under the Plans or Program | ||||||||||||||||||||
| Period | February 2018 Program | ||||||||||||||||||||||
| October 1 to October 31 | — | $ | — | — | 7,811,385 | ||||||||||||||||||
| November 1 to November 30 | 392,700 | 123.96 | 392,700 | 7,418,685 | |||||||||||||||||||
| December 1 to December 31 | 37,806 | 123.94 | 37,806 | 7,380,879 | |||||||||||||||||||
| For the Fourth Quarter | 430,506 | $ | 123.95 | 430,506 | 7,380,879 | ||||||||||||||||||
Upon expiration of the February 2018 share repurchase authorization, there were 7,380,879 shares remaining.
In November 2020, the Company's Board of Directors approved a new standing share repurchase authorization, whereby we may repurchase up to 20 million shares beginning on January 1, 2021 through December 31, 2023.
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Performance Graph
This performance graph does not constitute soliciting material, is not deemed filed with the Securities and Exchange Commission ("SEC"), and is not incorporated by reference in any of our filings under the Securities Act of 1933 or the Exchange Act of 1934, whether made before or after the date of this Form 10-K and irrespective of any general incorporation language in any such filing, except to the extent we specifically incorporate this performance graph by reference therein.
Comparison of Five-Year Cumulative Total Return +
Dover Corporation, S&P 500 Index, Peer Group Index
Total Shareholder Returns
Data Source: Research Data Group, Inc
_______________________
+Total return assumes reinvestment of dividends.
This graph assumes $100 invested on December 31, 2015 in Dover common stock, the S&P 500 index and a peer group index.
The 2020 peer index consists of the following 29 public companies selected by Dover.
| 3M Company | Flowserve Corporation | Parker-Hannifin Corp. | ||||||
| Ametek Inc. | Fortive Corp. | Pentair Plc | ||||||
| Carlisle Companies Inc. | Honeywell International Inc. | Regal Beloit Corp. | ||||||
| Colfax Corp. | IDEX Corporation | Rockwell Automation Inc. | ||||||
| Corning Inc. | Illinois Tool Works Inc. | Snap-on Inc. | ||||||
| Crane Co. | Ingersoll Rand Inc. | SPX Flow Inc. | ||||||
| Danaher Corp. | ITT Inc. | Teledyne Technologies Inc. | ||||||
| Eaton Corporation Plc | Johnson Controls International Plc | Textron Inc. | ||||||
| Emerson Electric Co. | Lennox International Inc. | The Timken Company | ||||||
| Enerpac Tool Group Corp. | Nordson Corp. | |||||||
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ITEM 6. SELECTED FINANCIAL DATA
| in thousands except per share data | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||||
| Revenue | $ | 6,683,760 | $ | 7,136,397 | $ | 6,992,118 | $ | 6,820,886 | $ | 6,043,224 | ||||||||||||||||||||||
| Earnings from continuing operations | 683,451 | 677,918 | 591,145 | 746,663 | 502,128 | |||||||||||||||||||||||||||
| (Loss) earnings from discontinued operations | — | — | (20,878) | 65,002 | 6,764 | |||||||||||||||||||||||||||
| Net earnings | 683,451 | 677,918 | 570,267 | 811,665 | 508,892 | |||||||||||||||||||||||||||
| Basic earnings (loss) per share: | ||||||||||||||||||||||||||||||||
| Continuing operations | $ | 4.74 | $ | 4.67 | $ | 3.94 | $ | 4.80 | $ | 3.23 | ||||||||||||||||||||||
| Discontinued operations | — | — | (0.14) | 0.42 | 0.04 | |||||||||||||||||||||||||||
| Net earnings | 4.74 | 4.67 | 3.80 | 5.21 | 3.28 | |||||||||||||||||||||||||||
| Weighted average basic shares outstanding | 144,050 | 145,198 | 149,874 | 155,685 | 155,231 | |||||||||||||||||||||||||||
| Diluted earnings (loss) per share: | ||||||||||||||||||||||||||||||||
| Continuing operations | $ | 4.70 | $ | 4.61 | $ | 3.89 | $ | 4.73 | $ | 3.21 | ||||||||||||||||||||||
| Discontinued operations | — | — | (0.14) | 0.41 | 0.04 | |||||||||||||||||||||||||||
| Net earnings | 4.70 | 4.61 | 3.75 | 5.15 | 3.25 | |||||||||||||||||||||||||||
| Weighted average diluted shares outstanding | 145,393 | 146,992 | 152,133 | 157,744 | 156,636 | |||||||||||||||||||||||||||
| Dividends per common share | $ | 1.97 | $ | 1.94 | $ | 1.90 | $ | 1.82 | $ | 1.72 | ||||||||||||||||||||||
| Capital expenditures | $ | 165,692 | $ | 186,804 | $ | 170,994 | $ | 170,068 | $ | 139,578 | ||||||||||||||||||||||
| Depreciation and amortization | 279,051 | 272,287 | 282,580 | 283,278 | 249,672 | |||||||||||||||||||||||||||
Total assets (1) | 9,152,074 | 8,669,477 | 8,365,771 | 10,658,359 | 10,130,325 | |||||||||||||||||||||||||||
| Total long-term debt, including current maturities | 3,108,829 | 2,985,716 | 2,943,660 | 3,336,713 | 3,207,632 | |||||||||||||||||||||||||||
All results and data in the table above reflect continuing operations, unless otherwise noted. See Note 4 — Acquisitions and Note 5 — Discontinued and Disposed Operations in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding the impact of 2020, 2019 and 2018 acquisitions and disposed and discontinued operations.
(1) Includes assets from discontinued operations
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand our results of operations and financial condition for the years ended December 31, 2020, 2019 and 2018. The MD&A should be read in conjunction with our Consolidated Financial Statements and Notes included in Item 8 of this Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed elsewhere in this Form 10-K, particularly in Item 1A. "Risk Factors" and in the "Special Note Regarding Forward-Looking Statements" preceding Part I of this Form 10-K.
Throughout this MD&A, we refer to measures used by management to evaluate performance, including a number of financial measures that are not defined under accounting principles generally accepted in the United States of America ("GAAP"). Please see "Non-GAAP Disclosures" at the end of this Item 7 for further detail on these financial measures. We believe these measures provide investors with important information that is useful in understanding our business results and trends. Reconciliations within this MD&A provide more details on the use and derivation of these measures.
OVERVIEW
Dover Corporation is a diversified global manufacturer and solutions provider delivering innovative equipment and components, consumable supplies, aftermarket parts, software and digital solutions and support services.
For the year ended December 31, 2020, consolidated revenue was $6.7 billion, a decrease of $0.5 billion or 6.3%, as compared to the prior year. This decline included an organic revenue decline of 6.6% driven by COVID-19 and a 0.7% impact from dispositions, partially offset by acquisition-related growth of 1.0%. Overall, customer pricing favorably impacted revenue by approximately 0.7% for the year.
Within our Engineered Products segment, revenue decreased $166.3 million, or 9.8%, from the prior year, reflecting a broad-based organic revenue decline of 10.3%, partially offset by acquisition-related growth of 0.3% and a favorable foreign currency translation of 0.2%. The organic revenue decline was primarily driven by the global economic downturn precipitated by the COVID-19 pandemic. The impact was broad-based across the segment, with the most significant impacts experienced in our waste handling, industrial winch and hoist, industrial automation and fluid dispensing businesses.
Our Fueling Solutions segment revenue decreased $143.9 million, or 8.9%, from prior year, reflecting an organic decline of 8.8% and an unfavorable impact from foreign currency translation of 0.3%, partially offset by acquisition-related growth of 0.2%. The organic revenue decline was principally driven by the adverse effects of COVID-19 and reduced underground equipment volume in China due to the tapering of government-mandated infrastructure upgrades.
Our Imaging & Identification segment revenue decreased $46.3 million, or 4.3%, from the prior year, comprised of organic decline of 7.2% and an unfavorable impact from foreign currency translation of 1.0%, partially offset by acquisition-related growth of 3.9%. The organic revenue decline was primarily driven by the global economic downturn precipitated by the COVID-19 pandemic, which materially impacted our digital textile printing business, as government-mandated clothing and apparel retail closures and widespread practice of working from home reduced demand worldwide for apparel and textiles.
Our Pumps & Process Solutions segment revenue decreased $14.5 million, or 1.1%, from the prior year, attributable to an organic decline of 2.3% and a 0.5% decrease from a disposition, partially offset by acquisition-related growth of 1.1% and a favorable impact from foreign currency translation of 0.6%. The organic revenue decline was principally driven by continued weakness in demand for compression components and aftermarket services, as well as continued slower demand for industrial pumps due to pandemic-related disruptions and weaker activity in the energy industry, which was partially offset by strong performance in the biopharma and plastics & polymers markets.
Our Refrigeration & Food Equipment segment revenue decreased $80.5 million, or 5.8%, from the prior year, reflecting an organic revenue decline of 3.0% and a disposition related decline of 2.9%, partially offset by a favorable impact from foreign currency translation of 0.1%. The organic decline was due to the impact of COVID-19 as government actions to contain the spread of the virus as well as atypically high volume of retail grocery sales during the early staged of the pandemic, resulted
27
in deferred customer orders and operational inefficiencies across the segment. The decline was partially offset by increased project activity in can-shaping equipment.
From a geographic perspective, organic revenue for the U.S., our largest market, declined 3.1%, while organic revenue in Europe and Asia declined 8.5% and 13.5%, respectively, year over year. Organic revenue in all other geographic markets declined 11.2%. Three out of our five segments experienced declines in U.S. organic sales, while organic sales in the Fueling Solutions and Refrigeration & Food Equipment segments grew 3.8% and 2.3%, respectively. Operational and demand headwinds from the COVID-19 pandemic led to a decline in Europe for four of our five segments, while the Pumps & Process Solutions segment grew 0.7%. The decline in Asia was driven mainly by a reduction in China where our Fueling Solutions segment, our second largest business in China, faced significant headwinds due to the expiration of the government's double-wall upgrade mandate that drove significant activity in prior years, as well as continued slower demand from the local national oil companies.
Gross profit was $2.5 billion for the year ended December 31, 2020, a decrease of $146.9 million, or 5.6%, as compared to the prior year. Gross profit decreased due to lower revenue as productivity initiatives including prior rightsizing programs and cost containment actions were partially offset by increased material costs and inflation and higher restructuring costs. Gross profit margin expanded to 37.0% for the year ended December 31, 2020 compared to 36.7% for the prior year. For further discussion related to our consolidated and segment results, see "Consolidated Results of Operations" and "Segment Results of Operations," respectively, within MD&A.
Bookings decreased 4.4% over the prior year to $6.9 billion for the year ended December 31, 2020. This included an organic bookings decline of 4.6%, a 0.6% decline due to dispositions, and an unfavorable impact due to foreign exchange rate of 0.2%, partially offset by a 1.0% increase in acquisition-related bookings. Bookings declined organically in four segments primarily as a result of the global impact on customer demand from the COVID-19 pandemic, and increased in our Refrigeration & Food Equipment on the back of positive trends, most significantly in can-shaping, as well as food retail and heat exchanger markets. Overall, our book-to-bill increased from the prior year to 1.04. Backlog as of December 31, 2020 was $1.8 billion, up from $1.5 billion from the prior year. The increase in backlog occurred in the third and fourth quarters of 2020 as order rates sequentially improved after a significant second quarter decline due to COVID-19. Backlog as of December 31, 2020 included $0.5 billion, $0.2 billion, $0.2 billion, $0.4 billion and $0.5 billion in the Engineered Products, Fueling Solutions, Imaging & Identification, Pumps & Process Solutions and Refrigeration & Food Equipment segments, respectively. See definition of bookings, organic bookings, book-to-bill and backlog within "Segment Results of Operations".
During the year ended December 31, 2020, we executed rightsizing programs to further optimize operations. Rightsizing charges of $51.5 million included restructuring charges of $44.5 million and other costs of $7.0 million. Restructuring expense was comprised primarily of new actions executed in response to lower demand driven by COVID-19 as well as continuing broad-based selling, general and administrative expense reduction initiatives and broad-based operational efficiency initiatives focusing on footprint consolidation, and operational optimization and IT centralization. These restructuring charges were broad-based across all segments as well as corporate, with costs incurred of $10.3 million in Engineered Products, $6.7 million in Fueling Solutions, $5.9 million in Imaging & Identification, $13.4 million in Pumps & Process Solutions, $4.0 million in Refrigeration & Food Equipment and $4.1 million at Corporate. Other costs were comprised primarily of charges related to the restructuring actions and asset charges, principally due to a $3.6 million write off of assets, partially offset by a $1.7 million gain on sale of assets in our Refrigeration & Food Equipment segment. Additional programs, beyond the scope of the announced programs may be implemented during 2021 with related restructuring charges.
During the year ended December 31, 2020, we made a total of six acquisitions totaling $335.8 million, net of cash acquired. We acquired Sys-Tech Solutions, Inc. ("Systech"), a leading provider of product traceability, regulatory compliance and brand-protection software and solutions to pharmaceutical and consumer products manufacturers, for $161.8 million, net of cash acquired, to strengthen the Imaging & Identification segment. We acquired So. Cal. Soft-Pak, Incorporated ("Soft-Pak"), a leading specialized provider of integrated back office, route management and customer relationship management software solutions to the waste and recycling fleet industry for $45.5 million, net of cash acquired, within the Engineered Products segment. We acquired Em-tec GmbH ("Em-tec"), a leading designer and manufacturer of flow measurement devices that serve a wide array of medical and biopharmaceutical applications for $30.4 million, net of cash acquired, to expand the Pumps & Process Solution segment. We acquired Solaris Laser S.A. ("Solaris"), a global manufacturer of product identification and traceability solutions for $18.7 million, net of cash acquired, to strengthen the Imaging & Identification segment. We acquired Innovative Control Systems, Inc. (“ICS”), a leading provider of car wash controllers, payment
28
terminals, point-of-sale and wash site management software solutions for $77.0 million, net of cash acquired, to enhance the Fueling Solutions segment. See Note 4 — Acquisitions in the Consolidated Financial Statements in Item 8 of this Form 10-K for further details regarding the businesses acquired during the year.
On March 6, 2020, we completed the sale of the Chino, California branch of The AMS Group ("AMS Chino"), a regional aftermarket refrigeration services and solutions provider based in Southern California. The AMS Group was a wholly owned subsidiary, which was part of our Refrigeration & Food Equipment segment. We sold the business for total consideration of $15.4 million and recorded a pre-tax gain on sale of $5.2 million.
During the year ended December 31, 2020, we purchased approximately 1.0 million shares of our common stock for a total cost of $106.3 million, or $108.54 per share. In November 2020, our Board of Directors approved a new standing share repurchase authorization, whereby we may repurchase up to 20 million shares beginning on January 1, 2021 through December 31, 2023. We also continued our 65 year history of increasing our annual dividend per share and paid a total of $284.3 million in dividends to our shareholders.
COVID-19
The COVID-19 pandemic disrupted the global economy and adversely impacted our business, including demand for our products across multiple end-markets as well as our supply chain and operations.
Our foremost focus as we respond to the pandemic has been on the health and safety of our employees. We have enhanced health and safety measures across our facilities, including modifying practices to adhere to guidance from the U.S. Centers for Disease Control and Prevention and local health and governmental authorities with respect to social distancing, physical separation, personal protective equipment and sanitization. We also restricted the number of employees permitted in common areas at any given time. We enhanced our operational excellence model by memorializing our approach to sanitized manufacturing which includes procedures for dealing with confirmed COVID-19 cases, compliance auditing, and manufacturing line design. We will continue to closely monitor the risks posed by COVID-19 and adjust our practices accordingly.
We consider our companies to be essential suppliers to our customers and business partners as we provide products and services on which our customers and broader society rely upon daily to support crucial functions. Therefore, most of our U.S. and global facilities have remained substantially operational during the outbreak with enhanced safety protocols to protect the well-being of our employees.
In order to help mitigate the negative financial impact caused by the pandemic beginning late in the first quarter, we executed a number of temporary cost savings measures across the portfolio and at our corporate center, including short-term workforce rightsizing actions, adjustments to variable compensation to reflect current conditions, elimination of non-essential travel and reduction of discretionary spending. We also reduced our capital spending for the year, without deferring strategic ongoing initiatives. In addition, we initiated restructuring actions to drive longer-term cost savings and are proactively managing our working capital.
Over the course of 2020, we experienced sequentially improving activity in most markets and geographies, though demand remains lower than historical averages across markets that we expect will take longer to fully recover, like our food equipment and digital textile businesses. However, given sequential improvements in bookings in a majority of our markets late in 2020 and a higher year over year backlog, we expect continued improvement in our financial results in 2021.
The public health situation, global response measures and corresponding impacts on various markets remain fluid and uncertain and may lead to sudden changes in trajectory and outlook. We will continue to proactively respond to the situation and may take further actions that alter our business activity as may be required by governmental authorities, or that we determine are in the best interests of our employees and operations.
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CONSOLIDATED RESULTS OF OPERATIONS
| Years Ended December 31, | % / Point Change | |||||||||||||||||||||||||||||||
| (dollars in thousands, except per share figures) | 2020 | 2019 | 2018 | 2020 vs. 2019 | 2019 vs. 2018 | |||||||||||||||||||||||||||
| Revenue | $ | 6,683,760 | $ | 7,136,397 | $ | 6,992,118 | (6.3) | % | 2.1 | % | ||||||||||||||||||||||
| Cost of goods and services | 4,209,741 | 4,515,459 | 4,432,562 | (6.8) | % | 1.9 | % | |||||||||||||||||||||||||
| Gross profit | 2,474,019 | 2,620,938 | 2,559,556 | (5.6) | % | 2.4 | % | |||||||||||||||||||||||||
| Gross profit margin | 37.0 | % | 36.7 | % | 36.6 | % | 0.30 | 0.10 | ||||||||||||||||||||||||
| Selling, general and administrative expenses | 1,541,032 | 1,599,098 | 1,716,444 | (3.6) | % | (6.8) | % | |||||||||||||||||||||||||
| Selling, general and administrative expenses as a percent of revenue | 23.1 | % | 22.4 | % | 24.5 | % | 0.70 | (2.10) | ||||||||||||||||||||||||
| Loss on assets held for sale | — | 46,946 | — | nm* | nm* | |||||||||||||||||||||||||||
| Operating Earnings | 932,987 | 974,894 | 843,112 | (4.3) | % | 15.6 | % | |||||||||||||||||||||||||
| Interest expense | 111,937 | 125,818 | 130,972 | (11.0) | % | (3.9) | % | |||||||||||||||||||||||||
| Interest income | (3,571) | (4,526) | (8,881) | (21.1) | % | (49.0) | % | |||||||||||||||||||||||||
| Loss on extinguishment of debt | — | 23,543 | — | nm* | nm* | |||||||||||||||||||||||||||
| Gain on sale of business | (5,213) | — | — | nm* | nm* | |||||||||||||||||||||||||||
| Other income, net | (11,900) | (12,950) | (4,357) | (8.1) | % | 197.2 | % | |||||||||||||||||||||||||
| Earnings before provision for income taxes and discontinued operations | 841,734 | 843,009 | 725,378 | (0.2) | % | 16.2 | % | |||||||||||||||||||||||||
| Provision for income taxes | 158,283 | 165,091 | 134,233 | (4.1) | % | 23.0 | % | |||||||||||||||||||||||||
| Effective tax rate | 18.8 | % | 19.6 | % | 18.5 | % | (0.8) | 1.1 | ||||||||||||||||||||||||
| Earnings from continuing operations | 683,451 | 677,918 | 591,145 | 0.8 | % | 14.7 | % | |||||||||||||||||||||||||
| Loss from discontinued operations, net | — | — | (20,878) | nm* | nm* | |||||||||||||||||||||||||||
| Earnings from continuing operations per common share - diluted | $ | 4.70 | $ | 4.61 | $ | 3.89 | 2.0 | % | 18.5 | % | ||||||||||||||||||||||
| Loss from discontinued operations per common share - diluted | $ | — | $ | — | $ | (0.14) | nm* | nm* | ||||||||||||||||||||||||
* nm: not meaningful
Revenue
For the year ended December 31, 2020, revenue decreased $452.6 million, or 6.3% to $6.7 billion compared with 2019, reflecting an organic decline of 6.6% due to lower sales volumes due to pandemic-related impacts in our markets. Acquisition-related growth increased by 1.0% led by our Imaging and Identification and Pumps & Process Solutions segments, partially offset by a 0.7% decrease from dispositions within our Pumps & Process Solutions and Refrigeration & Food Equipment segments. Foreign currency translation had no significant impact to revenue for the year ended December 31, 2020. Customer pricing favorably impacted revenue by approximately 0.7% in 2020.
For the year ended December 31, 2019, revenue increased $144.3 million, or 2.1% to $7.1 billion compared with 2018, reflecting organic growth of 3.8%, led by our Fueling Solutions and Engineered Products segments, partially offset by our Refrigeration & Food Equipment segment. Revenue also increased due to acquisition-related growth of 0.8% from our Pumps & Process Solutions and Fueling Solutions segments, partially offset by an unfavorable impact from foreign currency translation of 2.0%, particularly in our Fueling Solutions and Imaging and Identification segments and a 0.5% impact from dispositions within our Pumps & Process Solutions and Fueling Solutions segments. Customer pricing favorably impacted revenue by approximately 1.0% in 2019.
30
Gross Profit
For the year ended December 31, 2020, gross profit decreased $146.9 million, or 5.6%, to $2.5 billion compared with 2019, primarily due to lower revenue as productivity initiatives including prior rightsizing programs and cost containment actions were partially offset by increased material costs and inflation and higher restructuring costs. Gross profit margin expanded 30 basis points to 37.0% as compared to the prior year due to benefits from productivity initiatives and restructuring and cost containment actions. We are managing production at our operating plants aggressively to match demand.
For the year ended December 31, 2019, gross profit increased $61.4 million, or 2.4% to $2.6 billion compared with 2018, primarily due to organic volume growth, pricing actions, and productivity initiatives including the benefits of rightsizing actions and cost reduction initiatives, as well as reduced rightsizing costs, partially offset by increased material costs, due, in part, to U.S. Section 232 and 301 tariff exposure. Gross profit margin increased 10 basis points to 36.7% as compared to the prior year.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the year ended December 31, 2020, decreased $58.1 million, or 3.6% to $1.5 billion compared with 2019, due to reduction in discretionary spend and benefits from rightsizing actions partially offset by higher restructuring costs of $7.7 million and a $3.6 million write-off of assets. As a percentage of revenue, selling, general and administrative expenses increased 70 basis points in 2020 to 23.1%, reflecting the decrease in revenue base.
Selling, general and administrative expenses for the year ended December 31, 2019, decreased $117.3 million, or 6.8% to $1.6 billion compared with 2018 primarily due to benefits from rightsizing actions started in 2018 and a decrease in restructuring costs of $23.7 million. As a percentage of revenue, selling, general and administrative expenses decreased 210 basis points in 2019 to 22.4%, reflecting the leverage of costs on a higher revenue base and the decrease in expenses.
Research and development costs, including qualifying engineering costs, are expensed when incurred and amounted to $142.1 million, $141.0 million and $143.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. These costs as a percent of revenue were 2.1%, 2.0% and 2.0% for the years December 31, 2020, 2019 and 2018, respectively.
Loss on assets held for sale
On March 29, 2019, we entered into a definitive agreement to sell Finder for total consideration of approximately $23.6 million net of estimated selling costs. As of March 31, 2019, Finder met the criteria to be classified as held for sale and based on the total consideration from the sale, net of selling costs, we recorded a loss on the assets held for sale of $46.9 million. The loss was comprised of an impairment on assets held for sale of $21.6 million and foreign currency translation losses reclassified from accumulated other comprehensive losses to current earnings of $25.3 million. We subsequently sold Finder on April 2, 2019, which generated total cash proceeds of $24.2 million.
Non-Operating Items
Interest Expense, net
For the year ended December 31, 2020, interest expense, net of interest income, decreased $12.9 million, or 10.7%, to $108.4 million compared with 2019 primarily due to lower interest rates on new debt issued in November 2019 of €500 million of 0.750% notes due 2027 and $300 million of 2.950% notes due 2029. The new notes repaid the old debt of €300 million of 2.125% notes and $450 million of 4.30% notes, which carried higher interest rates.
For the year ended December 31, 2019, interest expense, net of interest income, decreased $0.8 million, or 0.7%, to $121.3 million compared with 2018 due to the $350 million 5.45% 10-year notes that were paid in March 2018 that resulted in lower outstanding long-term debt and lower interest expense compared to 2018, partially offset by lower interest income.
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Loss on extinguishment of debt
On December 4, 2019, the Company extinguished the €300 million of 2.125% notes due 2020 and the $450 million of 4.30% notes due 2021. The Company was required to pay a make whole premium to the bondholders for the early extinguishment of debt, resulting in a loss of $23.5 million.
Gain on sale of business
On March 6, 2020, we sold AMS Chino within the Refrigeration & Food Equipment segment for total consideration of $15.4 million which included a working capital adjustment. A gain of $5.2 million was recognized on this sale. The disposal did not represent a strategic shift in operations and, therefore, did not qualify for presentation as discontinued operations.
There were no dispositions in the year 2019 aside from the sale of Finder as described above, and no significant dispositions in 2018 aside from the spin-off of Apergy, whose results are presented as discontinued operations.
Other income, net
For the years ended December 31, 2020, 2019 and 2018, other income, net was $11.9 million, $13.0 million and $4.4 million, respectively. For the year ended December 31, 2020, other income decreased compared to 2019 primarily due to decreased earnings from our equity method investments and increased foreign exchange losses resulting from the re-measurement and settlement of foreign currency denominated balances. For the year ended December 31, 2019, other income increased compared to 2018 primarily due to increased earnings from our equity method investments and reduction of non-operating losses from our defined benefit and post-retirement benefit plans.
Income Taxes
Our businesses have a global presence with 45%, 47% and 52% of our pre-tax earnings in 2020, 2019 and 2018, respectively, generated in foreign jurisdictions. Foreign earnings are generally subject to local country tax rates that differ from the 21.0% U.S. statutory tax rate. As a result, for our non-U.S. business locations, our effective foreign tax rate is typically lower than the U.S. statutory tax rate.
Our effective tax rate was 18.8% for the year ended December 31, 2020, compared to 19.6% and 18.5% for the years ended December 31, 2019 and December 31, 2018, respectively. The 2020, 2019 and 2018 rates were impacted by $22.2 million,$26.6 million, and $24.0 million respectively, of favorable net discrete items primarily driven by the tax benefit of share award exercises.
See Note 15 — Income Taxes in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional details.
Earnings from Continuing Operations
For the year ended December 31, 2020, earnings from continuing operations increased $5.5 million, or 0.8%, to $683.5 million, or $4.70 per share, compared with earnings from continuing operations of $677.9 million, or $4.61 per share, for the year ended December 31, 2019. Despite a revenue decline of 6.3% due to the impact of COVID-19, earnings increased due to broad-based cost containment actions, benefits from productivity and restructuring actions, a loss due to the after-tax extinguishment of debt of $18.4 million in the prior year and a loss on assets held for sale of $46.9 million in the prior year.
For the year ended December 31, 2019, earnings from continuing operations increased $86.8 million, or 14.7%, to $677.9 million, or $4.61 per share, compared with earnings from continuing operations of $591.1 million, or $3.89 per share, for the year ended December 31, 2018. Earnings increased due to organic volume growth, pricing actions, and productivity initiatives including the benefits of restructuring actions and cost reduction initiatives. Additionally, after-tax rightsizing costs were lower by $32.9 million in 2019 compared to 2018. These benefits more than offset increases in material costs due, in part, to U.S. Section 232 and 301 tariff exposure, as well as a loss due to the after-tax extinguishment of debt of $18.4 million and a loss on assets held for sale of $46.9 million. Diluted earnings per share also improved due to the benefit of the prior and current year share repurchases.
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Discontinued Operations
There were no discontinued operations for the years ended December 31, 2020 and December 31, 2019.
The results of discontinued operations for the year ended December 31, 2018 include the historical results of Apergy prior to its distribution on May 9, 2018. The year ended December 31, 2018 included costs incurred by the Company to complete the spin-off of Apergy amounting to $46.4 million reflected in selling, general and administrative expenses in discontinued operations. Due to lump-sum payments made in 2018 for Apergy participants in the Dover U.S. Pension Plan, non-cash settlement costs of approximately $9.2 million were classified within discontinued operations.
Refer to Note 5 — Discontinued and Disposed Operations in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information on disposed and discontinued operations.
Rightsizing Activities, which includes Restructuring and Other Costs
We recorded the following rightsizing costs for the year ended December 31, 2020:
Year Ended December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Engineered Products | Fueling Solutions | Imaging & Identification | Pumps & Process Solutions | Refrigeration & Food Equipment | Corporate | Total | ||||||||||||||||||||||||||||||||||
| Restructuring (GAAP) | $ | 10,307 | $ | 6,681 | $ | 5,946 | $ | 13,374 | $ | 4,015 | $ | 4,145 | $ | 44,468 | |||||||||||||||||||||||||||
| Other costs, net | 1,223 | 22 | 81 | 62 | 2,460 | 3,156 | 7,004 | ||||||||||||||||||||||||||||||||||
| Rightsizing (non-GAAP) | $ | 11,530 | $ | 6,703 | $ | 6,027 | $ | 13,436 | $ | 6,475 | $ | 7,301 | $ | 51,472 | |||||||||||||||||||||||||||
During the year ended December 31, 2020, rightsizing activities included restructuring charges of $44.5 million and other costs of $7.0 million. Restructuring expense was comprised primarily of new actions executed in response to lower demand driven by COVID-19 as well as continuing broad-based selling, general and administrative expense reduction initiatives and broad-based operational efficiency initiatives focusing on footprint consolidation, and operational optimization and IT centralization. Other costs were comprised primarily of charges related to the restructuring actions and asset charges, principally due to a $3.6 million write off of assets, partially offset by a $1.7 million gain on sale of assets in our Refrigeration & Food Equipment segment. These rightsizing charges were recorded in cost of goods and services, selling, general and administrative expenses, interest expense, and other income, net in the Consolidated Statement of Earnings. Additional programs, beyond the scope of the announced programs may be implemented during 2021 with related restructuring charges.
We recorded the following rightsizing costs for the year ended December 31, 2019:
Year Ended December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Engineered Products | Fueling Solutions | Imaging & Identification | Pumps & Process Solutions | Refrigeration & Food Equipment | Corporate | Total | ||||||||||||||||||||||||||||||||||
| Restructuring (GAAP) | $ | 3,155 | $ | 4,943 | $ | 6,426 | $ | 5,666 | $ | 3,671 | $ | 2,961 | $ | 26,822 | |||||||||||||||||||||||||||
| Other (benefits) costs, net | (5) | (58) | (76) | 462 | 2,371 | 2,637 | 5,331 | ||||||||||||||||||||||||||||||||||
| Rightsizing (non-GAAP) | $ | 3,150 | $ | 4,885 | $ | 6,350 | $ | 6,128 | $ | 6,042 | $ | 5,598 | $ | 32,153 | |||||||||||||||||||||||||||
During the year ended December 31, 2019, rightsizing activities included restructuring charges of $26.8 million and other costs of $5.3 million. Restructuring expense was comprised primarily of broad-based selling, general and administrative expense reduction initiatives and broad-based operational efficiency initiatives focusing on footprint consolidation, operational optimization and IT centralization. Other costs were comprised primarily of other charges related to the restructuring actions. These rightsizing charges were recorded in cost of goods and services and selling, general and administrative expenses in the Consolidated Statement of Earnings.
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We recorded the following rightsizing costs for the year ended December 31, 2018:
Year Ended December 31, 2018 | |||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Engineered Products | Fueling Solutions | Imaging & Identification | Pumps & Process Solutions | Refrigeration & Food Equipment | Corporate | Total | ||||||||||||||||||||||||||||||||||
| Restructuring (GAAP) | $ | 7,158 | $ | 15,478 | $ | 13,882 | $ | 10,266 | $ | 3,475 | $ | 8,244 | $ | 58,503 | |||||||||||||||||||||||||||
| Other costs (benefits), net | 128 | (146) | (1,237) | 3,109 | 6,474 | 5,997 | 14,325 | ||||||||||||||||||||||||||||||||||
| Rightsizing (non-GAAP) | $ | 7,286 | $ | 15,332 | $ | 12,645 | $ | 13,375 | $ | 9,949 | $ | 14,241 | $ | 72,828 | |||||||||||||||||||||||||||
During the year ended December 31, 2018, rightsizing activities included restructuring charges of $58.5 million and other costs of $14.3 million. Restructuring expense was comprised primarily of several programs in order to further optimize operations, including 1) alignment of our cost structure in preparation for the Apergy separation, 2) broad-based selling, general and administrative expense reduction initiatives and 3) initiation of footprint consolidation actions. Other costs were comprised primarily of other charges related to the restructuring actions. These rightsizing charges were recorded in cost of goods and services, selling, general and administrative expenses and other income, net in the Consolidated Statement of Earnings.
See Note 12 — Restructuring Activities in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional details regarding our recent restructuring activities.
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SEGMENT RESULTS OF OPERATIONS
The summary that follows provides a discussion of the results of operations of each of our five operating and reportable segments (Engineered Products, Fueling Solutions, Imaging & Identification, Pumps & Process Solutions, and Refrigeration & Food Equipment). Each of these segments is comprised of various product and service offerings that serve multiple markets. See Note 20 — Segment Information in the Consolidated Financial Statements in Item 8 of this Form 10-K for a reconciliation of segment revenue, earnings and margin to our consolidated revenue, earnings from continuing operations and margin. Segment EBITDA and segment EBITDA margin, which are presented in the segment discussion that follows, are non-GAAP measures and do not purport to be alternatives to segment earnings (EBIT) as a measure of operating performance. We believe that these measures are useful to investors and other users of our financial information in evaluating ongoing operating profitability as they exclude the depreciation and amortization expense related primarily to capital expenditures and acquisitions that occurred in prior years, as well as in evaluating operating performance in relation to our competitors. For further information, see "Non-GAAP Disclosures" at the end of this Item 7.
Additionally, we believe the following operational metrics are useful to investors and others users of our financial information in assessing the performance of our segments:
•Bookings represent total orders received from customers in the current reporting period. This metric is an important measure of performance and an indicator of revenue order trends.
•Organic bookings represent total orders received from customers in the current reporting period excluding the impact of foreign currency exchange rates and the impact of acquisitions and dispositions. The metric is an important measure of performance and an indicator of revenue order trends.
•Backlog represents an estimate of the total remaining bookings at a point in time for which performance obligations have not yet been satisfied. This metric is useful as it represents the aggregate amount we expect to recognize as revenue in the future.
•Book-to-bill is a ratio of the amount of bookings received from customers during a period divided by the amount of revenue recorded during that same period. This metric is a useful indicator of demand.
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Engineered Products
Our Engineered Products segment is a provider of a wide range of products, software and services that have broad customer applications across a number of markets, including aftermarket vehicle service, solid waste handling, industrial automation, aerospace and defense, industrial winch and hoist, and fluid dispensing.
| Years Ended December 31, | % Change | |||||||||||||||||||||||||||||||
| (dollars in thousands) | 2020 | 2019 | 2018 | 2020 vs. 2019 | 2019 vs. 2018 | |||||||||||||||||||||||||||
| Revenue | $ | 1,531,277 | $ | 1,697,557 | $ | 1,633,147 | (9.8) | % | 3.9 | % | ||||||||||||||||||||||
| Segment earnings (EBIT) | $ | 238,167 | $ | 291,848 | $ | 252,368 | (18.4) | % | 15.6 | % | ||||||||||||||||||||||
| Depreciation and amortization | 42,603 | 41,032 | 44,995 | 3.8 | % | (8.8) | % | |||||||||||||||||||||||||
| Segment EBITDA | $ | 280,770 | $ | 332,880 | $ | 297,363 | (15.7) | % | 11.9 | % | ||||||||||||||||||||||
| Segment margin | 15.6 % | 17.2 % | 15.5 % | |||||||||||||||||||||||||||||
| Segment EBITDA margin | 18.3 % | 19.6 % | 18.2 % | |||||||||||||||||||||||||||||
| Other measures: | ||||||||||||||||||||||||||||||||
| Bookings | $ | 1,558,486 | $ | 1,708,321 | $ | 1,803,555 | (8.8) | % | (5.3) | % | ||||||||||||||||||||||
| Backlog | $ | 463,701 | $ | 452,142 | $ | 442,519 | 2.6 | % | 2.2 | % | ||||||||||||||||||||||
| Components of revenue (decline) growth: | ||||||||||||||||||||||||||||||||
| Organic (decline) growth | (10.3) | % | 5.4 | % | ||||||||||||||||||||||||||||
| Acquisitions | 0.3 | % | — | % | ||||||||||||||||||||||||||||
| Foreign currency translation | 0.2 | % | (1.5) | % | ||||||||||||||||||||||||||||
| Total revenue (decline) growth | (9.8) | % | 3.9 | % | ||||||||||||||||||||||||||||
2020 Versus 2019
Engineered Products segment revenue for the year ended December 31, 2020 decreased $166.3 million, or 9.8% compared to the prior year, comprised of a broad-based organic revenue decline of 10.3%, partially offset by acquisition-related growth of 0.3% and a favorable foreign currency translation of 0.2%. Acquisition-related growth was driven by the acquisition of Soft-Pak. Customer pricing favorably impacted revenue by approximately 0.3% in 2020.
The organic revenue decline was primarily driven by the global economic downturn precipitated by the COVID-19 pandemic beginning late in the first quarter of 2020. The impact was broad-based across the segment, with the most significant impacts in the year experienced in our waste handling, industrial winch and hoist, industrial automation and fluid dispensing businesses. In waste handling, we experienced headwinds in new order activity as waste haulers and municipalities reduced capital budgets to preserve cash flow, and orders for compaction and recycling solutions remained below prior year levels. Demand for vehicle aftermarket equipment was also subdued due to reduced driving mileage and vehicle service demand. Headwinds from the COVID-19 pandemic were more significant in the first half of the year and persisted, to a lesser extent, into the second half of the year across our businesses. Despite theses headwinds, activity improved sequentially from the second quarter into the second half of the year in a number of businesses, most notably in our vehicle service, industrial automation, and fluid dispensing businesses, as government mandated restrictions eased and customer demand accelerated. Our aerospace & defense business demonstrated resilience despite the challenges of COVID-19, posting year over year revenue growth on the back of stable demand from long-term defense programs.
While market headwinds for capital equipment across some of our businesses persist, we expect that demand for our products will continue to improve sequentially into 2021, as evidenced by strong order rates and a strong backlog in the fourth quarter
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of 2020. We also remain confident that the fundamental long-term demand drivers across our end-markets remain constructive, and thus continue to believe in the long-term growth trajectory of the segment.
Engineered Products segment earnings for the year ended December 31, 2020 decreased $53.7 million, or 18.4%, compared to the prior year. This decrease was primarily driven by the impact of the COVID-19 pandemic on customer spending, partially offset by cost containment initiatives we executed in the year. These initiatives include actions to adjust direct and indirect manufacturing costs to current demand levels, the execution of short-term actions to reduce labor costs, the elimination of non-essential travel, third party and other expenses, the recognition of adjustments to variable compensation to reflect current conditions, the execution of selective structural cost actions aimed at streamlining our businesses, and a detailed review and re-prioritization of all planned investments and hiring plans. Segment margin decreased from 17.2% to 15.6% as compared to the prior year.
Bookings for the year ended December 31, 2020 decreased 8.8% compared to the prior year, reflecting an organic decline of 9.5%, partially offset by acquisition-related growth of 0.4% and a favorable impact from foreign currency translation of 0.3%. The organic bookings decline was broad-based and primarily driven by the global impact on customer demand of the COVID-19 pandemic. Segment book-to-bill was 1.02. Backlog increased 2.6% compared to the prior year, with particular strength seen in our vehicle service, industrial automation and aerospace and defense businesses.
2019 Versus 2018
Engineered Products segment revenue for the year ended December 31, 2019 increased $64.4 million, or 3.9%, compared to the prior year, comprised of broad-based organic growth of 5.4%, partially offset by a 1.5% unfavorable impact from foreign currency translation. Organic revenue growth was driven by strong activity in the refuse truck and digital solutions product lines within our waste handling business, as well as solid revenue growth in our vehicle service business. Customer pricing favorably impacted revenue by approximately 1.9% in 2019.
Engineered Products segment earnings for the year ended December 31, 2019 increased $39.5 million, or 15.6%, compared to the prior year. This increase was primarily driven by solid conversion on organic volume growth, pricing actions, and productivity initiatives, including the benefits of rightsizing actions and cost reduction initiatives, as well as a reduction in rightsizing costs. These benefits more than offset increases in material costs driven by U.S. Section 232 tariffs, most notably commodity cost increases impacting steel, and Section 301 tariffs, along with unfavorable foreign currency translation. Segment margin increased from 15.5% to 17.2% as compared to the prior year.
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Fueling Solutions
Our Fueling Solutions segment is focused on providing components, equipment, and software and service solutions enabling safe transport of fuels and other hazardous fluids along the supply chain, as well as the safe and efficient operation of retail fueling and vehicle wash establishments.
| Years Ended December 31, | % Change | |||||||||||||||||||||||||||||||
| (dollars in thousands) | 2020 | 2019 | 2018 | 2020 vs. 2019 | 2019 vs. 2018 | |||||||||||||||||||||||||||
| Revenue | $ | 1,476,282 | $ | 1,620,177 | $ | 1,465,590 | (8.9) | % | 10.5 | % | ||||||||||||||||||||||
| Segment earnings (EBIT) | $ | 236,974 | $ | 231,873 | $ | 152,255 | 2.2 | % | 52.3 | % | ||||||||||||||||||||||
| Depreciation and amortization | 72,803 | 75,045 | 68,463 | (3.0) | % | 9.6 | % | |||||||||||||||||||||||||
| Segment EBITDA | $ | 309,777 | $ | 306,918 | $ | 220,718 | 0.9 | % | 39.1 | % | ||||||||||||||||||||||
| Segment margin | 16.1 % | 14.3 % | 10.4 % | |||||||||||||||||||||||||||||
| Segment EBITDA margin | 21.0 % | 18.9 % | 15.1 % | |||||||||||||||||||||||||||||
| Other measures: | ||||||||||||||||||||||||||||||||
| Bookings | 1,471,870 | 1,613,764 | 1,513,019 | (8.8) | % | 6.7 | % | |||||||||||||||||||||||||
| Backlog | 201,521 | 205,842 | 208,574 | (2.1) | % | (1.3) | % | |||||||||||||||||||||||||
| Components of revenue (decline) growth: | ||||||||||||||||||||||||||||||||
| Organic (decline) growth | (8.8) | % | 10.5 | % | ||||||||||||||||||||||||||||
| Acquisitions | 0.2 | % | 3.4 | % | ||||||||||||||||||||||||||||
| Dispositions | — | % | (0.4) | % | ||||||||||||||||||||||||||||
| Foreign currency translation | (0.3) | % | (3.0) | % | ||||||||||||||||||||||||||||
| Total revenue (decline) growth | (8.9) | % | 10.5 | % | ||||||||||||||||||||||||||||
2020 Versus 2019
Fueling Solutions segment revenue for the year ended December 31, 2020 decreased $143.9 million, or 8.9%, compared to the prior year, attributable to an organic decline of 8.8% and an unfavorable impact from foreign currency translation of 0.3%, partially offset by acquisition-related growth of 0.2%. Customer pricing favorably impacted revenue by approximately 1.0% in 2020.
The organic revenue decline was principally driven by the adverse effects of COVID-19 and the measures taken to reduce its spread globally. The negative impact started during the latter part of the first quarter in 2020 with several mandated manufacturing plant shutdowns temporarily disrupting our global operations and supply chain, followed by a reduction in customer demand, particularly from vertically-integrated oil & gas companies. Further adding to the decline in organic revenue was reduced underground equipment volume in China due to the tapering of government-mandated infrastructure upgrades. Additionally, our businesses serving the transportation and rail markets experienced slow order rates due to volatile oil prices and the resulting reduction in capital budgets of vertically-integrated international oil companies. Activity in the vehicle wash market was subdued due to government-mandated shutdowns in the first half of the year and slower new capital spending activity by independent operators due to general economic uncertainty. Despite the global decrease in sales, North America was favorably impacted by continued strong demand for Europay, Mastercard, and Visa ("EMV")-compliant equipment throughout the year. Headwinds were also partially offset by robust performance in Mexico due to the growing demand in fueling dispenser volume.
While we anticipate the tapering of North America EMV volume in 2021 due to the compliance deadline, recent new product introductions, recovery in global market demand and growth in our software and solutions business is expected to provide
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growth within the retail fueling markets. Our vehicle wash business is also supported by a healthy backlog of orders given improving recent order activity. Our rail and transportation market is expected to remain subdued due to the challenging dynamics within the oil and transport industry.
Fueling Solutions segment earnings for the year ended December 31, 2020 increased $5.1 million, or 2.2%, compared to the prior year. The increase was driven by favorable pricing initiatives, restructuring benefits, productivity actions, selling, general and administrative cost containment, and favorable impact from foreign currency translation. These benefits were partially offset by weakened organic volume due to COVID-19. Segment margin increased 180 basis points compared to the prior year.
Bookings for the year ended December 31, 2020 decreased 8.8% compared to the prior year, reflecting an organic decline of 8.0% and an unfavorable impact from foreign currency translation of 1.0%, partially offset by acquisition-related growth of 0.2%. The organic bookings decline was primarily driven by the global impact on customer demand caused by the COVID-19 pandemic, slower demand from vertically-integrated oil companies and prior year bookings reflected increased orders of underground equipment in China due to government-mandated site infrastructure upgrade activity that has since tapered. This was partially offset by high order trends for EMV equipment in North America. Segment book to bill was 1.00. Backlog decreased 2.1% as compared to the prior year primarily as a result of lower second and third quarter bookings.
2019 Versus 2018
Fueling Solutions segment revenue for the year ended December 31, 2019 increased $154.6 million, or 10.5%, compared to the prior year, attributable to organic growth of 10.5% and acquisition-related growth of 3.4%, partially offset by an unfavorable foreign currency translation impact of 3.0% and a 0.4% decrease from a disposition. The organic growth was principally driven by continued strong demand in the global retail fueling industry, particularly in the United States, Europe and Asia. Growth was also driven by the acquisition of Belanger. Customer pricing favorably impacted revenue by approximately 1.0% in 2019.
Fueling Solutions segment earnings for the year ended December 31, 2019 increased $79.6 million, or 52.3%, compared to the prior year. The increase was driven by volume leverage, pricing initiatives, productivity actions, acquisitions, and benefits of selling, general and administrative cost reductions realized, as well as decreased rightsizing costs. This growth was partially offset by increased material costs due, in part, to U.S. Section 232 and 301 tariff exposure. Segment margin increased 390 basis points compared to the prior year.
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Imaging & Identification
Our Imaging & Identification segment supplies precision marking and coding, product traceability and digital textile printing equipment, as well as related consumables, software and services.
| Years Ended December 31, | % Change | |||||||||||||||||||||||||||||||
| (dollars in thousands) | 2020 | 2019 | 2018 | 2020 vs. 2019 | 2019 vs. 2018 | |||||||||||||||||||||||||||
| Revenue | $ | 1,038,178 | $ | 1,084,471 | $ | 1,109,843 | (4.3) | % | (2.3) | % | ||||||||||||||||||||||
| Segment earnings (EBIT) | $ | 193,473 | $ | 229,484 | $ | 198,902 | (15.7) | % | 15.4 | % | ||||||||||||||||||||||
| Depreciation and amortization | 38,378 | 30,530 | 30,882 | 25.7 | % | (1.1) | % | |||||||||||||||||||||||||
| Segment EBITDA | $ | 231,851 | $ | 260,014 | $ | 229,784 | (10.8) | % | 13.2 | % | ||||||||||||||||||||||
| Segment margin | 18.6 % | 21.2 % | 17.9 % | |||||||||||||||||||||||||||||
| Segment EBITDA margin | 22.3 % | 24.0 % | 20.7 % | |||||||||||||||||||||||||||||
| Other measures: | ||||||||||||||||||||||||||||||||
| Bookings | $ | 1,065,098 | $ | 1,092,915 | $ | 1,106,303 | (2.5) | % | (1.2) | % | ||||||||||||||||||||||
| Backlog | $ | 192,785 | $ | 125,775 | $ | 118,057 | 53.3 | % | 6.5 | % | ||||||||||||||||||||||
| Components of revenue decline: | ||||||||||||||||||||||||||||||||
| Organic (decline) growth | (7.2) | % | 1.2 | % | ||||||||||||||||||||||||||||
| Acquisitions | 3.9 | % | — | % | ||||||||||||||||||||||||||||
| Foreign currency translation | (1.0) | % | (3.5) | % | ||||||||||||||||||||||||||||
| Total revenue decline | (4.3) | % | (2.3) | % | ||||||||||||||||||||||||||||
2020 Versus 2019
Imaging & Identification segment revenue for the year ended December 31, 2020 decreased $46.3 million, or 4.3% compared to the prior year, comprised of organic decline of 7.2% and an unfavorable impact from foreign currency translation of 1.0%, partially offset by acquisition-related growth of 3.9%. Acquisition-related growth was driven by the acquisition of Systech in the first quarter and Solaris, which closed in the third quarter. Customer pricing favorably impacted revenue by approximately 0.7% in 2020.
The organic revenue decline was primarily driven by the global economic downturn precipitated by the COVID-19 pandemic beginning late in the first quarter, which materially impacted our digital textile printing business, as government-mandated mobility restrictions forced clothing and apparel retailers to close locations, and resulted in the decline of overall demand for clothing and apparel, as fewer consumers went to schools, offices, restaurants and other gatherings. Digital textile printing activity has improved since the second quarter of the year especially in sportswear and home decor markets, however demand for capital equipment for apparel printing remains slower compared to the prior year as we exit 2020. This dynamic resulted in improving demand from the second quarter to the second half of the year for inks and consumables that are closely linked to current levels of activity, while we experienced a slower recovery in demand for new equipment purchases, as customers remained focused on cash preservation. Our largest business in this segment, marking and coding, posted a modest revenue decline for the year, as we saw solid demand for consumables throughout the year, particularly inks for food and beverage, cleaning supplies, pharmaceuticals and medical supplies, and strong second half growth in demand for equipment, as customers resumed equipment purchases in the second half of 2020 as COVID-19 restrictions eased and marking and coding activity remained solid.
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We expect our marking and coding business to remain resilient and anticipate a favorable long-term growth trend, supported by constructive secular trends in demand for product traceability, identification, differentiation, and brand protection solutions. We expect continued sequential improvement in activity in our digital printing business, as printing activity and overall demand for textiles continues to improve. However, uncertainty remains due to the direct impact that the COVID-19 pandemic has had on demand in the clothing and apparel industry. Despite those near-term challenges, we believe we remain favorably positioned to exploit a longer-term transition from analog to digital printing by our customers, and believe some business model shifts within the industry driven by the COVID-19 pandemic may accelerate our customers’ need to shift from analog to digital printing.
Imaging & Identification segment earnings for the year ended December 31, 2020 decreased $36.0 million, or 15.7%, compared to the prior year. This decrease was primarily driven by the impact of continued reduced consumer spending due to COVID-19 on clothing, sports apparel, and other textile products that impact our digital printing customers. Partially offsetting this decrease were continued cost containment initiatives during the year. These initiatives included actions to adjust direct and indirect manufacturing cost to current demand levels, the execution of short-term actions to reduce labor costs, the elimination of non-essential travel, third party and other expenses, the recognition of adjustments to variable compensation to reflect current conditions, the execution of selective structural cost actions aimed at streamlining our business, and a detailed review and re-prioritization of all planned investments and hiring plans. These actions have been taken deliberately and strategically, and have allowed us to rationalize current spending to levels appropriate given near-term market conditions, while preserving our ability to capitalize on long-term secular growth trends. As a result, segment margin decreased from 21.2% to 18.6% as compared to the prior year.
Segment bookings for the year ended December 31, 2020 decreased 2.5% compared to the prior year, reflecting an organic decline of 6.3% and an unfavorable impact from foreign currency translation of 1.0%, partially offset by acquisition-related growth of 4.8%. The organic reduction was primarily the result of a year over year reduction in new orders for equipment and consumables in our digital printing business. Segment book-to-bill was 1.03. Backlog increased 53.3% compared to the prior year driven by the Systech and Solaris acquisitions and strong order intake in marking and coding.
2019 Versus 2018
Imaging & Identification segment revenue for the year ended December 31, 2019 decreased $25.4 million, or 2.3%, compared to the prior year, comprised of organic growth of 1.2% more than offset by an unfavorable impact from foreign currency translation of 3.5%. The organic revenue growth was driven by increased equipment shipments and expanded service revenue in our marking and coding business, along with increased service revenue and increased printer and ink volumes in our digital printing business. The significant foreign currency impact was due to our broad international customer base, in particular in Asia and Europe. Customer pricing favorably impacted revenue by approximately 1.0% in 2019.
Imaging & Identification segment earnings for the year ended December 31, 2019 increased $30.6 million, or 15.4%, compared to the prior year. This increase was primarily driven by productivity initiatives, including the benefits of restructuring actions, favorable pricing, and conversion on revenue growth, as well as reduced rightsizing costs. As a result, segment margin increased from 17.9% to 21.2% as compared to the prior year.
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Pumps & Process Solutions
Our Pumps & Process Solutions segment manufactures specialty pumps, fluid handling components, plastics and polymer processing equipment, single use pumps, flow meters and connectors, and highly engineered components for rotating and reciprocating machines.
| Years Ended December 31, | % Change | |||||||||||||||||||||||||||||||
| (dollars in thousands) | 2020 | 2019 | 2018 | 2020 vs. 2019 | 2019 vs. 2018 | |||||||||||||||||||||||||||
| Revenue | $ | 1,324,003 | $ | 1,338,528 | $ | 1,331,893 | (1.1) | % | 0.5 | % | ||||||||||||||||||||||
Segment earnings (EBIT) (1) | $ | 305,276 | $ | 240,081 | $ | 237,549 | 27.2 | % | 1.1 | % | ||||||||||||||||||||||
| Depreciation and amortization | 72,191 | 67,584 | 71,982 | 6.8 | % | (6.1) | % | |||||||||||||||||||||||||
Segment EBITDA (1) | $ | 377,467 | $ | 307,665 | $ | 309,531 | 22.7 | % | (0.6) | % | ||||||||||||||||||||||
Segment margin (1) | 23.1 % | 17.9 % | 17.8 % | |||||||||||||||||||||||||||||
Segment EBITDA margin (1) | 28.5 % | 23.0 % | 23.2 % | |||||||||||||||||||||||||||||
| Other measures: | ||||||||||||||||||||||||||||||||
| Bookings | 1,334,338 | 1,393,830 | 1,386,875 | (4.3) | % | 0.5 | % | |||||||||||||||||||||||||
| Backlog | 390,238 | 353,073 | 315,230 | 10.5 | % | 12.0 | % | |||||||||||||||||||||||||
| Components of revenue (decline) growth: | ||||||||||||||||||||||||||||||||
| Organic (decline) growth | (2.3) | % | 3.9 | % | ||||||||||||||||||||||||||||
| Acquisitions | 1.1 | % | 0.5 | % | ||||||||||||||||||||||||||||
| Dispositions | (0.5) | % | (2.0) | % | ||||||||||||||||||||||||||||
| Foreign currency translation | 0.6 | % | (1.9) | % | ||||||||||||||||||||||||||||
| Total revenue (decline) growth | (1.1) | % | 0.5 | % | ||||||||||||||||||||||||||||
(1)