Dover Reports Fourth Quarter Organic Revenue Up 6.2%; Cost Saving Initiatives on Track to Deliver in 2019

- Reports fourth quarter and full year 2018 revenue of $1.8 billion and $7.0 billion, respectively, reflecting organic growth of 6.2% for the quarter and 3.7% for the year.

- Generates fourth quarter and full year 2018 diluted earnings per share from continuing operations on a GAAP basis of $1.07 and $3.89, respectively.

- Delivers fourth quarter and full year 2018 adjusted diluted earnings per share from continuing operations of $1.43 and $4.97, respectively, an increase of 25% for the quarter and 20% for the year.

- Provides 2019 guidance, reflecting 2% to 4% organic revenue growth and adjusted diluted earnings per share from continuing operations of $5.65 to $5.85.

News provided by

Dover

Jan 29, 2019, 06:45 ET

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

Fourth Quarter 2018 Financial Results:

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

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

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

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

Full Year 2018 Financial Results:

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

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

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

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

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

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

Full Year 2019 Guidance:

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

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

Completion of Belanger Acquisition:

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

Management Commentary:

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

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

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

Conference Call Information:

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

About Dover:

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

Forward-Looking Statements:

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

INVESTOR SUPPLEMENT - FOURTH QUARTER AND FULL YEAR 2018

DOVER CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)(in thousands, except per share data)

	Three Months Ended December 31,				Years Ended December 31,
	2018		2017		2018		2017
Revenue	$	1,808,950	$	1,752,530	$	6,992,118	$	6,820,886
Cost of goods and services	1,163,979		1,102,637		4,432,562		4,291,839
Gross profit	644,971		649,893		2,559,556		2,529,047
Selling, general, and administrative expenses	426,198		465,134		1,716,444		1,722,161
Operating earnings	218,773		184,759		843,112		806,886
Interest expense	32,015		36,363		130,972		144,948
Interest income	(2,201)		(1,822)		(8,881)		(8,491)
Gain on sale of businesses	—		(113,042)		—		(203,135)
Other expense (income), net	2,284		(844)		(4,357)		(2,251)
Earnings before provision for income taxes	186,675		264,104		725,378		875,815
Provision (benefit) for income taxes	28,700		(25,541)		134,233		129,152
Earnings from continuing operations	157,975		289,645		591,145		746,663
(Loss) earnings from discontinued operations, net	(16,406)		6,803		(20,878)		65,002
Net earnings	$	141,569	$	296,448	$	570,267	$	811,665

*Basic earnings per share:**
Earnings from continuing operations	$	1.08	$	1.86	$	3.94	$	4.80
(Loss) earnings from discontinued operations, net	(0.11)		0.04		(0.14)		0.42
Net earnings	$	0.97	$	1.90	$	3.80	$	5.21

Weighted average shares outstanding	146,007		155,734		149,874		155,685
*Diluted earnings per common share:**
Earnings from continuing operations	$	1.07	$	1.83	$	3.89	$	4.73
(Loss) earnings from discontinued operations, net	(0.11)		0.04		(0.14)		0.41
Net earnings	$	0.96	$	1.88	$	3.75	$	5.15

Weighted average shares outstanding	147,940		158,013		152,133		157,744

Dividends paid per common share	$	0.48	$	0.47	$	1.90	$	1.82

* Per share data may be impacted by rounding.

DOVER CORPORATION
QUARTERLY SEGMENT INFORMATION
(unaudited)(in thousands)
	2018										2017
	Q1		Q2		Q3		Q4		FY 2018		Q1		Q2		Q3		Q4		FY 2017
REVENUE
Engineered Systems
Printing & Identification	$	282,522	$	299,834	$	283,232	$	296,843	$	1,162,431	$	249,238	$	278,220	$	272,941	$	293,616	$	1,094,015
Industrials	389,104		403,155		388,302		399,956		1,580,517		379,634		400,065		398,058		396,212		1,573,969
	671,626		702,989		671,534		696,799		2,742,948		628,872		678,285		670,999		689,828		2,667,984

Fluids	628,098		693,666		690,065		785,509		2,797,338		597,645		633,252		638,068		686,100		2,555,065

Refrigeration & Food Equipment	338,235		401,766		386,214		326,878		1,453,093		356,834		426,304		438,788		377,179		1,599,105

Intra-segment eliminations	(288)		(327)		(410)		(236)		(1,261)		(141)		(470)		(80)		(577)		(1,268)
Total consolidated revenue	$	1,637,671	$	1,798,094	$	1,747,403	$	1,808,950	$	6,992,118	$	1,583,210	$	1,737,371	$	1,747,775	$	1,752,530	$	6,820,886

NET EARNINGS
Segment Earnings:
Engineered Systems	$	102,066	$	126,649	$	108,714	$	113,841	$	451,270	$	177,207	$	110,103	$	102,767	$	214,407	$	604,484
Fluids	67,348		93,028		101,207		128,221		389,804		67,172		91,465		103,052		106,941		368,630
Refrigeration & Food Equipment	29,182		51,372		42,434		13,131		136,119		33,562		65,829		65,413		29,018		193,822
Total segments	198,596		271,049		252,355		255,193		977,193		277,941		267,397		271,232		350,366		1,166,936
Corporate expense / other	30,763		30,050		30,207		38,704		129,724		37,282		34,818		30,843		51,721		154,664
Interest expense	35,640		32,125		31,192		32,015		130,972		36,359		36,854		35,372		36,363		144,948
Interest income	(2,057)		(2,563)		(2,060)		(2,201)		(8,881)		(2,575)		(2,335)		(1,759)		(1,822)		(8,491)
Earnings before provision for income taxes	134,250		211,437		193,016		186,675		725,378		206,875		198,060		206,776		264,104		875,815
Provision for income taxes	24,841		44,981		35,711		28,700		134,233		51,787		55,585		47,321		(25,541)		129,152
Earnings from continuing operations	109,409		166,456		157,305		157,975		591,145		155,088		142,475		159,455		289,645		746,663
Earnings (loss) from discontinued operations, net	22,025		(26,497)		—		(16,406)		(20,878)		17,159		21,583		19,457		6,803		65,002
Net earnings	$	131,434	$	139,959	$	157,305	$	141,569	$	570,267	$	172,247	$	164,058	$	178,912	$	296,448	$	811,665

SEGMENT MARGIN
Engineered Systems	15.2%		18.0%		16.2%		16.3%		16.5%		28.2%		16.2%		15.3%		31.1%		22.7%
Fluids	10.7%		13.4%		14.7%		16.3%		13.9%		11.2%		14.4%		16.2%		15.6%		14.4%
Refrigeration & Food Equipment	8.6%		12.8%		11.0%		4.0%		9.4%		9.4%		15.4%		14.9%		7.7%		12.1%
Total segment operating margin	12.1%		15.1%		14.4%		14.1%		14.0%		17.6%		15.4%		15.5%		20.0%		17.1%

DEPRECIATION AND AMORTIZATION EXPENSE
Engineered Systems	$	19,239	$	19,203	$	18,204	$	19,233	$	75,879	$	20,598	$	21,272	$	23,150	$	20,427	$	85,447
Fluids	34,449		34,981		34,954		36,060		140,444		32,454		33,362		34,211		35,794		135,821
Refrigeration & Food Equipment	13,579		13,524		13,533		19,841		60,477		15,035		14,522		14,093		13,557		57,207
Corporate	1,358		1,595		1,399		1,428		5,780		1,133		1,252		1,079		1,339		4,803
Total depreciation and amortization expense	$	68,625	$	69,303	$	68,090	$	76,562	$	282,580	$	69,220	$	70,408	$	72,533	$	71,117	$	283,278

DOVER CORPORATION
QUARTERLY SEGMENT INFORMATION
(continued)
(unaudited)(in thousands)
	2018										2017
	Q1		Q2		Q3		Q4		FY 2018		Q1		Q2		Q3		Q4		FY 2017
BOOKINGS
Engineered Systems
Printing & Identification	$	284,437	$	306,770	$	271,367	$	295,963	$	1,158,537	$	256,664	$	282,158	$	268,700	$	306,818	$	1,114,340
Industrials	466,722		412,780		390,606		481,172		1,751,280		444,058		392,816		390,254		397,053		1,624,181
	751,159		719,550		661,973		777,135		2,909,817		700,722		674,974		658,954		703,871		2,738,521

Fluids	703,461		737,340		723,996		734,943		2,899,740		638,801		631,350		655,305		687,307		2,612,763

Refrigeration & Food Equipment	372,701		428,816		331,979		341,221		1,474,717		438,576		466,276		357,855		319,899		1,582,606

Intra-segment eliminations	(624)		33		(549)		(584)		(1,724)		(1,093)		(397)		(339)		(502)		(2,331)

Total consolidated bookings	$	1,826,697	$	1,885,739	$	1,717,399	$	1,852,715	$	7,282,550	$	1,777,006	$	1,772,203	$	1,671,775	$	1,710,575	$	6,931,559

BACKLOG
Engineered Systems
Printing & Identification	$	135,915	$	137,019	$	126,609	$	122,028			$	109,347	$	115,763	$	116,359	$	129,752
Industrials	376,474		372,525		367,963		438,546				327,180		321,315		316,835		329,575
	512,389		509,544		494,572		560,574				436,527		437,078		433,194		459,327

Fluids	544,250		564,959		588,632		523,791				434,274		438,445		462,471		459,746

Refrigeration & Food Equipment	283,250		309,440		255,783		268,991				341,530		382,598		302,574		244,972

Intra-segment eliminations	(389)		(134)		(58)		(185)				(725)		(268)		(174)		(371)

Total consolidated backlog	$	1,339,500	$	1,383,809	$	1,338,929	$	1,353,171			$	1,211,606	$	1,257,853	$	1,198,065	$	1,163,674

DOVER CORPORATION
QUARTERLY EARNINGS PER SHARE
(unaudited)(in thousands, except per share data*)
Earnings Per Share
	2018										2017
	Q1		Q2		Q3		Q4		FY 2018		Q1		Q2		Q3		Q4		FY 2017
Basic earnings (loss) per common share:
Continuing operations	$	0.71	$	1.10	$	1.07	$	1.08	$	3.94	$	1.00	$	0.92	$	1.02	$	1.86	$	4.80
Discontinued operations	0.14		(0.17)		—		(0.11)		(0.14)		0.11		0.14		0.12		0.04		0.42
Net earnings	$	0.85	$	0.92	$	1.07	$	0.97	$	3.80	$	1.11	$	1.05	$	1.15	$	1.90	$	5.21

Diluted earnings (loss) per common share:
Continuing operations	$	0.70	$	1.08	$	1.05	$	1.07	$	3.89	$	0.99	$	0.90	$	1.01	$	1.83	$	4.73
Discontinued operations	0.14		(0.17)		—		(0.11)		(0.14)		0.11		0.14		0.12		0.04		0.41
Net earnings	$	0.84	$	0.91	$	1.05	$	0.96	$	3.75	$	1.09	$	1.04	$	1.14	$	1.88	$	5.15

Net earnings (loss) and weighted average shares used in calculated earnings per share amounts are as follows:
Net earnings (loss):
Continuing operations	$	109,409	$	166,456	$	157,305	$	157,975	$	591,145	$	155,088	$	142,475	$	159,455	$	289,645	$	746,663
Discontinued operations	22,025		(26,497)		—		(16,406)		(20,878)		17,159		21,583		19,457		6,803		65,002
Net earnings	$	131,434	$	139,959	$	157,305	$	141,569	$	570,267	$	172,247	$	164,058	$	178,912	$	296,448	$	811,665

Weighted average shares outstanding:
Basic	154,520		151,744		147,344		146,007		149,874		155,540		155,703		155,757		155,734		155,685
Diluted	157,090		153,938		149,457		147,940		152,133		157,399		157,513		157,555		158,013		157,744

* Per share data may be impacted by rounding.

Non-GAAP Reconciliations

Adjusted Earnings Per Share (Non-GAAP)
Earnings from continuing operations are adjusted by the effect of acquisition-related amortization, the Tax Cuts and Jobs Act, gains on disposition of businesses, disposition costs, rightsizing and other costs, and a product recall reversal to derive adjusted earnings from continuing operations and adjusted diluted earnings per common share as follows:
	2018										2017
	Q1		Q2		Q3		Q4		FY 2018		Q1		Q2		Q3		Q4		FY 2017
Adjusted earnings:
Earnings from continuing operations	$	109,409	$	166,456	$	157,305	$	157,975	$	591,145	$	155,088	$	142,475	$	159,455	$	289,645	$	746,663
Acquisition-related amortization, pre-tax ¹	38,150		38,072		34,997		35,078		146,297		38,996		37,620		37,553		37,108		151,277
Acquisition-related amortization, tax impact ²	(9,716)		(9,683)		(8,785)		(8,817)		(37,001)		(12,777)		(12,027)		(12,171)		(11,906)		(48,881)
Tax Cuts and Jobs Act ³	—		—		—		(2,832)		(2,832)		—		—		—		(54,908)		(54,908)
Gain on dispositions, pre-tax ⁴	—		—		—		—		—		(88,402)		—		—		(116,932)		(205,334)
Gain on dispositions, tax impact ²	—		—		—		—		—		26,682		—		—		6,071		32,753
Disposition costs, pre-tax ⁵	—		—		—		—		—		—		—		3,314		1,931		5,245
Disposition costs, tax impact ²	—		—		—		—		—		—		—		(964)		(1,051)		(2,015)
Rightsizing and other costs, pre-tax ⁶	4,371		6,808		24,201		37,448		72,828		—		—		—		49,379		49,379
Rightsizing and other costs, tax impact ²	(797)		(1,448)		(4,477)		(7,809)		(14,531)		—		—		—		(14,746)		(14,746)
Product recall reversal, pre-tax	—		—		—		—		—		—		—		—		(7,200)		(7,200)
Product recall reversal, tax impact ²	—		—		—		—		—		—		—		—		2,614		2,614
Adjusted earnings from continuing operations	$	141,417	$	200,205	$	203,241	$	211,043	$	755,906	$	119,587	$	168,068	$	187,187	$	180,005	$	654,847

*Adjusted diluted earnings per common share:**
Diluted earnings per share from continuing operations	$	0.70	$	1.08	$	1.05	$	1.07	$	3.89	$	0.99	$	0.90	$	1.01	$	1.83	$	4.73
Acquisition-related amortization, pre-tax ¹	0.24		0.25		0.23		0.24		0.96		0.25		0.24		0.24		0.23		0.96
Acquisition-related amortization, tax impact ²	(0.06)		(0.06)		(0.06)		(0.06)		(0.24)		(0.08)		(0.08)		(0.08)		(0.08)		(0.31)
Tax Cuts and Jobs Act ³	—		—		—		(0.02)		(0.02)		—		—		—		(0.35)		(0.35)
Gain on dispositions, pre-tax ⁴	—		—		—		—		—		(0.56)		—		—		(0.74)		(1.30)
Gain on dispositions, tax impact ²	—		—		—		—		—		0.17		—		—		0.04		0.21
Disposition costs, pre-tax ⁵	—		—		—		—		—		—		—		0.02		0.01		0.03
Disposition costs, tax impact ²	—		—		—		—		—		—		—		(0.01)		(0.01)		(0.02)
Rightsizing and other costs, pre-tax ⁶	0.03		0.04		0.16		0.25		0.48		—		—		—		0.31		0.31
Rightsizing and other costs, tax impact ²	(0.01)		(0.01)		(0.03)		(0.05)		(0.10)		—		—		—		(0.09)		(0.09)
Product recall reversal, pre-tax	—		—		—		—		—		—		—		—		(0.05)		(0.05)
Product recall reversal, tax impact ²	—		—		—		—		—		—		—		—		0.02		0.02
Adjusted diluted earnings per share from continuing operations	$	0.90	$	1.30	$	1.36	$	1.43	$	4.97	$	0.76	$	1.07	$	1.19	$	1.14	$	4.15

¹ Includes amortization on acquisition-related intangible assets and inventory step-up.
² Adjustments were tax effected using the statutory tax rates in the applicable jurisdictions or the effective tax rate, where applicable, for each period.
³ 2017 Tax impact primarily related to the enactment of the Tax Cuts and Jobs Act ("Tax Reform Act"). This benefit also includes decreases in statutory tax rates of foreign jurisdictions. 2018 adjustment represents tax benefits related to additional Tax Act regulatory guidance covered by SAB 118.
⁴ Includes a gains from the sales of Performance Motorsports International and Warn Industries, Inc. in the first and fourth quarters of 2017, respectively.
⁵ Disposition costs include costs related to the sale of Warn Industries, Inc. in the fourth quarter of 2017.
⁶ Rightsizing and other costs include actions taken on employee reductions, facility consolidations and site closures, product line exits and other associated asset charges.
* Per share data and totals may be impacted by rounding.

Non-GAAP Reconciliations (continued)

Adjusted Guidance Reconciliation
	2018 Actual		2019 Guidance
*Adjusted net earnings per share:**
Net earnings (GAAP)	$	3.89	$ 4.81 - 5.01
Acquisition-related amortization, net	0.72		0.76
Tax Cuts and Jobs Act	(0.02)		—
Rightsizing and other costs, net	0.38		0.08
Adjusted net earnings (Non-GAAP)	$	4.97	$ 5.65 - 5.85

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

DOVER CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)(in thousands)

	December 31, 2018		December 31, 2017
Assets:
Cash and cash equivalents	$	396,221	$	753,964
Receivables, net of allowances	1,231,859		1,183,514
Inventories, net	748,796		677,043
Prepaid and other current assets	126,878		175,626
Property, plant and equipment, net	806,497		787,940
Goodwill	3,677,328		3,686,372
Intangible assets, net	1,134,256		1,282,624
Other assets and deferred charges	243,936		245,723
Assets of discontinued operations	—		1,865,553
Total assets	$	8,365,771	$	10,658,359

Liabilities and Stockholders' Equity:
Notes payable and current maturities of long-term debt	$	220,318	$	581,102
Payables and accrued expenses	1,607,103		1,560,876
Deferred taxes and other non-current liabilities	826,024		882,246
Long-term debt	2,943,660		2,986,702
Liabilities of discontinued operations	—		264,253
Stockholders' equity	2,768,666		4,383,180
Total liabilities and stockholders' equity	$	8,365,771	$	10,658,359

DOVER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)(in thousands)

	Years Ended December 31,
	2018		2017
*Operating activities:*
Net earnings	$	570,267	$	811,665
Loss (earnings) from discontinued operations, net	20,878		(65,002)
Depreciation and amortization	282,580		283,278
Stock-based compensation	23,698		24,073
Contributions to employee benefit plans	(25,933)		(18,588)
Gain on sale of businesses	—		(203,135)
Net change in assets and liabilities	(82,297)		(92,882)
Net cash provided by operating activities	789,193		739,409

*Investing activities:*
Additions to property, plant and equipment	(170,994)		(170,068)
Acquisitions (net of cash and cash equivalents acquired)	(68,556)		(27,188)
Proceeds from the sale of property, plant and equipment	5,908		11,774
Proceeds from the sale of businesses	3,937		372,666
Other	(15,775)		21,151
Net cash (used in) provided by investing activities	(245,480)		208,335

*Financing activities:*
Cash received from Apergy, net of cash distributed	689,643		—
Change in commercial paper and notes payable, net	(10,722)		(182,596)
Reduction of long-term debt	(350,000)		—
Dividends to stockholders	(283,573)		(283,959)
Purchase of common stock	(894,977)		(105,023)
Payments to settle employee tax obligations on exercise	(46,257)		(18,443)
Other	(1,952)		(2,912)
Net cash used in financing activities	(897,838)		(592,933)

Net cash (used in) provided by discontinued operations	(14,263)		48,533

Effect of exchange rate changes on cash	10,645		1,474

Net (decrease) increase in cash and cash equivalents	(357,743)		404,818
Cash and cash equivalents at beginning of period	753,964		349,146
Cash and cash equivalents at end of period	$	396,221	$	753,964

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

Acquisitions

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

Discontinued and Disposed Businesses

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

Rightsizing and Other Costs

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

($ in millions)	2018
	Q4		FY
Engineered Systems	$	7.1	$	19.9
Fluids	12.8		28.7
Refrigeration & Food Equipment	9.5		10.0
Corporate	8.0		14.2
Total	$	37.4	$	72.8

Tax Rate

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

Share Repurchases

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

Capitalization

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

Net Debt to Net Capitalization Ratio (Non-GAAP)	December 31, 2018		December 31, 2017
Current maturities of long-term debt	$	—	$	350,402
Commercial paper	220,318		230,700
Notes payable and current maturities of long-term debt	220,318		581,102
Long-term debt	2,943,660		2,986,702
Total debt	3,163,978		3,567,804
Less: Cash and cash equivalents	(396,221)		(753,964)
Net debt	2,767,757		2,813,840
Add: Stockholders' equity	2,768,666		4,383,180
Net capitalization	$	5,536,423	$	7,197,020
Net debt to net capitalization	50.0%		39.1%

Quarterly Cash Flow

	2018										2017
	Q1		Q2		Q3		Q4		FY 2018		Q1		Q2		Q3		Q4		FY 2017
Net Cash Flows Provided By (Used In):
Operating activities	$	15,535	$	159,205	$	243,944	$	370,509	$	789,193	$	45,726	$	152,506	$	255,765	$	285,412	$	739,409
Investing activities	(122,597)		(51,606)		(35,922)		(35,355)		(245,480)		86,429		(46,460)		(47,584)		215,950		208,335
Financing activities	(289,103)		(227,734)		(232,476)		(148,525)		(897,838)		(93,293)		(216,273)		(197,635)		(85,732)		(592,933)

Quarterly Free Cash Flow (Non-GAAP)

	2018										2017
	Q1		Q2		Q3		Q4		FY 2018		Q1		Q2		Q3		Q4		FY 2017
Cash flow from operating activities	$	15,535	$	159,205	$	243,944	$	370,509	$	789,193	$	45,726	$	152,506	$	255,765	$	285,412	$	739,409
Less: Capital expenditures	(44,678)		(51,686)		(38,192)		(36,438)		(170,994)		(36,931)		(42,035)		(51,396)		(39,706)		(170,068)
Free cash flow *	$	(29,143)	$	107,519	$	205,752	$	334,071	$	618,199	$	8,795	$	110,471	$	204,369	$	245,706	$	569,341

Free cash flow as a percentage of revenue	(1.8)%		6.0%		11.8%		18.5%		8.8%		0.6%		6.4%		11.7%		14.0%		8.3%

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

Revenue Growth Factors

	2018
	Q1	Q2	Q3	Q4	Full Year
Organic	1.7%	3.5%	3.1%	6.2%	3.7%
Acquisitions	0.6%	0.4%	0.3%	0.6%	0.5%
Dispositions	(3.1)%	(2.6)%	(2.8)%	(1.5)%	(2.5)%
Currency translation	4.2%	2.2%	(0.6)%	(2.1)%	0.8%
	3.4%	3.5%	—%	3.2%	2.5%

Non-GAAP Disclosures

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

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

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

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

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

SOURCE Dover