Earnings Release

Dover Reports Third Quarter 2018 Results

DOWNERS GROVE, Ill., Oct. 18, 2018 /PRNewswire/ -- Dover (NYSE: DOV), a diversified global manufacturer, announced its financial results for the third quarter ended September 30, 2018.

Third Quarter 2018 Financial Results:

For the third quarter ended September 30, 2018, Dover's revenue was $1.7 billion, driven by organic growth of 3%. Net earnings for the third quarter ended September 30, 2018, were $157.3 million, compared to net earnings of $178.9 million in the prior year period. The third quarter 2017 results include earnings from discontinued operations of $19.5 million attributable to Apergy, which the company spun off in the second quarter of 2018.

Earnings from continuing operations were $157.3 million, a decrease of 1% as compared to $159.5 million for the prior year period, largely driven by forecasted rightsizing costs incurred in the period. Diluted earnings per share from continuing operations ("EPS") on a GAAP basis for the third quarter ended September 30, 2018, were $1.05, compared to $1.01 for the comparable period.

For the third quarter ended September 30, 2018, earnings from continuing operations included acquisition-related amortization costs of $26.2 million and rightsizing costs of $19.7 million, representing $0.18 EPS and $0.13 EPS, respectively. Excluding these costs, adjusted earnings from continuing operations for the third quarter ended September 30, 2018, was $203.2 million (+9%), and adjusted EPS was $1.36 (+14%).

A reconciliation between GAAP and adjusted earnings from continuing operations is included as an exhibit herein.

Full Year 2018 Guidance Update:

Dover tightened its guidance for adjusted diluted earnings per share from continuing operations to the upper end of the previous range, and is now $4.80 to $4.85. This guidance is based on full year revenue growth of approximately 2%, which is comprised of organic growth of 3%, acquisition growth of 1%, and a favorable impact from FX of 1%, partially offset by a 3% impact from dispositions.

Dover's 2018 guidance for adjusted EPS from continuing operations excludes forecasted full year acquisition-related amortization costs and rightsizing and other costs. Dover expects its full year effective tax rate to be between 20% and 21%.

Management Commentary:

Dover's President and Chief Executive Officer, Richard J. Tobin, said, "Dover's solid results reflect broad-based demand strength in Engineered Systems and Fluids, which posted organic growth of 5% and 9%, respectively, and more than offset the forecasted weak demand conditions in Refrigeration & Food Equipment. In all, we generated revenue of $1.7 billion at an organic growth rate of 3%. Adjusted net earnings of $203 million and adjusted EPS of $1.36 improved 9% and 14%, respectively.

"Heading into the fourth quarter, demand trends remain largely unchanged across the portfolio, with third quarter organic bookings growth of 6% over the comparable period. In the fourth quarter, we expect our Fluids segment to be a more meaningful contributor to our profits as a result of top line growth conversion and improved operational performance in our retail fueling operations. This, coupled with our cost containment actions, will more than offset weaker demand conditions in our Refrigeration & Food Equipment segment, which are expected to continue through the balance of the year.

"We are on track to complete our rightsizing initiatives as disclosed at our September investor day, and have made good progress in our footprint optimization projects, some of which we expect to begin to implement in the fourth quarter. On the back of our solid order book, productivity improvements and internal cost initiatives, we are tightening our full year EPS guidance to $4.80 to $4.85, which represents the top end of the previous range."

Conference Call Information:

Dover will host a webcast and conference call to discuss its third quarter 2018 results and 2018 guidance at 10:00 A.M. Eastern Time (9:00 A.M. Central Time) on Thursday, October 18, 2018. The webcast can be accessed on the Dover website at dovercorporation.com. The conference call will also be made available for replay on the website. Additional information on Dover's third quarter 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 over 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. 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, 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, 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 law, including the effect of U.S. tax reform and developments with respect to trade policy and tariffs, our ability to derive expected benefits from restructuring, productivity initiatives and other cost reduction actions, changes in sourcing input costs or the supply of input materials, the impact of legal compliance risks and litigation, including with respect to product quality and safety, cybersecurity and privacy, our ability to capture and protect intellectual property rights, and various other factors that are described in the Company's periodic reports filed with or furnished to the Securities and Exchange Commission, including our Annual Report on Form 10-K/A for the year ended December 31, 2017. 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 - THIRD QUARTER 2018

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Revenue	$	1,747,403	$	1,747,775	$	5,183,168	$	5,068,356
Cost of goods and services	1,100,883		1,098,582		3,268,583		3,189,202
Gross profit	646,520		649,193		1,914,585		1,879,154
Selling, general, and administrative expenses	426,445		410,040		1,290,246		1,257,027
Operating earnings	220,075		239,153		624,339		622,127
Interest expense	31,192		35,372		98,957		108,585
Interest income	(2,060)		(1,759)		(6,680)		(6,669)
Gain on sale of businesses	—		—		—		(90,093)
Other (income) expense, net	(2,073)		(1,236)		(6,641)		(1,407)
Earnings before provision for income taxes	193,016		206,776		538,703		611,711
Provision for income taxes	35,711		47,321		105,533		154,693
Earnings from continuing operations	157,305		159,455		433,170		457,018
Earnings (loss) from discontinued operations, net	—		19,457		(4,472)		58,199
Net earnings	$	157,305	$	178,912	$	428,698	$	515,217

Basic earnings per share:
Earnings from continuing operations	$	1.07	$	1.02	$	2.87	$	2.94
Earnings (loss) from discontinued operations, net	—		0.12		(0.03)		0.37
Net earnings	$	1.07	$	1.15	$	2.84	$	3.31

Weighted average shares outstanding	147,344		155,757		151,177		155,668
Diluted earnings per common share:
Earnings from continuing operations	$	1.05	$	1.01	$	2.82	$	2.90
Earnings (loss) from discontinued operations, net	—		0.12		(0.03)		0.37
Net earnings	$	1.05	$	1.14	$	2.79	$	3.27

Weighted average shares outstanding	149,457		157,555		153,429		157,565

Dividends paid per common share	$	0.48	$	0.47	$	1.42	$	1.35

DOVER CORPORATION QUARTERLY SEGMENT INFORMATION (unaudited)(in thousands)


	2018												2017
	Q1			Q2			Q3			Q3 YTD			Q1			Q2			Q3			Q3 YTD
REVENUE
Engineered Systems
Printing & Identification	$	282,522		$	299,834		$	283,232		$	865,588		$	249,238		$	278,220		$	272,941		$	800,399
Industrials	389,104			403,155			388,302			1,180,561			379,634			400,065			398,058			1,177,757
	671,626			702,989			671,534			2,046,149			628,872			678,285			670,999			1,978,156

Fluids	628,098			693,666			690,065			2,011,829			597,645			633,252			638,068			1,868,965

Refrigeration & Food Equipment	338,235			401,766			386,214			1,126,215			356,834			426,304			438,788			1,221,926

Intra-segment eliminations	(288)			(327)			(410)			(1,025)			(141)			(470)			(80)			(691)
Total consolidated revenue	$	1,637,671		$	1,798,094		$	1,747,403		$	5,183,168		$	1,583,210		$	1,737,371		$	1,747,775		$	5,068,356

NET EARNINGS
Segment Earnings:
Engineered Systems	$	102,066		$	126,649		$	108,714		$	337,429		$	177,207		$	110,103		$	102,767		$	390,077
Fluids	67,348			93,028			101,207			261,583			67,172			91,465			103,052			261,689
Refrigeration & Food Equipment	29,182			51,372			42,434			122,988			33,562			65,829			65,413			164,804
Total segments	198,596			271,049			252,355			722,000			277,941			267,397			271,232			816,570
Corporate expense / other	30,763			30,050			30,207			91,020			37,282			34,818			30,843			102,943
Interest expense	35,640			32,125			31,192			98,957			36,359			36,854			35,372			108,585
Interest income	(2,057)			(2,563)			(2,060)			(6,680)			(2,575)			(2,335)			(1,759)			(6,669)
Earnings before provision for income taxes	134,250			211,437			193,016			538,703			206,875			198,060			206,776			611,711
Provision for income taxes	24,841			44,981			35,711			105,533			51,787			55,585			47,321			154,693
Earnings from continuing operations	109,409			166,456			157,305			433,170			155,088			142,475			159,455			457,018
Earnings (loss) from discontinued operations, net	22,025			(26,497)			—			(4,472)			17,159			21,583			19,457			58,199
Net earnings	$	131,434		$	139,959		$	157,305		$	428,698		$	172,247		$	164,058		$	178,912		$	515,217

SEGMENT MARGIN
Engineered Systems	15.2		%	18.0		%	16.2		%	16.5		%	28.2		%	16.2		%	15.3		%	19.7		%
Fluids	10.7		%	13.4		%	14.7		%	13.0		%	11.2		%	14.4		%	16.2		%	14.0		%
Refrigeration & Food Equipment	8.6		%	12.8		%	11.0		%	10.9		%	9.4		%	15.4		%	14.9		%	13.5		%
Total segment operating margin	12.1		%	15.1		%	14.4		%	13.9		%	17.6		%	15.4		%	15.5		%	16.1		%

DEPRECIATION AND AMORTIZATION EXPENSE
Engineered Systems	$	19,239		$	19,203		$	18,204		$	56,646		$	20,598		$	21,272		$	23,150		$	65,020
Fluids	34,449			34,981			34,954			104,384			32,454			33,362			34,211			100,027
Refrigeration & Food Equipment	13,579			13,524			13,533			40,636			15,035			14,522			14,093			43,650
Corporate	1,358			1,595			1,399			4,352			1,133			1,252			1,079			3,464
Total depreciation and amortization expense	$	68,625		$	69,303		$	68,090		$	206,018		$	69,220		$	70,408		$	72,533		$	212,161

DOVER CORPORATION QUARTERLY SEGMENT INFORMATION (continued) (unaudited)(in thousands)


	2018								2017
	Q1		Q2		Q3		Q3 YTD		Q1		Q2		Q3		Q3 YTD
BOOKINGS
Engineered Systems
Printing & Identification	$	284,437	$	306,770	$	271,367	$	862,574	$	256,664	$	282,158	$	268,700	$	807,522
Industrials	466,722		412,780		390,606		1,270,108		444,058		392,816		390,254		1,227,128
	751,159		719,550		661,973		2,132,682		700,722		674,974		658,954		2,034,650

Fluids	703,461		737,340		723,996		2,164,797		638,801		631,350		655,305		1,925,456

Refrigeration & Food Equipment	372,701		428,816		331,979		1,133,496		438,576		466,276		357,855		1,262,707

Intra-segment eliminations	(624)		33		(549)		(1,140)		(1,093)		(397)		(339)		(1,829)

Total consolidated bookings	$	1,826,697	$	1,885,739	$	1,717,399	$	5,429,835	$	1,777,006	$	1,772,203	$	1,671,775	$	5,220,984

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

Fluids	544,250		564,959		588,632				434,274		438,445		462,471

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

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

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

DOVER CORPORATION QUARTERLY EARNINGS PER SHARE (unaudited)(in thousands, except per share data*)


Earnings Per Share
	2018								2017
	Q1		Q2		Q3		Q3 YTD		Q1		Q2		Q3		Q3 YTD
Basic earnings (loss) per common share:
Continuing operations	$	0.71	$	1.10	$	1.07	$	2.87	$	1.00	$	0.92	$	1.02	$	2.94
Discontinued operations	0.14		(0.17)		—		(0.03)		0.11		0.14		0.12		0.37
Net earnings	$	0.85	$	0.92	$	1.07	$	2.84	$	1.11	$	1.05	$	1.15	$	3.31

Diluted earnings (loss) per common share:
Continuing operations	$	0.70	$	1.08	$	1.05	$	2.82	$	0.99	$	0.90	$	1.01	$	2.90
Discontinued operations	0.14		(0.17)		—		(0.03)		0.11		0.14		0.12		0.37
Net earnings	$	0.84	$	0.91	$	1.05	$	2.79	$	1.09	$	1.04	$	1.14	$	3.27

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	$	433,170	$	155,088	$	142,475	$	159,455	$	457,018
Discontinued operations	22,025		(26,497)		—		(4,472)		17,159		21,583		19,457		58,199
Net earnings	$	131,434	$	139,959	$	157,305	$	428,698	$	172,247	$	164,058	$	178,912	$	515,217

Weighted average shares outstanding:
Basic	154,520		151,744		147,344		151,177		155,540		155,703		155,757		155,668
Diluted	157,090		153,938		149,457		153,429		157,399		157,513		157,555		157,565

* 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, gains on disposition of businesses, disposition costs, and rightsizing and other costs to derive
adjusted earnings from continuing operations and adjusted diluted earnings per common share as follows:

	2018											2017
	Q1		Q2			Q3			Q3 YTD			Q1			Q2			Q3			Q3 YTD
Adjusted earnings:
Earnings from continuing operations	$	109,409		$	166,456		$	157,305		$	433,170		$	155,088		$	142,475		$	159,455		$	457,018
Acquisition-related amortization, pre-tax ¹	38,150		38,072				34,997			111,219			38,996			37,620			37,553			114,169
Acquisition-related amortization, tax impact ²	(9,716)		(9,683)				(8,785)			(28,184)			(12,777)			(12,027)			(12,171)			(36,975)
Gain on dispositions, pre-tax ³	—		—				—			—			(88,402)			—			—			(88,402)
Gain on dispositions, tax impact ²	—		—				—			—			26,682			—			—			26,682
Disposition costs, pre-tax ⁴	—		—				—			—			—			—			3,314			3,314
Disposition costs, tax impact ²	—		—				—			—			—			—			(964)			(964)
Rightsizing and other costs, pre-tax ⁵	4,371		6,808				24,201			35,380			—			—			—			—
Rightsizing and other costs, tax impact ²	(797)		(1,448)				(4,477)			(6,722)			—			—			—			—
Adjusted earnings from continuing operations	$	141,417		$	200,205		$	203,241		$	544,863		$	119,587		$	168,068		$	187,187		$	474,842

*Adjusted diluted earnings per common share:**
Diluted earnings per share from continuing operations	$	0.70		$	1.08		$	1.05		$	2.82		$	0.99		$	0.90		$	1.01		$	2.90
Acquisition-related amortization, pre-tax ¹	0.24		0.25				0.23			0.72			0.25			0.24			0.24			0.72
Acquisition-related amortization, tax impact ²	(0.06)		(0.06)				(0.06)			(0.18)			(0.08)			(0.08)			(0.08)			(0.23)
Gain on dispositions, pre-tax ³	—		—				—			—			(0.56)			—			—			(0.56)
Gain on dispositions, tax impact ²	—		—				—			—			0.17			—			—			0.17
Disposition costs, pre-tax ⁴	—		—				—			—			—			—			0.02			0.02
Disposition costs, tax impact ²	—		—				—			—			—			—			(0.01)			(0.01)
Rightsizing and other costs, pre-tax ⁵	0.03		0.04				0.16			0.23			—			—			—			—
Rightsizing and other costs, tax impact ²	(0.01)		(0.01)				(0.03)			(0.04)			—			—			—			—
Adjusted diluted earnings per share from continuing operations	$	0.90		$	1.30		$	1.36		$	3.55		$	0.76		$	1.07		$	1.19		$	3.01

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 Includes a gain from the sale of Performance Motorsports International in the first quarter of 2017.

⁴ Disposition costs include costs related to the sale of Warn Industries, Inc. in the fourth quarter of 2017.

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

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

DOVER CORPORATION ADDITIONAL INFORMATION (unaudited)(in thousands)

Quarterly Cash Flow

	2018								2017
	Q1		Q2		Q3		Q3 YTD		Q1		Q2		Q3		Q3 YTD
Net Cash Flows Provided By (Used In):
Operating activities	$	15,535	$	159,205	$	243,944	$	418,684	$	45,726	$	152,506	$	255,765	$	453,997
Investing activities	(122,597)		(51,606)		(35,922)		(210,125)		86,429		(46,460)		(47,584)		(7,615)
Financing activities	(289,103)		(227,734)		(232,476)		(749,313)		(93,293)		(216,273)		(197,635)		(507,201)

Quarterly Free Cash Flow (Non-GAAP)

	2018												2017
	Q1			Q2			Q3			Q3 YTD			Q1			Q2			Q3			Q3 YTD
Cash flow from operating activities	$	15,535		$	159,205		$	243,944		$	418,684		$	45,726		$	152,506		$	255,765		$	453,997
Less: Capital expenditures	(44,678)			(51,686)			(38,192)			(134,556)			(36,931)			(42,035)			(51,396)			(130,362)
Free cash flow	$	(29,143)		$	107,519		$	205,752		$	284,128		$	8,795		$	110,471		$	204,369		$	323,635

Free cash flow as a percentage of revenue	(1.8)		%	6.0		%	11.8		%	5.5		%	0.6		%	6.4		%	11.7		%	6.4		%

Free cash flow as a percentage of earnings from continuing operations	(26.6)		%	64.6		%	130.8		%	65.6		%	5.7		%	77.5		%	128.2		%	70.8		%

Revenue Growth Factors

	Three Months Ended September 30, 2018
	Engineered Systems		Fluids		Refrigeration & Food Equipment		Total
Organic	5.2	%	9.1	%	(8.8)	%	3.1	%
Acquisitions	—	%	0.5	%	0.3	%	0.3	%
Dispositions	(4.9)	%	(0.2)	%	(3.3)	%	(2.8)	%
Currency translation	(0.2)	%	(1.3)	%	(0.2)	%	(0.6)	%
Total **	0.1	%	8.1	%	(12.0)	%	—	%

** Totals may be impacted by rounding.

	Nine Months Ended September 30, 2018
	Engineered Systems		Fluids		Refrigeration & Food Equipment		Total
Organic	6.3	%	5.6	%	(7.2)	%	2.8	%
Acquisitions	0.2	%	0.6	%	0.5	%	0.4	%
Dispositions	(5.7)	%	(0.2)	%	(2.2)	%	(2.8)	%
Currency translation	2.6	%	1.6	%	1.1	%	1.9	%
Total *	3.4	%	7.6	%	(7.8)	%	2.3	%

* Totals may be impacted by rounding.

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, 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, 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, gains on disposition of businesses, disposition costs, and rightsizing and other costs. 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.

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

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

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SOURCE Dover Corporation

Dover Beats

Dover Reports Third Quarter 2018 Results