DOVER CORPORATION 
DOWNERS GROVE, Ill., Jan. 26, 2017 /PRNewswire/ -- Dover (NYSE: DOV) announced today that for the fourth quarter ended December 31, 2016, revenue was $1.8 billion, an increase of 5% from the prior year. The increase in the quarter was driven by acquisition growth of 11%, offset by an organic revenue decline of 2%, a 3% impact from dispositions, and an unfavorable impact from foreign exchange of 1%. Earnings from continuing operations were $161.2 million, an increase of 18% as compared to $136.6 million for the prior year period. Diluted earnings per share from continuing operations ("EPS") for the fourth quarter ended December 31, 2016, were $1.03, compared to $0.87 EPS in the prior year period, representing an increase of 18%. EPS from continuing operations for the fourth quarter of 2016 included a gain on a disposition of $0.36, a charge of $0.09 for a voluntary product recall, and $0.05 of discrete tax benefits. EPS from continuing operations for the prior year period include discrete tax benefits of $0.06 EPS. Excluding these items, adjusted EPS from continuing operations for the fourth quarter of 2016 was $0.71, a decrease of 12% from an adjusted EPS of $0.81 in the prior year period. EPS for the fourth quarter ended December 31, 2016 and 2015 include restructuring costs of $0.04 EPS and $0.08 EPS, respectively.
Revenue for the year ended December 31, 2016 was $6.8 billion, a decrease of 2% from the prior year, reflecting an organic revenue decline of 5%, a 3% impact from dispositions, and an unfavorable impact from foreign exchange of 1%, offset by acquisition growth of 7%. Earnings from continuing operations for the year ended December 31, 2016, were $508.9 million, a decrease of 15% as compared to $595.9 million for the prior year period. Diluted EPS for the year ended December 31, 2016, was $3.25, compared to $3.74 EPS in the prior year period, representing a decrease of 13%. EPS from continuing operations for the year ended December 31, 2016, includes gains on dispositions of $0.44, a charge of $0.09 for a voluntary product recall, and discrete tax benefits of $0.09. EPS from continuing operations for the year ended December 31, 2015, includes discrete tax benefits of $0.11. Excluding these items adjusted EPS from continuing operations decreased 22% to $2.82 from a comparable EPS of $3.63 in the prior year period. EPS for the years ended December 31, 2016 and 2015 also include restructuring costs of $0.18 EPS and $0.25 EPS, respectively.
Dover's President and Chief Executive Officer, Robert A. Livingston, said, "I was pleased with our fourth quarter business activity and results. And, I was especially pleased we were able to close the Wayne transaction earlier than previously expected.
"Among the highlights in the quarter were a continued recovery in our shorter cycle drilling and artificial lift markets, along with strong results in our Printing & Identification platform. We also saw solid activity in our Bearings & Compression and Petrochemical & Polymer markets. These positive developments helped mitigate continued soft conditions in longer cycle oil & gas markets, especially within transport, and challenges in retail refrigeration.
"With regard to 2017, we confirm our guidance for full year diluted earnings per share from continuing operations to be in the range of $3.40 to $3.60. Within this guidance, revenue growth is expected to be 10% to 12%, including organic growth of 3% to 5% and acquisition growth of approximately 10%, partially offset by a 1% impact from dispositions and a 2% headwind from FX."
Net earnings for the fourth quarter ended December 31, 2016, were $161.2 million, or $1.03 EPS, compared to net earnings of $141.8 million, or $0.91 EPS, for the same period of 2015, which included earnings from discontinued operations of $5.3 million.
Net earnings for the year ended December 31, 2016, were $508.9 million, or $3.25 EPS, compared to net earnings of $869.8 million, or $5.46 EPS, for the same period of 2015, which included earnings from discontinued operations of $273.9 million, or $1.72 EPS. 2015 earnings from discontinued operations included gains of $265.6 million, or $1.67 EPS, resulting from the disposition of two businesses.
Dover will host a webcast of its fourth quarter 2016 conference call at 10:00 A.M. Eastern Time (9:00 A.M. Central Time) on Thursday, January 26, 2017. 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 results and its operating segments can also be found on the Company's website.
About Dover:
Dover is a diversified global manufacturer with annual revenue exceeding $7 billion. We deliver innovative equipment and components, specialty systems and support services through four major operating segments: Energy, 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 29,000 employees takes an ownership mindset, collaborating with customers to redefine what's possible. Headquartered in Downers Grove, Illinois, Dover trades on the New York Stock Exchange under "DOV." Additional information is available at dovercorporation.com.
Forward-Looking Statements:
This press release contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such statements relate to, among other things, operating and strategic plans, income, earnings, cash flows, foreign exchange, changes in operations, acquisitions, industries in which Dover businesses operate, anticipated market conditions and our positioning, global economies, and operating improvements. Forward-looking statements may be indicated by words or phrases such as "anticipates," "expects," "believes," "suggests," "will," "plans," "should," "would," "could," and "forecast", or the use of the future tense and similar words or phrases. Forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from current expectations, including, but not limited to, oil and natural gas demand, production growth, and prices; changes in exploration and production spending by Dover's customers and changes in the level of oil and natural gas exploration and development; changes in customer demand and capital spending; economic conditions generally and changes in economic conditions globally and in markets served by Dover businesses, including well activity and U.S. industrials activity; Dover's ability to achieve expected savings from integration and other cost-control initiatives, such as lean and productivity programs as well as efforts to reduce sourcing input costs; the impact of interest rate and currency exchange rate fluctuations; the ability of Dover's businesses to expand into new geographic markets; Dover's ability to identify and successfully consummate value-adding acquisition opportunities or planned divestitures; the impact of loss of a significant customer, or loss or non-renewal of significant contracts; the ability of Dover's businesses to develop and launch new products, timing of such launches and risks relating to market acceptance by customers; the relative mix of products and services which impacts margins and operating efficiencies; increased competition and pricing pressures; the impact of loss of a single-source manufacturing facility; short-term capacity constraints; increases in the cost of raw materials; domestic and foreign governmental and public policy changes or developments, including environmental regulations, conflict minerals disclosure requirements, and tax policies; protection and validity of patent and other intellectual property rights; the impact of legal matters and legal compliance risks, including product recalls; conditions and events affecting domestic and global financial and capital markets; and a downgrade in Dover's credit ratings which, among other matters, could make obtaining financing more difficult and costly. Dover refers you to the documents that it files from time to time with the Securities and Exchange Commission, such as its reports on Form 10-K, Form 10-Q and Form 8-K, for a discussion of these and other risks and uncertainties that could cause its actual results to differ materially from its current expectations and from the forward-looking statements contained herein. Dover undertakes no obligation to update any forward-looking statement, except as required by law.
INVESTOR SUPPLEMENT - FOURTH QUARTER AND FULL YEAR 2016
-------------------------------------------------------
DOVER CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)(in thousands, except per share data)
Three Months Ended December 31, Years Ended December 31,
2016 2015 2016 2015
---- ---- ---- ----
Revenue $1,777,961 $1,694,600 $6,794,342 $6,956,311
Cost of goods and services 1,158,257 1,080,791 4,322,373 4,388,167
--------- --------- --------- ---------
Gross profit 619,704 613,809 2,471,969 2,568,144
Selling, general, and administrative expenses 455,622 414,365 1,757,523 1,647,382
------- ------- --------- ---------
Operating earnings 164,082 199,444 714,446 920,762
Interest expense 35,515 32,520 136,401 131,676
Interest income (2,738) (1,271) (6,759) (4,419)
Other income, net (191) (1,295) (7,930) (7,105)
Gain on sale of businesses (84,537) - (96,598) -
------- --- ------- ---
Earnings before provision for income taxes and discontinued operations 216,033 169,490 689,332 800,610
Provision for income taxes 54,871 32,916 180,440 204,729
------ ------ ------- -------
Earnings from continuing operations 161,162 136,574 508,892 595,881
Earnings from discontinued operations, net - 5,251 - 273,948
Net earnings $161,162 $141,825 $508,892 $869,829
======== ======== ======== ========
Basic earnings per common share:
Earnings from continuing operations $1.04 $0.88 $3.28 $3.78
Earnings from discontinued operations, net - 0.03 - 1.74
Net earnings 1.04 0.92 3.28 5.52
Weighted average shares outstanding 155,376 154,986 155,231 157,619
======= ======= ======= =======
Diluted earnings per common share:
Earnings from continuing operations $1.03 $0.87 $3.25 $3.74
Earnings from discontinued operations, net - 0.03 - 1.72
Net earnings 1.03 0.91 3.25 5.46
Weighted average shares outstanding 156,816 156,254 156,636 159,172
======= ======= ======= =======
Dividends paid per common share $0.44 $0.42 $1.72 $1.64
===== ===== ===== =====
DOVER CORPORATION
QUARTERLY SEGMENT INFORMATION
(unaudited)(in thousands)
2016 2015
Q1 Q2 Q3 Q4 FY 2016 Q1 Q2 Q3 Q4 FY 2015
--- --- --- --- ------- --- --- --- --- -------
REVENUE
-------
Energy $283,230 $259,008 $273,248 $292,952 $1,108,438 $430,423 $366,044 $363,872 $323,341 $1,483,680
-------- -------- -------- -------- ---------- -------- -------- -------- -------- ----------
Engineered Systems
Printing & Identification 239,681 263,648 253,091 266,082 1,022,502 230,181 229,934 227,992 255,563 943,670
Industrials 337,314 328,784 317,471 360,212 1,343,781 343,015 363,157 351,404 341,667 1,399,243
------- ------- ------- ------- --------- ------- ------- ------- ------- ---------
576,995 592,432 570,562 626,294 2,366,283 573,196 593,091 579,396 597,230 2,342,913
------- ------- ------- ------- --------- ------- ------- ------- ------- ---------
Fluids 399,062 405,838 412,822 482,852 1,700,574 340,236 351,511 352,018 355,508 1,399,273
------- ------- ------- ------- --------- ------- ------- ------- ------- ---------
Refrigeration & Food Equipment 363,252 429,386 451,328 376,373 1,620,339 372,097 448,115 492,460 418,758 1,731,430
------- ------- ------- ------- --------- ------- ------- ------- ------- ---------
Intra-segment eliminations (266) (319) (197) (510) (1,292) (451) (133) (164) (237) (985)
---- ---- ---- ---- ------ ----
Total consolidated revenue $1,622,273 $1,686,345 $1,707,763 $1,777,961 $6,794,342 $1,715,501 $1,758,628 $1,787,582 $1,694,600 $6,956,311
========== ========== ========== ========== ========== ========== ========== ========== ========== ==========
NET EARNINGS
------------
Segment Earnings:
Energy $11,244 $(75) $13,279 $30,888 $55,336 $52,305 $40,909 $48,726 $31,250 $173,190
Engineered Systems 93,748 104,034 97,240 96,807 391,829 88,149 96,702 102,866 89,244 376,961
Fluids 46,047 54,033 66,178 34,663 200,921 54,634 70,168 74,911 62,404 262,117
Refrigeration & Food Equipment 38,161 63,230 64,111 118,126 283,628 36,150 65,732 76,665 42,752 221,299
------ ------ ------ ------- ------- ------ ------ ------ ------ -------
Total segments 189,200 221,222 240,808 280,484 931,714 231,238 273,511 303,168 225,650 1,033,567
Corporate expense / other 29,862 24,566 26,638 31,674 112,740 34,526 20,382 25,881 24,911 105,700
Interest expense 33,318 33,779 33,789 35,515 136,401 33,005 33,053 33,098 32,520 131,676
Interest income (1,604) (1,622) (795) (2,738) (6,759) (968) (1,065) (1,115) (1,271) (4,419)
------ ------ ---- ------ ------ ------
Earnings from continuing operations before provision for
income taxes 127,624 164,499 181,176 216,033 689,332 164,675 221,141 245,304 169,490 800,610
Provision for income taxes 28,268 46,209 51,092 54,871 180,440 47,485 65,507 58,821 32,916 204,729
------ ------ ------ ------ ------- ------ ------ ------ ------ -------
Earnings from continuing operations 99,356 118,290 130,084 161,162 508,892 117,190 155,634 186,483 136,574 595,881
Earnings (loss) from discontinued operations, net - - - - - 92,320 176,762 (385) 5,251 273,948
Net earnings $99,356 $118,290 $130,084 $161,162 $508,892 $209,510 $332,396 $186,098 $141,825 $869,829
======= ======== ======== ======== ======== ======== ======== ======== ======== ========
SEGMENT OPERATING MARGIN
------------------------
Energy 4.0% - % 4.9% 10.5% 5.0% 12.2% 11.2% 13.4% 9.7% 11.7%
Engineered Systems 16.2% 17.6% 17.0% 15.5% 16.6% 15.4% 16.3% 17.8% 14.9% 16.1%
Fluids 11.5% 13.3% 16.0% 7.2% 11.8% 16.1% 20.0% 21.3% 17.6% 18.7%
Refrigeration & Food Equipment 10.5% 14.7% 14.2% 31.4% 17.5% 9.7% 14.7% 15.6% 10.2% 12.8%
Total segment operating margin 11.7% 13.1% 14.1% 15.8% 13.7% 13.5% 15.6% 17.0% 13.3% 14.9%
DEPRECIATION AND AMORTIZATION EXPENSE
-------------------------------------
Energy $34,160 $33,289 $32,605 $31,366 $131,420 $34,427 $32,740 $31,858 $42,754 $141,779
Engineered Systems 16,036 16,075 16,238 25,597 73,946 14,526 14,392 14,503 16,493 59,914
Fluids 20,511 20,981 20,833 22,899 85,224 13,848 13,648 13,367 15,215 56,078
Refrigeration & Food Equipment 16,728 16,881 16,146 15,263 65,018 16,458 16,406 16,609 16,601 66,074
Corporate 1,169 868 901 2,193 5,131 923 841 837 643 3,244
Total depreciation and amortization expense $88,604 $88,094 $86,723 $97,318 $360,739 $80,182 $78,027 $77,174 $91,706 $327,089
======= ======= ======= ======= ======== ======= ======= ======= ======= ========
DOVER CORPORATION
QUARTERLY SEGMENT INFORMATION
(continued)
(unaudited)(in thousands)
2016 2015
Q1 Q2 Q3 Q4 FY 2016 Q1 Q2 Q3 Q4 FY 2015
--- --- --- --- ------- --- --- --- --- -------
BOOKINGS
--------
Energy $273,445 $246,021 $270,685 $299,771 $1,089,922 $416,628 $345,079 $351,557 $315,996 $1,429,260
-------- -------- -------- -------- ---------- -------- -------- -------- -------- ----------
Engineered Systems
Printing & Identification 242,569 266,490 248,443 268,951 1,026,453 235,617 224,203 226,756 250,639 937,215
Industrials 329,957 304,345 331,435 374,073 1,339,810 337,070 336,173 338,744 357,451 1,369,438
572,526 570,835 579,878 643,024 2,366,263 572,687 560,376 565,500 608,090 2,306,653
------- ------- ------- ------- --------- ------- ------- ------- ------- ---------
Fluids 418,345 413,767 413,535 457,283 1,702,930 339,310 333,695 357,032 321,154 1,351,191
------- ------- ------- ------- --------- ------- ------- ------- ------- ---------
Refrigeration & Food Equipment 411,367 468,661 429,134 336,645 1,645,807 419,659 486,793 430,681 379,967 1,717,100
------- ------- ------- ------- --------- ------- ------- ------- ------- ---------
Intra-segment eliminations (90) (944) (245) (308) (1,587) (628) (417) (385) (486) (1,916)
--- ---- ---- ---- ------ ---- ---- ---- ---- ------
Total consolidated bookings $1,675,593 $1,698,340 $1,692,987 $1,736,415 $6,803,335 $1,747,656 $1,725,526 $1,704,385 $1,624,721 $6,802,288
========== ========== ========== ========== ========== ========== ========== ========== ========== ==========
BACKLOG
-------
Energy $144,828 $129,873 $126,519 $134,181 $212,060 $194,819 $156,631 $155,586
-------- -------- -------- -------- -------- -------- -------- --------
Engineered Systems
Printing & Identification 102,640 104,509 101,190 98,924 108,151 103,403 100,476 98,288
Industrials 235,384 210,646 224,892 252,780 276,598 248,592 236,298 250,725
------- ------- ------- ------- ------- ------- ------- -------
338,024 315,155 326,082 351,704 384,749 351,995 336,774 349,013
------- ------- ------- ------- ------- ------- ------- -------
Fluids 286,457 315,786 318,246 331,238 259,504 240,389 236,608 243,459
------- ------- ------- ------- ------- ------- ------- -------
Refrigeration & Food Equipment 303,479 332,312 309,462 258,329 337,084 373,193 307,351 247,352
------- ------- ------- ------- ------- ------- ------- -------
Intra-segment eliminations (36) (265) (252) (102) (595) (354) (598) (808)
--- ---- ---- ---- ---- ---- ---- ----
Total consolidated backlog $1,072,752 $1,092,861 $1,080,057 $1,075,350 $1,192,802 $1,160,042 $1,036,766 $994,602
========== ========== ========== ========== ========== ========== ========== ========
DOVER CORPORATION
QUARTERLY EARNINGS PER SHARE
(unaudited)(in thousands, except per share data*)
Earnings Per Share
------------------
2016 2015
Q1 Q2 Q3 Q4 FY 2016 Q1 Q2 Q3 Q4 FY 2015
--- --- --- --- ------- --- --- --- --- -------
Basic earnings (loss) per common share:
Continuing operations $0.64 $0.76 $0.84 $1.04 $3.28 $0.72 $0.98 $1.20 $0.88 $3.78
Discontinued operations - - - - - 0.57 1.11 - 0.03 1.74
Net earnings $0.64 $0.76 $0.84 $1.04 $3.28 $1.30 $2.10 $1.20 $0.92 $5.52
Diluted earnings (loss) per common share:
Continuing operations $0.64 $0.76 $0.83 $1.03 $3.25 $0.72 $0.97 $1.19 $0.87 $3.74
Discontinued operations - - - - - 0.57 1.10 - 0.03 1.72
Net earnings $0.64 $0.76 $0.83 $1.03 $3.25 $1.28 $2.07 $1.19 $0.91 $5.46
Net earnings (loss) and average shares used in calculated earnings (loss) per share amounts are as follows:
Net earnings (loss):
Continuing operations $99,356 $118,290 $130,084 $161,162 $508,892 $117,190 $155,634 $186,483 $136,574 $595,881
Discontinued operations - - - - - 92,320 176,762 (385) 5,251 273,948
Net earnings $99,356 $118,290 $130,084 $161,162 $508,892 $209,510 $332,396 $186,098 $141,825 $869,829
Average shares outstanding:
Basic 155,064 155,180 155,300 155,376 155,231 161,650 158,640 155,300 154,986 157,619
Diluted 156,161 156,595 156,798 156,816 156,636 163,323 160,398 156,560 156,254 159,172
Adjusted Earnings Per Share (Non-GAAP)
-------------------------------------
Earnings from continuing operations are adjusted by gains (losses) from discrete and other tax items, gain on disposition of businesses, and a product recall charge to derive adjusted earnings from continuing operations and adjusted diluted earnings per common share as follows:
2016 2015
---- ----
Q1 Q2 Q3 Q4 FY 2016 Q1 Q2 Q3 Q4 FY 2015
--- --- --- --- ------- --- --- --- --- -------
Adjusted earnings from continuing operations:
Earnings from continuing operations $99,356 $118,290 $130,084 $161,162 $508,892 $117,190 $155,634 $186,483 $136,574 $595,881
Gains (losses) from discrete and other tax items 7,348 (1,221) (304) 7,752 13,575 - - 8,131 9,382 17,513
Gain on dispositions, net of tax 11,228 - - 56,975 68,203 - - - - -
Product recall charge, net of tax - - - (14,237) (14,237) - - - - -
--- --- --- ------- ------- --- --- --- --- ---
Adjusted earnings from continuing operations $80,780 $119,511 $130,388 $110,672 $441,351 $117,190 $155,634 $178,352 $127,192 $578,368
======= ======== ======== ======== ======== ======== ======== ======== ======== ========
Adjusted diluted earnings per common share:
Earnings from continuing operations $0.64 $0.76 $0.83 $1.03 $3.25 $0.72 $0.97 $1.19 $0.87 $3.74
Gains (losses) from discrete and other tax items 0.05 (0.01) - 0.05 0.09 - - 0.05 0.06 0.11
Gain on dispositions, net of tax 0.07 - - 0.36 0.44 - - - - -
Product recall charge, net of tax - - - (0.09) (0.09) - - - - -
--- --- --- ----- ----- --- --- --- --- ---
Adjusted earnings from continuing operations $0.52 $0.76 $0.83 $0.71 $2.82 $0.72 $0.97 $1.14 $0.81 $3.63
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
* Per share data may not add due to rounding.
DOVER CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)(in thousands)
December 31, 2016 December 31, 2015
----------------- -----------------
Assets:
Cash and cash equivalents $349,146 $362,185
Receivables, net of allowances 1,265,201 1,120,490
Inventories, net 870,487 802,895
Prepaid and other current assets 104,357 133,440
Property, plant and equipment, net 945,670 854,269
Goodwill 4,562,677 3,737,389
Intangible assets, net 1,802,923 1,413,223
Other assets and deferred charges 215,530 182,185
Total assets $10,115,991 $8,606,076
=========== ==========
Liabilities and Stockholders' Equity:
Notes payable and current maturities of
long-term debt $414,550 $151,122
Payables and accrued expenses 1,525,768 1,216,060
Deferred taxes and other non-current
liabilities 1,169,290 990,664
Long-term debt 3,206,637 2,603,655
Stockholders' equity 3,799,746 3,644,575
--------- ---------
Total liabilities and stockholders'
equity $10,115,991 $8,606,076
=========== ==========
DOVER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)(in thousands)
Years Ended December 31,
2016 2015
---- ----
Operating activities:
Net earnings $508,892 $869,829
Earnings from discontinued
operations, net - (273,948)
Depreciation and amortization 360,739 327,089
Stock-based compensation 21,015 30,697
Contributions to employee
benefit plans (25,691) (21,942)
Gain on sale of businesses (96,598) -
Net change in assets and
liabilities 93,618 17,334
------ ------
Net cash provided by operating
activities of continuing
operations 861,975 949,059
------- -------
Investing activities:
Additions to property, plant and
equipment (165,205) (154,251)
Acquisitions (net of cash and
cash equivalents acquired) (1,561,737) (567,843)
Proceeds from the sale of
property, plant and equipment 17,749 14,604
Proceeds from the sale of
businesses 206,407 689,314
Settlement of net investment
hedge - (17,752)
Other (1,057) 1,350
Net cash used in investing
activities of continuing
operations (1,503,843) (34,578)
---------- -------
Financing activities:
Change in commercial paper and
notes payable, net 254,834 (327,000)
Net increase in debt 654,382 94,252
Dividends to stockholders (268,339) (257,969)
Purchase of common stock - (600,164)
Net proceeds from exercise of
share-based awards (7,269) (1,005)
------ ------
Net cash provided by (used in)
financing activities of
continuing operations 633,608 (1,091,886)
------- ----------
Net cash used in discontinued
operations - (115,930)
--- --------
Effect of exchange rate changes
on cash (4,779) (26,061)
------ -------
Net decrease in cash and cash
equivalents (13,039) (319,396)
Cash and cash equivalents at
beginning of period 362,185 681,581
------- -------
Cash and cash equivalents at end
of period $349,146 $362,185
======== ========
ADDITIONAL INFORMATION
FOURTH QUARTER AND FULL YEAR 2016
(Amounts in thousands except share data and where otherwise indicated)
Acquisitions
During the fourth quarter of 2016, the Company completed the acquisitions of Ravaglioli S.p.A. Group, a provider of automotive service equipment, and Wayne Fueling Systems Ltd., a provider of fuel dispensing, payment, systems and aftermarket services for retail and commercial fuel stations. These acquisitions were acquired to complement and expand upon existing operations within the Engineered Systems and Fluids segments, respectively. For the full year 2016, Dover made a total of six acquisitions for a net cash consideration totaling $1,561.7 million.
Disposed Businesses
For the full year 2016, the Company completed the sale of Texas Hydraulics, a custom manufacturer of fluid power components, during the first quarter of 2016 as well as Tipper Tie, a global supplier of processing and clip packaging machines, during the fourth quarter of 2016. These disposals did not represent strategic shifts in operations and, therefore, did not qualify for presentation as a discontinued operation. Upon disposal of these businesses, the Company recognized total proceeds of $47.3 million and $158.9 million, which resulted in an after-tax gain on sale of $11.2 million and $57.0 million, respectively.
Restructuring
During the quarter, the Company took actions to adjust our costs and streamline our businesses, resulting in $8.8 million, or $0.04 EPS, of restructuring charges. These charges were incurred primarily within our Fluids segment with costs incurred of $7.8 million. For full year, restructuring costs totaled $40.2 million, or $0.18 EPS, of which primarily $18.5 million was incurred in Energy and $16.9 million in Fluids.
Tax Rate
The effective tax rate on continuing operations was 25.4% and 19.4% for the fourth quarters of 2016 and 2015, respectively. On a full year basis, the effective tax rates on continuing operations for 2016 and 2015 were 26.2% and 25.6%, respectively. The 2016 and 2015 rates were favorably impacted by discrete and other items, as shown in the reconciliation for quarterly earnings per share included herein. After adjusting for discrete and other items, the fourth quarter effective tax rates were 29.0% and 25.0% for 2016 and 2015, respectively, and the full year rates were 28.1% and 27.8% for 2016 and 2015, respectively. The increase in the effective tax rate year over year is principally due to adjustments of the tax accounts to the U.S. tax return filed.
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, 2016 December 31, 2015
--------------- ----------------- -----------------
Current
maturities
of
long-
term
debt $6,950 $122
Commercial
paper 407,600 151,000
------- -------
Notes
payable
and
current
maturities
of
long-
term
debt 414,550 151,122
Long-
term
debt 3,206,637 2,603,655
--------- ---------
Total
debt 3,621,187 2,754,777
Less:
Cash
and
cash
equivalents (349,146) (362,185)
-------- --------
Net
debt 3,272,041 2,392,592
Add:
Stockholders'
equity 3,799,746 3,644,575
--------- ---------
Net
capitalization $7,071,787 $6,037,167
========== ==========
Net
debt
to net
capitalization 46.3% 39.6%
==== ====
Quarterly Cash Flow
2016 2015
Q1 Q2 Q3 Q4 FY 2016 Q1 Q2 Q3 Q4 FY 2015
--- --- --- --- ------- --- --- --- --- -------
Net Cash Flows Provided By (Used In):
Operating activities $133,413 $207,868 $231,665 $289,029 $861,975 $131,332 $218,911 $282,213 $316,603 $949,059
Investing activities (425,857) (69,415) (66,110) (942,461) (1,503,843) 156,585 457,875 (33,454) (615,584) (34,578)
Financing activities 178,507 (127,678) 98,491 484,288 633,608 (416,603) (608,329) (86,033) 19,079 (1,091,886)
Quarterly Free Cash Flow (Non-GAAP)
2016 2015
Q1 Q2 Q3 Q4 FY 2016 Q1 Q2 Q3 Q4 FY 2015
--- --- --- --- ------- --- --- --- --- -------
Cash flow from operating activities $133,413 $207,868 $231,665 $289,029 $861,975 $131,332 $218,911 $282,213 $316,603 $949,059
Less: Capital expenditures (37,230) (35,422) (43,116) (49,437) (165,205) (27,956) (43,807) (39,516) (42,972) (154,251)
------- ------- ------- ------- -------- ------- ------- ------- ------- --------
Free cash flow $96,183 $172,446 $188,549 $239,592 $696,770 $103,376 $175,104 $242,697 $273,631 $794,808
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Free cash flow as a percentage of earnings from continuing
operations 96.8% 145.8% 144.9% 148.7% 136.9% 88.2% 112.5% 130.1% 200.4% 133.4%
Free cash flow as a percentage of revenue 5.9% 10.2% 11.0% 13.5% 10.3% 6.0% 10.0% 13.6% 16.1% 11.4%
Revenue Growth Factors
2016
Q1 Q2 Q3 Q4 Full Year
--- --- --- ---------
Organic (7)% (7)% (7)% (2)% (5)%
Acquisitions 6% 6% 6% 11% 7%
Dispositions (3)% (3)% (3)% (3)% (3)%
Currency translation (1)% - % (1)% (1)% (1)%
--- --- --- --- --- ---
(5)% (4)% (5)% 5% (2)%
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 earnings from continuing operations, adjusted diluted earnings per common share, net debt, net capitalization, net debt to net capitalization ratio, free cash flow, organic revenue growth are not financial measures under GAAP and should not be considered as a substitute for earnings from continuing operations, 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 gains or losses from discrete and other tax items, gain on disposition of businesses, and a product recall charge. Adjusted diluted earnings per common share represents adjusted earnings from continuing operations divided by average diluted shares. Management believes this information is useful to investors to better understand the company's ongoing profitability and facilitates easier comparisons of the company's profitability to prior and future periods and to its peers. Net debt represents total debt minus cash and cash equivalents. Net capitalization represents net debt plus stockholders' equity. Management believes the net debt to net capitalization ratio is useful to assess our overall financial leverage and capacity. Free cash flow represents net cash provided by operating activities minus capital expenditures. Management believes that free cash flow is an important measure of operating performance because it provides management and investors a measurement of cash generated from operations that is available for mandatory payment obligations and investment opportunities, such as funding acquisitions, paying dividends, repaying debt and repurchasing our common stock. Management believes that reporting organic revenue growth, which excludes the impact of foreign currency exchange rates and the impact of acquisitions and dispositions, provides a useful comparison of our revenue performance and trends between periods.
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SOURCE Dover Corporation
