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, 2016

Commission File Number: 1-4018
Dover Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
 
53-0257888
(I.R.S. Employer
Identification No.)
 
 
 
3005 Highland Parkway
Downers Grove, Illinois 60515
(Address of principal executive offices)
 
 
 
Registrant's telephone number : (630) 541-1540
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
 
 
  Title of Each Class
 
  Name of Each Exchange on Which Registered
Common Stock, par value $1
 
New York Stock Exchange
2.125% Notes due 2020
 
New York Stock Exchange
1.250% Notes due 2026
 
New York Stock Exchange
 
 
 
Securities registered pursuant to Section 12(g) of the Act:
 
 
 
None
 
 
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 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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files.) Yes  þ      No  o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   þ
 
  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer  þ
Accelerated filer  o
Non-accelerated filer  o
Smaller reporting company  o
(Do not check if a smaller reporting company)







  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o      No  þ

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, 2016 was $10,669,106,014 . The registrant’s closing price as reported on the New York Stock Exchange-Composite Transactions for June 30, 2016 was $69.32 per share. The number of outstanding shares of the registrant’s common stock as of January 27, 2017 was 155,502,313 .

Documents Incorporated by Reference: Part III — Certain Portions of the Proxy Statement for Annual Meeting of Shareholders to be held on May 5, 2017 (the “ 2017 Proxy Statement”).




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. Such statements concern future events and 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 address matters that are uncertain, including, by way of example only: operating and strategic plans, future sales, earnings, cash flows, margins, organic growth, growth from acquisitions, restructuring charges, cost structure, capital expenditures, capital allocation, capital structure, dividends, cash flows, exchange rates, tax rates, interest rates, interest expense, changes in operations and trends in industries in which our businesses operate, anticipated market conditions and our positioning, global economies, and operating improvements. Forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from current expectations, including, but not limited to, economic conditions generally and changes in economic conditions globally and in the markets and industries served by our businesses, including oil and gas activity and U.S. industrials activity; conditions and events affecting domestic and global financial and capital markets; oil and natural gas demand, production growth, and prices; changes in exploration and production spending by our customers and changes in the level of oil and natural gas exploration and development; changes in customer demand and capital spending; risks related to our international operations and the ability of our businesses to expand into new geographic markets; the impact of interest rate and currency exchange rate fluctuations; increased competition and pricing pressures; the impact of loss of a significant customer, or loss or non-renewal of significant contracts; the ability of our businesses to adapt to technological developments; the ability of our businesses to develop and launch new products, timing of such launches and risks relating to market acceptance by customers; the relative mix of products and services which impacts margins and operating efficiencies; the impact of loss of a single-source manufacturing facility; short-term capacity constraints; domestic and foreign governmental and public policy changes or developments, including import/export laws and sanctions, tax policies, environmental regulations and conflict minerals disclosure requirements; increases in the cost of raw materials; our ability to identify and successfully consummate value-adding acquisition opportunities or planned divestitures, and to realize anticipated earnings and synergies from acquired businesses and joint ventures; our ability to achieve expected savings from integration and other cost-control initiatives, such as lean and productivity programs as well as efforts to reduce sourcing input costs; the impact of legal compliance risks and litigation, including product recalls; indemnification obligations related to acquired or divested businesses; cybersecurity and privacy risks; protection and validity of patent and other intellectual property rights; goodwill or intangible asset impairment charges; a downgrade in our credit ratings which, among other matters, could make obtaining financing more difficult and costly; and work stoppages, union and works council campaigns and other labor disputes which could impact our productivity. Certain of these risks and uncertainties are described in more detail in Item 1A. "Risk Factors" of this Annual Report on Form 10-K. Dover undertakes no obligation to update any forward-looking statement, except as required by law.

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. 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.

The Company may, from time to time, post financial or other information on its website, www.dovercorporation.com. The website is for informational purposes only and is not intended for use as a hyperlink. The Company is not incorporating any material on its website into this report.




1


TABLE OF CONTENTS

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2

Table of Contents


PART I

ITEM 1. BUSINESS

Overview

Dover Corporation is a diversified global manufacturer delivering innovative equipment and components, specialty systems, consumable supplies, software and digital solutions and support services through four operating segments: Energy, Engineered Systems, Fluids and Refrigeration & Food Equipment. The Company's entrepreneurial business model encourages, promotes and fosters deep customer engagement and collaboration, which has led to Dover's well-established and valued reputation for providing superior customer service and industry-leading product innovation. 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 29,000 people worldwide.

Dover's businesses are aligned in four segments organized around our key end markets focused on growth strategies. Our segment structure is also designed to provide increased opportunities to leverage Dover's scale and capitalize on productivity initiatives. Dover's four operating segments are as follows:

Our Energy segment, serving the Drilling & Production, Bearings & Compression and Automation end markets, is a provider of customer-driven solutions and services for safe and efficient production and processing of fuels worldwide and has a strong presence in the bearings and compression components and automation markets.

Our Engineered Systems segment is comprised of two platforms, Printing & Identification and Industrials and is focused on the design, manufacture and service of critical equipment and components serving the fast-moving consumer goods, digital textile printing, vehicle service, environmental solutions and industrial end markets.

Our Fluids segment, serving the Fluid Transfer and Pumps end markets, is focused on the safe handling of critical fluids across the retail fueling, chemical, hygienic, oil and gas and industrial end markets.

Our Refrigeration & Food Equipment segment is a provider of innovative and energy efficient equipment and systems serving the commercial Refrigeration and Food Equipment end markets.

The following table shows the percentage of total revenue and segment earnings generated by each of our four operating segments for the years ended December 31, 2016 , 2015 and 2014 :
 
Revenue
 
Segment Earnings
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
Energy
16
%
 
21
%
 
26
%
 
6
%
 
17
%
 
34
%
Engineered Systems
35
%
 
34
%
 
31
%
 
42
%
 
36
%
 
29
%
Fluids
25
%
 
20
%
 
18
%
 
22
%
 
26
%
 
19
%
Refrigeration & Food Equipment
24
%
 
25
%
 
25
%
 
30
%
 
21
%
 
18
%

Management Philosophy

Our businesses are committed to operational excellence and to being market leaders as measured by market share, customer service, growth, profitability and return on invested capital. Our operating structure of four business segments allows for focused acquisition activity, accelerates opportunities to identify and capture operating synergies, including global sourcing and supply chain integration, shared services and manufacturing and advances the development of our executive talent. Our segment and executive management set strategic direction, initiatives and goals for our operating companies and also provide oversight, allocate and manage capital, are responsible for major acquisitions and provide other services. We foster an operating culture with high ethical standards, trust, respect and open communication, designed to allow individual growth and operational effectiveness.

In addition, we are committed to creating value for our customers, employees and shareholders through sustainable business practices that protect the environment and the development of products that help our customers meet their sustainability goals.

3



We have accelerated our efforts and processes around innovation, focusing on technologies which create tangible value for our customers. Most notably, we believe that product innovations like the Spirit Genesis Pump Off Controller within our Energy segment, CNrG tailgate within our Engineered Systems segment, EvoClean laundry system within our Fluids segment and AdvansorFlex CO 2 refrigeration system and Vista Elite Cooler Door within our Refrigeration & Food Equipment segment help to make a positive difference for the environment while providing value to shareholders and customers.

Our companies are increasing their focus on efficient energy usage, greenhouse gas reduction and waste management as they strive to meet the global environmental needs of today and tomorrow.

Company Goals

We are committed to driving shareholder return through three key objectives. First, we are committed to achieving annual organic sales growth of 3% to 5% over a long-term business cycle, absent adverse economic conditions, complemented by acquisition growth. Second, we continue to focus on segment margin expansion through productivity initiatives, including supply chain activities, targeted, thoughtful restructuring activities, strategic pricing and portfolio shaping. Third, we are committed to generating free cash flow as a percentage of sales of approximately 11% through strong earnings performance, productivity improvements and active working capital management. We support these goals through (1) alignment of management compensation with financial objectives, (2) well-defined and actively managed merger and acquisition processes and (3) talent development programs.

Business Strategy

To achieve our goals, we are focused on execution of the following three key business strategies:

Positioning ourselves for growth

We have aligned our business segments to focus on the needs of customers in key end markets that are well-positioned for future growth. We capitalize on our expertise while maintaining an intense focus on our customers and their needs. We maintain and emphasize our 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 trends in the areas of global energy demand, continuous productivity improvement, sustainability, energy efficiency, consumer product safety and growth of consumerism in emerging economies. Our Energy segment is focusing on expansion in high growth regions and technologies, accelerating capabilities to drive international growth and increasing investment in innovation to drive customer productivity and cash flow. Our Engineered Systems segment combines its engineering technology, unique product advantages and applications expertise to address market needs and requirements including conversion to digital textile printing, productivity solutions, sustainability, consumer product safety and growth in emerging economies. The Fluids segment is focused on accelerated growth within the chemical/plastics, retail fueling, fluid transfer, industrial and hygienic markets as well as globalizing brands across geographies while expanding sales channels and engineering support. In particular, we are pursuing further growth in the retail fueling, hygienic and pharma and polymers/plastics markets. Our Refrigeration & Food Equipment segment is responding to our customers’ energy efficiency and sustainability concerns and unique merchandising requirements with innovative new products.

Capturing the benefits of common ownership

We are committed to operational excellence through our Dover Excellence ("DEx") program. This program focuses on free cash flow generation, productivity to support ongoing investment in product innovation and customer expansion activities, the continuous evaluation of operating efficiencies and the continued consolidation of back office support. Through this program we have implemented various productivity initiatives, such as supply chain management and lean manufacturing, to maximize our efficiency as well as workplace safety initiatives to help ensure the health and welfare of our employees. We foster the sharing of best practices throughout the organization. To ensure success, our businesses place strong emphasis on continual quality improvement and new product development to better serve customers and expand into new product and geographic markets. We have also developed regional support centers and shared manufacturing centers in the United States, China, Brazil and India. Further, we continue to make significant investments in talent development, recognizing that the growth and development of our employees are essential for our continued success.


4



Additionally in 2016, we began to invest in our Dover Business Services ("DBS") shared service centers which will bring significant value to Dover by providing important transactional and value added services to our operating companies in the areas of finance, information technology and human resources. Our model allows us to leverage scale across Dover, increase process efficiencies through technology and specialization and reduce risk through centralized controls. Ultimately, our mission is to serve our operating companies by freeing resources normally dedicated to transactional services to allow those resources to focus on customers, markets and product excellence.

Disciplined capital allocation

Our businesses generate annual free cash flow of approximately 10% to 11% of revenue. We are focused on the most efficient allocation of our capital to maximize investment returns. To do this, we grow and support our existing businesses with average annual investment in capital spending of approximately 2% to 2.5% of revenue with a focus on internal projects to expand markets, develop products and boost productivity. Businesses in our portfolio are continually evaluated for strategic fit and our acquisitions are targeted in our key growth markets which include printing and identification, refrigeration and food equipment, pumps and fluid transfer and select energy markets. We consistently provide shareholder returns by paying dividends, which have increased annually over each of the last 61 years. We will also consider opportunistic share repurchases as part of our capital allocation strategy to offset the impact of dilution.

Portfolio Development

Acquisitions

Our acquisition program has two key elements. First, we seek to acquire value creating add-on businesses that enhance our existing businesses either through their global reach and customers, or by broadening their product mix. Second, in the right circumstances, we will strategically pursue larger, stand-alone businesses that have the potential to either complement our existing businesses or allow us to pursue innovative technologies within our key growth spaces.

Over the past three years ( 2014 through 2016 ), we have spent over $2.9 billion to purchase 17 businesses. During 2016 , we acquired six businesses for an aggregate consideration of $1.6 billion , net of cash acquired. These businesses include Tokheim Group S.A.S., Fairbanks Environmental LTD, ProGauge and Wayne Fueling Systems Ltd. to expand our Fluids segment's retail fueling portfolio and Alliance Wireless Technologies, Inc. and Ravaglioli S.p.A. Group to complement the Industrials platform within our Engineered Systems segment. During 2015, we acquired four businesses for an aggregate purchase price of $567.8 million , net of cash acquired. These businesses include Gala Industries and Reduction Engineering Scheer, expanding our Fluids segment's plastics and polymers product and integrated systems portfolio. In addition, we acquired JK Group, a global manufacturer and provider of innovative digital inks for the textile printing market, which complements the Printing & Identification platform within our Engineered Systems segment. During 2014, we acquired seven businesses for an aggregate purchase price of $802.3 million , net of cash acquired, including Accelerated Companies LLC, expanding our artificial lift footprint within our Energy segment. For more details regarding acquisitions completed over the past two years, see Note 2 — 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. While we expect to generate annual organic growth of 3% to 5% over a long-term business cycle absent extraordinary economic conditions, sustained organic growth at these levels for individual businesses is difficult to achieve consistently each year. Our success is also dependent on the ability to successfully integrate our acquired businesses within our existing structure. To track post-merger integration and accountability, we utilize an internal scorecard and defined processes to help ensure expected synergies are realized and value is created.

Dispositions

Occasionally, we may also make an opportunistic sale of one of our businesses based on specific market conditions or for strategic considerations, which include an effort to reduce our exposure to cyclical markets and focus on our higher margin growth spaces. During the past three years ( 2014 through 2016 ) we have sold six businesses for aggregate consideration of $1.1 billion .

During 2016, we completed the sale of Texas Hydraulics and Tipper Tie, within the Engineered Systems and Refrigeration & Food Equipment segments, respectively. In addition, during the fourth quarter of 2015 we completed the divestiture of the walk-in cooler business of Hillphoenix within the Refrigeration & Food Equipment segment. These disposals did not represent strategic

5



shifts in operations and, therefore, did not qualify for presentation as discontinued operations. We expect to make further dispositions in the future, none of which, individually, are expected to be significant.

During 2015, we completed the sale of Datamax O'Neil and Sargent Aerospace. The financial position and results of operations for the 2015 divestitures have been presented as discontinued operations for all periods presented. For more details, see Note 3 — Disposed and Discontinued Operations in the Consolidated Financial Statements in Item 8 of this Form 10-K.

In addition, in February 2014, we divested of a significant portion of our technology business with the spin-off of Knowles Corporation ("Knowles") as discussed below.

Spin-Off of Knowles

On February 28, 2014, we completed the separation of Knowles from Dover through the pro rata distribution of 100% of the common stock of Knowles to Dover's stockholders of record as of the close of business on February 19, 2014. Each Dover shareholder received one share of Knowles common stock for every two shares of Dover common stock held as of the record date. As a result, Knowles became an independent, publicly traded company listed on the New York Stock Exchange, and Dover retains no ownership interest in Knowles. The distribution was structured to be tax-free to Dover and its shareholders for U.S. federal income tax purposes.

Business Segments

As noted previously, we currently operate through four business segments that are aligned with the key end markets they serve and comprise our operating and reportable segments: Energy, Engineered Systems, Fluids and Refrigeration & Food Equipment. For financial information about our segments and geographic areas, see Note 16 — Segment Information in the Consolidated Financial Statements in Item 8 of this Form 10-K.

Energy

Our Energy segment serves the Drilling & Production, Bearings & Compression and Automation end markets. This segment is a provider of customer-driven solutions and services for safe and efficient production and processing of fuels worldwide. This segment consists of the following end markets:

Drilling & Production – Our businesses serving the drilling and production end markets design and manufacture products that promote efficient and cost-effective drilling, including long-lasting polycrystalline diamond cutters ("PDCs") for applications in down-hole drilling tools and facilitate the extraction and movement of oil and gas from the ground, including steel sucker rods, down-hole rod pumps, electric submersible pumps, progressive cavity pumps and drive systems and plunger lifts. In addition, these businesses manufacture winches, hoists, gear drives and electronic monitoring solutions for energy, infrastructure and recovery markets worldwide.

Bearings & Compression – These businesses manufacture various compressor parts that are used in natural gas production, distribution and oil refining markets. Product offerings include bearings, bearing isolators, seals and remote condition monitoring systems that are used for rotating machinery applications such as turbo machinery, motors, generators and compressors used in energy, utility, marine and other industries.

Automation These businesses design and manufacture products that promote efficient drilling and production of oil and gas including quartz pressure transducers and hybrid electronics used in down-hole monitoring devices, chemical injection pumps, automated pump controllers, artificial lift optimization software, diagnostic instruments for reciprocating machinery and control valves.

Our Energy segment’s sales are made directly to customers and through various distribution channels. We manufacture our products primarily in North America and our sales are concentrated in North America with an increasing level of international sales directed primarily to Europe, Australia and Asia.


6



Engineered Systems

Our Engineered Systems segment is focused on the design, manufacture and service of critical equipment and components within the Printing & Identification and Industrials platforms, as described below.

Printing & Identification Printing & Identification is a worldwide supplier of precision marking and coding, digital textile printing, soldering and dispensing equipment and related consumables and services. Our Printing & Identification platform 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, capitalizing on expanding food and product safety requirements and growth in emerging markets. In addition, our businesses serving the textile market are benefiting from a significant shift from analog to digital printing, resulting from shorter runs and more complex fashion designs, as well as increasing regulatory and environmental standards.

Industrials These businesses serve the vehicle service, industrial automation and waste and recycling markets, providing a wide range of products and services which have broad customer applications.

Our businesses serving the global vehicle service market provide products 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.  Products are sold to national dealership networks, original equipment manufacturers ("OEM"), national multi-shop operations ("MSO") Groups, independent repair and service shops, large national accounts and government/transit customers through a network of distributors and channel partners.

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. These products serve a very broad market including food processing, packaging, paper processing, medical, electronic, automotive, nuclear and general industrial products.

Our businesses serving waste and recycling markets provide products and services for the refuse collection industry and for on-site processing and compaction of trash and recyclable materials. Products are sold to municipal customers, national accounts and independent waste haulers through a network of distributors and directly in certain geographic areas.

Engineered Systems' products are manufactured primarily in the United States and Europe and are sold throughout the world directly and through a network of distributors.

Fluids
Our Fluids segment is focused on the safe handling of critical fluids across the retail fueling, chemical, hygienic, oil and gas and industrial end markets. The segment serves two broad global end markets: Fluid Transfer and Pumps.

Fluid Transfer – Providing fully integrated fluid handling solutions from refineries and chemical-processing plants through point-to-point transfers, transportation and delivery to the final point of consumption. Within this framework, we have a very strong presence in the retail and commercial fueling markets, where we provide fuel dispensers, payment systems, hanging hardware, underground containment systems, as well as monitoring and optimization software.  Fluid Transfer also specializes in the manufacturing of connectors for use in a variety of bio-processing applications. We strive to optimize safety, efficiency, reliability and environmental sustainability through innovative fluid handling and information management solutions.

Pumps – The pumps and compressors are used to transfer liquid and bulk products and are sold to a wide variety of markets, including the refined fuels, LPG, food/sanitary, transportation and chemical process industries. The pumps include positive displacement and centrifugal pumps that are used in demanding and specialized fluid transfer process applications.

Fluids' products are manufactured primarily in the United States, Europe, China and Brazil and are sold throughout the world directly and through a network of distributors.

7



Refrigeration & Food Equipment

Our Refrigeration & Food Equipment segment is a provider of innovative and energy efficient equipment and systems serving the commercial Refrigeration and Food Equipment end markets.

Refrigeration – Our businesses manufacture refrigeration systems, refrigeration display cases, specialty glass, commercial glass refrigerator and freezer doors and brazed heat exchangers used in industrial and climate control.

Food Equipment – Our businesses manufacture electrical distribution products and engineering services, commercial food service equipment, cook-chill production systems, custom food storage and preparation products, kitchen ventilation systems, conveyer systems and beverage can-making machinery.

The majority of the refrigeration/food systems and machinery that are manufactured or serviced by the Refrigeration & Food Equipment segment are used by the supermarket industry, including “big-box” retail and convenience stores, the commercial/industrial refrigeration industry, institutional and commercial food service and food production markets and beverage can-making industries. Refrigeration & Food Equipment'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 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 are encouraged to develop innovative products as well as to upgrade and improve existing products to satisfy customer needs, expand revenue opportunities domestically and internationally, maintain or extend competitive advantages, improve product reliability and reduce production costs. During 2016 , we spent $104.5 million for research and development, including qualified engineering costs. In 2015 and 2014 , research and development spending totaled $115.0 million and $118.4 million , respectively.

Our Engineered Systems 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 believe that their customers expect a continuing rate of product innovation, performance improvement and reduced costs. The result has been that product life cycles in these markets generally average less than five years with meaningful sales price reductions over that time period.

Our other 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. Most of these businesses experience a much more moderate rate of change in their markets and products than is generally experienced by the Engineered Systems segment.


8



Intellectual Property and Intangible Assets

Our businesses own many patents, trademarks, licenses and other forms of intellectual property, which have been 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 2016 . Given our diversity of served markets, customer concentrations are not significant. Businesses supplying the waste and recycling, agricultural, defense, energy, 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, our businesses, while not strongly seasonal, tend to have stronger revenue in the second and third quarters, particularly those serving the transportation, construction, waste and recycling, petroleum, commercial refrigeration and food service markets. Our businesses serving the retail fueling market tend to increase sequentially through 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 that tend to moderate the aforementioned seasonality patterns.

Backlog

Backlog is more relevant to our businesses that produce larger and more sophisticated machines or have long-term contracts, primarily for the markets within our Fluids and Refrigeration & Food Equipment segments. Our total backlog relating to our continuing operations as of December 31, 2016 and 2015 was $1.1 billion and $1.0 billion , respectively.


9



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. However, as we become increasingly global, we are exposed to more competition. A summary of our key competitors by end market within each of our segments follows:
Segment
 
End Market
 
Key Competitors
Energy
 
Drilling & Production /Automation
 
DeBeers Group (Element Six), Schlumberger Ltd.,Weatherford International Ltd., General Electric (Lufkin), Baker Hughes, BORETS and Novomet
 
 
Bearings & Compression
 
Compression Products International, Hoerbiger Holdings AG, John Crane, Kingsbury
Engineered Systems
 
Printing & Identification
 
Danaher Corp. (Videojet), Brother Industries Ltd (Domino Printing), Electronics for Imaging
 
 
Industrials
 
Oshkosh Corp. (McNeilus), Siemens AG (Weiss GmbH), Challenger Lifts, Labrie Enviroquip Group and numerous others
Fluids
 
Fluid Transfer
 
Fortive, (Gilbarco Veeder-Root), Franklin Electric, Gardner Denver, Inc. (Emco Wheaton)
 
 
Pumps
 
IDEX Corp, Ingersoll Rand, ITT, SPX Corp.
Refrigeration & Food Equipment
 
Refrigeration
 
Panasonic (Hussman Corp.), Lennox International (Kysor/Warren), Alfa Laval
 
 
Food Equipment
 
Manitowoc Company, Illinois Tool, Middleby

International

Consistent with our strategic focus on positioning our businesses for growth, we continue to increase our expansion into international markets, particularly in developing economies in South America, Asia, the Middle East and Eastern Europe.

Most of our non-U.S. subsidiaries and affiliates are currently based in France, Germany, the Netherlands, Sweden, Switzerland, the United Kingdom and, with increasing emphasis, Australia, Canada, China, Malaysia, India, Mexico, Brazil, Eastern Europe and the Middle East.

The following table shows annual revenue derived from customers outside the United States. as a percentage of total annual revenue for each of the last three years, by segment and in total:
 
% Non-U.S. Revenue by Segment
 
Years Ended December 31,
 
2016
 
2015
 
2014
Energy
26
%
 
26
%
 
28
%
Engineered Systems
47
%
 
45
%
 
48
%
Fluids
57
%
 
49
%
 
53
%
Refrigeration & Food Equipment
32
%
 
33
%
 
35
%
Total percentage of revenue derived from customers outside of the United States
42
%
 
39
%
 
40
%

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 16 — Segment Information to the Consolidated Financial Statements in Item 8 of this Form 10-K.


10



Environmental Matters

Sustainability

In response to our concerns around global sustainability, i n 2010, we developed and implemented a process to conduct an inventory of our greenhouse gas emissions. Since then, we have evaluated our climate change risks and opportunities, as well as developed an energy and climate change strategy that includes goals, objectives and related projects for reducing energy use and greenhouse gas emissions reductions. To further promote our sustainability efforts, we have committed to reducing our overall energy and greenhouse gas intensity indexed to net revenue by 20% from 2010 to 2020. We are near our goal for reducing overall energy intensity and have surpassed our goal for reducing greenhouse gas intensity. We will continue to work proactively to maintain these goals to reduce carbon emissions amidst acquisition and business growth. We have also participated as a voluntary respondent in the Carbon Disclosure Project since 2010 and have maintained our scoring range since we began reporting.

All of our segments assess the energy efficiencies related to their operations and the opportunities associated with the use of their products and services by customers. In some instances, our businesses may be able to help customers reduce their energy needs. Increased demand for energy-efficient products, based on a variety of drivers could result in increased sales for a number of our businesses.

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.

Employees

We had approximately 29,000 employees as of December 31, 2016 .

Other Information

We make available 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.

11



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; possible future terrorist threats and their effect on the worldwide economy; 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.

Our results may be impacted by current domestic and international economic conditions and uncertainties.

Our businesses may be adversely affected by disruptions in the financial markets or declines in economic activity both domestically and internationally in those countries in which we operate. These circumstances will also impact our suppliers and customers in various ways which could have an impact on our business operations, particularly if global credit markets are not operating efficiently and effectively to support industrial commerce.  

Our Energy segment is subject to risk due to the volatility of global energy prices and regulations that impact drilling and production, with overall demand for our products and services impacted by depletion rates, global economic conditions and related energy demands.

Negative changes in worldwide economic and capital market conditions are beyond our control, are highly unpredictable and can have an adverse effect on our consolidated results of operations, financial condition, cash flows and cost of capital.

Trends in oil and natural gas prices may affect the drilling and production activity, profitability and financial stability of our customers and therefore the demand for, and profitability of, our energy products and services, which could have a material adverse effect on our business, our consolidated results of operations and financial condition. 

The oil and gas industry historically has experienced periodic downturns, including the significant downturn experienced in 2015 and 2016. Demand for our energy products and services is sensitive to the level of drilling and production activity of, and the corresponding capital spending by, oil and natural gas companies. The level of drilling and production activity is directly affected by trends in oil and natural gas prices, which have been recently volatile and may continue to be volatile. In particular, the prices of oil and natural gas were highly volatile in 2014 and 2015 and declined dramatically. Prices of oil began to recover in late 2016 but there can be no assurance that increases will continue.

Prices for oil and natural gas are subject to large fluctuations in response to changes in the supply of and demand for oil and natural gas, market uncertainty, geopolitical developments and a variety of other factors that are beyond our control. Even the perception of longer-term lower oil and natural gas prices can reduce or defer major capital expenditures by our customers in the oil and gas industry. Given the long-term nature of many large-scale development projects, a significant downturn in the oil and gas industry could result in the reduction in demand for our energy and pumps products and services, and could have a material adverse effect on our consolidated results of operations, financial position and cash flows.


12



We are subject to risks relating to our existing international operations and expansion into new geographical markets.

Approximately 42% of our revenues from continuing operations for 2016 and 39% of our revenues for 2015 were derived outside the United States. We continue to focus on penetrating 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 export controls, economic sanctions, embargoes or trade restrictions, including compliance with U.S. government licenses such as the U.S. Treasury’s Office of Foreign Assets Control’s General License H, violation of which could result in penalties and denial of export privileges;
 
 
o  
the imposition of duties and tariffs and other trade barriers;
 
 
o  
limitations on ownership and on repatriation or dividend of earnings;
 
 
o  
transportation delays and interruptions;
 
 
o  
labor unrest and current and changing regulatory environments;
 
 
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; 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 strategy involving expansion into new geographical markets, our reputation, our consolidated results of operations, financial position and cash flows.

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. For example, foreign exchange rates had an unfavorable impact on our revenue for the year ended December 31, 2016. 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, Pound Sterling, Swiss franc, Chinese Renminbi (Yuan), Brazilian real and the 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 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.

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 and services that may be introduced by competitors, changes in customer preferences, new business models and technologies and pricing pressures. If our businesses are unable to anticipate their competitors’ development of new products and services and/or identify customer needs and preferences on a timely basis, or successfully introduce new products and 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.





13



Some of our businesses may not anticipate, adapt to, or capitalize on technological developments and this could cause these businesses to become less competitive and lead to reduced market share, revenue, operating profits and cash flows.

Certain of our businesses sell their products in industries that are constantly experiencing change as new technologies are developed. In order to grow and remain competitive in these industries, they must adapt to future changes in technology to enhance their existing products and introduce new products to address their customers’ changing demands. If these businesses are unable to adapt to the rapid technological changes, it could adversely affect our consolidated results of operations, financial position and cash flows.

Our businesses 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 are subject to risks associated with changes in laws, regulations and policies (including environmental and employment regulations, export/import laws, tax policies such as export subsidy programs and research and experimentation credits, carbon emission regulations and other similar programs). 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. In addition, we cannot provide assurance that our costs of complying with new and evolving regulatory reporting requirements and current or future laws, including environmental protection, employment, data security, data privacy and health and safety laws, will not exceed our estimates. In addition, we have invested in certain 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.
 
We could lose customers or generate lower revenue, operating profits and cash flows if there are significant increases in the cost of raw materials (including energy) or if we are unable to obtain raw materials.

We purchase raw materials, sub-assemblies and components for use in our manufacturing operations, which expose us to volatility in prices for certain commodities. Significant price increases for these commodities could adversely affect operating profits for certain 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. In addition, while raw materials are generally available now, the inability to obtain necessary raw materials could affect our ability to meet customer commitments and satisfy market demand for certain products. Consequently, a significant price increase in raw materials, or their unavailability, may result in a loss of customers and adversely impact our consolidated results of operations, financial condition and cash flows.

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. If we are unsuccessful in our acquisition efforts, then our ability to continue to grow at rates similar to prior years could be adversely affected.  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.


14



Our operating profits and cash flows could be adversely affected if we cannot achieve projected savings and synergies.

We are continually evaluating our cost structure and seeking ways to capture synergies across our operations. If we are unable to reduce costs and expenses through our various programs, it could adversely affect our consolidated results of operations, financial condition and cash flows.

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 their businesses involving alleged injuries arising out of the use of their products, exposure to hazardous substances, or 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. For example, during the fourth quarter of 2016, we determined there was a quality issue with a product component part in the Fluids segment and voluntarily reported this issue to the U.S. Consumer Product Safety Commission (“CPSC”). We are finalizing a plan to announce a voluntary recall of the product in conjunction with the CPSC. 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.

The indemnification provisions of acquisition and disposition agreements by which we have acquired or sold 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 discontinued operations may from time to time agree to indemnify us for operations of such businesses after the closing. In addition, in connection with the spin-off, Knowles agreed to indemnify us for any losses relating to the conduct of the Knowles business. 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.  
 
Failure to attract, retain and develop personnel or to provide adequate succession plans for key management could have an adverse effect on our consolidated results of operations, financial condition and cash flows.

Our growth, profitability and effectiveness in conducting our operations and executing our strategic plans depend in part on our ability to attract, retain and develop qualified personnel, align them with appropriate opportunities and maintain adequate succession plans for key management positions and support for strategic initiatives. If we are unsuccessful in these efforts, our consolidated results of operations, financial condition and cash flows could be adversely affected and we could miss opportunities for growth and efficiencies.
 
Our operations and businesses are subject to cybersecurity and privacy risks. 

We depend on various information technologies throughout our company to store and process information and support our business activities. We also manufacture and sell hardware and software products, and in some cases, we also provide services that support customer business activities, such as transmitting payment information, providing mobile monitoring services and capturing operational data. If these technologies, systems, products or services are damaged, cease to function properly, are breached due to employee error, malfeasance, system errors, or other vulnerabilities, or are subject to cybersecurity attacks, such as those involving unauthorized access, malicious software and/or other intrusions, including by criminals, nation states or insiders, we could experience production downtimes, operational delays, other detrimental impacts on our operations or ability to provide products and services to our customers, the compromising of confidential, proprietary or otherwise protected information, including personal and customer data, destruction, corruption, or theft of data, security

15



breaches, other manipulation, disruption, misappropriation or improper use of our systems or networks, financial losses from remedial actions, loss of business or potential liability, adverse media coverage, legal claims or legal proceedings, including regulatory investigations and actions, and/or damage to our reputation. While we attempt to mitigate these risks by employing a number of measures, including employee training, technical security controls and maintenance of backup and protective systems, 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 affect on our consolidated results of operations, financial condition and cash flows.
 
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, 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. 
 
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 have a negative impact on our consolidated results of operations, financial condition and cash flows.

A significant decline in the future economic outlook of our businesses and expected future cash flows could result in goodwill or intangible asset impairment charges which would negatively impact our results of operations.

We have significant goodwill and intangible assets on our consolidated balance sheet as a result of current and past acquisitions. The valuation and classification of these assets and the assignment of useful lives involve significant judgments and the use of estimates. The testing of goodwill and intangibles for impairment requires significant use of judgment and assumptions, particularly as it relates to the determination of fair market value. A decrease in the long-term economic outlook and future cash flows of our businesses could significantly impact asset values and potentially result in the impairment of intangible assets, including goodwill. Charges relating to such impairments could have a material adverse effect on our consolidated results of operations in the periods recognized. Although fair values currently exceed carrying values in all of our businesses, the value of our businesses within the Energy segment were unfavorably impacted by the steep declines in revenue and order rates during the year as drilling and production activity fell due to unfavorable oil prices and lower U.S. rig counts.

Our borrowing costs may be impacted by our credit ratings developed by various rating agencies.

Three major ratings agencies (Moody’s, Standard and Poor’s and Fitch Ratings) evaluate our credit profile on an ongoing basis and have each assigned high ratings for our short-term and long-term debt as of December 31, 2016 .  Although we do not anticipate a material change in our credit ratings, if our current credit ratings deteriorate, then our borrowing costs could increase, including increased fees under our five-year credit facility, and our access to future sources of liquidity may be adversely affected.

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.

16




Customer requirements and new regulations may increase our expenses and impact the availability of certain raw materials, which could adversely affect our revenue and operating profits.

Our businesses use parts or materials that are impacted by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") requirement for disclosure of the use of "conflict minerals" mined in the Democratic Republic of the Congo and adjoining countries. It is possible that some of our businesses' customers will require "conflict free" metals in products purchased from us. We are in the process of determining the country of origin of certain metals used by our businesses, as required by the Dodd-Frank Act. The supply chain due diligence and verification of sources may require several years to complete based on the current availability of smelter origin information and the number of vendors. We may not be able to complete the process in the time frame required because of the complexity of our supply chain. Other governmental social responsibility regulations also may impact our suppliers, manufacturing operations and operating profits.
 
The need to find alternative sources for certain raw materials or products because of customer requirements and regulations may impact our ability to secure adequate supplies of raw materials or parts, lead to supply shortages, or adversely impact the prices at which our businesses can procure compliant goods.    

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.


17



ITEM 2. PROPERTIES

The number, type, location and size of the properties used by our operations as of December 31, 2016 are shown in the following charts, by segment:

Number and nature of facilities

Square footage (in 000s)

Manufacturing

Warehouse

Sales / Service
 
Total

Owned

Leased
Energy
43


44


65

 
152


2,425


1,455

Engineered Systems
40


40


76

 
156


3,592


1,912

Fluids
43


15


49

 
107


2,398


3,454

Refrigeration & Food Equipment
17

 
15

 
20

 
52

 
1,569

 
2,586

 
Locations
 
Expiration dates of leased facilities (in years)
 
North America
 
Europe
 
Asia
 
Other
 
Total
 
Minimum
 
Maximum
Energy
139

 
4

 

 
3

 
146

 
1

 
15

Engineered Systems
40

 
53

 
42

 
2

 
137

 
1

 
11

Fluids
18

 
25

 
32

 
4

 
79

 
1

 
10

Refrigeration & Food Equipment
24

 
10

 
11

 
3

 
48

 
1

 
10


We believe our owned and leased facilities are well-maintained and suitable for our operations.

ITEM 3. LEGAL PROCEEDINGS

A few of our subsidiaries are involved in legal proceedings relating to the cleanup of waste disposal sites identified under federal and state statutes which provide for the allocation of such costs among "potentially responsible parties." In each instance, the extent of the subsidiary’s liability appears to be relatively insignificant in relation to the total projected expenditures and the number of other "potentially responsible parties" involved and it is anticipated to be immaterial to us on a consolidated basis. In addition, a few of our subsidiaries are involved in ongoing remedial activities at certain plant sites, in cooperation with regulatory agencies, and appropriate reserves have been established. At December 31, 2016 and 2015 , we have reserves totaling $30.0 million and $30.6 million, respectively, for environmental and other matters, including private party claims for exposure to hazardous substances, that are probable and estimable.

The Company and certain of its subsidiaries are also parties to a number of other legal proceedings incidental to their businesses. These proceedings primarily involve claims by private parties alleging injury arising out of use of the Company’s products, exposure to hazardous substances, patent infringement, employment matters and commercial disputes. Management and legal counsel, at least quarterly, review the probable outcome of such proceedings, the costs and expenses reasonably expected to be incurred and currently accrued to-date and the availability and extent of insurance coverage. The Company has reserves for other legal matters that are probable and estimable and at December 31, 2016 and 2015 , these reserves are not significant. While it is not possible at this time to predict the outcome of these legal actions, in the opinion of management, based on the aforementioned reviews, the Company is not currently involved in any legal proceedings which, individually or in the aggregate, could have a material effect on its financial position, results of operations, or cash flows.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.


18



EXECUTIVE OFFICERS OF THE REGISTRANT

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 10, 2017 , 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
Robert A. Livingston
 
63
 
Chief Executive Officer and Director (since December 2008) and President (since June 2008).
William T. Bosway
 
51
 
Vice President of Dover and President and Chief Executive Officer (since June 2016) of Dover Refrigeration & Food Equipment; prior thereto Group Vice President, Solutions & Technology (from May 2008 to June 2016) of Emerson’s Climate Technologies.  
Patrick M. Burns
 
54
 
Senior Vice President, Strategy (since September 2016) of Dover; prior thereto Vice President, Corporate Strategy (from January 2014 to June 2016) of Johnson Controls; Vice President, Marketing, Strategy and M&A (from December 2012 to December 2013) of Danaher Corporation; Vice President & General Manager (from September 2011 to December 2012) of Danaher Corporation.
Ivonne M. Cabrera
 
50
 
Senior Vice President, General Counsel and Secretary of Dover (since January 2013); prior thereto Vice President, Deputy General Counsel, and Assistant Secretary of Dover (from November 2012 to December 2012); prior thereto Vice President, Business Affairs and General Counsel of Knowles Electronics, LLC (from February 2011 to December 2012); prior thereto Vice President (from May 2010 to February 2011), Deputy General Counsel and Assistant Secretary (from February 2004 to February 2011) of Dover.
Brad M. Cerepak
 
57
 
Senior Vice President and Chief Financial Officer (since May 2011) of Dover; prior thereto Vice President and Chief Financial Officer (from August 2009 to May 2011) of Dover.
C. Anderson Fincher
 
46
 
Vice President (since May 2011) of Dover and President and Chief Executive Officer (since February 2014) of Dover Engineered Systems; prior thereto and Executive Vice President (from November 2011 to February 2014) of Dover Engineered Systems; prior thereto Executive Vice President (from May 2009 to November 2011) of Dover Industrial Products.
Stephen Gary Kennon
 
57
 
Senior Vice President of Dover and President (since February 2016) of Dover Business Services; prior thereto Executive Vice President (from 2014) to February 2016) of Dover Engineered Systems; prior thereto President and Chief Executive Officer of Vehicle Services Group (2005 to 2014).
Jay L. Kloosterboer
 
56
 
Senior Vice President, Human Resources (since May 2011) of Dover; prior thereto Vice President, Human Resources (from January 2009 to May 2011) of Dover.
Sivasankaran Somasundaram
 
51
 
Vice President (since January 2008) of Dover and President and Chief Executive Officer (since August 2013) of Dover Energy; prior thereto Executive Vice President (from November 2011 to August 2013) of Dover Energy; prior thereto Executive Vice President (from January 2010 to November 2011) of Dover Fluid Management; President (from January 2008 to December 2009) of Dover's Fluid Solutions Platform.
William W. Spurgeon, Jr.
 
58
 
Vice President (since October 2004) of Dover and President and Chief Executive Officer (since February 2014) of Dover Fluids; prior thereto President and Chief Executive Officer (from August 2013 to February 2014) of Dover Engineered Systems; prior thereto President and Chief Executive Officer (from November 2011 to August 2013) of Dover Energy; prior thereto President and Chief Executive Officer (from July 2007 to November 2011) of Dover Fluid Management.


19



Name
 
Age
 
Positions Held and Prior Business Experience
Russell E. Toney
 
47
 
Senior Vice President, Global Sourcing (since February 2015) of Dover; prior thereto General Manager, Market Development (from January 2013 to February 2015) of GE Energy Management; prior thereto Commercial Leader (from January 2011 to  January 2013) of GE Energy Global Industries; prior thereto General Manager, Global Sourcing (from March 2007 to January 2011) of GE Energy Services.
Sandra A. Arkell
 
48
 
Vice President, Controller (since August 2015) of Dover; prior thereto Assistant Controller (2009 to August 2015) of Dover.
Paul E. Goldberg
 
53
 
Vice President, Investor Relations (since November 2011) of Dover; prior thereto Treasurer and Director of Investor Relations (from February 2006 to November 2011) of Dover.
Anthony K. Kosinski
 
50
 
Vice President, Tax (since June 2016) of Dover; prior thereto Director, Domestic Tax (June 2003 to June 2016) of Dover.
James M. Moran
 
51
 
Vice President, Treasurer (since November 2015) of Dover; prior thereto Senior Vice President and Treasurer (June 2013 to August 2015) of Navistar International Corporation (“NIC”); prior thereto Vice President and Treasurer (2008 to June 2013) of NIC; also served as Senior Vice President and Treasurer of Navistar, Inc. (June 2013 to August 2015) and Vice President and Treasurer of Navistar, Inc. (2008 to June 2013); also served as Senior Vice President and Treasurer of Navistar Financial Corporation (“NFC”) (April 2013 to August 2015) and Vice President and Treasurer of NFC (January 2013 to April 2013).


20



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. Information on the high and low close prices of our stock and the frequency and the amount of dividends paid during the last two years is as follows:
 
2016
 
2015
 
Market Prices
 
Dividends per Share
 
Market Prices
 
Dividends per Share
 
High
 
Low
 
 
High
 
Low
 
First Quarter
$
66.30

 
$
52.65

 
$
0.42

 
$
74.50

 
$
68.59

 
$
0.40

Second Quarter
72.08

 
62.31

 
0.42

 
77.77

 
69.40

 
0.40

Third Quarter
74.53

 
67.10

 
0.44

 
70.03

 
55.99

 
0.42

Fourth Quarter
77.13

 
65.53

 
0.44

 
66.57

 
56.51

 
0.42

 
 
 
 
 
$
1.72

 
 
 
 
 
$
1.64


Holders

The number of holders of record of Dover common stock as of January 27, 2017 was approximately 19,309 . This figure includes participants in our domestic 401(k) program.

Securities Authorized for Issuance Under Equity Compensation Plans

Information regarding 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

In January 2015, the Board of Directors approved a standing share repurchase authorization, whereby the Company may repurchase up to 15,000,000 shares of its common stock over the following three years. The Company did not purchase any shares under this program in 2016 . As of December 31, 2016 , the number of shares still available for repurchase under the January 2015 share repurchase authorization was 6,771,458 .

 

21



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
A2016PERFORMANCEGRAPH2.JPG

Data Source: Research Data Group, Inc
_______________________
*Total return assumes reinvestment of dividends.
This graph assumes $100 invested on December 31, 2011 in Dover common stock, the S&P 500 index and a peer group index.

The 2016 peer index consists of the following 32 public companies selected by Dover.
3M Company
Honeywell International Inc.
Snap-On Inc.
Actuant Corp.
Hubbell Incorporated
SPX Corporation
AMETEK Inc.
IDEX Corporation
Teledyne Technologies Inc.
Amphenol Corp.
Illinois Tool Works Inc.
Textron Inc.
Carlisle Companies Inc.
Ingersoll-Rand PLC
The Timken Company
Corning Inc.
Lennox International Inc.
United Technologies Corp.
Crane Company
Nordson Corp.
Vishay Intertechnology Inc.
Danaher Corporation
Parker-Hannifin Corp.
Weatherford International PLC
Eaton Corporation
Pentair PLC
 
Emerson Electric Co.
Regal Beloit Corp.
 
Flowserve Corporation
Rockwell Automation Inc.
 
FMC Technologies Inc.
Roper Industries Inc.
 


22



ITEM 6. SELECTED FINANCIAL DATA

in thousands except per share data
 
2016
 
2015
 
2014
 
2013
 
2012
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
$
6,794,342

 
$
6,956,311

 
$
7,752,728

 
$
7,155,096

 
$
6,626,648

Earnings from continuing operations
 
508,892

 
595,881

 
778,140

 
797,527

 
650,075

Net earnings
 
508,892

 
869,829

 
775,235

 
1,003,129

 
811,070

 
 
 
 
 
 
 
 
 
 
 
Basic earnings (loss) per share:
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
$
3.28

 
$
3.78

 
$
4.67

 
$
4.66

 
$
3.58

Discontinued operations
 

 
1.74

 
(0.02
)
 
1.20

 
0.89

Net earnings
 
3.28

 
5.52

 
4.65

 
5.86

 
4.47

 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
155,231

 
157,619

 
166,692

 
171,271

 
181,551

 
 
 
 
 
 
 
 
 
 
 
Diluted earnings (loss) per share:
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
$
3.25

 
$
3.74

 
$
4.61

 
$
4.60

 
$
3.53

Discontinued operations
 

 
1.72

 
(0.02
)
 
1.18

 
0.88

Net earnings
 
3.25

 
5.46

 
4.59

 
5.78

 
4.41

 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
156,636

 
159,172

 
168,842

 
173,547

 
183,993

 
 
 
 
 
 
 
 
 
 
 
Dividends per common share
 
$
1.72

 
$
1.64

 
$
1.55

 
$
1.45

 
$
1.33

 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
$
165,205

 
$
154,251

 
$
166,033

 
$
141,694

 
$
146,502

Depreciation and amortization
 
360,739

 
327,089

 
307,188

 
278,033

 
229,934

Total assets
 
10,115,991

 
8,606,076

 
9,018,522

 
10,788,895

 
10,382,872

Total debt
 
3,621,187

 
2,754,777

 
3,019,228

 
2,815,715

 
2,788,360


All results and data in the table above reflect continuing operations, unless otherwise noted. See Note 3 — Disposed and Discontinued Operations in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information on disposed and discontinued operations and Note 2 — Acquisitions for additional information regarding the impact of 2016 and 2015 acquisitions. Certain amounts in prior years have been reclassified to conform to the current year presentation.


23



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 three years ended December 31, 2016 , 2015 and 2014 . 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 AND OUTLOOK

Dover is a diversified global manufacturer delivering innovative equipment and components, specialty systems, consumable supplies, software and digital solutions and support services through four operating segments: Energy, Engineered Systems, Fluids and Refrigeration & Food Equipment.

For the year ended December 31, 2016 , consolidated revenue from continuing operations was $6.8 billion , a decrease of $0.2 billion or 2.3% , as compared to the prior year. This decrease included a decline in organic revenue of 5.4% , a 3.0% impact from dispositions and an unfavorable impact of 1.0% from foreign currency, partially offset by acquisition-related growth of 7.1% . Overall, customer pricing had a minimal unfavorable impact of 0.2% on revenue for the year.

Our Energy segment revenue decreased $375.2 million , or 25.3% , from the prior year, comprised of an organic revenue decline of 24.4% and an unfavorable impact from foreign currency translation of 0.9% . The decline in organic revenue within our Energy segment was largely attributable to a significantly lower U.S. rig count and end customer capital spending compared to the prior year. Within our Engineered Systems segment, revenue increased $23.4 million , or 1.0% , from the prior year, primarily driven by organic growth of 1.7% and acquisition-related growth of 4.4% , partially offset by a 3.9% impact from a disposition and an unfavorable impact from foreign currency of 1.2% . Organic growth was primarily driven by strong markets in our Printing & Identification platform. Our Fluids segment revenue increased $301.3 million , or 21.5% , comprised primarily of acquisition-related growth of 27.8% , offset by an organic decline of 5.1% and an unfavorable foreign currency impact of 0.9% . The decline in organic revenue impacted both the Fluids Transfer and Pumps end markets as a result of weak longer cycle oil and gas markets and the associated effect of reduced capital spending by our customers. Within our Refrigeration & Food Equipment segment, revenue decreased $111.1 million , or 6.4% , from the prior year, including a 6.4% decline due to dispositions, an unfavorable impact from foreign currency translation of 0.2% , offset by modest organic revenue growth of 0.2% .

Gross profit was $2.5 billion for the year ended December 31, 2016 , a decrease of $96.2 million , or 3.7% , as compared to the prior year. The decrease was primarily a result of the decline in revenue partially offset by supply chain cost containment initiatives and the benefits of prior restructuring actions. Gross profit margin was 36.4% for the year ended December 31, 2016 compared to 36.9% 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 were flat over the prior year at $6.8 billion for the year ended December 31, 2016 . Included in this result was a 3.6% decline from organic bookings, 3.1% decline due to dispositions and 0.8% impact as a result of unfavorable foreign exchange rates, which were offset by 7.5% increase due to acquisition-related bookings. Bookings declined 23.7% and 4.2% within our Energy and Refrigeration & Food Equipment segments, respectively, while bookings in our Fluids and Engineered Systems segments increased 26.0% and 2.6%, respectively. Overall, our book-to-bill remained flat from the prior year at 1.00. Backlog as of December 31, 2016 was $1.1 billion , up from $994.6 million from the prior year.


24



From a geographic perspective, our US activity, excluding Energy, was flat year-over-year, on an organic basis. Including Energy, our U.S. activity declined due to weakness in oil and gas-related end markets. Both European and China activities improved year-over-year on an organic basis.

During the year we continued to adjust our cost structure to better align with the current economic environment resulting in full year 2016 restructuring charges of $40.2 million . These actions were concentrated within our Energy and Fluids segments with charges of $18.5 million and $16.9 million , respectively, for the year ended December 31, 2016 .

For the full year 2016 , Dover made a total of six acquisitions for a net cash consideration totaling $1.6 billion . We completed the acquisition of the dispenser and system businesses of Tokheim Group S.A.S ("Tokheim") in the first quarter of 2016, as well as the acquisitions of Fairbanks Environmental LTD and ProGauge in the retail fueling space in the second quarter of 2016. These businesses joined our Fluids segment. In the third quarter of 2016, we also acquired Alliance Wireless Technologies, Inc. ("AWTI") in the Engineered Systems segment. During the fourth quarter of 2016 , the Company completed the acquisitions of Ravaglioli S.p.A. Group ("RAV"), a provider of automotive service equipment, and Wayne Fueling Systems Ltd. ("Wayne"), a provider of fuel dispensing, payment systems and monitoring and optimization software 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. See Note 2 — Acquisitions in the Consolidated Financial Statements in Item 8 of this Form 10-K for further details regarding the businesses acquired during the year.

In addition, in 2016 , as part of the regular review of our portfolio and the fit of our businesses, we completed the divestitures of the Texas Hydraulics and Tipper Tie businesses. These disposals did not represent strategic shifts in operations and, therefore, did not qualify for presentation as discontinued operations. Upon disposal of these businesses, we recognized total proceeds for Texas Hydraulics and Tipper Tie 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. See Note 3 — Disposed and Discontinued Operations in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding these disposed businesses.

For the year ended December 31, 2016 , we continued our history of increasing our annual dividend payments to shareholders and paid a total of $267.7 million in dividends to our shareholders.

Looking Forward

In 2017 , we expect total consolidated revenue growth of 10% to 12% as compared to 2016. This increase will be comprised of growth from acquisitions of approximately 10%, organic revenue growth of 3% to 5%, partially offset by the impact from dispositions of approximately 1% and a negative impact from foreign currency translation of approximately 2%. We expect all of our segments to contribute to our overall organic growth. Within the Energy segment, we are encouraged by the recovery in the North American rig count and oil prices and have developed our full year estimate on an average U.S. rig count of 680 to 700 and an average price per barrel of oil of approximately $55.

We anticipate corporate expense in 2017 to be approximately $125 million, up $12 million from current year results, primarily reflecting increases in compensation and increased investments as we further implement Dover Business Services ("DBS") across the company.

We expect to generate free cash flow in 2017 of approximately 11% of revenue. In total, we expect full year diluted earnings per share from continuing operations ("EPS") to be in the range of $3.40 to $3.60. Our 2017 guidance includes the impact of disposed businesses, the net benefit from restructuring activities and the impact of foreign currency translation.



25



CONSOLIDATED RESULTS OF OPERATIONS
 
 
 
Years Ended December 31,
 
% / Point Change
(dollars in thousands, except per share figures)
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
Revenue
 
$
6,794,342

 
$
6,956,311

 
$
7,752,728

 
(2.3
)%
 
(10.3
)%
Cost of goods and services
 
4,322,373

 
4,388,167

 
4,778,479

 
(1.5
)%
 
(8.2
)%
Gross profit
 
2,471,969

 
2,568,144

 
2,974,249

 
(3.7
)%
 
(13.7
)%
Gross profit margin
 
36.4
%
 
36.9
%
 
38.4
%
 
(0.5
)
 
(1.5
)
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
1,757,523

 
1,647,382

 
1,758,765

 
6.7
 %
 
(6.3
)%
Selling, general and administrative expenses as a percent of revenue
 
25.9
%
 
23.7
%
 
22.7
%
 
2.2

 
1.0

 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
136,401

 
131,676

 
131,689

 
3.6
 %
 
 %
Interest income
 
(6,759
)
 
(4,419
)
 
(4,510
)
 
53.0
 %
 
(2.0
)%
Other income, net
 
(7,930
)
 
(7,105
)
 
(5,902
)
 
11.6
 %
 
20.4
 %
Gain on sale of businesses
 
(96,598
)
 

 

 
nm*

 
nm*

 
 
 
 
 
 
 
 
 
 
 
Provision for income taxes
 
180,440

 
204,729

 
316,067

 
(11.9
)%
 
(35.2
)%
Effective tax rate
 
26.2
%
 
25.6
%
 
28.9
%
 
0.6

 
(3.3
)
 
 
 
 
 
 
 
 
 
 
 
Earnings from continuing operations
 
508,892

 
595,881

 
778,140

 
(14.6
)%
 
(23.4
)%
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) from discontinued operations, net
 

 
273,948

 
(2,905
)
 
nm*

 
nm*

 
 
 
 
 
 
 
 
 
 
 
Earnings from continuing operations per common share - diluted
 
$
3.25

 
$
3.74

 
$
4.61

 
(13.1
)%
 
(18.9
)%
 * nm: not meaningful

Revenue

For the year ended December 31, 2016 , revenue decreased $162.0 million , or 2.3% to $6.8 billion compared with 2015 , reflecting an organic decline of 5.4% , a 3.0% impact from dispositions and an unfavorable impact of 1.0% from foreign currency translation, offset by growth from acquisitions of 7.1% . Decline in organic revenue was attributable to weakness in U.S. oil and gas-related end markets as well as reduced capital spending by our customers. Acquisition growth of 7.1% was largely driven by the acquisitions of Tokheim and Wayne within our Fluids segment and RAV within our Engineered Systems segment, as well as the full-year benefit from the fourth quarter 2015 acquisitions. Overall customer pricing was slightly unfavorable, impacting consolidated revenue 0.2%.

For the year ended December 31, 2015 , revenue decreased $796.4 million , or 10.3% to $7.0 billion compared with 2014 , reflecting an organic decline of 9.8% , an unfavorable impact of 3.9% from foreign currency translation and a decline due to a disposition of 0.1% , offset by acquisition-related growth of 3.5% . Acquisition growth was largely driven by the acquisitions of JK Group within our Engineered Systems segment and Gala Industries and Reduction Engineering Scheer within our Fluids segment.

Gross Profit

For the year ended December 31, 2016 , our gross profit decreased $ 96.2 million , or 3.7% , to $2.5 billion compared with 2015 , primarily due to the decline in sales volumes and a product recall charge of $23.2 million , partially offset by supply chain cost containment initiatives and the benefits of prior restructuring actions. Gross profit margin declined 50 basis points primarily due to margin declines in our Energy segment.


26


For the year ended December 31, 2015 , our gross profit decreased $406.1 million , or 13.7% to $2.6 billion compared with 2014 , primarily due to the significant decline in organic sales volumes, especially in our Energy segment, partially offset by supply chain cost containment initiatives and the benefits of prior restructuring actions. Gross profit margin declined 150 basis points due to an unfavorable product mix as those businesses with historically higher margin contributions experienced significant revenue declines.

Selling, General and Administrative Expenses

For the year ended December 31, 2016 , selling, general and administrative expenses increased $ 110.1 million , or 6.7% to $1.8 billion compared with 2015 , primarily reflecting the impact of acquisition-related depreciation and amortization expense, acquisition-related deal costs and increased headcount. The increase is also impacted by increased investment in DBS, offset by lower restructuring charges and the benefits of previously implemented cost reduction actions. As a percentage of revenue, selling, general and administrative expenses increased 220 basis points in 2016 to 25.9% , reflecting deleveraging of fixed administrative costs and acquisition-related costs on lower revenue.

For the year ended December 31, 2015 , selling, general and administrative expenses decreased $111.4 million , or 6.3% to $1.6 billion compared with 2014 reflecting the impact of cost savings realized as the result of restructuring programs and reduced discretionary spending. As a percentage of revenue, selling, general and administrative expenses increased 100 basis points in 2015 to 23.7%, reflecting deleveraging of fixed administrative costs, particularly within the Energy segment. Additionally, higher restructuring costs of $8.9 million in 2015 as compared to 2014 also contributed to higher selling, general and administrative expenses relative to the revenue base.

Non-Operating Items

For the year ended December 31, 2016 , interest expense, net of interest income, increased $2.4 million , or 1.9% , to $129.6 million compared with 2015 due to higher interest rates on higher balances of commercial paper in 2016 as well as the fourth quarter 2016 issuance of the €600 million of 1.25% euro-denominated notes. This increase was offset in part by the full year impact of lower interest on $400.0 million, 3.15% notes which replaced the $300.0 million, 4.875% notes in October 2015. For the year ended December 31, 2015 , interest expense, net of interest income, remained relatively flat at $127.3 million compared with 2014 due to higher interest rates on commercial paper year over year offset by lower interest on the Euro-denominated debt and on the $400.0 million notes issued in October 2015.

During 2016, we completed the sale of Texas Hydraulics, a custom manufacturer of fluid power components within the Engineered Systems segment, and Tipper Tie, a global supplier of processing and clip packaging machines within the Refrigeration & Food Equipment segment. These disposals did not represent strategic shifts in operations and, therefore, did not qualify for presentation as discontinued operations. Upon disposal of Texas Hydraulics and Tipper Tie, for the year ended December 31, 2016 , we recognized a gain on sale of $11.9 million and $85.0 million , respectively.

For the years ended December 31, 2016 , 2015 and 2014 , other income, net of $7.9 million , $7.1 million and $5.9 million , respectively, includes earnings on equity method investments of $3.3 million, $3.3 million and $1.7 million, respectively. Other income, net for 2016 , 2015 and 2014 also included $2.9 million, ($1.6) million and ($2.1) million, respectively, of net foreign exchange gains (losses) resulting from the re-measurement and settlement of foreign currency denominated balances. The foreign exchange losses in 2015 and 2014 were more than offset by other nonrecurring items including income due to insurance settlements for property damage of $3.6 million and $5.1 million, respectively.

Income Taxes

Our businesses span the globe with 39.0% , 33.8% and 27.8% of our pre-tax earnings in 2016 , 2015 and 2014 , respectively, generated in foreign jurisdictions. Foreign earnings are generally subject to local country tax rates that are below the 35.0% U.S. statutory tax rate. As a result, our effective non-U.S. tax rate is typically significantly lower than the U.S. statutory tax rate.

Our effective tax rate on continuing operations was 26.2% for the year ended December 31, 2016 , compared to 25.6% for the year ended December 31, 2015 . The 2016  and 2015 rates were impacted by $13.6 million and $17.5 million of favorable net discrete items, principally resulting from the adjustment of the tax accounts to the U.S. tax return filed and settlements of uncertain tax matters, respectively. After adjusting for discrete items, our effective tax rates were 28.1% and 27.8% for the years ended December 31, 2016 and 2015 , respectively.

27



We believe it is reasonably possible during the next twelve months that uncertain tax positions may be settled, which could result in a decrease in the gross amount of unrecognized tax benefits. This decrease may result in an income tax benefit. Due to the potential for resolution of federal, state, and foreign examinations and the expiration of various statutes of limitation, our gross unrecognized tax benefits balance may change within the next twelve months by a range of zero to $18.9 million . Some portion of such change may be reported as discontinued operations. We believe adequate provision has been made for all income tax uncertainties.

For the year ended December 31, 2014 , our effective tax rate on continuing operations was 28.9% . The effective tax rate was impacted by favorable net discrete items totaling $11.3 million, principally related to settlements of uncertain tax matters. After adjusting for discrete and other items, the effective tax rate for the year ended December 31, 2014 was 29.9%.

Earnings from Continuing Operations

For the year ended December 31, 2016 , earnings from continuing operations decreased $87.0 million , or 14.6% , to $508.9 million , or $3.25 EPS compared with earnings from continuing operations of $595.9 million , or $3.74 EPS, for the year ended December 31, 2015 . These results include discrete tax benefits of $13.6 million , or $0.09 EPS, in 2016 and $17.5 million , or $0.11 EPS, in 2015 . Excluding these tax benefits, earnings from continuing operations decreased 14.4% in 2016 primarily due to lower revenues, a product recall charge of $23.2 million and acquisition-related expenses. EPS decreased in 2016 as a result of lower earnings, partially offset by lower weighted average shares outstanding relative to 2015.

For the year ended December 31, 2015 , earnings from continuing operations decreased $182.3 million , or 23.4% , to $595.9 million , or $3.74 EPS, compared with earnings from continuing operations of $778.1 million , or $4.61 EPS, for the year ended December 31, 2014 . These results include discrete tax benefits of $17.5 million , or $0.11 EPS, in 2015 and $11.3 million, or $0.07 EPS, in 2014. Excluding these discrete tax benefits, earnings from continuing operations decreased 24.6% primarily due to lower revenues and additional restructuring charges, partially offset by benefits from productivity and cost containment initiatives. EPS decreased in 2015 as a result of lower earnings, partially offset by lower weighted average shares outstanding relative to 2014 due to approximately eight million shares repurchased during the year.
 
Discontinued Operations

For the year ended December 31, 2015 , earnings from discontinued operations of $273.9 million primarily includes the gain on sale of $265.6 million as a result of the sale of Datamax O'Neil and Sargent Aerospace and $6.3 million of earnings attributable to those businesses prior to their disposal. These businesses were previously included in the results of the Engineered Systems segment and were reclassified to discontinued operations in 2014.

For the year ended December 31, 2014 , loss from discontinued operations of $2.9 million primarily includes a loss on the sale of DEK of $6.9 million and a gain of $3.2 million in connection with a working capital adjustment for ECT, which was sold in 2013. Also reflected within the net loss from discontinued operations is $32.3 million of after-tax earnings for those businesses classified as discontinued operations, including Datamax O'Neil and Sargent Aerospace, $27.1 million of spin-off costs and a pension settlement charge of $4.4 million , net of tax, attributable to lump sum payments made to Knowles participants in Dover's qualified defined benefit pension plan.
 
Refer to Note 3 — Disposed and Discontinued Operations in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information on disposed and discontinued operations.


28


Restructuring Activities

2016 Restructuring Activities

The Company incurred $40.2 million of restructuring charges for the year ended December 31, 2016 , including the programs described below.

The Energy segment incurred restructuring charges of $18.5 million related to various programs across the segment focused on workforce reductions and field service consolidations. These programs were initiated to better align cost base with the significantly lower demand environment.

The Engineered Systems segment recorded $3.1 million of restructuring charges relating to headcount reductions across various businesses primarily related to optimization of administrative functions within Printing & Identification and U.S. manufacturing consolidation within Industrials.

The Fluids segment recorded $16.9 million of restructuring charges principally related to headcount reductions and facility consolidations at various businesses across the segment.

The Refrigeration & Food Equipment segment recorded restructuring charges of $0.9 million , primarily related to headcount reductions.

We anticipate that much of the benefit of these 2016 programs will be realized in 2017 and into 2018. We expect the programs currently underway to be substantially completed in the next 12 to 18 months. In light of the economic uncertainty in certain of our end markets and our continued focus on improving our operating efficiency, it is possible that additional programs may be implemented throughout 2017 . As such, we expect to incur restructuring charges of approximately $20.0 million to $25.0 million during 2017.

2015 Restructuring Activities

The Company incurred $55.2 million of restructuring charges for the year ended December 31, 2015 , including the programs described below.

The Energy segment incurred restructuring charges of $30.8 million related to various programs across the segment focused on workforce reductions and field service consolidations. These programs were initiated to better align cost base with the significantly lower demand environment.

The Engineered Systems segment recorded $13.3 million of restructuring charges relating to headcount reductions across various businesses primarily related to optimization of administrative functions within the Printing & Identification platform and U.S. manufacturing consolidation within the Industrials platform.

The Fluids segment recorded $4.9 million of restructuring charges principally related to reduction in workforce for those businesses serving the Pumps markets. Additional restructuring was completed in the pumps businesses for facility consolidation.

The Refrigeration & Food Equipment segment recorded restructuring charges of $5.8 million , primarily related to asset impairments due to exit plans at targeted facilities and headcount reductions.
  
Restructuring initiatives in 2014 included targeted facility consolidations at certain businesses, headcount reductions and actions taken to optimize the Company's cost structure. We incurred restructuring charges of $44.8 million for the year ended December 31, 2014 relating to such activities. See Note 8 — Restructuring Activities in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional details regarding our recent restructuring activities.

29


SEGMENT RESULTS OF OPERATIONS
 
The summary that follows provides a discussion of the results of operations of each of our four reportable operating segments (Energy, Engineered Systems, Fluids and Refrigeration & Food Equipment). Each of these segments is comprised of various product and service offerings that serve multiple end markets. See Note 16 — 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 operating income 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.

Energy

Our Energy segment, serving the Drilling & Production, Bearings & Compression and Automation end markets, is a provider of customer-driven solutions and services for safe and efficient production and processing of fuels worldwide and has a strong presence in the bearings and compression components and automation markets.
 
 
Years Ended December 31,
 
% Change
(dollars in thousands)
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
Revenue:
 
 
 
 
 
 
 
 
 
 
Drilling & Production
 
$
719,229

 
$
1,009,416

 
$
1,459,514

 
(28.7
)%
 
(30.8
)%
Bearings & Compression
 
276,807

 
306,387

 
347,470

 
(9.7
)%
 
(11.8
)%
Automation
 
112,402

 
167,877

 
210,255

 
(33.0
)%
 
(20.2
)%
Total
 
$
1,108,438

 
$
1,483,680

 
$
2,017,239

 
(25.3
)%
 
(26.4
)%
 
 
 
 
 
 
 
 
 
 
 
Segment earnings
 
$
55,336

 
$
173,190

 
$
461,815

 
(68.0
)%
 
(62.5
)%
Segment margin
 
5.0
%
 
11.7
%
 
22.9
%
 

 


 
 
 
 
 
 
 
 
 
 
 
Segment EBITDA
 
$
186,756

 
$
314,969

 
$
573,771

 
(40.7
)%
 
(45.1
)%
Segment EBITDA margin
 
16.8
%
 
21.2
%
 
28.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other measures:
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
$
131,420

 
$
141,779

 
$
111,956

 
(7.3
)%
 
26.6
 %
Bookings
 
1,089,922

 
1,429,260

 
2,016,411

 
(23.7
)%
 
(29.1
)%
Backlog
 
134,181

 
155,586

 
233,347

 
(13.8
)%
 
(33.3
)%
 
 
 
 
 
 
 
 
 
 
 
Components of revenue growth (decline):
 
 
 
 
 
 
 
 
 
 
Organic decline
 
 
 
 
 
 
 
(24.4
)%
 
(34.3
)%
Acquisitions
 
 
 
 
 
 
 
 %
 
9.3
 %
Foreign currency translation
 
 
 
 
 
 
 
(0.9
)%
 
(1.4
)%
Total revenue decline
 
 
 
 
 
 
 
(25.3
)%
 
(26.4
)%

2016 Versus 2015

Energy segment revenue for the year ended December 31, 2016 decreased $375.2 million , or 25.3% , compared to the prior year, composed of an organic revenue decline of 24.4% and an unfavorable impact from foreign currency translation of 0.9% . This result was driven by significant declines in market fundamentals, especially with regard to U.S. rig count and end customer capital spending. These reductions broadly impacted our end markets. Customer pricing unfavorably impacted revenue by approximately 1.5% in 2016 .


30


Drilling & Production end market revenue (representing 64.9% of segment revenue) decreased $290.2 million , or 28.7% , compared to the prior year, due to year over year declines in U.S. rig count and end-customer capital spending in our North American markets.

Bearings & Compression end market revenue (representing 25.0% of segment revenue) decreased $29.6 million , or 9.7% , compared to the prior year, as U.S. OEM end-user demand weakened within its end markets, especially with oil and gas customers.

Automation end market revenue (representing approximately 10.1% of segment revenue) decreased $55.5 million , or 33.0% , compared to the prior year. This decrease was driven by customer project delays, as low oil prices and market uncertainties continued to drive reduced capital spending by well service and exploration and production companies.

Although revenue decreased for the year ended December 31, 2016 compared to the prior year, on a quarterly sequential basis in 2016, revenue in the segment increased 6% in the third quarter over the second quarter, and 7% in the fourth quarter over the third quarter. These increases were principally driven by sequential increases in the U.S. rig count and sequentially improving oil prices. These improving fundamentals drove sequential increases in our drilling and artificial lift businesses which provide products for early cycle oil and gas production.

Energy segment earnings for the year ended December 31, 2016 decreased $117.9 million , or 68.0% , compared to the prior year, primarily driven by significantly lower volume across our businesses, especially within the Drilling & Production and Automation end markets. Segment margin decreased from the prior year due to lower volumes and price reductions. Decreased restructuring charges of $12.3 million and lower acquisition-related depreciation and amortization of $14.1 million partially offset the impact of volume.

Bookings for the year ended December 31, 2016 decreased 23.7% compared to the prior year, reflecting ongoing market weakness. Backlog at December 31, 2016 decreased 13.8% compared to the prior year due to decreased demand in all three end markets primarily due to lower oil prices. Segment book-to-bill was 0.98 .

2015 Versus 2014

Energy segment revenue for the year ended December 31, 2015 decreased $533.6 million , or 26.4% , compared to the prior year, including an organic decline of 34.3% , an unfavorable impact from foreign currency translation of 1.4% , offset by acquisition-related growth of 9.3% . T his decline in revenue was the result of significantly lower demand from our customers as a result of the dramatic decrease in the price of oil during 2015 and a decline of approximately 47% in the year over year average number of active drilling rigs in the U.S. The impact of customer price reductions on revenue was approximately 1.7% in 2015.

Drilling & Production end market revenue (representing 68.0% of 2015 segment revenue) decreased $450.1 million , or 30.8% , compared to the prior year, due to significantly reduced demand and customer inventory reductions in our North American markets caused by the decrease in the price of oil and reduced number of active drilling rigs. The decrease in revenue for Drilling & Production was partially offset by acquisition-related growth, mainly due to our acquisition of Accelerated Companies LLC in the fourth quarter of 2014.

Bearings & Compression end market revenue (representing 20.7% of 2015 segment revenue) decreased $41.1 million , or 11.8% , compared to the prior year, due to ongoing declines in our Bearings end market, as slower OEM build rates continued, especially with oil and gas customers.

Automation end market revenue (representing 11.3% of 2015 segment revenue) decreased $42.4 million , or 20.2% , compared to the prior year. The favorable impact of recent acquisitions was more than offset by customer project delays, as low oil prices and uncertainties resulted in reduced capital spending by service and exploration and production companies.

Energy segment earnings for the year ended December 31, 2015 decreased $288.6 million , or 62.5% , compared to the prior year, primarily driven by lower volume for our businesses serving the Drilling & Production end market as well as higher acquisition-related depreciation and amortization of approximately $10.1 million over the prior year. In addition, restructuring charges increased $23.3 million over the prior year, as the segment continued targeted workforce reductions and field service consolidations.

31


Engineered Systems

Our Engineered Systems segment is comprised of two platforms, Printing & Identification and Industrials, and is focused on the design, manufacture and service of critical equipment and components serving the fast-moving consumer goods, digital textile printing, vehicle service, environmental solutions and industrial end markets.

 
 
Years Ended December 31,
 
% Change
(dollars in thousands)
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
Revenue:
 
 
 
 
 
 
 
 
 
 
Printing & Identification
 
$
1,022,502

 
$
943,670

 
$
988,884

 
8.4
 %

(4.6
)%
Industrials
 
1,343,781

 
1,399,243

 
1,397,081

 
(4.0
)%

0.2
 %
 
 
$
2,366,283


$
2,342,913


$
2,385,965

 
1.0
 %

(1.8
)%
 
 
 
 
 
 
 
 
 
 
 
Segment earnings
 
$
391,829

 
$
376,961

 
$
386,998

 
3.9
 %
 
(2.6
)%
Segment margin
 
16.6
%
 
16.1
%
 
16.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment EBITDA
 
$
465,776

 
$
436,875

 
$
448,944

 
6.6
 %
 
(2.7
)%
Segment EBITDA margin
 
19.7
%
 
18.6
%
 
18.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other measures:
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
$
73,947

 
$
59,914

 
$
61,946

 
23.4
 %
 
(3.3
)%
 
 
 
 
 
 
 
 
 
 
 
Bookings
 
 
 
 
 
 
 
 
 
 
Printing & Identification
 
$
1,026,453

 
$
937,215

 
$
993,204

 
9.5
 %
 
(5.6
)%
Industrials
 
1,339,810

 
1,369,438

 
1,451,847

 
(2.2
)%
 
(5.7
)%
 
 
$
2,366,263

 
$
2,306,653

 
$
2,445,051

 
2.6
 %
 
(5.7
)%
 
 
 
 
 
 
 
 
 
 
 
Backlog
 
 
 
 
 
 
 
 
 
 
Printing & Identification
 
$
98,924

 
$
98,288

 
$
110,359

 
0.6
 %
 
(10.9
)%
Industrials
 
252,780

 
250,725

 
282,598

 
0.8
 %
 
(11.3
)%
 
 
$
351,704

 
$
349,013

 
$
392,957

 
0.8
 %
 
(11.2
)%
 
 
 
 
 
 
 
 
 
 
 
Components of revenue growth (decline):
 
 
 
 
 
 
 
 
 
 
Organic growth
 
 
 
 
 
 
 
1.7
 %
 
3.2
 %
Acquisitions
 
 
 
 
 
 
 
4.4
 %
 
0.9
 %
Dispositions
 
 
 
 
 
 
 
(3.9
)%
 
 %
Foreign currency translation
 
 
 
 
 
 
 
(1.2
)%
 
(5.9
)%
Total revenue growth (decline)
 
 
 
 
 
 
 
1.0
 %
 
(1.8
)%

2016 Versus 2015

Engineered Systems segment revenue for the year ended December 31, 2016 increased $23.4 million , or 1.0% compared to the prior year, primarily driven by organic growth of 1.7% and acquisition-related growth of 4.4% due to the acquisitions of JK Group in the fourth quarter 2015 and RAV in the fourth quarter 2016, partially offset by a 3.9% impact from a disposition and an unfavorable impact from foreign currency translation of 1.2% . Customer pricing favorably impacted revenue by approximately 0.3% in 2016 .

Revenue derived from our Printing & Identification platform (representing 43.2% of segment revenue) increased $78.8 million , or 8.4% , compared to the prior year. The growth in organic revenue of 4.8% and acquisition-related growth of 6.0% was partially offset by the negative impact of foreign currency translation of 2.5%. Organic revenue growth was primarily driven by solid activity in our global marking and coding and digital printing businesses.

32



Revenue of our Industrials platform (representing 56.8% of segment revenue), decreased $55.5 million , or 4.0% , compared to the prior year. The decrease was primarily due to the disposition in the first quarter of 2016 of Texas Hydraulics of 6.4%, a decrease in organic revenue of 0.4% and a minimal unfavorable impact of foreign currency translation of 0.4%. These declines were partially offset by acquisition-related growth of 3.3% due to JK Group and RAV. The organic revenue decline was primarily impacted by reduced demand in our environmental solutions business, along with general softness in industrials markets. This decrease was partially offset by strong growth in our vehicle service business.

Engineered Systems segment earnings for the year ended December 31, 2016 increased $14.9 million , or 3.9% , compared to the prior year, driven primarily by leverage on organic revenue growth, acquisitions and productivity improvements. Segment margin increased from the prior year, reflecting productivity gains and favorable customer pricing.

Bookings for our Industrials platform for the year ended December 31, 2016 decreased 2.2% , compared to the prior year, due primarily to reduced activity in our environmental solutions business. Our Printing & Identification bookings for the year ended December 31, 2016 increased 9.5% , compared to the prior year, due to solid activity in our global marking and coding and digital printing businesses. Segment book-to-bill was 1.00 .

2015 Versus 2014

Engineered Systems segment revenue for the year ended December 31, 2015 decreased $43.1 million , or 1.8% , compared to the prior year, primarily driven by an unfavorable impact from foreign currency translation of 5.9% , partially offset by organic growth of 3.2% and acquisition-related growth of 0.9% . Customer pricing did not have a significant impact on Engineered Systems revenue in 2015 as compared to 2014.

Revenue within our Printing & Identification platform (representing 40.3% of 2015 segment revenue) decreased $45.2 million , or 4.6% , compared to the prior year. The growth in organic revenue of 4.6% and acquisition-related growth of 2.2% was more than offset by the negative impact of foreign currency translation of 11.4%, as the Euro and several other currencies weakened against the U.S. dollar.

Revenue derived from our Industrials platform (representing 59.7% of 2015 segment revenue) increased $2.2 million , or 0.2% , compared to the prior year. Organic growth of 2.3% was driven by continued strong results in our waste handling and auto-related businesses, partially offset by softness in other Industrials businesses. This increase was partially offset by a 2.1% unfavorable foreign currency translation impact.

Engineered Systems segment earnings for the year ended December 31, 2015 decreased $10.0 million , or 2.6% , compared to the prior year. Increased volume as a result of organic growth was more than offset by the significant, unfavorable impact from foreign currency translation and higher restructuring charges of $6.7 million. Segment margin remained relatively flat with the prior year, reflecting productivity gains and the benefits from completed restructuring initiatives.



33


Fluids

Our Fluids segment, serving the Fluid Transfer and Pumps end markets, is focused on the safe handling of critical fluids across the retail fueling, chemical, hygienic, oil and gas and industrial end markets.

 
 
Years Ended December 31,
 
% Change
(dollars in thousands)
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
Revenue:
 
 
 
 
 
 
 
 
 
 
Fluid Transfer
 
$
1,055,909

 
$
792,971

 
$
778,979

 
33.2
 %

1.8
 %
Pumps
 
644,665

 
606,302

 
651,587

 
6.3
 %

(6.9
)%
Total
 
$
1,700,574

 
$
1,399,273

 
$
1,430,566

 
21.5
 %

(2.2
)%
 
 
 
 
 
 
 
 


 


Segment earnings
 
$
200,921

 
$
262,117

 
$
251,639

 
(23.3
)%
 
4.2
 %
Segment margin
 
11.8
%

18.7
%

17.6
%
 


 


 
 
 
 
 
 
 
 


 


Segment EBITDA
 
$
286,145

 
$
318,195

 
$
312,542

 
(10.1
)%
 
1.8
 %
Segment EBITDA margin
 
16.8
%

22.7
%

21.8
%
 


 


 
 
 
 
 
 
 
 


 


Other measures:
 
 
 
 
 
 
 


 


Depreciation and amortization
 
$
85,224

 
$
56,078

 
$
60,903

 
52.0
 %
 
(7.9
)%
Bookings
 
1,702,930

 
1,351,191

 
1,434,358

 
26.0
 %
 
(5.8
)%
Backlog
 
331,238

 
243,459

 
277,834

 
36.1
 %
 
(12.4
)%
 
 
 
 
 
 
 
 
 
 
 
Components of revenue growth (decline):
 
 
 
 
 
 
 
 
 
 
Organic (decline) growth
 
 
 
 
 
 
 
(5.1
)%
 
0.8
 %
Acquisitions
 
 
 
 
 
 
 
27.8
 %
 
2.4
 %
Dispositions
 
 
 
 
 
 
 
(0.3
)%
 
 %
Foreign currency translation
 
 
 
 
 
 
 
(0.9
)%
 
(5.4
)%
Total revenue growth (decline)
 
 
 
 
 
 
 
21.5
 %
 
(2.2
)%

2016 Versus 2015

Fluids segment revenue for the year ended December 31, 2016 increased $301.3 million , or 21.5% , compared to the prior year, comprised primarily of acquisition-related growth of 27.8% primarily due to Tokheim and Wayne, partially offset by an organic decline of 5.1% and an unfavorable foreign currency translation impact of 0.9% . The decline in organic revenue impacted both the Fluids Transfer and Pumps end markets as a result of weak longer cycle oil and gas markets and the associated effect of reduced capital spending by our customers. Customer pricing favorably impacted revenue by approximately 0.6% in 2016.

Fluid Transfer end market revenue (representing 62.1% of segment revenue) increased $262.9 million , or 33.2% , compared to the prior year. This revenue increase was primarily driven by our acquisitions of Tokheim and Wayne partially offset by the impact of reduced capital spending by longer cycle midstream customers and certain integrated energy customers.

Pumps end market revenue (representing 37.9% of segment revenue) increased $38.4 million , or 6.3% , compared to the prior year, primarily driven by our fourth quarter of 2015 acquisitions partially offset by the impacts of lower activity in upstream oil and gas-related end markets.

Fluids segment earnings for the year ended December 31, 2016 decreased $61.2 million , or 23.3% , compared to the prior year, primarily driven by the impact of acquisitions, including increased acquisition-related depreciation and amortization expense and acquisition-related deal costs of approximately $14.7 million. The decrease was also impacted by a $23.2 million charge due to a voluntary product recall. These were partially offset by productivity improvements, cost controls and the benefits of

34


restructuring programs. Segment margin decreased 690 basis points as a result of lower organic volume, impact of acquisitions, the recall charge and deal costs.

Bookings for the year ended December 31, 2016 increased 26.0% compared to the prior year, and backlog levels at December 31, 2016 increased 36.1% compared to the prior year, primarily reflecting the positive impact of acquisitions. Book to bill was 1.00 .

2015 Versus 2014
 
Fluids segment revenue for the year ended December 31, 2015 decreased $31.3 million , or 2.2% , compared to the prior year, comprised of an unfavorable foreign currency translation impact of 5.4% , offset by organic revenue growth of 0.8% and acquisition-related growth of 2.4% . Fluids segment revenue experienced some favorability in 2015 as a result of customer pricing offset by pricing pressure in polymer pumps and pressures within the oil and gas markets.

Fluid Transfer end market revenue (representing 56.7% of 2015 segment revenue) increased $14.0 million , or 1.8% , compared to the prior year. The Fluid Transfer businesses grew organically and continue to benefit from acquisition-related growth, which partially offset the unfavorable impact of foreign currency translation.

Pumps end market revenue (representing 43.3% of 2015 segment revenue) decreased $45.3 million , or 6.9% , compared to the prior year, as solid results for our plastic and polymer pump business were offset by the impacts of foreign currency translation and slower activity in oil and gas-related pump end markets.

Fluids segment earnings for the year ended December 31, 2015 increased $10.5 million , or 4.2% , compared to the prior year, driven by the benefits of completed restructuring and productivity actions. Segment margin expanded 110 basis points, in spite of an increase in depreciation and amortization expense related to recent acquisitions, higher restructuring charges as compared to the prior year period, deal related expenses and the unfavorable impact of foreign currency translation.


35


Refrigeration & Food Equipment

Our Refrigeration & Food Equipment segment is a provider of innovative and energy efficient equipment and systems serving the commercial Refrigeration and Food Equipment end markets.

 
 
Years Ended December 31,
 
% Change
(dollars in thousands)
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
Revenue:
 
 
 
 
 
 
 
 
 
 
Refrigeration
 
$
1,261,633

 
$
1,336,829

 
$
1,483,157

 
(5.6
)%

(9.9
)%
Food Equipment
 
358,706

 
394,601

 
438,032

 
(9.1
)%

(9.9
)%
Total
 
$
1,620,339

 
$
1,731,430

 
$
1,921,189

 
(6.4
)%

(9.9
)%
 
 
 
 
 
 
 
 
 
 
 
Segment earnings
 
$
283,628

 
$
221,299

 
$
238,734

 
28.2
 %

(7.3
)%
Segment margin
 
17.5
%
 
12.8
%
 
12.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment EBITDA
 
$
348,645

 
$
287,373

 
$
307,435

 
21.3
 %
 
(6.5
)%
Segment EBITDA margin
 
21.5
%
 
16.6
%
 
16.0
%