DOV
#Thanks, Bob
Good morning everyone
Let's start on Slide three of our presentation deck
Today, we reported first quarter revenue of $1.8 billion, an increase of 12%
Growth from acquisitions of 12% was complemented by organic growth of 4%
Partially offsetting these strong results was a 4% impact from dispositions and FX
EPS was a $1.09 and included a gain of $0.39. Adjusted EPS of $0.70 exceeded the high end of our expectations, principally reflecting strong performance on higher revenue and a lower tax rate
Adjusted segment margin was 11.8%, an 80 basis point improvement over last year, largely driven by strong incremental margin on increased volume in our energy segment
Bookings increased 21% to $2 billion
This positive result was broad based and reflects organic growth of 12% and acquisition growth of 12%, offset by a 3% combined impact of dispositions and FX
Total company book to bill finished at a seasonally strong 1.12. Overall, our backlog increased 20% to $1.3 billion
On an organic basis, backlog increased 13%
Free cash flow was $36 million for the first quarter, which is always our lowest quarter of the year
Our quarterly result was impacted by inventory increases driven by selective pre-builds
Overall, we remain committed to full year free cash flow of about 11% of revenue or 140% of net income
Now turning to Slide four
Organic growth in the quarter was solid led by energies growth of 15% on improving US oil and gas fundamentals
Refrigeration and food equipment increased 5%, primarily on strong retail refrigeration markets
Engineered Systems was up 2%, primarily reflecting continued solid growth in printing and identification
Fluids organic revenue declined 2%, principally reflecting weak longer cycle transport markets
As seen on the chart, acquisition growth in the quarter was most prevalent at Fluids and Engineered Systems at 35% and 9% respectively
Now moving to Slide five
Energy revenue of $324 million increased 14% year over year and 11% sequentially
Earnings were $42 million and segment margin was 12.9%, both significantly improved over last year
These results exceeded our expectations, driven by continuing improvements in oil and gas fundamentals, especially the US retail
These results also reflect strong conversion on volume
Bookings of $348 million were up 27% year over year and 16% sequentially
These bookings trends, along with continued rig count additions and higher expected well completions, set us up for a strong second quarter
In total, in the second quarter, we expect year over year revenue growth of about 30% or 4% on a sequential basis
Book to bill finished at 1.07. Turning to Slide six
Engineered Systems revenue of $608 million was up 5% overall and included organic growth of 2%
Excluding a gain on a disposition, earnings of $86 million increased 4% over an adjusted prior year, driven by volume growth
Our Printing and Identification platform revenue of $249 million increased 4%
Organic revenue was up 5%, reflecting solid global marking and coding and strong digital textile markets
In the industrial platform, revenue increased 6% to $359 million
This result included net acquisition growth of 8% and a 1% organic decline
The organic decline was attributable to lower shipments at environmental solutions
The remaining businesses in the industrial platform, all delivered solid organic growth, especially our auto service equipment business
Adjusted margin was 14.2%, essentially in line with last year
Bookings of $676 million were up 18% overall, including organic bookings growth of 12% and growth from net acquisitions of 7%
Organic bookings growth was very broad based, with printing and identification up 7% and industrials up 15%
Book to bill for printing and identification was 1.03. Industirals was 1.17. Overall book to bill was 1.11. Now on Slide seven
Foods revenue increased 32% to $525 million, principally driven by acquisitions
This revenue performance primarily reflects solid activity across the majority of our businesses, especially retail fueling within fueling and transport
This market is benefiting from robust activity in the US and also from improving international activity
Overall, organic revenue declined 2% and FX was a 1% headwind
Earnings increased 14% to $53 million, largely driven by volume growth, offset in part by $4 million of integration and restructuring costs
Margin in the quarter was 10%, slightly better than expected
Bookings grew significantly to $566 million, an increase of 35%
This result reflects acquisition growth of 35% and organic growth of 2%
Organics booking growth was broad based
Book to bill was 1.08. Now let's turn to Slide eight
Refrigeration and food equipments revenue of $357 million included organic revenue growth of 5%
Organic revenue increase was largely driven by the strong activity in the glass door and refrigeration case product lines
Food equipment results reflected solid organic growth in the commercial kitchen equipment markets, offset by expected lower shipments in can shaping equipment
Earnings of $34 million were down 12% year over year, reflecting a $2 million impact from a disposition in the prior year and approximately $2 million in restructuring
Margin was 9.4%, 110 basis points below last year and largely in line with our forecast
Bookings of $439 million increased 7% overall and 13% organically, reflecting strong order rates in nearly all of our end markets
Book to bill was seasonally strong at 1.23. Going to the overview on Slide nine, let me cover some highlights
Corporate expense and interest expense were both essentially in line with expectations
Our first quarter tax rate was 25.7%, reflecting the impact of a disposition and other discrete items of about $0.04. Excluding these items, our normalized rate was 27.8%
Moving on to Slide 10 which shows our 2017 guidance
As Bob previously mentioned, we are increasing our annual guidance
We now expect total revenue to increase 11% to 13% versus our prior forecast of 10% to 12%
This forecast includes organic revenue growth of 4% to 6%, up one point
Our expectation for full year acquisition growth is largely unchanged
Completed dispositions will now impact revenue by 2% and FX is now expected to be a 1% headwind
From a segment perspective, energy is now expected to grow 20% to 23% organically, up seven points over the last forecast, largely driven by the growth in our drilling and production and automation businesses
Engineered Systems and Fluids organic growth rates are both being raised one point at the low end, driven by solid bookings growth
Refrigeration and food equipments estimated revenue range has been increased one point to reflect our strong first quarter and continued bookings momentum
Corporate expense has been increased $5 million and net interest expense remains unchanged from our last forecast
Our full year tax rate is now expected to be slightly lower than our initial estimate, largely driven by favorable tax items reported in the first quarter
Our forecast for CapEx and free cash flow is also unchanged from the prior forecast
Lastly, we now expect full year segment margin to be around 14%, excluding the gain, up about 30 basis points from our prior forecast
Turning to the bridge on Slide eleven
Starting with 2016 adjusted EPS of $2.85 as a base, the year over year impact of lower restructuring cost in 2017 is unchanged
Performance, including volume productivity pricing and restructuring benefits, is now expected to increase $0.29 from the prior forecast at the midpoint, principally driven by our improved organic revenue forecast, especially at energy
Compensation investment will now be about $0.02 higher than our prior forecast
The combined impact of interest corporate expense and the tax rate is about $0.01 lower than our prior forecast
Lastly, the full year net benefit from disposition will be $0.35. This represents a gain on sale of $0.39 less the $0.04 of previously forecasted earnings from the divested business
In total, we expect 2017 EPS to be in the range of $4.05 to $4.20. With that, I’ll turn the call back over to Bob for some final thoughts
Holy
Let’s see here
I'm looking at Bob
So I actually don't have in front of me the data on the Wayne margins inclusive of ADNA
They're not negative, but they’re - we are - as your question infers, we are eating a fair amount of purchase accounting charges here in the first quarter
From a full year perspective, let me give you this comment
I think you should have a fairly good feel for the ADNA for this business for the full year
We do see the operating margins for Wayne and Tokheim expanding through the year
The first quarter is the lowest quarter of the year, both in revenue and earnings for this business
I think for the year, we're looking at margins for the year of 11% in my operating margins brand, 11% for the year, with the fourth quarter being maybe 300 basis points higher than the yearly average
And the first quarter was - I don't think we hit 8% operating margins in the first quarter
Just shy of 8%
So I guess to add to that
The Wayne business is typically double digit, slightly over double digit type margin profile, ex ADNA again, all these numbers that Bob is talking about
And Tokheim, we've told you before is in the high single
So the combination of those two …
Is about 11 for the year
Now, we're - what I would say is DFS or Dover …
Fueling Solutions, we're off to a great start there
I would expect that we will beat our plan with respect to acquisition, delivery of EPS related to DFS
Okay
So let's stay with the first quarter first
As you know, the conversion there was significant year over year
Adjusted ex restructuring, Jeff, 60% conversion year over year, driven on the strength of drilling as you point out
Sequential improvement in margin on the higher volume about 30%, 31%
As I think about it going forward, and we gave you some numbers related to the second quarter in our script, the pre read, I’m thinking that the year over year for the year, for the full year, will be in the 40% range
So coming off that high first quarter conversion will moderate based upon the mix of business
But sequentially I still see going sequential improvement in that 30% range
Still feel very comfortable with the year
First quarter activity was a little bit stronger than we expected, Jeff coming into the quarter
So the inventory levels naturally were a bit higher
Receivables a little bit higher than we expected, but I would also tell you that in a couple areas of the business, we did make decisions about halfway through the quarter to do some selective pre-builds to make sure we were holding delivery times where we wanted them to be in the second quarter
And that's - they were …
$40 million of inventory that was - I would just label as pre-builds to support second quarter delivery schedules
Slightly over 13, yes
So I think, Steve you're dead on with those numbers
Here what I would say, is we just went through energy
We’re up 30 to 40 basis points from our last estimates
So that spread pretty evenly across the other three segments
That’s the best way to think of it
So everybody up slightly with energy being up significant
Through the third and the fourth
No
That’s just cash payments against the reserves
Yes, in April
About $2 million
