Dover Corporation

02/13/2026 | Press release | Distributed by Public on 02/13/2026 15:23

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

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 year ended December 31, 2025. 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. For more information regarding our consolidated results, segment results, and liquidity and capital resources for the year ended December 31, 2024 as compared to the year ended December 31, 2023 refer to Part II Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2024 Annual Report on 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
Dover Corporation is a diversified global manufacturer and solutions provider delivering innovative equipment and components, consumable supplies, aftermarket parts, software and digital solutions and support services.
For the year ended December 31, 2025, consolidated revenue was $8.1 billion, an increase of $346.7 million or 4.5%, as compared to the prior year. The increase is driven by acquisition-related growth of 2.6%, organic revenue growth of 1.6% and a favorable impact from foreign currency translation of 1.0%, partially offset by a disposition-related decline of 0.7%. The results were primarily driven by robust trends in our secular-growth-exposed end markets, strategic pricing initiatives and acquisitions within the Clean Energy & Fueling and Pumps & Process Solutions segments.
The 1.6% organic revenue growth was driven by increases of 6.7%, 4.6%, and 1.9% in our Pumps & Process Solutions, Clean Energy & Fueling, and Imaging & Identification segments, respectively, partially offset by the Engineered Products and Climate & Sustainability Technologies segments which declined 6.6% and 2.1%, respectively. For further information, see "Segment Results of Operations" within this Item 7.
From a geographic perspective, organic revenue for the U.S., our largest market, grew 3.3% as compared to the prior year, driven by broad-based growth primarily in our Clean Energy & Fueling and Pumps & Process Solutions segments. Organic revenue in Asia grew 3.4%, while organic revenue in Europe and Other Americas declined 0.9% and 4.3%, respectively. All other geographic markets grew 0.7% organically year over year.
Bookings increased 6.0% over the prior year to $8.1 billion for the year ended December 31, 2025. The bookings increase was broad-based across the portfolio, with each segment except Engineered Products posting year-over-year growth.
Restructuring and other costs of $78.0 million included restructuring charges of $56.7 million and other costs of $21.2 million. Restructuring and other costs were primarily related to exit costs and headcount reductions across all segments, most notably within the Climate & Sustainability Technologies and Clean Energy & Fueling segments. Other costs (benefits) include $4.0 million in costs associated with a product line exit and $6.3 million in costs associated with a footprint reduction, both in our Climate & Sustainability Technologies segment. For further discussion related to our restructuring and other costs, see "Restructuring and Other Costs (Benefits)," within this Item 7.
During the year ended December 31, 2025, the Company completed four business acquisitions totaling$665.3 million, net of cash acquired and inclusive of contingent consideration and measurement period adjustments. See Note 3 - Acquisitions in the consolidated financial statements in Item 8 of this Form 10-K for further details regarding the businesses acquired during the year.
On November 10, 2025, the Company entered into the 2025 ASR Agreement, a $500.0 million accelerated share repurchase agreement with JP Morgan to repurchase its shares under the 2025 ASR Program. The Company funded the 2025 ASR Program with cash on hand. Under the terms of the 2025 ASR Agreement, the Company paid JP Morgan $500.0 million on November 12, 2025, and on that date received initial delivery of 2,334,010 shares, representing a substantial majority of the shares expected to be retired over the course of the 2025 ASR Program. See Note 21 - Stockholders' Equity in the consolidated financial statements in Item 8 of this Form 10-K for further details.
CONSOLIDATED RESULTS OF OPERATIONS
Years Ended December 31, % / Point Change
(dollars in thousands, except per share figures) 2025 2024 2025 vs. 2024
Revenue $ 8,092,571 $ 7,745,909 4.5 %
Cost of goods and services 4,874,402 4,787,288 1.8 %
Gross profit 3,218,169 2,958,621 8.8 %
Gross profit margin 39.8 % 38.2 % 1.60
Selling, general and administrative expenses 1,844,808 1,752,266 5.3 %
Selling, general and administrative expenses as a percent of revenue 22.8 % 22.6 % 0.20
Operating earnings 1,373,361 1,206,355 13.8 %
Interest expense 109,772 131,171 (16.3) %
Interest income (73,032) (37,158) 96.5 %
Gain on dispositions (4,644) (597,798) nm*
Other income, net (32,987) (46,876) (29.6) %
Earnings before provision for income taxes 1,374,252 1,757,016 (21.8) %
Provision for income taxes 276,823 357,048 (22.5) %
Effective tax rate 20.1 % 20.3 % (0.20)
Earnings from continuing operations 1,097,429 1,399,968 (21.6) %
(Loss) earnings from discontinued operations, net
(3,473) 1,297,158 nm*
Net earnings $ 1,093,956 $ 2,697,126 (59.4) %
Earnings per common share from continuing operations - diluted
$ 7.97 $ 10.09 (21.0) %
*nm: not meaningful
Revenue
Revenue for the year ended December 31, 2025 increased $346.7 million, or 4.5%, to $8.1 billion compared with 2024. Organic revenue growth of 1.6% is primarily driven by robust trends in our secular-growth-exposed end markets and above and below-ground retail fueling and pricing actions, partially offset by lower volumes in our vehicle service business and project timing in retail refrigeration equipment and services. The increase in revenue was also driven by acquisition-related growth of 2.6% primarily in our Pumps & Process Solutions and Clean Energy & Fueling segments and a favorable impact from foreign currency translation of 1.0%, partially offset by a disposition-related decline of 0.7% in our Engineered Products segment. Customer pricing favorably impacted revenue in 2025 by approximately 1.9% and by 1.6% in the prior year.
Gross Profit
Gross profit for the year ended December 31, 2025, increased $259.5 million, or 8.8%, to $3.2 billion compared with 2024, primarily driven by favorable price versus cost dynamics, volume growth, product mix, and productivity actions. Gross profit margin increased 160 basis points to 39.8% as compared to the prior year driven by favorable price versus cost dynamics, productivity initiatives, favorable portfolio mix and benefits from restructuring actions.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the year ended December 31, 2025 increased $92.5 million, or 5.3% to $1.8 billion compared with 2024, primarily due to increased employee compensation and benefits and acquisition-related amortization. As a percentage of revenue, selling, general and administrative expenses increased 20 basis points to 22.8%.
Research and development costs, including qualifying engineering costs, are expensed when incurred and amounted to $165.3 million and $149.6 million for the years ended December 31, 2025, and 2024, respectively. These costs as a percent of revenue were 2.0% and 1.9% for the years December 31, 2025 and 2024, respectively.
Non-Operating Items
Interest Expense, net
For the year ended December 31, 2025, interest expense, net of interest income, decreased $57.3 million, or 60.9%, to $36.7 million compared with 2024 primarily driven by higher interest income generated by the investment of proceeds from the sale of Environmental Solutions Group ("ESG") held in highly liquid short-term investments and reduced interest expense resulting from a lack of commercial paper borrowings.
Gain on Dispositions
Gain on dispositions for the years ended December 31, 2025 and 2024 were $4.6 million and $597.8 million, respectively. The gain on dispositions for the year ended December 31, 2024 was driven by the sale of the De-Sta-Co business on March 31, 2024 and the sale of a minority owned equity method investment on September 30, 2024. See Note 4 - Discontinued and Disposed Operations in the consolidated financial statements in Item 8 of this Form 10-K for further details.
Other Income, net
Other income, net includes non-service pension benefit, deferred compensation plan investments gain or loss, earnings or charges from equity method investments, foreign exchange gain or loss, and various other items. Other income, net for the years ended December 31, 2025 and 2024 was $33.0 million and $46.9 million, respectively. For the year ended December 31, 2025, other income decreased compared to 2024 primarily due to decreased deferred compensation plan investment gain, decreased earnings from our equity method investments and foreign currency exchange loss.
Income Taxes
Our businesses have a global presence with 38.6% and 35.8% of our pre-tax earnings in 2025 and 2024, respectively, generated in foreign jurisdictions. Foreign earnings are generally subject to local country tax rates that differ from the 21.0% U.S. statutory tax rate.
Our effective tax rate was 20.1% for the year ended December 31, 2025, compared to 20.3% for the year ended December 31, 2024. Our effective tax rate differs from the U.S. statutory tax rate primarily driven by mix of earnings and reorganizations.
On July 4, 2025, the One Big Beautiful Bill was enacted into law, introducing changes to the U.S. tax code, including making permanent certain provisions originally enacted under the Tax Cuts and Jobs Act, such as 100% bonus depreciation and the immediate expensing of domestic research and development costs. The changes do not have a material impact to our consolidated financial statements.
The Company is continuing to monitor the changes in tax laws resulting from the Organization for Economic Cooperation and Development's multi-jurisdictional plan of action to address base erosion and profit shifting. The changes do not have a material impact on our effective tax rate.
See Note 14 - Income Taxes in the consolidated financial statements in Item 8 of this Form 10-K for additional details.
Earnings from Continuing Operations
For the year ended December 31, 2025, earnings from continuing operations decreased $302.5 million, or 21.6%, to $1.1 billion, or $7.97 per diluted share, compared with earnings from continuing operations of $1.4 billion, or $10.09 per diluted share, for the year ended December 31, 2024. Earnings from continuing operations decreased primarily due to the after-tax gain on dispositions of De-Sta-Co and a minority owned equity method investment totaling $462.4 million in the prior year, partially offset by higher operating earnings in the current period.
Discontinued Operations
Loss from discontinued operations, net for the year ended December 31, 2025 was $3.5 million. Earnings from discontinued operations, net for the year ended December 31, 2024 was $1.3 billion representing the results of ESG through the date of disposition. Refer to Note 4 - Discontinued and Disposed Operations in Item 8 of this form 10-K for additional information on discontinued and disposed operations.
SEGMENT RESULTS OF OPERATIONS
The summary that follows provides a discussion of the results of operations of each of our five reportable operating segments (Engineered Products, Clean Energy & Fueling, Imaging & Identification, Pumps & Process Solutions and Climate & Sustainability Technologies). Each of these segments is comprised of various product and service offerings that serve multiple markets. We evaluate our operating segment performance based on segment earnings as defined in Note 19 - Segment Information in the consolidated financial statements in Item 8 of this Form 10-K.
We report organic revenue growth, a non-GAAP measure, which excludes the impact of foreign currency exchange rates and the impact of acquisitions and divestitures. We believe that reporting organic revenue growth provides a useful comparison of our revenue performance and trends between periods.
Additionally, we use the following operational metrics in monitoring the performance of the business. We believe the operational metrics are useful to investors and other users of our financial information in assessing the performance of our segments:
•Bookings represent total orders received from customers in the current reporting period and exclude de-bookings related to orders received in prior periods, if any. This metric is an important measure of performance and an indicator of revenue order trends.
•Book-to-bill is a ratio of the amount of bookings received from customers during a period divided by the amount of revenue recorded during that same period. This metric is a useful indicator of demand.
Engineered Products
Our Engineered Products segment provides a wide range of equipment, components, software, solutions and services to the vehicle aftermarket, aerospace and defense, industrial winch and hoist, precision soldering and fluid dispensing end-markets.
Years Ended December 31, % Change
(dollars in thousands) 2025 2024 2025 vs. 2024
Revenue $ 1,085,844 $ 1,202,457 (9.7) %
Segment earnings
$ 217,266 $ 231,237 (6.0) %
Segment margin
20.0 % 19.2 %
Operational metric:
Bookings $ 1,095,624 $ 1,171,777 (6.5) %
Components of revenue decline:
Organic decline
(6.6) %
Acquisitions 0.4 %
Dispositions (4.3) %
Foreign currency translation 0.8 %
Total revenue decline
(9.7) %
2025 Versus 2024
Engineered Products revenue for the year ended December 31, 2025 decreased $116.6 million, or 9.7%, compared to the prior year due to an organic revenue decline of 6.6% and a disposition-related decline of 4.3%, partially offset by a favorable impact from foreign currency translation of 0.8% and acquisition-related growth of 0.4%. The disposition-related decline was due to the divestiture of De-Sta-Co in the first quarter of 2024. Customer pricing favorably impacted revenue in 2025 by approximately 2.8%.
The organic revenue decline was primarily due to lower volumes in our vehicle service business, partially offset by pricing actions and favorable demand trends in aerospace and defense components and software. We expect improvements in organic growth trends in 2026 driven by favorable demand trends in several of our key end markets, most notably in aerospace and defense, as well as an improving demand outlook in vehicle service.
Engineered Products segment earnings for the year ended December 31, 2025 decreased $14.0 million, or 6.0%, compared to the prior year. The decrease was primarily due to disposition-related impacts and lower volumes in vehicle service, partially offset by favorable price versus cost dynamics, productivity and cost management initiatives and benefits from restructuring actions. Segment margin increased to 20.0% from 19.2% in the prior year.
Overall, bookings for the year ended December 31, 2025 decreased $76.2 million, or 6.5%, compared to the prior year. The bookings decline was due to the above mentioned divestiture and reduced demand in our vehicle service business, partially offset by strength in aerospace and defense. Segment book-to-bill was 1.01.
Clean Energy & Fueling
Our Clean Energy & Fueling segment provides components, equipment, software solutions and services enabling safe and reliable storage, transport, dispensing, and remote monitoring of traditional and clean fuels (including liquefied natural gas, hydrogen, and electric vehicle charging), cryogenic gases, and other hazardous substances along the supply chain, and safe and efficient operation of convenience retail, retail fueling and vehicle wash establishments.
Years Ended December 31, % Change
(dollars in thousands) 2025 2024 2025 vs. 2024
Revenue $ 2,130,507 $ 1,936,784 10.0 %
Segment earnings $ 418,070 $ 359,993 16.1 %
Segment margin 19.6 % 18.6 %
Operational metric:
Bookings $ 2,167,272 $ 1,938,495 11.8 %
Components of revenue growth:
Organic growth
4.6 %
Acquisitions 5.1 %
Foreign currency translation 0.3 %
Total revenue growth
10.0 %
2025 Versus 2024
Clean Energy & Fueling revenue for the year ended December 31, 2025 increased $193.7 million, or 10.0%, compared to the prior year, attributable to acquisition-related growth of 5.1%, organic growth of 4.6% and a favorable impact from foreign currency translation of 0.3%. Acquisition-related growth was primarily driven by the acquisition of Marshall Excelsior Company in the third quarter of 2024. Customer pricing favorably impacted revenue in 2025 by approximately 1.7%.
The organic revenue growth was primarily driven by pricing actions and favorable demand trends in our above and below-ground retail fueling, fluid transport, and clean energy components businesses. We expect positive demand trends to continue in 2026 driven by a favorable outlook across major end markets.
Clean Energy & Fueling segment earnings for the year ended December 31, 2025 increased $58.1 million, or 16.1%, compared to the prior year. The increase was primarily driven by volume growth, favorable price versus cost dynamics, the positive impact from acquisitions and benefits from restructuring actions. Segment margin increased to 19.6% from 18.6% in the prior year.
Overall bookings for the year ended December 31, 2025 increased 11.8% compared to the prior year. The bookings growth was primarily driven by acquisition-related growth in clean energy platforms and demand in North America above and below-ground retail fueling equipment, partially offset by reduced vehicle wash orders. Segment book-to-bill was 1.02.
Imaging & Identification
Our Imaging & Identification segment supplies precision marking and coding, product traceability, brand protection and digital textile printing equipment, as well as related consumables, software and services to the global packaged and consumer goods, pharmaceutical, industrial manufacturing, textile and other end-markets.
Years Ended December 31, % Change
(dollars in thousands) 2025 2024 2025 vs. 2024
Revenue $ 1,173,443 $ 1,137,165 3.2 %
Segment earnings $ 314,735 $ 301,707 4.3 %
Segment margin 26.8 % 26.5 %
Operational metric:
Bookings $ 1,174,537 $ 1,144,147 2.7 %
Components of revenue growth:
Organic growth
1.9 %
Acquisitions 0.1 %
Foreign currency translation 1.2 %
Total revenue growth
3.2 %
2025 Versus 2024
Imaging & Identification revenue for the year ended December 31, 2025 increased $36.3 million, or 3.2% compared to the prior year, comprised of organic growth of 1.9%, a favorable impact from foreign currency translation of 1.2% and acquisition-related growth of 0.1%. Customer pricing favorably impacted revenue in 2025 by approximately 3.1%.
The organic revenue growth was primarily driven by pricing, along with volume growth in core marking and coding equipment and serialization software. We expect demand trends to remain favorable in 2026 driven by solid demand trends across the segment.
Imaging & Identification segment earnings for the year ended December 31, 2025 increased $13.0 million, or 4.3%, compared to the prior year. This increase was primarily driven by favorable price versus cost dynamics and productivity initiatives. Segment margin increased to 26.8% from 26.5% in the prior year.
Overall bookings for the year ended December 31, 2025 increased 2.7% compared to the prior year. The bookings increase was primarily driven by our core marking and coding business. Segment book-to-bill was 1.00.
Pumps & Process Solutions
Our Pumps & Process Solutions segment manufactures specialty pumps and flow meters, fluid transfer connectors, highly engineered precision components, instruments and digital controls for rotating and reciprocating machines, polymer processing equipment, measurement, inspection, and control technologies, serving single-use biopharmaceutical production, diversified industrial manufacturing applications, chemical production, plastics and polymer processing, midstream and downstream oil and gas, clean energy markets, thermal management, wire and cable, food and beverage, semiconductor production and medical applications and other end-markets.
Years Ended December 31, % Change
(dollars in thousands) 2025 2024 2025 vs. 2024
Revenue $ 2,148,670 $ 1,894,566 13.4 %
Segment earnings $ 651,600 $ 536,606 21.4 %
Segment margin 30.3 % 28.3 %
Operational metric:
Bookings $ 2,041,184 $ 1,856,680 9.9 %
Components of revenue growth:
Organic growth
6.7 %
Acquisitions
5.2 %
Foreign currency translation 1.5 %
Total revenue growth
13.4 %
2025 Versus 2024
Pumps & Process Solutions revenue for the year ended December 31, 2025 increased $254.1 million, or 13.4%, compared to the prior year, attributable to organic growth of 6.7%, acquisition-related growth of 5.2% and a favorable impact from foreign currency translation of 1.5%. Acquisition-related growth was driven by the acquisitions of Cryogenic Machinery Corp. ("Cryo-Mach") in the first quarter of 2025 and Sikora AG ("Sikora") and ipp Pump Products GmbH ("ipp") in the second quarter of 2025. Customer pricing favorably impacted revenue by approximately 1.9% in 2025.
The organic revenue growth was primarily driven by single-use biopharma components, thermal connectors used in liquid cooling of data centers, as well as precision components and digital controls for midstream natural gas compression and power generation, partially offset by expected declines in our polymer processing equipment business as customers shift focus to optimizing the significant capacity investments made over the last several years. We expect demand conditions to remain constructive across end markets in 2026.
Pumps & Process Solutions segment earnings for the year ended December 31, 2025 increased $115.0 million, or 21.4%, compared to the prior year. The increase was primarily driven by higher volumes, productivity initiatives, favorable portfolio mix and the impact from acquisitions. Segment margin increased to 30.3% from 28.3% in the prior year.
Overall bookings for the year ended December 31, 2025 increased 9.9% as compared to the prior year. The bookings increase was primarily driven by positive demand trends in biopharmaceutical end markets, growth in high performance computing and data center application demand and the favorable impact from acquisitions. Segment book-to-bill was 0.95.
Climate & Sustainability Technologies
Our Climate & Sustainability Technologies segment is a provider of innovative and energy-efficient equipment, components, solutions, services and parts for the commercial refrigeration, heating and cooling and beverage can-making equipment end-markets.
Years Ended December 31, % Change
(dollars in thousands) 2025 2024 2025 vs. 2024
Revenue $ 1,559,841 $ 1,579,649 (1.3) %
Segment earnings $ 265,647 $ 250,875 5.9 %
Segment margin 17.0 % 15.9 %
Operational metric:
Bookings
$ 1,665,049 $ 1,570,632 6.0 %
Components of revenue decline:
Organic decline
(2.1) %
Foreign currency translation 0.8 %
Total revenue decline
(1.3) %
2025 Versus 2024
Climate & Sustainability Technologies revenue for the year ended December 31, 2025 decreased $19.8 million, or 1.3%, compared to the prior year, reflecting an organic revenue decline of 2.1%, partially offset by a favorable impact from foreign currency translation of 0.8%. Customer pricing favorably impacted revenue in 2025 by approximately 0.6%.
The organic revenue decline was primarily due to project timing in retail refrigeration door cases and services, partially offset by continued strong demand for low-GWP CO2refrigerant systems and improving demand across beverage can-making and heat exchanger applications. We expect demand conditions to trend favorably in 2026 primarily driven by continued strong demand in CO2refrigerant systems, expected recovery in refrigerated door cases and services, as well as a favorable outlook for heat exchangers due to accelerating demand in data center cooling applications and continued improvement in European residential heat pumps.
Climate & Sustainability Technologies segment earnings for the year ended December 31, 2025 increased $14.8 million, or 5.9%, compared to the prior year. The segment earnings increase was primarily driven by higher heat exchanger and beverage can-making volumes, productivity and cost management initiatives and the favorable mix impact from CO2refrigerant systems growth. Segment margin increased to 17.0% from 15.9% in the prior year.
Overall, bookings for the year ended December 31, 2025 increased 6.0% compared to the prior year. The bookings increase was driven by favorable heat exchanger and CO2refrigerant systems demand trends. Segment book-to-bill was 1.07.
Reconciliation of Segment Earnings to Earnings from Continuing Operations
Years Ended December 31,
(dollars in thousands) 2025 2024
Earnings from Continuing Operations:
Segment earnings:
Engineered Products
$ 217,266 $ 231,237
Clean Energy & Fueling 418,070 359,993
Imaging & Identification 314,735 301,707
Pumps & Process Solutions 651,600 536,606
Climate & Sustainability Technologies 265,647 250,875
Total segment earnings 1,867,318 1,680,418
Purchase accounting expenses (1)
218,445 186,241
Restructuring and other costs (2)
77,986 84,983
Gain on dispositions (3)
(4,644) (597,798)
Corporate expense / other (4)
164,539 155,963
Interest expense 109,772 131,171
Interest income (73,032) (37,158)
Earnings before provision for income taxes 1,374,252 1,757,016
Provision for income taxes 276,823 357,048
Earnings from continuing operations
$ 1,097,429 $ 1,399,968
(1)Purchase accounting expenses are primarily comprised of amortization of intangible assets.
(2)Restructuring and other costs relate to actions taken for headcount reductions, facility consolidations and site closures, product line exits, and other asset charges.
(3)Gain on dispositions includes post-closing adjustments; see Note 4 - Discontinued and Disposed Operations in the consolidated financial statements in Item 8 of this Form 10-K for further details.
(4)Certain expenses are maintained at the corporate level and not allocated to the segments. These expenses include executive and functional compensation costs, non-service pension costs, non-operating insurance expenses, shared business services and digital and IT overhead costs, deal related expenses and various administrative expenses relating to the corporate headquarters.
Restructuring and Other Costs (Benefits)
Restructuring and other costs are not presented in our segment earnings because these costs are excluded from the segment operating performance measure reviewed by management. During the year ended December 31, 2025, restructuring charges of $56.7 million were primarily related to exit costs and headcount reductions across all segments, most notably within the Climate & Sustainability Technologies and Clean Energy & Fueling segments. These restructuring programs were initiated in 2024 and 2025 and the Company will continue to make proactive adjustments to its cost structure to align with current demand trends. Additional programs, beyond the scope of the announced programs, may be implemented during 2026 with related restructuring charges. Other costs, net of $21.2 million for the year ended December 31, 2025, include $4.0 million in costs associated with a product line exit and $6.3 million in costs associated with a footprint reduction, both in our Climate & Sustainability Technologies segment. These restructuring and other charges were primarily recorded in cost of goods and services and selling, general and administrative expenses in the consolidated statement of earnings.
We recorded the following restructuring and other costs for the year ended December 31, 2025:
Year Ended December 31, 2025
(dollars in thousands) Engineered Products Clean Energy & Fueling Imaging & Identification Pumps & Process Solutions Climate & Sustainability Technologies Corporate Total
Restructuring $ 4,983 $ 13,755 $ 4,652 $ 9,735 $ 22,508 $ 1,110 $ 56,743
Other costs, net
407 3,556 1,875 49 11,368 3,988 21,243
Restructuring and other costs $ 5,390 $ 17,311 $ 6,527 $ 9,784 $ 33,876 $ 5,098 $ 77,986
During the year ended December 31, 2024, restructuring charges of $69.8 million were primarily related to headcount reductions and product line and other exit costs in the Clean Energy & Fueling and Climate & Sustainability Technologies segments. These restructuring programs were initiated in 2023 and 2024 and were undertaken in light of current market conditions. Other costs, net of $15.2 million were primarily due to non-cash asset impairment charges and reorganization costs in the Climate & Sustainability Technologies and Imaging & Identification segments, respectively. These restructuring and other charges were primarily recorded in cost of goods and services and selling, general and administrative expenses in the consolidated statement of earnings.
We recorded the following restructuring and other costs for the yearended December 31, 2024:
Year Ended December 31, 2024
(dollars in thousands) Engineered Products Clean Energy & Fueling Imaging & Identification Pumps & Process Solutions Climate & Sustainability Technologies Corporate Total
Restructuring $ 7,847 $ 30,858 $ 9,960 $ 4,956 $ 15,197 $ 992 $ 69,810
Other costs, net
9 2,714 4,900 61 4,916 2,573 15,173
Restructuring and other costs
$ 7,856 $ 33,572 $ 14,860 $ 5,017 $ 20,113 $ 3,565 $ 84,983
See Note 11 - Restructuring Activities in the consolidated financial statements in Item 8 of this Form 10-K for additional details regarding our recent restructuring activities.
Purchase Accounting Expenses
Purchase accounting expenses are primarily comprised of amortization of intangible assets. These expenses are not presented in our segment earnings because they are excluded from the segment operating performance measure reviewed by management. These expenses are as follows:
Years Ended December 31,
(dollars in thousands) 2025 2024
Purchase accounting expenses
Engineered Products $ 11,117 $ 10,727
Clean Energy & Fueling
101,219 93,719
Imaging & Identification 22,702 23,015
Pumps & Process Solutions (1)
65,742 38,803
Climate & Sustainability Technologies 17,665 19,977
Total $ 218,445 $ 186,241
(1)Purchase accounting expenses in our Pumps & Process Solutions segment increased by $26.9 million for the year ended December 31, 2025 from the prior year, primarily due to the acquisition of Sikora in Q2 2025.
FINANCIAL CONDITION
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Significant factors affecting liquidity are cash flows generated from operating activities, capital expenditures, acquisitions, dispositions, dividends, repurchase of outstanding shares, adequacy of available commercial paper and bank lines of credit and the ability to attract long-term capital with satisfactory terms. We generate substantial cash from the operations of our businesses and remain in a strong financial position, with sufficient liquidity available for upcoming debt maturities and for reinvestment in existing businesses and strategic acquisitions.
Cash Flow Summary
The following table is derived from our consolidated statements of cash flows:
Years Ended December 31,
Cash Flows from Operations (in thousands)
2025 2024
Net cash flows provided by (used in):
Operating activities
$ 1,338,005 $ 1,087,833
Investing activities
(886,594) (26,983)
Financing activities
(624,870) (1,271,673)
Operating Activities
Cash flow from operating activities for the year ended December 31, 2025 increased by $250.2 million compared to 2024. This increase was primarily driven by higher operating earnings during the year ended December 31, 2025 and timing of tax payments on prior year dispositions.
Adjusted Working Capital: We believe adjusted working capital (a non-GAAP measure calculated as accounts receivable, plus inventory, less accounts payable) provides a meaningful measure of liquidity by showing changes caused by operational results. The following table provides a calculation of adjusted working capital:
Adjusted Working Capital (in thousands)
December 31, 2025 December 31, 2024
Receivables, net
$ 1,371,352 $ 1,354,225
Inventories, net
1,272,784 1,144,838
Less: Accounts payable 875,678 848,006
Adjusted working capital $ 1,768,458 $ 1,651,057
Adjusted working capital increased by $117.4 million, or 7.1%, to $1.8 billion at December 31, 2025, which reflected an increase in accounts receivable of $17.1 million, an increase in inventory of $127.9 million and an increase in accounts payable of $27.7 million. These amounts include the effects of acquisitions and foreign currency translation. The increase in adjusted working capital versus year-end 2024 is primarily driven by higher inventory purchases to support the increase in order rates.
Investing Activities
Cash flow from investing activities is derived from cash inflows from proceeds from dispositions, offset by cash outflows for acquisitions and capital expenditures. The majority of the activity in investing activities was comprised of the following:
•Proceeds from dispositions: We received net proceeds of $6.0 million and $93.0 million in 2025 and 2024, respectively, related to the sale of a minority owned equity method investment in the third quarter of 2024 within the Climate & Sustainability Technologies segment. In 2024, we also received net proceeds of $675.9 million from the sale of De-Sta-Co, an operating company within the Engineered Products segment. See Note 4 - Discontinued and Disposed Operations in the consolidated financial statements in Item 8 of this Form 10-K for additional information.
•Acquisitions: In 2025, we deployed approximately $663.3 million, net of cash acquired to acquire three businesses within the Pumps & Process Solutions segment and one business within the Clean Energy & Fueling segment. In comparison, we acquired eight businesses in 2024 for total consideration of $635.3 million, net of cash acquired. See Note 3 - Acquisitions in the consolidated financial statements in Item 8 of this Form 10-K for additional information.
•Capital spending:Capital expenditures increased $52.7 million to $220.3 million in 2025 compared to $167.5 million in 2024, primarily to support growth initiatives, productivity and new product launches.
We anticipate that capital expenditures and any additional acquisitions we make in 2026 will be funded from available cash and internally generated funds and, if necessary, through the issuance of commercial paper, or by accessing the public debt or equity markets. We estimate capital expenditures in 2026 to range from $190.0 million to $210.0 million.
Financing Activities
Cash flow from financing activities generally relates to the use of cash for purchases of our common stock and payment of dividends, offset by net borrowing activity. The majority of financing activity was attributed to the following:
•Repurchase of common stock, including accelerated share repurchase program: During 2025, the Company received initial delivery of 2,334,010 shares, representing a substantial majority of the shares expected to be retired over the course of the 2025 ASR Program for $500.0 million. Exclusive of the 2025 ASR Program, the Company repurchased 200,000 shares of common stock at a total cost of $40.7 million. During the year ended December 31, 2024, the Company received a total of 2,869,282 shares upon completion of the 2024 ASR Program for $500.0 million.
•Long-term debt, commercial paper and other short-term borrowings, net: During 2025,we issued €550.0 million of 3.50% euro-denominated notes due 2033 ("2033 Notes"). The proceeds of €546.6 millionfrom the issuance of the 2033 Notes, net of discounts and issuance costs, were used for general corporate purposes. On November 15, 2025, the outstanding 3.150% notes with a principal value of $400.0 million matured. The repayment of the notes at maturity was funded by the Company's existing cash balances. There were no repayments or issuances of long-term debt in 2024. During 2025, we used $0.6 million to pay off other short-term borrowings. In 2024, we used $467.6 million to pay off primarily commercial paper borrowings.
•Dividend payments:Total dividend payments to common shareholders were $283.0 million in 2025 and $283.1 million in 2024. Our dividends paid per common share increased 1% to $2.07 per share in 2025 compared to $2.05 per share in 2024. The number of common shares outstanding decreased from 2024 to 2025, as share repurchases exceeded share issuances.
Cash Flows from Discontinued Operations
Net cash (used in) provided by discontinued operations for the years end December 31, 2025 and 2024 amounted to $(14.2) million and $1.6 billion, respectively. Cash flows from discontinued operations generated in 2024 primarily relate to cash provided by investing activities of $2.0 billion, which is comprised primarily of proceeds from the sale of ESG and partially offset by cash used in operating activities of $339.5 million, comprised of $439.9 million in tax payments made related to the gain on disposition, partially offset by cash flows from ESG's operating results.
Liquidity and Capital Resources
Free Cash Flow
In addition to measuring our cash flow generation and usage based upon the operating, investing and financing classifications included in the consolidated statements of cash flows, we also measure free cash flow (a non-GAAP measure) which represents net cash provided by operating activities minus capital expenditures. Free cash flow as a percentage of revenue equals free cash flow divided by revenue. Free cash flow as a percentage of earnings from continuing operations equals free cash flow divided by earnings from continuing operations. We believe that free cash flow is an important measure of liquidity because it provides management and investors a measurement of cash generated from operations that may be available for mandatory payment obligations and investment opportunities, such as funding acquisitions, paying dividends, repaying debt and repurchasing our common stock.
The following table reconciles our free cash flow to cash flow provided by operating activities:
Years Ended December 31,
Free Cash Flow (dollars in thousands)
2025 2024
Cash flow provided by operating activities $ 1,338,005 $ 1,087,833
Less: Capital expenditures (220,263) (167,533)
Free cash flow $ 1,117,742 $ 920,300
Cash flow from operating activities as a percentage of revenue 16.5 % 14.0 %
Cash flow from operating activities as a percentage of earnings from continuing operations
121.9 % 77.7 %
Free cash flow as a percentage of revenue 13.8 % 11.9 %
Free cash flow as a percentage of earnings from continuing operations
101.9 % 65.7 %
For the year ended December 31, 2025, we generated free cash flow of $1.1 billion, representing 13.8%of revenue and 101.9%of earnings from continuing operations. Free cash flow increased by $197.4 million compared to 2024, primarily driven by higher operating earnings and the timing of tax payments on prior year dispositions, partially offset by higher capital expenditures. The increases in cash flow from operating activities and free cash flow as percentages of earnings from continuing operations are due primarily to the gain on disposition of De-Sta-Co impacting the prior year. See Note 4 - Discontinued and Disposed Operations in the consolidated financial statements in Item 8 of this Form 10-K for additional information.
Capitalization
We use commercial paper borrowings for general corporate purposes, including the funding of acquisitions and the repurchase of our common stock. As of December 31, 2025, we maintained $1.0 billion five-year and $500.0 million 364-day unsecured revolving credit facilities (together, the "Credit Agreements") with a syndicate of banks which expire April 6, 2028 and April 2, 2026, respectively. The Company may elect to extend the maturity date of any loans under the 364-day credit facility until April 2, 2027, subject to conditions specified therein. The Credit Agreements are designated as a liquidity back-stop for the Company's commercial paper program and also are available for general corporate purposes.
At the Company's election, loans under the Credit Agreements will bear interest at a base rate plus an applicable margin. The Credit Agreements require the Company to pay facility fees and impose various restrictions on the Company such as, among other things, a requirement to maintain an interest coverage ratio of consolidated EBITDA to consolidated net interest expense of not less than 3.0 to 1. The Company was in compliance with all covenants in the Credit Agreements and other long-term debt covenants at December 31, 2025 and had an interest coverage ratio of consolidated EBITDA to consolidated net interest expense of 48.8 to 1. We are not aware of any potential impairment to our liquidity and expect to remain in compliance with all of our debt covenants.
We also have a current shelf registration statement filed with the SEC that allows for the issuance of additional debt securities that may be utilized in one or more offerings on terms to be determined at the time of the offering. Net proceeds of any offering would be used for general corporate purposes, including repayment of existing indebtedness, capital expenditures and acquisitions.
On November 12, 2025, the Company issued €550.0 million of 3.50% euro-denominated notes due 2033. The proceeds of €546.6 millionfrom the issuance of the 2033 Notes, net of discounts and issuance costs, were used for general corporate purposes.
On November 15, 2025, the outstanding 3.150% notes with a principal value of $400.0 million matured. The repayment of the notes at maturity was funded by the Company's existing cash balances.
At December 31, 2025, our cash and cash equivalents totaled $1.7 billion, of which approximately $447.8 million was held outside the United States. At December 31, 2024, our cash and cash equivalents totaled $1.8 billion, of which $300.5 million was held outside the United States. Cash and cash equivalents are held primarily in bank deposits with highly rated banks. We regularly hold cash in excess of near-term requirements in bank deposits or invest the funds in government money market instruments or short-term investments, which consist of investment grade time deposits with original maturity dates at the time of purchase of no greater than three months.
For the year ended December 31, 2025, the Company completed four business acquisitions for total consideration of $665.3 million, net of cash acquired and inclusive of contingent consideration of $2.0 million and measurement period adjustments. See Note 3 - Acquisitions in the consolidated financial statements in Item 8 of this Form 10-K for additional information.
We utilize the net debt to net capitalization calculation (a non-GAAP measure) to evaluate our capital structure and assess our overall financial leverage and capacity and believe the calculation is useful to investors for the same reasons. Net debt represents total debt minus cash and cash equivalents. Net capitalization represents net debt plus stockholders' equity. The following table provides a calculation of net debt to net capitalization from the most directly comparable GAAP measures:
Net Debt to Net Capitalization Ratio
(dollars in thousands)
December 31, 2025 December 31, 2024
Short-term borrowings and current portion of long-term debt
$ 706,677 $ 400,056
Long-term debt 2,621,295 2,529,346
Total debt 3,327,972 2,929,402
Less: Cash and cash equivalents
(1,676,808) (1,844,877)
Net debt 1,651,164 1,084,525
Add: Stockholders' equity 7,405,206 6,953,996
Net capitalization $ 9,056,370 $ 8,038,521
Net debt to net capitalization 18.2 % 13.5 %
Our net debt to net capitalization ratio increased to 18.2% at December 31, 2025 compared to 13.5% at December 31, 2024. Net debt increased $566.6 million during the period primarily due to the issuance of the 2033 Notes and the increase in value of the euro-denominated debt resulting from foreign currency translation adjustments offset by a decrease in cash and cash equivalents from acquisition-related investments and repayment of the current portion of long-term debt. Stockholders' equity increased for the period as a result of current earnings of $1.1 billion, partially offset by share repurchases, including shares repurchased under the ASR Program, and dividends paid during the period.
Our ability to obtain debt financing at comparable risk-based interest rates is partly a function of our existing cash flow-to-debt and debt-to-capitalization levels as well as our current credit standing. Set forth below are our credit ratings, as of December 31, 2025, which were independently developed by the respective credit agencies. The Moody's rating and outlook were issued in December 2018, and the Standard & Poor's rating was issued in December 2017 and the outlook was most recently revised in May 2021. The ratings and outlooks from both agencies were affirmed in 2025.
Short-Term Rating Long-Term Rating Outlook
Moody's P-2 Baa1 Stable
Standard & Poor's A-2 BBB+ Stable
As of December 31, 2025, we had approximately $230.0 millionoutstanding in letters of credit, surety bonds, and performance and other guarantees which primarily expire on various dates through 2035. These letters of credit and bonds are primarily issued as security for insurance, warranty and other performance obligations. In general, we would only be liable for the amount of these guarantees in the event of default in the performance of our obligations, the probability of which is believed to be remote.
As of December 31, 2025, our estimate of future interest payments on long-term debt, including the current portion, is $927.1 million.
Operating cash flow and access to capital markets are expected to satisfy our various cash flow requirements, including acquisitions, capital expenditures, purchase obligations, debt maturities and lease obligations. Acquisition spending and/or share repurchases could potentially increase our debt.
We believe that existing sources of liquidity are adequate to meet anticipated funding needs at current risk-based interest rates for the foreseeable future.
Financial Instruments and Risk Management
The diverse nature of our businesses' activities necessitates the management of various financial and market risks, including those related to changes in interest rates, foreign currency exchange rates and commodity prices. We periodically use derivative and non-derivative financial instruments to manage some of these risks. We do not hold or issue derivative instruments for trading or speculative purposes. We are exposed to credit loss in the event of nonperformance by counterparties to our financial instrument contracts; however, nonperformance by these counterparties is considered unlikely as our policy is to contract with highly-rated, diversified counterparties.
Interest Rate Exposure
As of December 31, 2025, and for the years ended December 31, 2025 and 2024, we did not have any open interest rate swap contracts; however, we may in the future enter into interest rate swap agreements to manage our exposure to interest rate changes. We issue commercial paper, which exposes us to changes in variable interest rates; however, maturities are typically three months or less so a change in rates over this period would not have a material impact on our pre-tax earnings.
We consider our current risk related to market fluctuations in interest rates to be minimal since our debt is long-term and fixed rate in nature. Generally, the fair market value of fixed-interest rate debt will increase as interest rates fall and decrease as interest rates rise. A 100 basis point increase in market interest rates would decrease the 2025 year-end fair value of our long-term debt by approximately $156.7 million. However, since we have no plans to repurchase our outstanding fixed-rate instruments before their maturities, the impact of market interest rate fluctuations on our long-term debt does not affect our results of operations or financial position.
Foreign Currency Exposure
We conduct business in various non-U.S. countries, including Canada, substantially all of the European countries, Mexico, Brazil, China, India and other Asian countries. Therefore, we have foreign currency risk relating to receipts from customers, payments to suppliers and intercompany transactions denominated in foreign currencies. We will occasionally use derivative and non-derivative financial instruments to offset such risks, when it is believed that the exposure will not be limited by our normal operating and financing activities. We have formal policies to mitigate risk in this area by using fair value and/or cash flow hedging programs.
Changes in the value of the currencies of the countries in which we operate affect our results of operations, financial position and cash flows when translated into U.S. dollars, our reporting currency. The strengthening of the U.S. dollar could result in unfavorable translation effects as the results of foreign operations are translated into U.S. dollars. We have generally accepted the exposure to exchange rate movements relative to our investment in non-U.S. operations. We may, from time to time, for a specific exposure, enter into fair value hedges.
Additionally, we have designated the €600 million, €500 million and €550 million of euro-denominated notes issued November 9, 2016, November 4, 2019 and November 12, 2025, respectively, as a hedge of our net investment in euro-denominated operations. Due to the high degree of effectiveness between the hedging instruments and the exposure being hedged, fluctuations in the value of the euro-denominated debt due to exchange rate changes are offset by changes in the net investment. Accordingly, changes in the value of the euro-denominated debt are recognized in the cumulative translation adjustment section of other comprehensive income to offset changes in the value of the net investment in euro-denominated operations. Due to the fluctuations of the euro relative to the U.S. dollar, the U.S. dollar equivalent of this debt increases or decreases, resulting in the recognition of a pre-tax loss of $154.8 million and a pre-tax gain of $66.8 million in other comprehensive earnings (loss) for the years ended December 31, 2025, and 2024, respectively.
Commodity Price Exposure
Some of our businesses are exposed to volatility in the prices of certain commodities, such as aluminum, steel, copper and various precious metals, among others. Our primary exposure to commodity pricing volatility relates to the use of these materials in purchased component parts or the purchase of raw materials. In some cases, we maintain longer-term index-based contracts on raw materials and component parts and centrally drive an ongoing effort to minimize risk proactively. However, we are prone to exposure as these contracts expire.
Critical Accounting Estimates
Revenue Recognition
Description
The majority of our revenue is generated through the manufacture and sale of a broad range of specialized products and components, with revenue recognized upon transfer of title and risk of loss, which is generally upon shipment. In limited cases, our revenue arrangements with customers require delivery, installation, testing, certification, or other promises to deliver goods or services that may impact the timing or pattern of revenue recognized. The remainder of our revenue is recognized over time, which is primarily related to services performed and specialized goods manufactured.
Judgments and uncertainties involved in the estimate
A significant level of judgment is involved in the identification of performance obligations for contracts with multiple-element arrangements and the allocation of the transaction price based on the relative stand-alone selling price. The identification requires judgment to identify all distinct goods or services and also the appropriate timing of revenue recognition for each distinct good or service based on the transfer of control to the customer. We estimate the relative stand-alone selling price for performance obligations if not directly observable. A significant level of judgment is also involved in the selection of the appropriate method to recognize revenue over time.
Effect if actual results differ from assumptions
To the extent the judgments and estimates used or the method selected to recognize revenue over time differ or change in a future period, a change to revenue and the related assets and liabilities could impact our financial position or results of operations. The judgments, estimates, and methods used have been applied consistently over the last three fiscal years.
Valuation of Acquired Intangible Assets
Description
Intangible assets represent a significant portion of our consolidated balance sheet as a result of current and past acquisitions. Intangible assets primarily include customer intangibles, trademarks, unpatented technologies, and patents. The fair value of acquired intangible assets is determined using widely accepted valuation techniques, and the Company may engage third-party appraisal firms to assist with the determination of fair values of significant intangible assets. The valuation of intangible assets is performed at the time of acquisition and may change during the acquisition measurement period until the valuation is finalized. The fair value of finite-lived intangible assets is subsequently amortized over the estimated useful life.
Judgments and uncertainties involved in the estimate
The significant assumptions used in the valuation of customer intangibles include future cash flows, customer attrition rate, and discount rate. The significant assumptions for the valuation of trademarks include future revenues, royalty rate, and
discount rate. The significant assumptions for the valuation of unpatented technologies and patents include future revenues, obsolescence rate, royalty rate, and discount rate. The assumptions and estimates used in the valuation of these intangible assets are based on several factors, including historical experience with similar businesses and industries and information obtained from operating company management.
Effect if actual results differ from assumptions
While we believe the assumptions used in our valuation of intangible assets are reasonable and representative of expected results, actual results may differ from these assumptions. While the assumptions used for each acquisition are dependent on the acquired company, the assumptions have been applied using a consistent methodology over the last three fiscal years.
Goodwill Impairment
Description
Goodwill is the difference between the consideration transferred and the fair value of net assets acquired. Goodwill is tested for impairment on an annual basis during the fourth quarter, or more frequently when indicators of impairment exist, or when a change in the composition of reporting units for goodwill occurs for other reasons, such as a disposition or a change in segments. The impairment test involves a comparison of the fair value of each reporting unit with its carrying value. Fair value reflects the price a potential market participant would be willing to pay for the reporting unit in an arms-length transaction.
Judgments and uncertainties involved in the estimate
The significant assumptions in the fair value analysis of goodwill are the estimated future cash flows and the discount rate. The determination of future cash flows involves significant judgment and is primarily driven by forecasted revenue growth rates and EBITDA margins for the reporting unit. These assumptions are developed based on the reporting unit's expected future performance, which considers historical performance. We use a discount rate commensurate with the inherent risks in our internally developed forecasts of future cash flows. The discount rate may also fluctuate due to market conditions such as rising interest rates.
Effect if actual results differ from assumptions
While we believe the assumptions used in our annual impairment analysis are reasonable and representative of expected results and reflective of a market participant, actual results may differ from these assumptions. The methodology used for the goodwill impairment test has remained consistent over the last three fiscal years.
Valuation of Pension Benefit Obligation
Description
The pension benefit obligation is actuarially determined in accordance with GAAP and is impacted by assumptions used to estimate the obligation, namely the discount rate. Annually, we review the actuarial assumptions used and compare the assumptions to third-party benchmarks to ensure that the selected assumptions accurately account for our future pension benefit obligations.
Judgments and uncertainties involved in the estimate
Our discount rate assumptions are determined by developing a yield curve based on high quality corporate bonds with maturities matching the plans' expected benefit payment streams. The plans' expected cash flows are then discounted by the resulting year-by-year discount rates. The 2025 weighted-average discount rate used to measure our pension benefit obligations for non-US plans increased to 2.89% from 2.64% in 2024. The U.S. Plan discount rate decreased to 5.40% from 5.70% in 2024. The change in both the non-US plans and the U.S. Plan were driven by changes in corporate bond yields over the period.
Effect if actual results differ from assumptions
A 25-basis point decrease in the discount rates used for these plans would have increased pension benefit obligations by approximately $15.5 million from the amount recorded at December 31, 2025. The methodology used for the valuation of the pension benefit obligation has remained consistent over the last three fiscal years.
Recoverability of Deferred Income Tax Assets and Unrecognized Tax Benefits
Description
We operate in and are subject to income taxes in various jurisdictions and are subject to ongoing audits by federal, state, and non-U.S. tax authorities. Significant judgment is required in determining the realizability of deferred tax assets and evaluating unrecognized tax benefits.
We have significant amounts of deferred tax assets that are evaluated for recoverability and valued accordingly. Management evaluates the realizability of deferred income tax assets for each jurisdiction in which the Company operates. We record valuation allowances to reduce the carrying value of deferred tax assets to amounts that we expect are more likely than not to be realized.
The provision for unrecognized tax benefits provides a recognition threshold and measurement attribute for determining the financial statement tax benefits taken or expected to be taken in a tax return and disclosure requirements regarding uncertainties in income tax positions. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.
Judgments and uncertainties involved in the estimate
In assessing the adequacy of a recorded valuation allowance, we consider all positive and negative evidence, including the scheduled reversal of deferred tax liabilities, historical and projected future taxable income, and tax planning strategies. Additionally, significant judgment is required in the identification and measurement of unrecognized tax benefits. Our liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply judgment to estimate the exposures associated with our various filing positions.
Effect if actual results differ from assumptions
Although we believe that our judgments and estimates are reasonable, actual results could differ and result in additional tax expense or benefit. If we determine a valuation allowance should be recognized to reduce the carrying value of a deferred tax asset or a liability for an unrecognized tax benefit needs to be recorded, the adjustment would result in a change to tax expense in the period such determination is made. We have not made any material changes in the process we use to assess valuation allowances and unrecognized tax benefits over the last three fiscal years.
Contingencies
Description
Liabilities are established for environmental and legal contingencies at both the business and corporate levels. A significant amount of judgment and the use of estimates are required to quantify our ultimate exposure in these matters.
Judgments and uncertainties involved in the estimate
The valuation of liabilities for these contingencies is reviewed on a quarterly basis to ensure that we have accrued the proper level of expense. The liability balances are adjusted to account for changes in circumstances for ongoing issues and the establishment of additional liabilities for emerging issues. Estimates used in the valuations include the probable outcome of such proceedings, the costs and expenses reasonably expected to be incurred and currently accrued to-date and consider the availability and extent of insurance coverage. Such liability balances contain uncertainties due to new developments regarding the facts and circumstances of each proceeding, changes in applicable laws and regulations, and other future events and decisions by third parties that may impact the ultimate resolution of a proceeding.
Effect if actual results differ from assumptions
Although we believe that the amount accrued to-date is adequate, future changes in circumstances could impact these determinations, and we may be exposed to a material loss. For example, to the extent we prevail in matters for which a liability has been established or are required to pay amounts in excess of our established liability, our contingent liability in a given financial statement period could be materially affected. However, the Company does not believe that it is 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.
Recent Accounting Standards
See Note 1 - Description of Business and Summary of Significant Accounting Policies in the consolidated financial statements in Item 8 of this Form 10-K for a discussion of recent accounting pronouncements and recently adopted accounting standards.
Non-GAAP Disclosures
In an effort to provide investors with additional information regarding our results as determined by GAAP, we also disclose non-GAAP information, which we believe provides useful information to investors. Free cash flow, free cash flow as a percentage of revenue, free cash flow as a percentage of earnings from continuing operations, net debt, net capitalization, net debt to net capitalization ratio, adjusted working capital, and organic revenue growth are not financial measures under GAAP and should not be considered as a substitute for cash flows from operating activities, debt or equity, working capital or revenue as determined in accordance with GAAP, and they may not be comparable to similarly titled measures reported by other companies.
Reconciliations and comparisons to non-GAAP measures can be found above in this Item 7, MD&A.
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