Dover Corp
NYSE:DOV
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Dover Corp
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Good morning and welcome to the Dover's First Quarter 2018 Earnings Conference Call. Speaking today are Bob Livingston, President and Chief Executive Officer; Brad Cerepak, Senior Vice President and CFO; and Paul Goldberg, Vice President of Investor Relations.
After the speakers' remarks, there will be a question-and-answer period. [Operator Instructions] As a reminder, ladies and gentlemen, this conference call is being recorded and your participation implies consent to our recording of this call. If you do not agree with these terms, please disconnect at this time. Thank you.
I would now like to turn the conference over to Mr. Paul Goldberg. Mr. Goldberg, you may go ahead.
Thanks, Jennifer. Good morning and welcome to Dover's first quarter earnings call. Today's call will begin with comments from Bob and Brad on Dover's first quarter operating and financial performance, and follow with our 2018 guidance. We will then open the call up for questions. As a courtesy, we kindly ask that you limit yourself to one question with a follow-up.
Dover's providing adjusted EPS results and pro forma EPS guidance that exclude after-tax acquisition related amortization. We believe reporting adjusted EPS on this basis better reflects our core operating results offers more transparency and facilitates easy comparability with peer companies.
A full reconciliation between forecasted GAAP and adjusted measures, reflecting adjustments for aforementioned acquisition related amortization, as well as separation cost and the rightsizing costs, is included in our investor supplement. Please note that our current earnings release, investor supplement and associated presentation can be found on our website dovercorporation.com.
This call will be available for playback through May 11 and the audio portion of this call will be archived on our website for three months. The replay telephone number is 800-585-8367. When accessing the playback, you'll need to supply the following access code, 7788105.
And before we get started, I'd like to remind everyone that our comments today, which are intended to supplement your understanding of Dover, may contain certain forward-looking statements that are inherently subject to uncertainties. We caution everyone to be guided in their analysis of Dover by referring to our Form 10-K for a list of factors that could cause our results to differ from those anticipated in any such forward-looking statement.
Also, we undertake no obligation to publicly update or revise any forward-looking statements except as required by law. We would also direct your attention to our website, where considerably more information can be found.
And with that, I'd like to turn the call over to Bob.
Thanks Paul. Good morning everyone and thank you for joining us for this morning's conference call. Our first quarter performance reflects continued broad based strength in our industrial markets. We generated 4% organic growth and delivered margin improvement in three of our four segments. In particular, we had strong organic growth in environmental solutions, printing and identification, heat exchangers and our upstream energy businesses. A number of other businesses also turned into solid performances including Pumps, vehicle service equipment and industrial ventures. Retail fueling revenue was in line with their expectations whereas retail refrigeration was lower than expected reflecting tough comp in south market conditions.
With regard to margin, we delivered 70 basis points of improvement year-over-year and expect further increases in coming quarters especially in fluids and refrigeration equipment. We performed well in engineer systems in energy. Refrigeration and Food equipment was below expectations on lower volume. Fluids margin were slightly off reflecting some temporary inefficiencies regarding our factory consolidation in Europe and all our teams have done a nice job this quarter, a pushing pricing through to offset material cost inflation especially for steel.
We also had strong organic bookings in Engineer Systems and Fluids positioning these segments well as we move through the second quarter. The team made great progress on the spin off during the quarter and on May 9th Apergy will become a fully independent company. During the quarter, we also announced a management transition.
Rich Tobin will begin his President and CEO on May 1st, I'm very pleased Rich has joined us and I'm excited to see him put his stamp on the company. Let me take a moment to cover several other things happening across the company. We have continued to make progress on our digital efforts, our remote monitoring and IOT solutions and retail fueling and environmental solutions have enabled us to win significant new business. We're actively developing several focused offerings to help our customers, manage cost and improved productivity. Our pipeline is developing nicely. We have bolt-on target companies in multiple areas that add either technology or in market presence which is complementary to our existing business.
And lastly, we are well positioned to take advantage of the constructive global macro environment as most of our businesses are booking well and are poised to deliver solid organic growth this year. We had provided pro forma 2018 guidance, which excludes our upstream energy business. We expect solid revenue growth and strong EPS growth.
Brad will now take you through the specifics of our first quarter performance and our guidance, and then I will come back for some closing comments.
Thanks Bob. Good morning, everyone. As I take you through the next few slides, please note there being presented inclusive of our upstream energy businesses. As Bob mentioned, our results reflect organic revenue and bookings growth in three out of the four segments. Leverage on this organic growth, combined with benefits of our productivity and cost initiatives, led to solid year-over-year improvement and adjusted margin.
There are several highlights in the quarter; including broad based revenue and bookings growth in Engineered Systems, within Fluids, we had strong performance in our industrial pumps, pharma, and international retail fueling business, as well broad based bookings growth across the segment. And within Refrigeration and Food Equipment, we had strong growth in our heat exchanger and can-shaping business.
In the quarter, we also experienced temporary operating efficiencies including parts availability issues in retail fueling and weaker than expected market conditions in retail refrigeration. From a geographic perspective, the U.S, Europe and China markets all grew year-over-year. Let's go through the details starting on Slide 3 of the presentation deck. Today, we reported first quarter revenue growth of 6%, which includes organic growth of 4% and 1% from acquisitions. Partially offsetting these results was a 3% impact from dispositions. FX provided a 4% benefit.
Adjusted EPS increased 26% to $1.16. This result excludes acquisition related amortization cost, as well as costs associated with our previously announced right-sizing initiatives, and separation related costs. A reconciliation of adjusted EPS can be found in our investor supplement.
Adjusted segment margin was 12.5%, a 70 basis point improvement over last year, primarily driven by incremental margin on increased organic growth. Bookings increased 4% overall. This includes 4% organic growth, which reflect strong results in Engineered Systems and Fluids of no excluding Apergy, organic bookings also increased 4%. Book-to-bill finished at 1.10 excluding Apergy, book-to-bill was 1.12.
Our first quarter adjusted free cash flow was as expected, reflecting a slight increase in working capital and higher compensation payments. Overall, we are pleased with our continued progress on working capital. Specifically working capital as a percent of trailing 12 month in revenue was 17.5%, down 200 basis points from last year.
Now let's turn to Slide 4. As previously mentioned 4% organic growth was driven by broad-based growth in both Engineered Systems and Energy. Fluids Organic revenue was essentially flat were industrial Pumps and international retail fueling was largely offset by U.S. E&P activity which came in soft as expected.
Refrigeration and Food Equipment decrease 7% primarily on the combination of tough comps and lower capital spending in retail refrigeration markets. As seen on the chart, foreign exchange was a 4% benefit while dispositions impacted revenue 3%.
Now, turning to Slide 5. Engineered Systems revenue was up 8% organically, reflecting broad-based growth. Adjusted earnings increased 15% over the prior year and adjusted margin was 15.3%, representing a 110 basis point improvement. These results reflect solid conversion on volume and the ability to mitigate increasing material cost through pricing.
Our Printing and Identification platform revenue increased 4% organically, driven by continued solid activity in both marking and coding and digital print businesses.
In the Industrial platform, revenue increased 10% organically, reflecting strong - very strong shipments in Waste Handling and broad based growth across other businesses.
Bookings increased 6% overall, including organic bookings growth of 8%. Organic growth reflects continued solid activity across the segment. Book-to-bill was 1.01 for printing and identification, and a very strong 1.19 for industrials, and 1.11 overall.
Now on Slide number 6. Fluids revenue increased 5%, including acquisition growth of 1% and 4% from FX. Organic revenue was flat, principally reflecting solid pump international retail fueling and pharma market offset by U.S. E&P activity.
Adjusted earnings increased 7%, largely driven by volume growth. Adjusted margin increased 20 basis points to 10.2%. This performance reflects earnings on volume largely offset by temporary inefficiencies including supply chain shortages of components used in retail fueling. Of no, productivity will improve as a retail fueling factory consolidation is completed in the second quarter resulting in substantially improve margin on a sequential basis.
Bookings activity was strong and grew 11% overall, including 6% organic growth. Organic bookings growth was broad based. Book-to-bill was a strong 1.13.
Now let us turn to Slide 7, refrigeration of food equipment revenue organically declined 7%. The decline is largely driven by tough comps and weaker than expected capital spending in retail refrigeration. Last year we saw seasonally strong first quarter activity in front of the new DOV energy efficiency regulations. We knew that this volume wouldn't repeat in 2018, whereas our can-shaping and heat exchanger businesses performed very well in the quarter. Earnings decreased 13% from the prior year and large contracted 80 basis points reflected the impact of lower volume. Bookings decreased 14% organically largely reflecting softness in retail refrigeration market in order timing in can-shaping equipment. Book to bill was 1.01.
Now on Slide 8, energies organic revenue increased 17% reflecting growth in U.S rig count and increased well completion activity and it includes continued solid results in our industrial winch business. Earnings and segment margin both significantly improved over last year. Bookings were up to 14% year-over-year. Book to bill finished at 1.03. As Bob mentioned, our Apergy business had a strong quarter with 22% organic growth.
Going to the overview on Slide 9, our first quarter corporate expense included $12 million of separation cost and $1 million right sizing cost, excluding these cost corporate expenses was $29 million. Interest expense was $34 million. Our first quarter tax rate was 22.6% in line with expectations when excluding discrete benefits. In the first quarter, we completed $45 million of share repurchases as part of our previously announced $1 billion repurchase plan.
Now moving on to Slide 10, which shows our updated 2018 guidance? Our updated guidance is presented on a pro forma adjusted basis, as discussed last quarter, we're adjusting for acquisition related amortization and right sizing cost and separation cost as incurred. Further updated guidance now excludes Apergy for the full year. Lastly, within our updated guidance bearing and compression which was part of our energy segment will be reported within fluids. And Tulsa Winch which was also part of the energy will be reported in Engineered Systems.
Moving to the guide, we expect 2018 total revenue to increase 45%. Within this forecast organic revenue growth is expected to be 3% to 4%. Acquisition will add 1% and FX should add about 3%. Dispositions are expected to have a 3% impact. All segments are expected to grow organically. Further, we expected adjusted segment to improve about 50 basis points over 2017 to approximately 15.1% at the midpoint.
In summary, we expect full year adjusted EPS of $4.70 to $4.85. Our guidance exclude second quarter costs related to the Apergy separation. Further this guidance represents an increase of approximately 15% over 2017 at the midpoint.
With that, I will turn the call back over to Bob, for some final comments.
Thanks Brad. Going forward the strong bookings in Engineered Systems and Fluids and are strong book to bill supports our organic revenue forecast. Additionally, we expect marking and coding, digital printing and waste handling to continue to perform very well. In Fluids, we expected another year of strong growth in our pumps and pharma businesses. We also expect bearings and compression to be solid and retail fueling to sequentially improve. In Refrigeration and Food Equipment, we expect continued and strong performance in heat exchangers and can-shaping equipment, while retail refrigeration will improve in the back half of the year as several customers step up the remodel activity.
With regard to the second quarter, we expect both Engineered Systems and Fluids to deliver solid organic growth as they ship under strong order books.
Retail refrigeration in second quarter will continue to be impacted by tough comps related to last year strong shipments and softer overall markets. We also expect to see improved margin on a sequential basis that all three segments especially at our fluids and refrigeration and food equipment segments. I believe that Dover is well positioned in 2018.
In closing, I just want to say that it has been a great honor and pleasure to serve as Dover's CEO these past nine years and I would like to personally thank every Dover employee for contributing to our success. I wish you all well and I am sure you'll have continued success in the future.
Now Paul let's do some questions.
Thanks Bob, before we take questions I just want to remind everybody that if you can limit yourself to one question with a follow up, we'll be better able to handle the 18 analysts that are in queue right now. So with that Jennifer let's take the first question.
Your first question will come from Jeff Sprague with Vertical Research.
Thank you, good morning everyone. Bob congrats on a good run; enjoy your retirement thanks for all your help over the years much appreciate it. Hey, I know you don't want to speak for Rich and you made the comment about him putting his stamp on things, but is it safe to assume that given that he's on the Board that this guy that we're getting today and the outlook we're getting today kind of conforms at his views of the world also?
He is not inherent of the guide providing today I can guarantee you that, Jeff. I think the forecast and the guide we have shared with you today with respect to I would say with respect to engineered systems reflects the very strong visibility we have for them in the second quarter. And I would also say the third quarter. With the fourth quarter, I think we are being a bit conservative with our outlook in engineered systems. And on fluids I will tell you, we didn't shared this in the comments, in the prepared comments here but we were very-very pleased with the order activity in retail fueling in the first quarter, especially as it build through the quarter, and have pretty strong confidence that we are going to see sequential both revenue and margin improvements in this platform and in this segment as we move through the year. It would be --I think the last thing I would want to do is Jeff as Rich is coming on board would be to raise guidance because I don't think it's necessary today. I think if there's going to be any change in guidance with respect to our strong activity I'm going to leave that for Brad and Rich to speak to you about on the July and the October call.
Great, understood and then I just wonder if we could drill a little bit more in the refrigeration for a moment then obviously there's a lot of uncertainty among grocers in particular on CapEx they want to spend and what they want to spend on and that sort of thing. Can you just provide a little bit more detail what you're hearing from the channel? Do you see capital spend perhaps freeing up later in the year and is there any particular price cost dynamics that influenced the margins in refrigeration in the quarter?
So let me deal with the first one. I think there is a growing confidence that we have as a result of input and conversations we're having with customers that we will see increased spending capital spending in the second half of the year. But Jeff I will tell you it is going to be very-very much driven by remodel activity not new store construction. And without sharing the name of the customers, we have a couple of new customers that enter the order books in the second half of the year as well. So I feel pretty good with the outlook right now for refrigeration. Material and cost are pricing, I'll give you a response on refrigeration but I think it's just as important I give it for all of Dover. We entered the year with about $14 million of what we labeled as tailwind for 2018 what we thought we pricing - the tailwind we thought we have pricing above material and cost inflation, some of that has evaporated, Jeff. I think I'd get throughout the number $14 million on the January call and I would say our forecast right now and our guide assumes that $10 million of that $14 million has dissipated. But we have been much quicker this year than we were last year in pushing pricing through and many of our companies especially the larger users of steel have implemented price increases during the first quarter, we are taking orders now that have the new prices increases in them. And feel like we have got a much better start on covering the material cost inflation with our price increases this year than we did last year, across the border yes.
Your next question is from Julian Mitchell with Barclays.
Thank you. And I would like just congratulations Bob and wish you all the best. On the just looking at that slide in the appendix, you talk about the $0.05 of the EPS this year, coming from incremental share repurchase just wondered what sort of dollar number of buyback spending that tally too, and if there had been any change in the aspiration to spend the spin dividend all on buybacks this year?
Well, I'll give you a headline comment or response on that, and Brad can provide a bit more detail. So the nickel change in our guide with respect to share repurchases does assume that the dividend we received from Apergy spin will be fully allocated, 100% allocated to share repurchases in 2018. That said Julian, I will tell you the nickel increase on the guide is as conservative as we can make it with respect to the share repurchase activity. It does not assume an early ASR with respect to share repurchases; it is sort of feathered in our guide to occur during the balance of the year following the spin of Apergy. I will leave to Rich and to Brad and to the Board to make their final decision on how those shares repurchase activity actually occurs. But I'll repeat myself. The nickel could not be any more conservative on our share repurchase activity.
So, let me just add I mean a couple of facts there, I guess our forecast is assuming about 140, 154.6 or so shares weighted average for the year. Remember the timing of the nickel is it could be done lots of different ways to Bob's point. But the power actually comes forward into - goes forward into 2019, where we see those shares, opening up 2019 in that 140, 145 million to 146 million type of share range on spending of that $700 million. So you have this carryover benefit going into 2019.
Very helpful, thank you. And then my follow up would just be around the corporate cost, the guidance has gone up about $7 million I guess that's mostly costs that were in Apergy that are sort of stranded at the remainco for now. But I guess when you think about what that number should be feel revenue based excluding Apergy how much lower do you think that run rate should be than the $129 million? I guess the stranded costs would go away and then some of that base corporate cost also should be coming down because of the smaller revenue base?
Well, one of the right sizings we did last year, as you know and that's why we call it rightsizing, getting ready for the Apergy spin. You're correct that our previous guide I believe was one $122 million now $129 million. Little, almost $5 million of that I would say is this Apergy stranded cost that we've shown here in corporate. Of that $5 million we got to work through the details of that we have been working through the details some of it will go away a lot of it will go away into 2019 but some of it fixed infrastructure of a building for instance doesn't go away. But we're active on it. We're on top of it. We expect to continue to work it down and I would expect the corporate cost number to continue to come down a bit into 2019.
Your next question is from Andrew Obin with Bank of America Merrill Lynch.
Yes, good morning. And Bob congratulations on your retirement and thanks for the hard work over the years.
Just one question given all the macro concerns just wanted to drill into one of the businesses, drill down to one of the businesses, specifically on printing and IT. Could you provide more detail by geography and end-markets both on sales and what are you seeing on orders if you seeing signs of a slowdown in any specific market or any specific geography?
Okay. I don't have the detail with me, the geographic detail for printing and IT though I do know in the first quarter I know that order rates were extremely balanced around the globe. There was nothing unusual in growth rates on order activity in the first quarter that would raise any concerns, but I don't have the specific numbers. And order activity the answer is no. We have seen no sign; no evidence in our order book would actually speak just the opposite of your question that the order activity did build through the quarter. And we are booking at a fairly solid 2018 at Markem-Imaje and another double-digit growth rate in our digital print business.
And just a follow up on refrigeration and food equipment question, given sort of the weakness of organic orders in the first quarter you are saying that you are seeing pickup in orders, but basically the pickup on orders has to be a fairly substantial to get you to flat revenues for the segment for the year. How much uncertainty is there about the order pickup? Or do you actually have enough visibility at this point to feel comfortable with this forecast?
Well number one this business, let's speak to our retail refrigeration, Hill PHOENIX and Anthony. I would tell you that and our customers recognize this is that our lead times over the last I would say six months maybe nine months are significantly shorter than what we were dealing within I think it was in, help me here guys in 2016 and in the first half of 2017 as we were making so many changes there in the factories. So it's the short cycle nature of this business is very well recognized by our customers today. We have very strong input from customers with respect to anticipated spending in the second half and the new awards that I referenced or hinted to earlier those are not yet, I mean we're not waiting for those to be signed they have been awarded.
Fantastic thank you very much Bob and enjoy your retirement well deserved.
Your next question is from Steve Tusa with JP Morgan.
Hey, guys, good morning, congrats as well. Congratulations to Mr. Livingston. So just on refrigeration the book-to-bill was good but not perhaps as strong as it's been historically in the first quarter because obviously this is a very seasonal business with 2Q and 3Q stronger than 1Q and 4Q. Should we expect you mentioned back half deliveries, should we expect a bit of a sub-seasonal performance in 2Q before maybe being a bit better seasonal in kind of three in 4Q. How should we just think about all - base in 1Q?
Yes I think you will see this year that the third quarter is a much stronger seasonal third quarter relative to the other three quarters of the year that we have historically shown. If you look back in history, many years the second quarter has been the strongest quarter, with the third quarter being strong but typically trailing a little bit behind the second quarter. I mean we see that being different issue. We see in the third quarter, June through September are being the strongest shipment period for this business in 2018. And right now we do expect the fourth quarter to show organic growth for the retail refrigeration part of the business. And again I'm going to reference the new awards that have been booked recently.
Right, okay. And as far as the margin guidance for that segment, I'm not sure you've given that specifically but maybe just some color on how you would expect for the year, its play out for Refrigeration?
Well, I can't, I don't have it by quarter Steve.
No, no, just for the year, just color for the year.
I think we're seating 100 bps of margin improvement for the year.
Okay. Even with the first quarter start being down?
Even with the first quarter start.
Your next question is from Joe Ritchie with Goldman Sachs.
Thanks and congratulations Bob. So maybe touching on Steve question there for second on just refrigeration. So I want to make sure that I've got this right. The booking this quarter were down a lot but it sounds like the awards are have been booked, so just like or we're expecting this year?
No, no, I referenced two new customer wins. We have those contracts in house. But we don't have the releases yet and when they actually want the product shipped, but we do know there will be shipped in the second half of the year.
So the awards will then be booked in your backlog sometime in 2Q or 3Q?
I would expect some of that to be flowing into Q2 and the balance of it in Q3, yes.
Got it. That's good clarification. And then I may have missed the last comment you made on a 100 basis points on margin expansion. Are you guys talking about refrigeration specifically?
The segment.
The segment.
Yes.
Okay. And that's start to pick up from Acadian perspective in 2Q?
Q2.
Okay, great. And then one question on EMV, you saw some softness this quarter. One of your large competitors talked about it last night as well. Maybe talk to it's a little bit about how you expect that to move forward for the rest of the year?
Well, Brad, you have to clarify if I'm speaking incorrectly here but I don't think our EMV activity in the first quarter was any differ than what we expected and my statement is true.
That's true.
It is interesting that we did see in the first quarter and here you are going to get into the new launches of is it EMV or is it commercial actually normal commercial activity, the order rates were stronger in the first quarter then we had anticipated. Across the board for retail if we like it. And I see across the board, I'm not just referring to our U.S. market. We had stronger booking rates most notably in Asia, especially China and India in the first quarter, but also in Europe, across the board for retail fueling. The order rate increases we're seeing are actually for new dispensers. So, as we get into the second half of the year, we are - our confidence is growing that we are going to see increased EMV activity. But we also know especially as we saw in the fourth quarter of last year and even more so in the first quarter that was just completed, that some of the strong dispenser orders we're getting are for applications or for sites especially here in the U.S. that absent, the purchase of a new dispenser, we would be selling EMV kits. So, we've - we're actually quite pleased with the order activity we had in the first quarter and our confidence is growing that we're going to have a very solid year in retail fueling not just here in there U.S. but globally.
Your next question is from Deane Dray with RBC Capital Markets.
Thank you, good morning everyone. Hey, Bob I would have thought that you would have timed your farewell to include one last appearance at EPG, how did that does not happen?
I made a mistake.
Alright, we'll toast you in your absence. Could we talk about the supply chain disruptions, factory consolidation issues in fluids in Europe, just give us a perspective on what is happened and you just try it will be completed in the second quarter, so will it still be disrupted in the second quarter?
So, it is within the fluid Segment, Deane, you're correct. But to be more specific it's actually within retail fueling. So we as part of integration plan and activity with Tokheim and Wayne, we are in the process of moving production from the Swedish factory which was the Wayne factory into the Dundee, Scotland factory which was the Tokheim-- is the Tokheim factory. And that move I believe actually believe it gets completed in two weeks. Am I right, Brad? Its May, I think it actually gets completed in two weeks. And the - we did incur some additional I would call it overtime and let's just call it move costs in February and March that frankly we didn't have in our forecast. With respect to the supply chain, I don't remember all four parts and it really was restricted to four components that we had some supply interruption with in January and February. I think two of them were fairly much resolved and behind this but a time we exited the first quarter. The other two are being resolved as we are on this stone right now Deane and will be a non-issue but a time we exit the second quarter. And I think you're going to see some fairly significant improvement in margins for this segment in the second quarter.
Got it and then for the follow-up, in engineered systems the comment about industrial businesses having broad base growth beyond the highlighted waste handling business, can you just talk for a moment about these other businesses within industrial? They don't usually get much of your time, but maybe if you could touch on those here that'll be helpful?
Well again it was broad based; I think I did mention in the script that we saw very solid growth at vehicle services in the first quarter. And I called out industrial ventures which going forward will be in engineered systems, but it was broad based across each of the businesses and the industrial platform. That said I will tell you it was most, the Company that led that platform in growth rates and the first quarter was material handling, they did an outstanding job.
Your next question is from Andrew Kaplowitz with Citigroup.
Hey, good morning, guys. Bob congratulations and good luck.
Okay, you have two minutes, because I am leaving at 9:45.
Okay, I'll be quick then. So, Bob can you talk about the change in free cash guidance, just marginal to 10% from 10% to 11% but cash as you know came in a little late last year in terms of conversion. So and you could sort of read into around working capital movement or maybe just being a little bit more conservative at the start of the year?
Brad will give you some detail on this, but I look I - we have indicated this pretty strongly, every week, every month, every quarter. Working capital was down again as a percentage of revenue in the first quarter, I think you're going to continue to see that through the balance of the year. But working capital as an absolute dollar amount did increase in the first quarter as a result of some increased inventory and it's totally connected to growth rates. We had really strong growth rates and order rates and engineered systems and in fluids and some of the working capital absolute dollar working capital increase and in the first quarter, are in response to the growth rates. But again as a working capital metric, working capital came down. You want to clarify or add to that?
Not clarify but I would add a few points, our first quarter, we characterize as expected slightly negative; splits between I'll call Dover and Apergy about the same levels meaning about 50:50. And again, if you look at five years trends, we're always somewhat little bit negative to low single-digits in the first quarter, that's traditionally, what we've seen in our first quarter, so nothing unusual there. With respect to last year, I'll just reiterate, when we looked at, last year we came in at about 9%, little over 9%. Again that splits about the same for both companies, so, going forward to 10% called now, I'd say early days, a little bit conservative perhaps but, we think it's a reasonable number as we now go forward on Dover basis ex Apergy. So, we feel like it's a good guide for us.
Okay, that's helpful color. And then obviously, - which might have a different view when he gets into the seat but, are there any more significant actions that you can take in refrigeration, if the weakness in the market persist, if it doesn't come back as you expect, can you do more restructuring in that business?
Well, number one, I'd tell you we haven't stopped. I don't remember the count, but I know that in the month of March and coming into the first part of April, there were additional right sizing steps taken, within Hill PHOENIX and Anthony. I don't remember the number but I think it was, gosh I think it was about a 110 employment positions that were reduced in March and early April. So we continue to, I think manage the business really well, and I will tell you the business leadership team at Hill PHOENIX and Anthony has done a very good job over the last couple of years. Relaying out the factories, reducing the factories footprint, and I think, I have a lot of confidence, we say little bit of volume growth here in the second half for the year, you're going to see pop in margins from this business that will reflect all of the work that this team has done over the last couple of years. I actually feel very positive about the work they've done.
Your next question is from Steve Winoker with UBS.
Thanks and good morning, and congrats on your retirement Bob. So just you spoke about the M&A pipeline a bit and the richness of that right now, I guess the couple of questions there, one is to what extend is that a little bit on hold given leadership transition at all? And then secondly, Middleby, others have been very active we've seen a lot of closed deals in food equipment et cetera in the recent quarter, just give us a sense for whether that space is still a priority I suppose going forward, how do you think about it?
Well, let me correct something, you used the word richness. I didn't use that word. I think our pipeline is fairly active, it is absent at the current time, any significant or large deals, they're all fairly, I call them small to mid-size deals and they're all bolt-on and I would tell you that nothing has slowdown with respect to our pursuit of these opportunities over the last couple of months especially in the last few weeks as we've announced the transition with myself and Rich. And I think you'll hear more from Rich on this topic over the next couple or three quarters I am sure.
Okay. Fair comments. And on margins, those long-term margin targets is that in place, you've talked a little bit about it now, but just on the road map to those kind of 300 to 400 basis points for fluid and refrigeration and food equipment. What your sense of the kind of achievability in timing of that now?
I think we're in a good position to achieve those targets in engineered systems and in fluids. As I commented earlier with respect to refrigeration, we need to see this leadership team have a little bit of volume here in the second half of the year, pickup over the first half and I think you'll see those margins are achievable as well.
Your next question is from Scott Graham with BMO Capital Markets.
Hi, good morning and re-echo of everyone else, Bob, congratulations and good luck and really enjoy your retirement. I'm just - I'd like to go back and revisit that last question because I think it was a prefaced with a long term characterization. Those are 2019 targets right?
Correct.
So you do feel that with the strong second half you can get to your refrigeration targets in 2019?
We're referring to the strong second half of 2018, we still have another year.
Right, but there is I guess my broader question is there anything right now that you see and sounds like not but just to ask it directly where you won't at least hit the low end of those targets in 2019?
No, no. I feel very confident with the bow-end of this target.
Yes. But maybe I inject something here because I want to make sure we're talking a lot about the back half here. I just want to maybe set something up here for a second. I want to go back; I know you don't have 2017 on a pro forma basis that will become -
Not yet.
Not yet, but I'm actually going to give it to you right now. But we're going to file an 8-K after the spin and we'll provide all the restated data and you'll have that information. But in 2017 we did $4.15 on a comparable basis to our guide that we're guiding today on an adjusted pro forma basis. The way the year setting up, you think about this way, when you see 2017 you'll see the first half was 44% of our year, the back half was the delta 56%. This year setting up no different. It's -
It's actually identical.
It's identical and so when you think about first half, second half and trajectory the business, yes, DR, FE we have some bookings that we expect in Q2 into Q3 which will make the back half better. By the way on food equipment same thing, we won a big piece of business even food equipment's been a challenging market. I'm talking about matching up with the well builds and Middleby, we feel really good about that business and we said this heat exchange your business is going to have an awesome year. And so we feel good about that. The last piece I would say just again you have this data it's coming out. Our first quarter, the way our first quarter on a pro forma ex-Apergy basis will look versus the $1.16 is $0.90. And we're right on pace where we want to be. Our guide hasn't changed; our guide paused for Dover ex Apergy hasn't changed. Our core growth is up 1% on the revenue side. Our segment margin expectation guide to guide on a pro forma basis hasn't changed. There's a little bit of a change in corporate that we talked about, offset by a little bit of interest savings as we paid down the $350 million of debt due in the first quarter. And a little bit of benefit on tax and shares. And that's how our guide sets up. So we're really sitting here today with fundamentally the first quarter as we expected the mix shift is different within the segments. And the trajectory of the business feels good to us.
And I echo that strongly.
Brad that was usually helpful thanks you. I do want to maybe just go back and maybe try to understand price cost where you said that about $10 million of your $14 million, which I assume was positive price cost if I remember that correctly that is $4 million left and you're out there increasing prices so I need to triangulate here a little bit because first quarter inflation certain commodities obviously the metals complex was pretty significant. So are you saying that you are $4 million positive price cost on an annualized basis today?
Yes, without further inflation, yes.
So then your price increases will make you price cost positive in 2018?
Slightly, slightly.
Very good, thanks, that's all I had.
Yes, impacts the margin rate a bit but yes, marginally price positive again. Again, as Bob said, we got ahead of the curve on this and that's where we still see ourselves at this point.
And it was different than what we experienced last year. I would say across the board here in Dover, the price increases, they weren't all done on the same day, but the companies all pursue this during their first quarter and we feel fairly comfortable with the position we are with respect to pricing as it exist today for the second or third quarters.
Very good. I appreciate your comprehensive responses there and again good luck to you, Bob.
Your final question is from Robert Barry with Susquehanna.
Hey, guys. Good morning, everyone. Thanks for taking the question. I will also conclude with echoing the congrats to Bob. Good luck. Just a few follow-ups at this point, on the inefficiencies in retail fueling can you say how much that cost you in the quarter? And was that also a revenue headwind because you couldn't ship?
It was a slight revenue headwind. I don't want to make a big deal of the additional revenue but I mean it may have been. It may have been $5 million, $6 million or $7 million, it wasn't a game changer. It did cause us to incur some additional cost on express freight and some overtime.
Got it. Got it. And following up on something Brad said earlier about feeling particularly good about Food Equipment business those lines up well build and Middleby. I know that's been kind of challenging for a little while is that - do you think that end market there is finally starting to show some traction?
I would say it's spotty. I think with some customers - we see some customers buying that or buying more that they were last year, but I would say it's not broad based. We're actually looking at growth within this part of the business for the year. But it's all around special projects and special orders. And I would also tell you they are all on the books. We have the orders in house. But we see a fairly good growth rate in this part of the business in the second half of the year.
Got it. Just one last kind of big picture question. Are you guy hearing anything from customers about using past savings or new depreciation rules to step up investments at this point?
We keep asking that question internally as well. And it's difficult. It's difficult to pin in order to the taxable changes.
Got it. So not clear yet that it's helping?
Correct
Thank you. That does conclude our question-and-answer period. I would now like to turn the call back over to Mr. Goldberg for his closing remarks.
Yes. So this concludes our conference call. With that, we thank you for your continued interest in Dover. And we look forward to speaking with you again next quarter. Thanks again for your interest. Bye.
Thank you, ladies and gentlemen. This does conclude today's First Quarter 2018 Dover Earnings Conference Call. You may now disconnect your lines at this time. And have a wonderful day.